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Resource guide for NDC finance

Selecting effective financial instruments to support action on climate change

This low emission development strategies (LEDS) Finance Resource Guide presents a curated selection of resources on a range of topics around finance for LEDS and Nationally Determined Contributions (NDCs). It is designed to help LEDS practitioners find high-quality resources that meet their specific needs, avoiding time-consuming searches on the internet. It will be useful to individuals working on, or interested in, LEDS and NDC finance in both developed and developing countries.

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5. Designing financial instruments

Green projects often appear to present higher risks to investors due to the higher capital costs often associated with green—and perhaps unproven and unfamiliar—technologies; the financing risks from immature financial markets and institutions; the perceived risk associated with finance in a particular country and sector; and policy risks. These latter risks are not specific to green growth investments, but where they do apply they add to the already higher risk profile of green projects. Their impact will vary depending on sector and country context. The real or perceived risks associated with green projects may lead to their rejection by private investors. Providing access to capital through public direct investment will not fix this problem on its own; targeted financial instruments are required to restructure risks or increase returns in order to attract private capital. This section presents resources on a range of instruments that may be used to stimulate investment in LEDS and NDCs. (Adapted from Green Growth Best Practices website.)

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