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.
- 1. Understanding the situation
- 1.1 Understanding current flows
- 1.2 Assessing financing needs
- 1.3 Assessing capacity
- 1.4 Identifying and overcoming barriers
- 2. Planning and coordinating
- 2.1 Institutions and governance
- 2.2 National finance strategies
- 2.3 Investment plans
- 2.4 National climate funds
- 2.5 Green investment banks
- 4. Using public finance
- 4.1 Managing national finance
- 4.2 International climate finance
- 4.3 Climate finance readiness
- 4.4 The Green Climate Fund
- 4.5 Direct access
- 5. Designing financial instruments
- 5.1 General resources
- 5.2 Sources of private finance
- 5.3 Risk mitigation
- 5.4 Guarantees
- 5.5 Feed-in tariffs and auctions
- 5.6 Taxes and tax incentives
- 5.7 Carbon pricing
2.3 Investment plans
A climate change investment plan is a document that identifies priority investment areas for a country and outlines why these priorities would be good investments from a climate point of view. In addition to providing information about specific investment needs, an investment plan often provides contextual information about the country, its policy framework, and current activities. It may also discuss sources of finance and institutional arrangements.
Around 70 countries so far have developed investment plans for the Climate Investment Funds, the US$9 billion family of four climate funds managed by the World Bank and other multilateral development banks. These investment plans are required for countries to access the funds, and provide a degree of predictability over the funding streams available to countries. They follow a specific format prescribed by Climate Investment Funds.
Beyond Climate Investment Funds, countries can also prepare general climate investment plans to support their efforts to raise climate change investments. An example is provided for Malawi, and for the investment prospectuses developed by several African countries for the Sustainable Energy For All (SE4All) initiative.
The Clean Technology Fund investment plan is a business plan, developed under the leadership of the government, to assist a country with Clean Technology Fund co-financing in implementing its national development strategies or programs that include low carbon objectives. The investment plan is agreed between, and owned by, the government and the multilateral development banks. It should be a clearly articulated, multiyear proposal that describes the proposed uses of Clean Technology Fund resources, identifying components of the country’s existing strategies and plans that could be co-financed by the Fund. This brief guidance document outlines how to prepare a Clean Technology Fund investment plan, including an annotated outline that should be followed.
Stakeholder engagement in preparing investment plans for the Climate Investment Funds: Case studies from Asia
This study, part of a wider review of Climate Investment Funds experiences in the Asian Development Bank, uses a case study approach to examine how stakeholder engagement was carried out in the preparation of investment plans in Cambodia, Indonesia, Nepal, and the Philippines, with reference to the guidance on stakeholder participation provided by the Asian Development Bank and Climate Investment Funds.
The primary objective of the National Climate Change Investment Plan is to increase climate change investments in Malawi. It covers the country profile, climate change governance and policy framework, and current portfolio of activities and financing. The Plan identifies priority investment areas, outlines the total investment requirement, and discusses institutional arrangements, potential financing sources, and monitoring and evaluation.
An SE4All Investment Prospectus presents a set of implementable programs and projects, including their investment requirements. This website makes available several countries’ Investment Prospectuses.
For countries to access Climate Investment Funds, they must develop an investment plan that targets investments which are in line with, and reinforce, national development priorities. The investment plan is developed through constructive consultations between the country government, multilateral development banks, and key stakeholders, including civil society, indigenous peoples, and the private sector. This resource presents examples of the investment plans approved for implementation.