In Short : Multilateral climate funds such as the Green Climate Fund and Climate Investment Funds are vital in advancing clean energy. They provide concessional financing, technical support, and risk mitigation to help developing nations adopt renewables, improve energy efficiency, and reduce emissions. These funds catalyze private investment and support national energy transitions aligned with global climate and sustainable development goals.
In Detail : Multilateral climate funds (MCFs) are specialised actors in the international climate finance landscape. With a mandate to support emerging and developing economies in addressing the challenges of climate mitigation and adaptation, they are designed to serve as catalysts for resilient, secure and affordable energy transitions. This analysis explores how MCFs are fulfilling this role, focusing on the four main actors in this space: the Adaptation Fund (AF), Climate Investment Funds (CIF), the Global Environment Facility (GEF) and the Green Climate Fund (GCF).
Breaking down MCF financing for energy projects
In total, MCFs allocated USD 7.8 billion in financing for clean energy projects from 2015 to 2024, according to IEA analysis of OECD data. Some 95% of this sum was directed towards emerging and developing economies, with countries in Asia and Africa receiving more than half. The vast majority of the total funding went towards electricity generation projects, although there has also been a rise in financing for end-use projects in the buildings, transport and industry sectors over time.
In terms of instruments, MCFs deployed higher levels of grants and equity – 18% and 6%, respectively – compared with other international public financiers. A breakdown of instruments deployed by each MCF highlights the distinct mandates and financing strategies of each fund. Most notably, the Adaptation Fund and Global Environment Facility rely almost exclusively on grants, which between 2015 and 2024 covered 100% and 98%, respectively, of their clean energy financing. This approach reflects their strategic focus on targeted, smaller-scale projects in vulnerable regions that might otherwise struggle to attract commercial or private investment.
Climate Investment Funds showed a strong reliance on debt instruments, with nearly 85% of its financing provided as loans, 15% as grants and less than 1% as equity. The Green Climate Fund also strongly favoured debt, while allocating 16% of its financing to equity and 8% to grants. Both CIF and GCF are structured to provide larger volumes of concessional finance – not only through grants, but also via concessional loans and equity investments. This enables them to mobilise higher volumes of capital, finance larger scale projects and attract financing partners from the private sector. For example, according to a report from the Clean Technology Fund (CTF), which together with the Strategic Climate Fund (SCF) makes up the CIF, CTF-approved funding of USD 4.8 billion between 2008 and 2024 is expected to mobilise around USD 11.5 billion from the private sector. This indicates that for every dollar financed by the CTF for energy projects, the private sector has financed 2.5 dollars.
Beyond project financing, all four MCFs also supported technical assistance activities, including readiness programmes and policy development, allocating USD 1.2 billion1 between 2015 and 2024. These efforts have helped strengthen the capacity of local stakeholders to design and implement clean energy projects.
The role of concessional finance
Concessionality is a key enabler of clean energy investments in emerging and developing economies, and it lies at the heart of MCFs’ engagements, making them highly sought-after partners for energy investment. Between 2015 and 2024, the high share of Official Development Assistance (ODA) in total energy-related financing from MCFs (nearly 70%) indicated the strong availability of concessional financing compared with other international public financiers. This has allowed MCFs to play a role in mobilising finance at scale by enabling the participation of different types of financiers – domestic and international, public and private – that have lower risk appetites and are less willing to finance projects in markets with high degrees of uncertainty.
A prime example is the ongoing Climate Investor One (CIO) programme developed by the Dutch Entrepreneurial Development Bank. The GCF provided USD 100 million in grants and first-loss equity to establish two facilities focused on mobilising private sector investment in renewable energy projects across 11 developing economies in Africa, Asia and Latin America and the Caribbean. By the end of 2023, the programme had mobilised around USD 930 million in total capital from public and private sources and enabled the construction and operation of multiple projects, installing more than 1 gigawatt (GW) of renewable energy capacity. Over its lifetime, the programme aims to mobilise more than USD 2.5 billion and deliver up to 1.7 GW of additional renewable energy capacity.
There is still a major shortage of concessional financing in the most vulnerable regions, especially in Africa. The continent received a quarter of MCF financing for clean energy projects between 2015 and 2024 – more than Latin America (12%) and Southeast Asia (10%). However, only 56% of this support was provided on concessional terms. In contrast, for Latin America and for Southeast Asia, which generally have stronger capital markets and lower risk premiums, a higher share of MCF financing (72% and 84%, respectively) was concessional.
While countries in Africa have received greater amounts of funding overall from MCFs, there is room for MCFs to step up efforts to provide access to affordable capital for clean energy projects across the continent, since higher risk premiums and thinner capital markets drive up the cost of capital in many African economies. Moreover, MCFs can lead efforts to improve the flow of bankable clean energy projects in Africa by working with local stakeholders to build a pipeline of country-led projects focused on each country’s energy needs and climate priorities.
What types of energy projects receive support?
Given the limited availability of concessional finance, a key question for MCFs is how to allocate these scarce funds to maximise their impact and ensure they are spent on projects that can drive transformative change. IEA analysis has underscored the need for increased concessional funding for grids and storage, as well as end-use sectors (such as buildings, transport and industry) and other low-emissions power.
There are signs that financing trends are moving in this direction. The share of spending on solar and wind has pulled back below 50% in recent years, with the balance of support going to grids and storage, end-use sectors and other low-emissions sources of power generation. The share of financing for end-use sectors grew from only 3% in 2015 to 36% in 2024.
In the transport sector, the rapid increase in financing was driven by targeted initiatives from the GCF, CIF and GEF to accelerate the deployment of electric vehicle (EV) infrastructure and support the adoption of low-emissions transit systems. One such example is the GCF’s India E-Mobility Financing Program, which provides tailored financing to EV owners and operators – including for charging infrastructure – to encourage the adoption of e-buses and shared fleets across Indian cities. The GEF’s strong emphasis on e-mobility projects during its seventh replenishment cycle, including the launch of the Global Programme to Support Countries with the Shift to Electric Mobility, has also contributed to the rapid increase in financing for transport projects.
In comparison, investment in grids and storage – which are crucial components of secure and affordable clean energy transitions – remains relatively low, accounting for only 3% of total energy-related MCF financing in 2024. However, by strategically providing concessional funds and supporting capacity building, MCFs can help promote scalable grid and storage projects by attracting private investment. The GCF project Desert to Power G5 Sahel Facility, which is currently being implemented across Burkina Faso, Chad, Mali, Mauritania and Niger, illustrates this potential. One of the project’s key pillars is expanding and reinforcing centralised transmission, distribution and battery storage infrastructure in partnership with the African Development Bank (AfDB). A total of USD 200 million in loans and grants has been committed for this component, along with USD 20 million from the private sector.
Looking ahead
The recent International Conference on Financing for Development highlighted that “the gap between our sustainable development aspirations and financing to meet them has continued to widen.” IEA analysis finds this is also the case for energy-related goals – highlighting the need for a rapid and sustained increase in the scale of concessional financing and private finance, as well as easier access to these funds.
Ongoing initiatives by multilateral climate funds to improve their accessibility and amplify their impact, following a joint declaration by the heads of the four MCFs at COP28 in Dubai, are an important step forward. Special focus has been placed on harmonising the procedures for preparing, appraising and approving projects and on better aligning indicators across MCFs, which will facilitate further access to MCF resources and reduce the time required to disburse concessional funds. At the same time, scaling up solutions such as blended finance, local currency financing and capacity building to develop local financial markets remains critical.
Considering the co-benefits of clean energy investments in terms of adaptation could also have significant impact. A project recently approved by the Adaptation Fund to deliver greater climate resilience in the Philippines’ Tawi-Tawi province illustrates how integrating resilient water systems with renewable energy infrastructure can address water scarcity and climate variability, for example. Additionally, a key component of a rural development project completed in Ethiopia in 2022, also financed by the Adaptation Fund, leveraged solar-powered water systems to address water insecurity and enhance irrigation in vulnerable agricultural regions. These projects are showing how clean energy investments can directly support climate adaptation.
The current global energy investment landscape is characterised by significant uncertainties which disproportionately affect emerging and developing economies. Against this backdrop, MCFs can serve as trusted partners, including in the most vulnerable regions, as they work to implement scalable and high-impact clean energy projects around the world.
