Development Banks Pitch Private Capital as Route to Climate Finance Goal

Multilateral development banks moved $103 billion in climate finance to low- and middle-income countries in 2025. At a COP31 side event on Nov. 13, 2026, the Asian Infrastructure Investment Bank's vice president argued that public money alone cannot close the gap. His remedy was policy reform, clear rules and banks guaranteeing one another. Officials from Tanzania, Bhutan, Cambodia and three development banks then described what is already working. No decisions were taken, but the session previewed what developing countries will push for at COP32 in Addis.

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• $103 billion in 2025 MDB climate finance isn't enough; AIIB urges reforms to tap pension and insurance funds
• Tanzania's community-led program produced 500+ subprojects in six months; seeks program-based financing at COP32
• Bhutan opens energy sector to private developers and targets 25,000 MW by 2040, needing about $26 billion
• African Development Bank pitches Adaptation Benefits Mechanism, estimating it could raise $100 billion a year from emitters

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AIIB: Public Money Alone Won't Close the Gap

The basics: The New Collective Quantified Goal, or NCQG, is the climate finance target countries adopted at COP29 in Baku. Sophie De Coninck, Director, Means of Implementation, UNFCCC secretariat, opened the session by recalling its terms: "Two years ago in Baku, the parties agreed on the new NCQG with the first goal of $300 billion by 2035 to developing countries, with developed countries taking the lead." The goals she referenced run from $300 billion to $1.3 trillion by 2035.

Why it matters: The keynote speaker was Ajay, Vice President, Asian Infrastructure Investment Bank (AIIB). He said the real money sits with pension and insurance funds, which hold more than $100 trillion. Reaching that money, he argued, depends on host governments. Investors, he said, "actually need clear rules, the stable regulations," along with bankable projects.

Where things stand: All multilateral development banks (MDBs) together provided $103 billion in climate finance to low- and middle-income countries in 2025. AIIB has invested more than $80 billion across more than 380 projects since 2016, and about 70% of that counts as climate finance.

The AIIB vice president focused on climate policy-based financing, which ties lending to policy reforms rather than to individual projects. "In 3 years, we have done $4.3 billion of climate policy-based lending to the various countries," he said. That total includes $1.6 billion for Türkiye, approved just before COP31.

He also described MDBs guaranteeing each other's exposure. His cross-border example was a 600 MW wind project in Lao PDR that sends most of its power to Vietnam.

Decisions and stakeholder impacts: The keynote was informational, and no action was taken. The model favors institutional investors looking for predictable, bankable deals. It puts the burden on borrowing governments to write rules investors trust. MDBs would carry more of the risk-sharing through guarantees, including guarantees of each other.

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Tanzania Sends Climate Money to Communities

Why it matters: Hawa Mwechaga, National Climate Change Coordinator, Prime Minister's Office of the United Republic of Tanzania, said only a small share of climate finance aimed at subnational levels actually reaches communities. Tanzania's answer is to route funds through local governments.

Where things stand: Tanzania built the Scaling Up Locally Led Climate Action program (SCALE) with the World Bank. Communities identify their own climate risks and priorities, which are tied to the country's nationally determined contribution (NDC) under the Paris Agreement and its Vision 2050 plan. The money then flows to local government authorities.

The results she reported:

• 65 local authorities have been verified as performing well.
• "We come up with more than 500 subprojects within 6 months," said Mwechaga.
• Climate budget tagging is underway with GIZ and Danida.

What she wants at COP32: Moderator Gianpiero Nacci, Managing Director for Climate Strategy and Delivery, European Bank for Reconstruction and Development, asked about expectations for Addis. Mwechaga listed four priorities:

• Clean cooking, with an 80% adoption target under a 2024–2034 strategy
• Community carbon markets
• Protecting more than 60.5 million hectares of community forest by 2030
• Restoring wetlands

Her central request was about how money arrives. "Projects are fine, but let us think of a programme," she said.

Decisions and stakeholder impacts: No action was taken. The model gives local authorities and residents direct control over climate spending. Program-based financing would ask donors such as the World Bank, GIZ and Danida for longer, steadier commitments in place of one-off project grants.

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Bhutan Opens Its Grid to Outside Developers

Why it matters: Bhutan exports surplus hydropower to India in summer and imports electricity in winter. Yeshi Lendup, Senior Economist, Ministry of Finance of Bhutan, said that seasonal swing is pushing the country into solar, wind, biomass and hydrogen.

Where things stand: "We have liberalized where we have opened for any developer, particularly in terms of solar," Lendup said.

The new rules work in two tiers:

• Solar: open to full individual or foreign ownership.
• Large hydropower: projects above 100 MW must partner with a state-owned company.

The World Bank is backing a 1,125 MW hydropower project worth $1.7 billion. Other financiers Lendup named are the Asian Development Bank (ADB), OPEC, the European Investment Bank (EIB) and the Kuwait Fund.

To protect the national budget, projects use special purpose vehicles (SPVs) and non-recourse structures. In a non-recourse deal, lenders are repaid from project revenue rather than by the government. Developers, in turn, are asking for long-term power purchase agreements (PPAs) and set tariffs.

What's next: "We have actually laid a plan of 25,000 megawatts by 2040, and where we need financing of around $26 billion," Lendup said. He invited developers to engage and pointed to Bhutan's green finance taxonomy, Bhutan Climate Fund and carbon registries.

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AfDB Floats a $100 Billion Adaptation Mechanism

The basics: Gareth Phillips, Manager, Climate and Environmental Finance Division, African Development Bank (AfDB), said the Adaptation Benefits Mechanism is meant to do for adaptation what the Clean Development Mechanism did for emissions reduction.

Here is how it would work:

• Adaptation projects would be certified for the benefits they deliver.
• Those certified benefits would be sold.
• Proceeds would replenish grant funding that is reinvested to scale up projects.

Where things stand: The mechanism would operate under Article 6.8 of the Paris Agreement, a non-market track. Phillips said that means no profit element is allowed, and the mechanism is not yet operating.

His estimate is conditional: "If 25% of global emitters contributed $10 per tonne of CO2 emissions, that would mobilize $100 billion a year," said Phillips.

Host countries would issue letters of approval. That would let the money be reported as adaptation finance through the enhanced transparency framework and count toward the NCQG. Nacci noted that countries at a biennial climate finance event had suggested carbon markets as a way to bridge the gap.

Decisions and stakeholder impacts: The pitch would send money directly to adaptation project costs, with no margin for intermediaries. Its scale depends entirely on how many emitters choose to pay, and no one has committed.

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Minor Items

• EIB bond initiative: Effie Hesjmid, Head of the Policy and Impact Unit, European Investment Bank, said the Global Green Bond Initiative aims to mobilize up to $20 billion in private capital. It is backed by a fund of over €1 billion from the EU, EBRD, the Green Climate Fund, Luxembourg and other investors, and Amundi manages it. She said the first bonds have launched but gave no details.
• Cambodia's farm lending: Zodi Tai, Director of Green Finance Department, Agriculture Rural Development Bank (Cambodia), described two programs. One is an IFAD-funded effort building markets for smallholder farmers. The other is the $100 million Cambodian Climate Financing Facility, funded by the Green Climate Fund, which covers renewables, efficiency, sustainable agriculture and forestry, low-emission transport and water.
• Why this panel: Nacci said the session followed a UNFCCC–MDB dialogue the day before. "The idea was to start a dialogue on how we can connect better the financial instruments," he said.

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Looking Ahead

Panelists named their scaling priorities ahead of COP32 in Addis:

• Faster project processes: urged by Tai.
• Exit strategies: "we need to consider about how to make it sustainable. So it's about exit strategy," Tai said.
• Program-based financing: Tanzania's central ask.
• Emitter contributions for adaptation: the basis of the AfDB mechanism.