New York Climate Week 2025 has marked a shift in the financial debate. The focus is no longer limited to decarbonisation and mitigation; investors and policy-makers are now confronting the harder challenge of financing resilience and adaptation measures, particularly in emerging markets.
In 2024, collective climate financing by multilateral development banks reached a record $137bn, with $85.1bn being committed in low- and middle-income countries. Within those economies, 69% ($58.8bn) went to mitigation and 31% ($26.3bn) to adaptation.
At this year’s gathering, OMFIF convened two roundtables – one with MDBs to discuss blended finance, and one on financial strategies for physical risk. Together, they framed one of the week’s central themes: how to close the gap between climate ambition and the financial system’s capacity to deliver capital at scale.
MDBs and blended finance
Private capital is indispensable to meeting global climate investment needs, which the International Energy Agency estimates at more than $4tn annually by 2030. Yet investors remain highly sensitive to risk perception. Adaptation projects in particular suffer from uncertain revenue streams and limited comparability across markets.
Participants at the OMFIF roundtable underlined the evolving role of MDBs as market architects rather than simple lenders. Their involvement in raising the capital necessary to fund climate-related projects helps to calm investors’ nerves when it comes to high-risk ventures.
Blended finance is central to efforts to crowd in private capital. First-loss tranches, guarantees, subordinated debt and technical assistance are being deployed to absorb political, regulatory or early-stage risks. The Asian Development Bank, for example, has used such structures to unlock commercial financing for wind and solar projects across Asia. The principle is straightforward: use scarce concessional capital strategically to mobilise private investment.
The ambition now is to move beyond isolated transactions to system-level mobilisation. The World Bank has set a target of leveraging at least $3-$4 of private capital for every dollar of public money. Meeting that ratio will require predictable pipelines, standardised frameworks and closer alignment with national regulatory regimes.
Signalling confidence
MDBs provide more than capital. Their participation signals political support, rigorous due diligence and governance oversight. That reassurance is often decisive for institutional investors such as pension funds and insurers.
This is reinforced by the fact that MDBs carry much of the cost of project verification and monitoring. They fund feasibility studies, environmental, social and governance impact assessments, and compliance checks that would otherwise fall to private investors. These activities reduce information asymmetry, lower transaction costs and improve transparency. The result is a stronger confidence signal to commercial lenders, who can rely on MDB due diligence as a benchmark of project quality.
Mechanisms include first-loss buffers, guarantees against convertibility or regulatory change and technical assistance to strengthen project preparation. MDB involvement also imposes higher disclosure and ESG standards, raising the overall credibility of projects. Together, these elements often make the difference between a project being unbankable or investment-ready.
So far, institutional capital has tended to flow into mature mitigation sectors such as renewables or dual-benefit projects that combine mitigation with resilience. For adaptation to scale, investors require bankable models, credible exit options and a degree of standardisation. MDBs and governments must therefore focus not just on de-risking but also on replicability, so that investors can assess projects across geographies with confidence.
Transition Finance Working Group
Pension and sovereign funds have an important part to play here, too. Their long-term horizons and mandates to provide for their beneficiaries for decades to come mean that sustainability is a crucial consideration for the companies and projects they invest in.
In 2024, OMFIF established the Transition Finance Working Group to examine the outlooks and funding priorities for these institutions, digging into the concerns and challenges they face in financing the transition. We conducted bilateral interviews with a group of funds representing more than $5tn in assets under management. The conclusions of these conversations were published in a report that published at COP29.
This year, the working group has returned to assess how the landscape has changed over the past 12 months, particularly against the backdrop of geopolitical trends and a new US administration. OMFIF has partnered with Moody’s Ratings and MSCI to interrogate what transition finance looks like for both developed and emerging markets and to ask what needs to be done to surmount new and existing challenges in this space.
Over the last year, we have found that the focus has changed from why transition finance is an important tool in pension and sovereign funds’ arsenals to how they ensure capital is being scaled up and directed to the regions and sectors that need it most. Each of the conversations stressed the value of blended-finance approaches, particularly when it comes to adaptation and resilience, as well as credible transition plans and regulatory support from governments. The results of these conversations will be published in a research report on 6 November.
Climate Week 2025 showed that the architecture of global finance is beginning to reflect these changing realities. The test now is whether the momentum translates into scaled investment flows, particularly in emerging markets where resilience needs are greatest. Success will depend on MDBs and investors mobilising private capital effectively, regulators creating stable frameworks and rating agencies embedding forward-looking climate risk in their methodologies. Only then will financial markets fully align with the economic imperative of climate resilience.
Ben Rands is Managing Director of Corporate Development, Operations and Marketing and Sarah Moloney is Editorial Director at OMFIF.
Join OMFIF on 6 November for the launch of the next Transition Finance Working Group report.
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