About This Opportunity
Advancing national climate action lies in comprehensively assessing the costs and benefits of NDC actions, and providing the evidence base to explain how investments will mitigate greenhouse gas (GHG) emissions, help countries adapt to climate impacts and build resilience in line with national development priorities. Moreover, enhancing understanding of investment needed for transformational climate action empowers national governments to allocate resources judiciously, maximize the impact of investments, and drive progress towards achieving their climate targets.
Evidence, data, and the science behind the prioritization of sectors in the NDC should inform the unlocking of investments. Additionally, evidence-based processes developed before the NDC should be leveraged to inform NDC updates.
While the NDC itself is not an investment plan, it can provide information and direction-setting to inform a country’s investment priorities. It is important that countries consider the development of an implementation plan and an investment plan in tandem with their NDC 3.0 to further detail and plan out the support and finance needed to achieve their NDC targets. Once the full spectrum of investment needs for updated and more ambitious NDCs 3.0 is understood, including typology and quantity, national governments can begin to strategize on financial resource allocation. This involves determining where financing flows should be directed to maximize impact and ensure the effective implementation of NDC targets.
The following strategies could help to implement this Opportunity:
The following strategies and enablers can help to facilitate comprehensive assessments and informed decision-making:
Undertaking a cost-benefit analysis of targets and actions in the NDC:
Estimating the costs and benefits of actions in the NDC can help decision-makers to understand wider implications of climate action and identify potential financing gaps. Costing NDCs involves considering various cost components, such as the capital costs required for infrastructure, technology, and other initiatives, as well as operational and maintenance expenses necessary to sustain and optimize these investments over time. Costing serves as the foundation for cost-benefit analysis, which is a key step in translating climate change risks and opportunities into development, economic and financial terms. This analysis assists in prioritizing specific climate adaptation and mitigation measures compared to a baseline of inaction.
Developing the evidence on how the NDC targets and actions will contribute to mitigation and adaptation efforts:
Applying evidence-based methodologies enables prioritizing the sectors and goals with the highest impact in terms of mitigation and adaptation to climate change. It provides potential financiers such as climate funds, Multilateral Development Banks (MDBs), bilateral donors and the private sector with a clear climate rationale to justify their investments. Additionally, it offers a basis to monitor and report on their climate impact. Suitable methodologies include a Climate Change Risk Assessment (CCRA) for adaptation and GHG emission scenarios for mitigation. See also Route: Technically Sound and Transparent Documents .
Conducting a policy-driven investment needs assessment is an excellent first step for understanding an NDC’s investment needs:
Conducting a policy-driven investment needs assessment is an important first step for understanding and addressing the investment requirements of an NDC. This comprehensive assessment should be informed by evidence, data, and the scientific basis for sector prioritization within the NDC, guiding the unlocking of investments. It typically involves evaluating current implementation levels of NDC actions, identifying key barriers, and determining whether some obstacles are related to capital shortages. If capital constraints are identified as significant hurdles, it is useful to conduct a thorough financial needs assessment and risk analysis. This analysis could consider both present and future financial requirements, sector maturity, and potential investment-related risks, ensuring that financial resources are allocated strategically and with due consideration to risk management. By understanding the root causes of investment challenges, governments can develop targeted strategies to address them effectively.
Understanding investment needs through sectoral and private sector insights:
Enhancing understanding of investment needs entails harnessing sectoral expertise and leveraging insights from the private sector. By engaging technical experts from various sectors, governments can assess technology readiness and evaluate the feasibility of proposed actions. Collaboration with the private sector, including through pilot projects, can provide quantitative data on the costs of actions and associated financial needs. These initiatives offer invaluable insights into unit costs, capital costs, and operational expenses, informed by real-world implementation experiences. Additionally, sectoral targets can be particularly helpful in spurring investments by providing clear, specific goals that guide investment decisions. By integrating sectoral expertise and private sector insights, governments can develop informed investment strategies that prioritize cost-effective solutions and maximize the impact of NDC implementation. See also Route: Mobilizes All-Of-Government and All-Of-Society and Opportunity: Disaggregating Targets Across Sectors and Government Levels.
Undertaking a financial needs and risk assessment:
Undertaking a detailed analysis of financial requirements, considering both present and future investment needs, can help ensure that financial resources are allocated strategically and with due consideration of risk management. This assessment can encompass a risk analysis that evaluates the maturity of the sector and potential risks associated with investment.
Undertaking political economy analysis:
Identifying regulatory bottlenecks and advocating for policy reforms, by assessing existing regulations and policies that may either support or hinder investment in key sectors, governments can create an enabling environment that attracts investment and accelerates progress toward climate targets. Additionally, establishing cross-governmental steering or working groups can facilitate effective consultation and engagement among stakeholders to address regulatory challenges and promote investment-friendly policies.
Establishing communication and engagement processes:
By establishing regular communication channels and mechanisms for interministerial cooperation, governments can mitigate fragmented processes and enhance buy-in from different sectors. This could involve mapping out the public entities linked to investment plans, their mandates, roles, and existing institutional arrangements; as well as fostering strong communication and engagement processes to facilitate collaboration and coordination among relevant stakeholders. See also Opportunity: Ensuring Effective Coordination Across Government.
Tracking progress of evolving investment needs and financial flows:
Recognizing that investment needs will evolve over time, it can be helpful to establish a dynamic approach to continuously updating investment requirements and evaluating climate finance flows. By adopting a domestic “investment cycle” approach that synchronizes activities such as assessing investment needs, updating investment plans, tracking progress, and reporting, governments can maintain an up-to-date understanding of evolving investment priorities and resource allocation. This integrated approach ensures that decision-makers are equipped with the most current information to prioritize financing needs and measures effectively. By streamlining the investment planning process and enhancing alignment between activities, governments can enhance implementation readiness for successive cycles, fostering agility and responsiveness in addressing evolving climate challenges.
Country Examples
Antigua and Barbuda sought assistance from the NDC Partnership to create a detailed investment plan for the mitigation and adaptation measures outlined in the NDC Implementation Plan. This plan was initially developed through the NDC Partnership’s Climate Action Enhancement Package (CAEP) and the country’s Capacity-Building Initiative for Transparency (CBIT). The resulting NDC Financing Strategy and Action Plan reviews the country’s existing capacity to access climate finance, determines the investment needs and gaps in the NDC, prioritizes these requirements, identifies potential sources of finance and suggests policy interventions to overcome obstacles to climate finance. Additionally, it establishes a pipeline of climate investments, including four project concept notes. (Source: Advancing NDC Implementation in Antigua & Barbuda through Investment Planning and Private Sector Engagement, NDC Partnership)
Belize undertook an assessment of the Climate Finance Landscape, specifically evaluating domestic climate finance (both public and private) as well as international sources, to understand where funding is going and what the gaps are. In parallel, the country also conducted an analysis of resource requirements, estimating the financial and human requirements for implementing the NDC’s adaptation and mitigation measures. Initial costs for the financing gap were obtained from policy documents, sectoral strategies, or project documents where available. When unavailable, known costs of activities were scaled or costs were estimated from relevant international or local examples and adjusted to Belize’s context. Stakeholder consultations helped in preparation and validation of cost estimates. For example, stakeholder consultations with the Ministry of Transport resulted in an estimated additional USD 10 million for electric vehicle charging infrastructure costs. The resulting Resource Requirement report lists specific projects which have secured funding and estimates that the funding gap is close to USD 1.4 billion. (Source: Lessons from Belize’s NDC Investment Planning: An Integrated Approach to Accessing Climate Finance, NDC Partnership)
Further Resources
Needs-based Finance (NBF) Project (UNFCCC)
This ongoing project collaborates with partners to facilitate access to and mobilization of climate finance. It focuses on implementing priority mitigation and adaptation measures identified by developing countries, in line with their NDCs, NAPs and other relevant policies. From 2017 to 2023 it supported over 150 country representatives, across 80 countries in eight regions, to assess their climate finance needs and priorities in a country-driven manner and to translate these needs into action.
Climate Investment Planning and Mobilization Framework Stages (CIPMF) (GCF/NDC Partnership, 2023)
This document offers step-by-step guidance for countries to develop and enhance their climate commitments through climate investment plans based on best practices from the NDC Partnership and includes a checklist in the annex summarizing outputs and steps. The guidance is adaptable to each country’s fiscal circumstances, climate ambition, and capabilities.
Integrated Investment Framework for Climate-Adaptive Water Resilient Food Systems (IFAD/NDC Partnership, 2023)
Developed jointly by NDC Partnership and the International Fund for Agricultural Development (IFAD), this resource advocates for global collaboration and investment in climate-adaptive, water-resilient food systems by balancing agricultural productivity with the preservation of nature, biodiversity, and ecosystems.
Methodological Guide for Costing Adaptation Measures of Colombia’s NDC (World Bank, 2020)
This guide outlines specific considerations for different sectors in costing 10 of Colombia’s 2020 NDC goals, providing steps useful for future exercises. It also includes a methodology for prioritizing and costing adaptation goals.
Paying for Paris — A Resource Hub for Climate Finance (WRI)
The Paying for Paris Resource Hub offers a central knowledge base for governments to explore instruments for financing climate goals, suitable for both beginners and experienced practitioners. It includes briefs, readings, and expert video interviews from various fields, including multilateral development banks and ministries.
Assessing the Financial Impact of the Land Use Transition on the Food and Agriculture Sector (UN Climate Change High-Level Champions, 2022)
This report highlights how the coming land use transition will drive a wedge between financial winners and losers in the sector. The thriving companies and investors of tomorrow will be those who move early to align their business models with, and help accelerate, the land use transition – developing and tapping solutions for a net zero, nature positive, resilient food system that could generate up to USD$4.5 trillion of
new business opportunities annually by 2030. Meanwhile, those who fail to act could shortly see billions of dollars of value permanently lost.
Mobilizing Private Capital For Nature To Meet Climate And Nature Goals (UN Climate Change High-Level Champions, 2023)
This paper serves as a companion to ‘Financing Nature Action: A transformative action agenda’, a report by the CGC that aims to inspire collective action across the public, private and philanthropic system to scale and improve nature finance globally.
How This Links to Other Routes
Enhancing understanding of investment needs is fundamentally linked to various routes and opportunities within the broader context of climate action. Navigate to the resources below to learn more:
Route: Aligned to the Paris Agreement Temperature Goal
Identifying investment needs is important for implementing mitigation strategies, prioritizing investments in low-carbon technologies, and advancing emission reduction goals.
Route: Aligned to Paris Agreement Global Goal on Adaptation
Understanding investment needs is important for investing in resilient infrastructure and climate-resilient agriculture, as well as for enhancing resilience to climate risks and vulnerabilities. Appropriate monitoring, evaluation, and learning systems, based on reliable adaptation metrics, can be reviewed and help estimate investment needs.
Route: Delivers a Just and Equitable Transition
Understanding investment needs helps prioritize investments in communities affected by the transition to a low-carbon economy, fostering equitable and inclusive climate action.
Route: Mobilizes All-Of-Government and All-Of-Society
Engaging stakeholders and ensuring broad ownership of investment priorities empowers communities, businesses, and civil society to contribute to decision-making processes and take ownership of climate solutions.
Route: Technology and Capacity-Building as Needs and Enablers
Accurately assessing investment needs enables governments to mobilize funding efficiently and address pressing climate challenges through optimal resource allocation.
Route: Technically Sound and Transparent Documents
Enhancing understanding of investment needs facilitates the development of technically sound investment plans, informed by rigorous assessment of costs, benefits, and risks.
