Leveraging the Private Sector

About This Opportunity

Fostering effective engagement, partnerships, and cooperation with the private sector as early as possible is important to support enhanced ambition and accelerate implementation. Given the right opportunities, businesses and investors, in particular, can play a critical role in meeting climate action priorities by greening their supply chains, investing in climate-resilient infrastructure, goods, and services, and crucially, by financing climate action. The private sector is also an important source of technical knowledge, human capital, and innovation. By working with the private sector, including both large companies, small and medium enterprises (SMEs), micro-SMEs, and informal businesses, the government’s climate change interventions can target changes at multiple entry points across sectors and systems.

Many businesses and investors are setting ambitious climate targets and developing their own transition plans and are actively supporting rapid decarbonization and enhancing resilience. Businesses and investors are directly experiencing climate impacts, associated financial risks, and are responding to the global and national imperative to reduce emissions and build resilience, as well as shareholder and public pressure to act. The commitment and drive to take action, and ability to take action and make changes quickly, as well as directly facilitate the rollout of technologies and skills development needed for ambitious and resilient transitions provides a significant opportunity for national governments to deliver key priorities.

The following strategies could help to implement this Opportunity:

Adopting ambitious global targets and goals to enable businesses and investors to also act ambitiously:

Large multinational businesses operate globally across multiple countries and increasingly look for common commitments and direction of travel across all countries in developing their country investment strategies. Their supply chains and operations are global and responding to different policy and market signals creates challenges. Hence, ensuring a consistent and stable policy environment within individual countries is important and encourages further investments in those countries. In addition, adopting ambitious targets also involves transitioning away from fossil fuels, and related signals for possible energy transition pathways should be part of the NDC. Integrating the highest level of ambition and adopting the outcomes of the GST and the GGA sends a clear message and encouragement to the private sector, including not only large multinational companies but also domestic companies such as small and medium-sized enterprises (SMEs) to adopt ambitious targets and implement robust transition plans aligned with national strategies. (See also “Opportunity: Setting Targets, Including Economy-Wide NDC Targets”, “Opportunity: Raising Ambition Through Setting and Achieving Thematic & Process-Related Targets”)

Including foundational elements of climate investment planning and mobilization

In the climate transition, there will be competition for capital and investment, and countries with the best plans and frameworks may attract more investment. NDCs 3.0 are likely to provide a useful starting point for businesses to understand national economy-wide transition plans and sectoral investment plans. NDCs can send policy and market signals to shift the economics of the transition and change future corporate cashflows and market valuations in order to (re)shape the private sector’s investment decisions. NDCs could refer to such plans as principal implementation documents for the country’s climate and development priorities. Such plans can be updated and adopted in parallel to the NDCs 3.0 and cover fiscal policy incentives and sector-specific policy measures, processes for identifying a robust pipeline of projects, and detailed and plausible capital-raising plans, with frameworks on annual reporting on progress. (See also “Opportunity: Enhancing Understanding of Investment Needs”).

Understanding investment needs through sectoral and private sector insights:

The private sector could be leveraged to provide insights that will enhance understanding of investment needs. Collaboration with the private sector, including through pilot projects, could provide quantitative data on the costs of actions and associated financial needs. These initiatives might offer invaluable insights into unit costs, capital costs, and operational expenses, informed by real-world implementation experiences. By integrating private sector insights, governments could develop better-informed supporting investment strategies that prioritize cost-effective solutions and maximize the impact of NDC implementation.

Engaging with industries to understand and map their needs and priorities:

Channeling investment in technologies, or scaling up or rolling out new approaches, requires the private sector to understand the key levers and enabling environment they are working within. This includes the policies, regulations, guarantees, and other government support required for confident investment in relevant priority sectors. Engaging private sector stakeholders to understand their needs and priorities could help to better ensure that the enabling environment is conducive climate-aligned investment or action. Private sector stakeholders in priority sectors could provide input, via coalitions and neutral forums, on barriers and possible solutions for unlocking investment flows, or technologies for example.

Ensuring there is a clear and consistent policy and regulatory environment:

Businesses and investors require legal and fiscal stability for their investments, particularly, for capital-intensive long-term infrastructure projects. Having favorable and stable enabling environment will enable businesses and investors to have confidence in investing, retooling, training or developing new approaches that respond to and deliver climate actions. An integrated planning approach (See also: “Opportunity: Mainstreaming the NDC in National Planning Processes”) can help to support a consistent and clear policy approach which can help to better identify potential private sector support including financing or technology (See also: “Route: Unlocks Finance” and “Route: Technology and Capacity-Building as Needs and Enablers”).

Including clear targets for private sector contribution:

When setting sectoral targets for emissions reductions, it can be helpful to explicitly mention what the expected contribution from the private sector (e.g., the oil and gas industry and the renewable energy industry and end-use sectors such as transport, buildings and across hard-to-abate industries) is to reach the target. These expectations can create business opportunities and clarify the role of the public and private sector in jointly achieving the targets. By aligning efforts to meet the targets at a national level, both sectors can maximize their impact by adopting complementing strategies (See also: “Opportunity: Disaggregating and Enhancing Targets Across Sectors and Government Levels”).

Working with private sector coalitions in priority sectors to raise ambition:

Many businesses have extensive supply chains both within and outside of countries.Working with business groups and coalitions, both within and outside of countries (e.g., local trade associations, local networks of the UN Global Compact, or WBCSD (for business), SME Climate Hub (for SMEs) or UNEP FI, IIGCC or GFANZ (for investors) globally), to understand collective opportunities and needs, and ways to align business targets and actions with national climate priorities for example, can increase ambition and resilience through supply chains in the country.

Utilising businesses for innovation in value chains, technology transfers, and economic opportunities:

Working with businesses and investors to identify and priorities climate-friendly policies, investments, strategies and actions can lead to development of new value chains and associated local content and other economic opportunities such as job creation and new markets. It can also help to minimize negative consequences and support just and equitable transitions. (See also “Route: Delivers a Just and Equitable Transition”). Furthermore, specific incentives such as tax breaks or subsidies could be used to encourage businesses to adopt sustainable practices or new opportunities.

Setting up efficient and transparent monitoring processes that include data from the private sector:

When establishing or reviewing the monitoring and evaluation process, a system to track the private sector contribution from business data could be incorporated. Relevant data can be found in public sources such as corporate sustainability reports, environmental disclosures, or can be obtained through dialogue with companies. To ensure quality and comparable information, policy actors could require the private sector to report their contributions using internationally accepted and widely adopted business disclosures and reporting frameworks such as the GRI Standards and CDP, and more recently, the work of the International Sustainability Standards Board and efforts to consolidate this through the Net-Zero Public Data Utility (NZPDU) and integrate with the Global Climate Action portal. Collecting this data can provide a fuller picture of the progress as it complements official public data. In addition, aligning national MRV systems with those of the private sector can ensure that the investments and proceeds from the private sector are used for eligible projects, and both use the same type of methodology to monitor, report and verify activities.

Communicating with and educating the private sector:

While many businesses are setting ambitious climate targets, some others do not engage with climate processes. It is also likely that many businesses do not fully understand NDCs and related planning processes, or how they might be impacted by them. Countries could consider communicating clearly the expected contribution from the private sector, as well as setting up monitoring processes and providing appropriate guidance and incentives. Educating private investors on investment opportunities in climate change related sectors and in companies, providing climate change solutions (renewables, waste management, water management, resilient infrastructure etc.) is a further opportunity to enhance private sector engagement and education on climate processes. Ongoing dialogues and exchanges between the public and private sector, as well as directing financial incentives towards, for example, public private partnerships to further engage the private sector and mobilize private investment, can also be considered.

Engage private sector actors for skills development:

Private sector actors, both individual companies as well as trade associations and chambers play an important role in skilling the people needed for successful implementation of NDC goals.

Leveraging private sector transition plans:

Many businesses and investors have also set their own transition plans with highly ambitious targets and look to invest in the countries that are equally ambitious and offer the enabling environment necessary to achieve such targets.  Awareness of such transition plans could help leverage these to achieve national climate and development priorities. The alignment between such national priorities and the private sector plans could enable greater flows of foreign direct investments as well as transfer of technology, knowledge, managerial and operational expertise, and good industry practices into the country.  The finance for the transition could be based on clear, interlinking and interdependent transition plans of countries and private sector as well as those of development banks, regulators, supervisors, and standard setters.

Leveraging expertise and support of multilateral bodies to mobilize private capital at scale:

Multilateral development banks, bilateral development finance institutions and other public sector stakeholders are also in transition and are expected to use their limited public sector resources more effectively to mobilize private capital and investments. Leveraging their country programs and transition plans, as well as their expertise and networks of private sectors companies is also advisable, particularly, for investments and projects that have potential of commercial viability and suitable for blended finance solutions.

Country Examples

Peru’s NDC capital raising strategy: Achieving Peru’s climate change goals will require substantial investment increases across a range of critical mitigation and adaptation sectors. The private sector could play a key role as 70–80% of climate solutions are expected to be more attractive from a risk-return perspective than conventional emissions-intensive alternatives by 2030. However, finance cannot currently flow at the speed and scale required due to both a lack of detailed, concrete, and realistic plans for financing NDCs – and a lack of capacity among key public actors to develop and deploy strategies.

Scaling up of private climate investment was realized through:

  • Identification and sizing of key investment opportunities, covering all seven sectors in Peru’s NDC (power, transport, industry, buildings, forestry, agriculture, waste, and wastewater).
  • Assessment of feasible sources of private finance for each investment opportunity, considering both local and international sources of private capital.
  • Identification of strategies to mobilize additional private capital, setting out the actions that policymakers, investors, and corporations can undertake to address current barriers to investment.

A series of workshops and public-private engagement sessions helped to successfully embed technical knowledge among public and private actors, helping them to understand potential financial sector reforms and other activities needed to promote capital raising for climate action, and therefore help drive climate investment.

Source: “Developing an NDC Capital Raising Strategy for Peru” (UK PACT)

Burkina Faso is receiving support from Climate Analytics and GIZ’s NDC ASSIST II Project through the NDC Partnership to strengthen resource mobilization for NDC implementation by developing bankable projects with key national and sectoral stakeholders. To do so, implementing partners are providing capacity building for staff in central and decentralized technical services, civil society organizations and the private sector on creating adaptation and mitigation project concept notes. Implementing partners support embedding capacity within national stakeholders while also helping develop a portfolio of projects that express technical assistance and funding needs.

Source: “Whole of Society Approaches to Stakeholder Engagement” (NDC Partnership)

Further Resources

The following guidance and tools can provide further support for integrating the private sector into NDCs.

Engaging Business in the NDCs. Policy Recommendations on the Role of the Private Sector and Reporting (GRI and CDP, 2020)
This briefing provides an analysis of the first round of NDCs, and what this means for business action and reporting. It includes recommendations for policy makers and businesses, trends and lessons learned, as well as examples of good practice.

Whole-of-Society Approaches to Inclusive Stakeholder Engagement (NDC Partnership, 2024)
This best practice brief provides guidance and examples on how to apply a Whole-of-Society approach to effectively engage stakeholders in the enhancement, planning and implementation of NDCs.

Caribbean Public-Private Partnerships (PPP) Toolkit (World Bank, 2017)
A document to assist policymakers in establishing partnerships between the public and private sectors to develop climate-friendly infrastructure and to improve service delivery, including climate risk assessment, with a specific focus on Small Island Developing States (SIDS).

NDC Private Sector Engagement Project: Engaging Private Sector in NDC Implementation – Assessment of Private Sector Investment Potential in the Agriculture Sector (UNDP, undated)
This report estimates the private sector investment potential for delivering NDC sectoral targets for the agriculture sector in Paraguay through assessments of the NDC targets, the enabling environment, the current market and Paraguay’s investment potential. Its findings will allow for mapping private sector actors in the agriculture sector, one of the country’s NDC priority sectors.

Strategy to Enhance Private Sector Engagement in Eswatini NDC Actions (Commonwealth Secretariat, 2021)
A resource developed by the Commonwealth Secretariat to support the Government of Eswatini in their NDC revision. It aims to enhance private sector engagement in financing, supporting, and implementing technically sound and financially viable risk-informed mitigation and adaptation actions and therefore contributing to the implementation of Eswatini’s NDC.

How This Links to Other Routes

The private sector can play a key role in all areas, but some specific linkages to other Routes that are particularly relevant include the following. Navigate to these to read more:

Route: Unlocks Finance

The private sector can both directly finance and indirectly finance through new economic opportunities

Route: Delivers a Just and Equitable Transition

The private sector plays a key role in provision of jobs and understanding and distributing economic impacts and opportunities of the transition, as well as maintaining worker’s rights.

Route: Aligned to the Paris Agreement Temperature Goal

The private sector can be a key supporter of adopting and implementing higher global ambition within country commitments.

Route: Aligned to Paris Agreement Global Goal on Adaptation

The private sector can play an important role in helping fill the adaptation finance gap, and is impacted by climate change and responding to climate risks.

Route: Technology and Capacity-Building as Needs and Enablers

The private sector is key to technology transfer and engagement can help to enhance understanding of needs and access to necessary support.

Support Opportunities

Support is available to countries to apply the learning from the navigator and develop ambitious NDCs 3.0.

Share Additional Resources

Contribute new guidance, tools and strategies to be reflected in the NDC 3.0.