As COP31 gets underway, Wendy Walford, Legal & General and Policy Track Co-Lead, NZAOA, says institutional investors need a stronger pipeline of investable climate and resilience opportunities to meet their climate commitments.
Institutional investors need more opportunities to invest in climate solutions and resilience if they are to meet their climate goals. In many cases, private capital is available, but the opportunities are not yet investable. As governments, investors and other key actors head to Antalya for COP31, the focus should be on turning national climate priorities into opportunities that both public and private capital can finance.
NZAOA recently made this case at the Veredas Dialogue, the United Nations Framework Convention on Climate Change (UNFCCC) process examining Article 2.1(c) of the Paris Agreement and how it complements Article 9. Including private finance alongside public finance actors in that discussion was welcome, as both perspectives are needed if the Dialogue is to achieve its objectives.
Two articles, one objective
Article 9 and Article 2.1(c) of the Paris Agreement have distinct but complementary roles. They work together, not as substitutes. Article 9 provides and mobilises support for developing countries. Article 2.1(c) is broader: it is about making all financial flows consistent with low-emissions, climate-resilient development. Meeting that objective requires change across the financial system. That is why the voice of private finance matters in the Dialogue.
The same system-wide logic applies to investability. Investment will only happen when country priorities, policy, project development, public and concessional finance, risk-sharing and private capital all work together.
For NZAOA signatories, this means acting both within portfolios and across the wider financial system. The NZAOA Target-Setting Protocol, the foundational framework used by NZAOA signatories to set and implement their climate objectives, requires near-term targets on emissions, sectors, engagement and financing the transition. Signatories have already allocated roughly US$800 billion to climate solutions. But if more capital is to flow, including to a wider range of markets, policy, regulation, public finance and private capital must move together, through country-led approaches that reflect different development pathways and fiscal circumstances.
What works: aligning policy, revenue and risk
L&G’s recent investment in a clean-cooking outcome bond in Ghana, shows what this can look like in practice. Private investors took part in a US$200 million World Bank bond linked to measurable climate and development outcomes. A carbon credit agreement between Ghana and Switzerland helped create the revenue mechanism behind it. Clean cooking improves health, reduces indoor air pollution and expands energy access alongside its climate benefits.
The deal size matters less than why capital flowed. The framework was credible, the revenue model clear, the outcomes measurable and the risks understandable. Risk was distributed, not removed. Investors took on the credit, duration and market risks they are best equipped to assess. Policy, political and early-stage development risks sat with those well-placed to manage them – including public actors such as the Swiss government. The question is how to create many more opportunities like this.
Two barriers to address
The first barrier is the shortage of investable opportunities at scale. Many countries have ambitious climate plans and significant investment needs, but capital cannot invest in targets alone. It needs opportunities with credible long-term cashflows, sound governance, measurable outcomes and risk-return profiles that meet fiduciary and prudential requirements.
National plans must become investable transition pathways and project pipelines, backed by project preparation, clear implementation plans and support from governments and development banks. Countries should not be expected to build investible pipelines unaided. Supporting project pipelines and institutional capacity is precisely where public and concessional finance can add value.
The second barrier is that risk is not always held by those best able to manage it. Policy uncertainty, currency risk, early-stage development risk and some adaptation-related risks are hard for private investors to absorb alone. When these risks go unaddressed, financing costs rise and capital stays on the sidelines. Guarantees, concessional finance and blended structures can improve investability and affordability. That support should be targeted, transparent and additional, and should not simply shift ordinary commercial risk onto the public sector.
Blended finance also needs to scale. Many structures remain bespoke and slow to assess. Greater standardisation, aggregation and repeatability can cut transaction costs, alongside making opportunities easier for mainstream investors to assess. NZAOA signatories are supporting this through their participation in initiatives such as SCALED, while recognising that there cannot be a single model on national priorities.
Priorities for the next five years
As we gather at COP31, NZAOA sees three priorities for the future of climate finance:
- Turn country-led pathways plans into delivery, with clearer sector pathways, implementation plans, project pipelines and the institutional capacity to deliver them.
- Improve the structures that turn available capital into deployed capital through credible cashflows, effective risk allocation and approaches that work for mainstream investors.
- Keeping Article 2.1(c) and Article 9 clearly complementary. Private finance can bring scale where opportunities are investable, but it cannot replace governments, public and concessional finance or international support.
The COP co-presidencies (Australia and Türkiye) have made it clear that this COP will focus on implementation. From an investor perspective, this means aligning policy, finance, risk and delivery, so that climate and resilience priorities become more investable. Making tangible progress towards this would be a meaningful and achievable outcome from this COP.