Sustainability Atlas
Policy, Standards & Strategy·12 min read··...

Explainer: Public-private partnerships & climate governance — the concepts, the economics, and the decision checklist

A practical primer: key concepts, the decision checklist, and the core economics. Focus on unit economics, adoption blockers, and what decision-makers should watch next.

In 2024, global climate finance crossed a historic threshold: for the first time, total investment exceeded $2 trillion annually, with private sector contributions surpassing $1 trillion—outpacing public finance for the first time in history (Climate Policy Initiative, 2025). This milestone reflects a fundamental shift in how nations approach decarbonization. Public-private partnerships (PPPs) have emerged as the primary architecture for channeling these unprecedented capital flows, blending government de-risking mechanisms with private sector efficiency and scale. Yet despite this progress, the $6.9 trillion annual investment required by 2030 to align infrastructure with Paris Agreement targets remains far out of reach. Understanding how climate PPPs function—their economics, governance structures, and decision frameworks—has become essential knowledge for engineers, policymakers, and sustainability professionals navigating the energy transition.

Why It Matters

The math of climate investment is unforgiving. Developing nations alone face a $15 trillion infrastructure shortfall, requiring approximately 4.5% of GDP annually for climate-aligned infrastructure investment (World Bank, 2024). Traditional public finance mechanisms cannot close this gap. Multilateral Development Banks (MDBs) delivered a record $125 billion in climate finance in 2023, while National Development Banks (NDBs) committed $268 billion in 2022—impressive figures that still represent only a fraction of total need.

Public-private partnerships address this capital gap through risk-sharing structures that make projects bankable for commercial investors. When structured effectively, each dollar of concessional (below-market-rate) public capital mobilizes approximately $2.65 in private investment, according to Convergence's State of Blended Finance 2024 report. This leverage ratio has improved from historical averages of $2.2, reflecting increasingly sophisticated partnership structures.

Beyond capital mobilization, PPPs bring operational advantages. Private partners typically assume design, construction, financing, and operations responsibilities, while public partners manage regulatory and political risks. Contract durations of 25-30 years provide the predictability investors require for long-payback infrastructure. Revenue can derive from user fees, taxpayer funding, carbon credits, or product sales—allowing flexibility across sectors from renewable energy to water infrastructure.

For cities specifically, the stakes are concrete: CDP reports that 1,706 climate projects disclosed through their tracking platform in 2024 represent $86 billion in investment needs—a 23% increase from 2023. Of these projects, 86% are actively seeking funding, with 40% of emerging market projects requiring full financing.

Key Concepts

Blended Finance

Blended finance combines concessional capital from public or philanthropic sources with commercial finance to de-risk investments and attract private capital at scale. The concessional component typically absorbs first-loss positions or provides guarantees that reduce investor risk to acceptable levels. Climate blended finance reached $18.3 billion in 2023—a 120% increase from $8 billion in 2022—with six individual deals exceeding $1 billion, equal to the previous five years combined (Convergence, 2024).

Just Energy Transition Partnerships (JETPs)

JETPs represent a specific PPP model designed for coal-dependent emerging economies. Over $50 billion has been mobilized across partnerships with South Africa ($12.8 billion), Indonesia ($20 billion), Vietnam ($15.5 billion), and Senegal ($2.7 billion). These partnerships aim to accelerate coal phase-outs while addressing social equity concerns through worker retraining and community support programs.

Climate Governance Frameworks

Effective climate PPPs require governance structures that clearly allocate risks, define accountability, and ensure transparency. The World Bank's Climate Toolkits for Infrastructure PPPs (CTIP3), published in 2024, provides sector-specific guidance for wind/solar, hydropower, transport, water/sanitation, and digital infrastructure. These frameworks integrate climate risk screening and adaptation requirements from project inception through operations.

Sector-Specific KPI Benchmarks

MetricBaseline RangeTarget RangeMeasurement Frequency
Private Capital Mobilization Ratio1:0.4 - 1:2.21:2.5 - 1:4.0Annual
Grant Share of Total Financing1.5% - 4%>15%Per Deal
Project Development Timeline24 - 48 months12 - 18 monthsPer Project
Emissions Reduction per $M Invested500 - 2,000 tCO2e>5,000 tCO2eAnnual
Community Benefit Distribution5% - 15% of revenue>25% of revenueAnnual
Adaptation Finance Share6% - 8%>50%Annual

What's Working

Scaled Blended Finance Platforms

The GAIA Platform, announced at COP29, represents a new model for aggregating climate investments. With $1.48 billion in commitments and the Green Climate Fund serving as first-loss investor, GAIA targets high-impact adaptation and mitigation projects across 25+ emerging markets. The parallel GAIA Partnership—combining FinDev Canada, MUFG Bank, the Green Climate Fund, and Climate Fund Managers—mobilized an additional $1.26 billion for developing country projects.

These platforms address a persistent challenge: transaction costs for individual climate projects often exceed investor appetite, particularly for smaller deals. By aggregating projects and standardizing due diligence, platforms reduce per-project costs while maintaining quality.

Renewable Energy PPPs in India

India has emerged as a global leader in climate PPPs. The government allocated $2.2 billion for green hydrogen capacity (5 million metric tonnes) and 125 GW of renewable energy, attracting over $200 billion in private sector pledges. The Production Linked Incentives scheme has drawn $8 billion in private investment for EVs, renewables, and battery manufacturing. India's net-zero transition is projected to generate 50 million jobs with economic impact exceeding $15 trillion (World Economic Forum, 2024).

Improved Mobilization Ratios

Climate blended finance efficiency has meaningfully improved. Private sector investment in climate deals increased approximately 200% in 2023, while commercial financing from DFIs and MDBs rose 60%. Institutional investor financing rebounded to $870 million, with 60% of all institutional investor blended finance deals over the past three years focused on climate outcomes.

What's Not Working

Grant Scarcity and Debt Burden

The most significant structural flaw in current climate PPPs is the scarcity of grant financing. Across JETPs, grants represent only 1.5-4% of total financing—the remainder comes as loans or equity that increase recipient country debt burdens. Indonesia's JETP has approved only $153 million in grants (1.5% of total), while South Africa's grant share stands at approximately 4%. This structure contradicts the "common but differentiated responsibilities" principle of climate finance, effectively requiring the most vulnerable nations to borrow their way to decarbonization.

Political Volatility and Donor Reliability

The U.S. withdrawal from JETP commitments in early 2025 exposed the fragility of donor-dependent models. The withdrawal removed approximately $1 billion from South Africa's partnership and created uncertainty across all JETPs. While other donors (notably Germany, which increased its commitment to $1.8 billion) partially offset the loss, the episode undermined confidence in long-term partnership reliability.

Implementation Delays

South Africa has decommissioned only one coal plant (Komati) since launching its JETP in 2021, with others delayed due to energy security concerns. Indonesia's situation is more problematic: captive coal power capacity nearly quadrupled from 5.5 GW (2019) to approximately 20 GW (2025), making it the only JETP country actively expanding fossil fuel capacity. The draft national electricity plan (RUKN 2024-2060) outlines over 20 GW of new fossil capacity, directly contradicting JETP objectives.

Adaptation Finance Gap

While mitigation deals ($10.5 billion in 2023) dominate blended finance, adaptation received only $1.2 billion—despite adaptation needs projected to reach $359 billion annually by 2030. The adaptation finance gap reflects both measurement challenges (adaptation benefits are harder to quantify) and return expectations (adaptation projects rarely generate commercial returns).

Key Players

Established Leaders

Green Climate Fund (GCF): The world's largest dedicated climate fund, with $13.6 billion pledged from 34 countries for 2024-2027. GCF serves as anchor investor in major blended finance platforms and has allocated $7.3 billion specifically to adaptation projects.

World Bank Group: Through its Climate Toolkits for Infrastructure PPPs and direct lending, the World Bank has become the primary technical standard-setter for climate PPPs. MDB-NDB collaboration facilitated by World Bank frameworks exceeded $100 billion from 2014-2024.

Climate Policy Initiative (CPI): The leading data and research organization tracking global climate finance flows. CPI's Global Landscape of Climate Finance reports provide the authoritative baseline for understanding public and private capital trends.

Emerging Startups

Pollination: Founded in 2019, this climate investment and advisory firm launched Climate Asset Management (joint venture with HSBC) with approximately $1 billion in assets targeting natural capital and nature-based carbon opportunities. Their 2024 Climate and Nature Impact Venture Fund focuses on early-stage Australian and OECD climate tech.

South Pole: A social enterprise recognized by the World Economic Forum's Schwab Foundation, South Pole has developed nearly 1,000 projects across 50+ countries, reducing over 1 gigaton of CO2 emissions since 2006. Their Impact Funding platforms structure tailored investment vehicles for governments and corporates.

Convergence: The global network for blended finance, maintaining a database of 1,233 transactions totaling $231 billion. Their State of Blended Finance reports provide essential market intelligence for structuring climate partnerships.

Key Investors and Funders

HSBC: Through Climate Asset Management and direct sustainable finance commitments, HSBC has positioned itself as a leading private sector participant in climate PPPs, targeting $6 billion across multiple funds.

Breakthrough Energy Ventures: Bill Gates' climate investment vehicle provides patient capital for early-stage climate technologies, often serving as anchor investor that attracts follow-on private capital.

European Investment Bank (EIB): The EU's lending arm committed €28.6 billion in public climate finance in 2023, mobilizing an additional €7.2 billion in private finance through blended structures.

Examples

South Africa JETP Implementation

South Africa's Just Energy Transition Partnership, launched in 2021 with an original $8.5 billion pledge (now $12.8 billion), provides the most developed case study for JETP implementation. The October 2024 launch of the JET Funding Platform matches projects with funders through standardized processes. With 133 GW of private renewable energy projects in pipeline and significantly improved load-shedding conditions since 2023, South Africa demonstrates both the potential and limitations of the model. The partnership's governance structure—with the energy minister chairing the JET Inter-Ministerial Committee—provides clear accountability while quarterly monitoring reports track GHG reductions, jobs created, and community engagement. However, the total investment need of $98.7 billion (2023-2027) far exceeds pledged amounts.

Ghana Climate Prosperity Plan

Unveiled at COP29, Ghana's Climate Prosperity Plan targets $76 billion in economic gains by 2050 through integrated PPP, blended finance, and green finance structures. The plan includes the Akosombo Net-Zero Industrial Park ($105 million through PPP, equity, concessional debt, and grants)—Africa's first net-zero industrial park—and Wahu Mobility ($100 million for electric vehicle adoption and manufacturing). This model demonstrates how smaller economies can structure comprehensive climate prosperity strategies using PPP frameworks.

UNDP Carbon Payments for Development (CP4D) Facility

Launched in 2024, the CP4D Facility catalyzes innovative PPPs that reduce emissions while achieving Sustainable Development Goals. The facility structures results-based financing where carbon credit revenue flows to project developers upon verified emissions reductions. This approach addresses the grant scarcity problem by creating self-sustaining revenue streams rather than relying on donor contributions.

Action Checklist

  • Assess current project pipeline for blended finance eligibility using Convergence database benchmarks and World Bank CTIP3 screening tools
  • Map applicable governance frameworks (national NDC requirements, Article 6.2 carbon market provisions, sector-specific regulations) before structuring partnerships
  • Structure risk allocation to place regulatory/political risks with public partners and operational/construction risks with private partners
  • Integrate community benefit requirements (target >25% revenue distribution) and just transition provisions from project inception
  • Identify concessional capital sources (GCF, bilateral DFIs, national climate funds) for first-loss positions before approaching commercial investors
  • Establish monitoring and verification systems aligned with emerging MRV standards for both emissions reductions and social outcomes
  • Build contingency provisions for donor withdrawal or policy changes based on JETP experience

FAQ

Q: What is the typical timeline for structuring a climate PPP? A: Current benchmarks show 24-48 months from concept to financial close, though target timelines of 12-18 months are achievable for standardized project types with experienced partners. The World Bank's CTIP3 toolkits aim to reduce timelines by providing pre-structured frameworks for common project types.

Q: How do climate PPPs differ from traditional infrastructure PPPs? A: Climate PPPs integrate emissions reduction and climate resilience requirements throughout the project lifecycle, typically include community benefit provisions aligned with just transition principles, and often involve carbon credit revenue streams. They also require climate risk screening that traditional PPPs may lack. Contract structures must address evolving climate regulations and carbon pricing mechanisms.

Q: What makes a project "bankable" for private climate investors? A: Private investors require predictable revenue streams (user fees, power purchase agreements, or carbon credit offtakes), clear regulatory frameworks, manageable currency and sovereign risk, proven technology, and creditworthy offtakers. De-risking instruments from DFIs—including guarantees, first-loss provisions, and political risk insurance—can bridge gaps where these conditions are not fully met.

Q: Why is adaptation finance so underfunded compared to mitigation? A: Adaptation projects typically lack the commercial revenue streams (electricity sales, carbon credits) that make mitigation projects attractive to private investors. Adaptation benefits—reduced flood damage, improved agricultural resilience—accrue to communities rather than generating investor returns. Closing this gap requires either larger grant components or innovative structures that monetize adaptation outcomes.

Q: How can smaller organizations participate in climate PPPs? A: Aggregation platforms like GAIA allow smaller projects to access blended finance structures through bundled approaches. Technical assistance facilities from GCF and bilateral DFIs support project preparation. For engineering firms, participation often comes through EPC (engineering, procurement, construction) contracts with the private SPV (special purpose vehicle) rather than direct partnership roles.

Sources

Topics

publicprivatetransition planSEC climate rulescomplianceriskLCA

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