1. Lowering the Cost of Capital for Climate and SDG Finance in Emerging Markets and Developing Economies (EMDEs)
- Author:
- Jeffrey Sachs, Lisa Sachs, Ana Maria Camelo Vega, and Bradford M. Willis
- Publication Date:
- 04-2025
- Content Type:
- Special Report
- Institution:
- Columbia Center on Sustainable Investment
- Abstract:
- Today, the world’s fastest-growing economies face the steepest borrowing costs — even for clean energy projects with solid fundamentals. This is not a function of global capital scarcity. Trillions are available. The problem lies in systemic barriers that prevent capital from flowing to where it’s most urgently needed. The high cost of capital in EMDEs not only undermines critical financing for the energy transition and sustainable development; it also limits the ability for US- and EU-based financial institutions to invest in and finance projects in EMDEs, despite institutional and stakeholder appetite and interest for transition finance. This paper provides a holistic diagnosis of the structural forces inflating the cost of capital in EMDEs – including sovereign credit ratings, investor risk perceptions, development finance mandates, and regulatory norms – and it outlines ten actionable solutions to unlock long-term, affordable finance for climate and sustainable development – at the speed and scale required by both global goals and national ambitions. Each of the proposed approaches deserves careful discussion, consideration, and exploration; they are presented in this paper as a roadmap for discussion, including in the context of relevant global discussions on financing climate action and sustainable development, including the UN Financing for Development Agenda, the UNFCCC COP process, and the G20 Sustainable Finance Working Group.
- Topic:
- Development, Emerging Markets, Climate Finance, Sustainable Development Goals, and Capital
- Political Geography:
- Global Focus