Scaling Climate Finance in Emerging Markets

Written by Jenny Liu, Yale College '26

I recently attended an event on “Scaling Climate Finance in Emerging Markets” as part of a series of events with the 2026 Yale Climate Fellows. I went in expecting to hear about new funding commitments or innovative financial instruments. And while that certainly was true, I left thinking more broadly about governance, institutional credibility, and the systems that determine how/when money actually moves into climate projects.

Speakers included Lolade Awogbade, Sustainability Specialist at the Development Bank of Nigeria (DBN); Tashmeem Muntazir Chowdhury, Head of Sustainable Finance at BRAC Bank; and Jiahui Lu, VP of Towngas Smart Energy and GM of Towngas Green Power. Though they all spoke on their unique experiences in their roles, there was a central, consistent message: climate ambition is not the constraint; the constraint is in the way current systems (or lack thereof) are.
 

Below are some other key takeaways from the event:
 

1. The constraint is institutional trust, not a lack of innovation.

Awogbade, who oversees sustainability at the Development Bank of Nigeria, spoke candidly about the disconnect between global climate finance pledges and what actually reaches Africa. On paper, millions of dollars–190, to be exact–are earmarked for emerging markets each year. In practice however, only about 20-25% actually flows into African economies.
 

It’s not that Africa lacks viable renewable energy or climate resilience projects. In fact, sectors like renewable energy, smart agriculture, and resilient infrastructure are full of opportunity. The challenge instead is that many international investors do not yet have sufficient confidence in the governance and risk management systems of local institutions.
 

She described conversations that often began with excitement but stalled once investors begin probing deeper into transparency, risk investigation strategies, and financial reporting standards. At that point, enthusiasm gives way to hesitation. There is not a lot of room to inspire trust.

DBN’s own trajectory illustrates what it takes to break through that hesitation. By strengthening its governance structures, tightening its risk management frameworks, and aligning its operations with international standards, DBN became a Direct Access Entity (DAE) to the Green Climate Fund [1]. DBN, as Awogbade says, was “able to go through key frameworks, justifying why that GCF could trust us in terms of our government structures.” The result is that DBN can now access blended finance and channel concessional funding into Nigeria’s financial system.
 

2. Ethiopia’s financing of the Grand Renaissance Dam is a great success story.
 

Ethiopia’s financing of the Grand Renaissance Dam is a great domestic financial success story and an example of what can happen when Africa starts “creating financing mechanisms on our own,” as Awogbade points out. After being repeatedly turned away by international lenders due to perceived risk and governance concerns, Ethiopia turned inward. The country mobilized capital from various sources, be it green bonds or even crowdsourcing for individual donations, to fund the dam. Today, the project not only addresses local electricity issues but also allows Ethiopia to export power to the rest of the region. This is empowering and a means of energy security.
 

There’s an important distinction here: the point is not anti-international finance. Indeed, international financing is crucial to making some projects pencil. Rather, it is that emerging markets should not assume that external capital is the way to go without considering capacity-building for domestic capital. Domestic capital may even achieve what international investors may be reluctant to support.
 

One may wonder then: climate finance may not just be a global trade issue, but a sovereignty question. Who defines risk? Who controls capital? Who decides what is bankable?
 

3. Climate Finance can be thought of as cash flow engineering.
 

Jiahui Lu of Towngas Smart Energy shifted the conversation from development banking to capital markets. Coming from an investor perspective meant his framing was more direct: climate finance is ultimately about future cash flows. Who pays the cash bill, where, and why? What’s the cost of the risk?
Renewable projects in China used to operate under relatively predictable pricing regimes. Over the past few years though, the shift in the power market has introduced hourly price volatility, grid constraints, and settlement risks. As a result, revenue streams that were once more stable are now less so. From investors, uncertainty translates directly into higher risk premiums or reluctance to invest.
 

Lu aptly described the need to “reengineer” renewable cash flows. This means building up the credibility of the cash flows and how the risks can be allocated among different parties. What stuck with me is the way he emphasized that a lack of capital is not the problem, but standardization is. Financial markets require clarity about revenue composition, curtailment risks, and payment timelines before capital can flow efficiently.
 

4. A dedicated climate finance taxonomy is key to large-scale capital investment.
 

Head of Sustainable Finance at BRAC, Bangladesh’s top-rated sustainable bank, Tashmeem Muntazir Chowdhury spoke from the perspective of one of the world’s most climate-vulnerable countries. Bangladesh contributes only 0.4% of global emissions yet is the seventh-most vulnerable country to be affected by climate change.
 

Though BRAC started from humble beginnings, it is now Bangladesh’s top-rated bank and owns 3.6% of market share and roughly 80% of sustainable finance in their portfolio. They also have been growing infrastructure internally; it established a Sustainable Finance Unit, worked with many Micro, Small, and Medium Enterprises (MSME), issued Bangladesh’s first social bond, and published disclosures aligned with IFRS S1 and S2 standards. This refers to the International Sustainability Standards Board (ISSB)’s first ESG standards, which signals a new chapter of International Finance Reporting Standards (IFRS). These focus specifically on climate-related risks and opportunities [2]. These reporting standards are not glamorous, but they send a signal to international investors that climate risks are being measured and managed systematically.
 

That being said, BRAC still lacks a dedicated climate finance taxonomy. This gap will be a significant challenge to prioritize in the coming years.
 

Looking Ahead
 

Emerging markets are not short on ambition or even capital in the abstract. They are short on standardized systems that make risk legible to investors. As a student working in climate and energy research, I found myself thinking about the role academia can play here. Research institutions can help develop taxonomies, improve risk modeling, and create better data systems. Those contributions may seem technical, but they directly influence whether climate capital scales.
 

In that sense, climate finance is less about writing bigger checks and more about constructing systems that make those checks possible in the first place.