By linking financial rewards to climate objectives, Results-based Finance (RBF) enables innovative financing arrangements that can accelerate funding from the private sector. The idea that results-based finance can contribute to achieving long-term climate objectives is not new. What is novel is combining financing models, indicators linked to climate performance, and partnerships to create new investment alternatives that improve public spending and attract the private sector towards low-carbon transitioning efforts. This is especially important considering the limited funding available from the public sector, especially in emerging markets where COVID-19v is exacerbating debt burdens.
RBF interventions are well suited to target sectors most affected by COVID-19, while reducing risk and pressure for public spending. While RBF has significant potential to reduce costs and improve project delivery, it also faces important challenges related to implementation. To maximize RBF success, support is needed throughout the project design and development phase.
RBF is an exciting opportunity to innovate on public procurement, mobilize private finance, and contribute substantial climate and economic impacts. This report assesses the potential for Results-based Finance (RBF) to expand postCOVID-19 recovery funds while improving sustainability efforts.