Over the past decade, climate and development finance has expanded significantly. New funds have emerged, development finance institutions have strengthened their climate mandates, and philanthropic foundations have increased their support for climate action. In principle, the volume of capital committed to climate initiatives has never been greater.
Yet across many climate and sustainability initiatives, a different experience is being reported by practitioners on the ground. Organisations working to develop climate and just transition projects increasingly find that securing funding is becoming more difficult, not less.
This apparent contradiction reflects an important shift in how climate initiatives are being assessed.
Funding has not disappeared. But the threshold for what is considered fundable has become significantly more demanding.
The Changing Nature of Climate Finance Assessment
Over the past several years, climate projects have begun to face a much deeper level of scrutiny during funding assessments. This is particularly visible in proposals submitted to development finance institutions, philanthropic foundations, and climate-focused investment facilities.
Where earlier project proposals may have been assessed primarily on environmental ambition and alignment with climate objectives, funding institutions are now placing greater emphasis on several additional dimensions.
First, economic positioning has become increasingly important. Even where projects are supported through grant funding, funders are asking more detailed questions about the economic rationale behind the intervention. Projects are expected to demonstrate how they contribute to economic value creation, employment pathways, or local economic development.
Second, implementation credibility is now examined far more closely. Funders want to understand whether the organisations proposing initiatives have the partnerships, governance structures, and operational capacity necessary to deliver results at scale.
Third, risk frameworks have become more sophisticated. Climate initiatives are increasingly expected to demonstrate not only their intended impact, but also how key delivery risks will be managed over the life of the project.
These shifts are not necessarily negative. In many ways, they reflect a maturing climate finance ecosystem that is seeking to ensure that capital is directed toward initiatives capable of delivering meaningful and sustained impact.
However, they do create new challenges for project developers and implementing organisations.
The Emerging Gap Between Ambition and Fundability
One of the most common issues emerging in climate project development today is the gap between project ambition and project architecture.
Many organisations are developing compelling climate initiatives with clear environmental and social objectives. Yet when those initiatives are translated into funding proposals, the underlying project structure often does not fully address the expectations of funding institutions.
This can manifest in several ways.
Economic assumptions may not be clearly articulated. Implementation arrangements may rely on informal partnerships rather than defined institutional roles. Risk frameworks may focus primarily on technical risks while overlooking governance, financial, or delivery risks.
In such cases, the idea behind the project may be strong. But the project itself may not yet meet the threshold that funding institutions require before committing capital.
As a result, promising climate initiatives can stall during proposal evaluation processes, even when they address urgent environmental challenges.
A More Demanding Global Context
These dynamics are also unfolding within a broader global context that is becoming more complex.
Geopolitical tensions, fiscal pressures in major economies, and shifting domestic priorities in donor countries are all contributing to greater caution in how international funding is deployed. Climate finance commitments remain substantial, but institutions are increasingly under pressure to demonstrate the effectiveness and credibility of the initiatives they support.
This is reinforcing the importance of well-structured, investment-ready climate projects.
For organisations working on climate and just transition initiatives, the implication is clear. Success in securing support will depend not only on the strength of the idea, but on the robustness of the project architecture that underpins it.
Strengthening the Design of Climate Initiatives
Addressing this challenge requires a shift in how climate initiatives are designed from the outset.
Project developers need to integrate considerations around economic positioning, implementation credibility, and risk management directly into project design. Partnerships must be structured in ways that demonstrate clear delivery capacity. Financial and institutional arrangements must be transparent and credible.
In short, projects must increasingly be designed with fundability in mind.
Recognising this emerging need, the African Centre for a Green Economy has been engaging with practitioners, project developers, and sustainability advisors to better understand how climate initiatives can be structured to meet evolving funding expectations.
These discussions have highlighted the importance of creating spaces where practitioners can reflect on the changing funding environment and exchange practical insights on how projects are currently being assessed.
A Practitioner Conversation
Later this month, through the Green Economy Leadership Academy (GELA), the African Centre for a Green Economy will convene a small practitioner session focused on the design of fundable climate and just transition projects.
The session will explore how climate initiatives are currently being evaluated by funding institutions, and what practical steps organisations can take to strengthen the credibility and positioning of their project proposals.
The discussion will draw on experience from both sides of the process: organisations seeking funding for climate initiatives, and institutions responsible for assessing project proposals.
The aim is not theoretical discussion, but a practical exchange among practitioners grappling with the evolving realities of climate finance.
