Case studies showcase

This case study highlights a national DFI that has become a strategic player in renewable energy development, with a particular focus on geothermal energy. Formed through the consolidation of several legacy finance agencies, the institution has a broad mandate spanning infrastructure, industrial development, and clean energy. Geothermal power makes up a significant share of the country's electricity mix and is well suited to its volcanic terrain.

The DFI plays a facilitative rather than purely financing role upstream — helping structure risk-mitigation tools such as partial-risk guarantees and drilling insurance, and funding project-preparation work once resource risk has been partially de-risked. Downstream, once a resource is confirmed, its role becomes operational: anchoring long-tenor debt and equity, arranging blended finance, offering credit enhancements, and supporting bankability reviews, procurement, ESG compliance, and grid-integration planning.

Its broader capital mobilisation strategy is sequenced across the project cycle — technical assistance and feasibility support upstream, blended structures at approval, anchor debt and syndication at financial close, and balance-sheet expansion (credit lines, co-lending, green bonds) post-close. The DFI has also prioritised internal reforms: clearer governance and risk oversight, upgraded credit and ESG due diligence, better data systems, and diversified funding sources.

Challenges

• Early-stage pipeline gaps: upstream project identification and technical scoping remained fragmented, slowing the flow of bankable proposals.
• ESG integration: safeguards were applied inconsistently, with limited dedicated expertise — creating a credibility gap with international climate funders and prolonging appraisal timelines.
• Data and risk management: the DFI lacked advanced climate risk tools (hazard mapping, physical and transition risk models, stress testing) and integrated data systems, limiting cross-departmental collaboration and alignment with global disclosure standards like TCFD.

In response, the DFI ran a structured self-assessment against international standards, formed partnerships with academic and policy institutions, and rolled out training in environmental risk assessment and governance.

Lessons Learnt

1. Geothermal investment requires strong public anchoring — private investors are unwilling to bear upstream exploration risk, so DFIs with concessional finance are best placed to anchor early-stage development.
2. Blended finance depends on institutional credibility — governance, transparency, and a track record of delivery are what attract donors and private co-financiers, not just access to funds.
3. Capacity gaps can stall delivery even when financing is available — bottlenecks in appraisal, ESG diligence, and procurement were often the real constraint, not funding. Investment in staff training, digital M&E tools, and standardised ESG safeguards reduced delays and improved credibility with co-financiers.
4. Strategic partnerships strengthen readiness — engagement with policy centres, technical agencies, and peer DFIs improved project design, regulatory alignment, and pipeline quality.

Looking Ahead

The DFI intends to broaden its focus beyond large-scale geothermal to distributed renewable solutions such as mini-grids and captive power for SMEs, particularly in underserved and rural areas. Priorities include improving pipeline generation, strengthening ESG compliance, and deepening partnerships to support a more inclusive, climate-resilient energy transition.

This case study reflects a national DFI operating a wholesale lending model to support climate resilience and financial inclusion. As a second-tier lender, it channelled long-term, low-cost financing through Participating Financial Institutions (PFIs) — microfinance providers, deposit-taking banks, and cooperatives — rather than lending directly to end-users. This allowed it to reach underserved rural areas where grid extension was uneconomical and traditional lenders were reluctant to operate.

Instruments included wholesale credit lines with longer tenors and low rates, partial credit guarantees to de-risk lending to first-time and informal borrowers, technical assistance grants to build PFI capacity, and digital credit assessment tools to improve loan origination where borrowers lacked formal credit histories.

Challenges

• Limited concessional capital: demand for affordable, long-tenor financing outstripped the DFI's capital base, and stringent international fiduciary and impact-verification requirements limited access to global climate finance.
• Inconsistent ESG compliance downstream: many PFIs lacked the capacity or training to apply consistent safeguards. This led in some cases to shallow stakeholder engagement, unclear grievance mechanisms, and community resistance — eroding social licence and, at times, causing co-financiers to withdraw.
• Data and impact measurement gaps: information on energy access, emissions avoided, and local economic benefits was often incomplete, hindering evidence-based decision-making and alignment with global reporting systems.

The DFI responded by embedding climate metrics into credit tools, standardising ESG baseline requirements for intermediaries, and launching technical support programmes covering ESG safeguards, gender-responsive finance, and climate risk screening.

Lessons Learnt

1. Wholesale lending can catalyse clean energy markets — but success depends heavily on the capacity and governance of downstream intermediaries.
2. Strengthening downstream ESG systems is critical — sustainability cannot be guaranteed through delegation alone; many PFIs lacked basic written safeguard policies.
3. Digital tools improve risk management but aren't sufficient alone — credit assessment platforms reduced default rates, but without integrated systems tracking development outcomes (energy reliability, emissions, household impact), the DFI struggled to demonstrate its full value.

Looking Ahead

The DFI plans to deepen off-grid electrification work, pursue accreditation with international climate finance institutions, and expand risk-sharing instruments such as partial guarantees and subordinated debt to attract private investment. Strengthening ESG systems, intermediary capacity, and impact measurement remain core priorities.

This case study covers a national DFI's role in financing a landmark hydropower project central to the country's climate-resilient, low-carbon strategy. As a policy-driven institution, it takes direction from national plans, accepts tailored risk-return profiles to achieve public outcomes, and uses concessional tranches, guarantees, and technical assistance to crowd in private capital.

The DFI helped structure early-stage financing combining sovereign guarantees, syndicated domestic bank loans, and concessional bilateral support. A defining feature was the mobilisation of diaspora bonds, drawing strong contributions from diaspora communities abroad — modest in scale relative to total project cost, but significant for legitimacy and momentum. When some international financiers withdrew over ESG concerns, concessional support from other bilateral partners filled the gap for key technical components.

Over time the DFI grew beyond a passive funding role into active project structuring — feasibility work, financial modelling, PPP structuring, permitting coordination, and ESG design — while also digitising safeguard tracking and building internal knowledge systems.

Challenges

• No national climate finance classification framework, making it hard to consistently identify "green" investments or align with global reporting standards.
• Institutional fragmentation: overlapping mandates across infrastructure, environment, and water authorities caused permitting delays and planning uncertainty.
• Difficulty replicating the model beyond flagship projects — smaller municipalities and cooperatives often couldn't meet the DFI's appraisal or ESG requirements, and commercial banks were reluctant to co-finance smaller deals.
• Operational overstretch: small, multi-hatted teams stretched across compliance and reporting left little capacity for early-stage support, so the DFI often entered projects only at appraisal stage rather than shaping bankability earlier.
• Fragmented donor engagement: misaligned procurement rules, safeguard standards, and reporting cycles among donors increased transaction costs and slowed pooled concessional finance.

Lessons Learnt

1. Sovereign-led infrastructure is achievable but demands strong institutional discipline — ownership and national pride are real benefits, but require robust fiduciary oversight and coordination.
2. Diaspora finance offers symbolic and strategic leverage — modest in scale, but valuable for legitimacy and stakeholder engagement.
3. ESG integration must be proactive, not peripheral — early weaknesses led to financing withdrawals and reputational scrutiny.
4. Institutional capacity is the cornerstone of scalable green finance — technical teams, standardised appraisal, and inter-agency coordination are foundational.
5. Balanced financing structures promote resilience — an overly domestic financing mix strained local institutions; a blend of sovereign, concessional, and commercial capital is more sustainable.

Looking Ahead

The institution aims to align investments with national power plans and electrification goals through a just-transition lens — mobilising local-currency capital, establishing a project preparation window for renewables and storage, and embedding just-transition KPIs (tariff impact, local content, gender and youth participation) across its portfolio.

This case study covers a well-capitalised national DFI that played a strategic role in a national clean energy transition targeting over half of electricity from renewables by 2030. Its most prominent contribution was financing one of the world's largest concentrated solar power (CSP) complexes, delivered through a public-private partnership.

The DFI used a coordinated mix of instruments: direct equity participation (giving it governance influence and absorbing early risk), sovereign-backed guarantees to reassure commercial lenders, debt syndication as lead arranger bringing together domestic banks and multilateral lenders, and green bonds plus concessional loans structured to international standards.

Institutionally, the DFI built strong in-house project structuring capacity across engineering, finance, and environmental disciplines, reducing reliance on external consultants. It established dedicated ESG teams aligned with IFC Performance Standards and the Equator Principles, and maintained a governance model that separated commercial decision-making from political oversight.

Challenges

• Systemic constraints: FX volatility, tight fiscal space, weak offtaker credit, grid bottlenecks, shallow local capital markets, and land/permitting frictions raised costs and timelines.
• Green taxonomy alignment: absence of a comprehensive national green taxonomy, and only partial alignment with global frameworks (EU Taxonomy, TCFD, ISSB), led to inconsistent internal classification and reduced eligibility for targeted green capital.
• Policy and institutional coordination: overlapping mandates and administrative turnover among government agencies occasionally sent contradictory signals to investors and delayed PPP frameworks.
• Scaling to smaller markets: successes in flagship national projects didn't translate easily to rural municipalities or off-grid sectors, which lacked the institutional capacity or credit history to structure bankable deals, and where commercial lenders saw high risk and low return.

Lessons Learnt

1. Strong institutions enable blended finance — governance, financial management, and technical credibility were what allowed sovereign guarantees and multi-stakeholder transactions to work.
2. Replicability depends on technical support beyond financing — acting as a technical advisor to municipalities was as important as capital provision.
3. Institutional credibility drives partnerships — transparency and operational consistency built long-term relationships with global climate finance actors.
4. Local adaptation is essential — models that worked for large national projects needed real adjustment (simplified processes, tailored risk-sharing) to work in underserved and rural contexts.

Looking Ahead

The DFI plans to broaden into green transport, sustainable housing, and climate-resilient infrastructure, while contributing to a regional common green finance taxonomy. Strengthening institutional partnerships, developing more agile financing tools, and embedding ESG systems across all operations remain core to its strategy.