Asian Development Bank utilizes first-loss guarantees to expand climate lending capacity

Deal Analysis

The Asian Development Bank's (ADB) Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP) utilizes first-loss guarantees to expand its climate lending capacity. This financing mechanism allows the ADB to leverage its existing sovereign loan portfolio by freeing up regulatory capital. By partnering with public, private, and philanthropic financing partners like the Climate Action Fund, IF-CAP aims to significantly increase climate-related investments across Asia and the Pacific. The structure of the deal, relying on guarantees rather than direct equity or debt, is designed to attract a broader range of investors who may be risk-averse but still seek to contribute to climate finance initiatives. This approach is particularly relevant given the substantial climate financing gap in the Asia-Pacific region. By employing innovative financial instruments like first-loss guarantees, the ADB seeks to catalyze greater private sector participation in climate projects. The involvement of the Climate Action Fund, known for its focus on sustainable infrastructure, further underscores the deal's commitment to climate change mitigation and adaptation. While the deal value remains undisclosed, the strategic importance of unlocking additional climate lending capacity through guarantee mechanisms is undeniable, potentially setting a precedent for other multilateral development banks.

ADB utilizes first-loss guarantees to expand climate lending capacity.
Partnership with Climate Action Fund, a dedicated climate infrastructure investor.
IF-CAP aims to unlock regulatory capital and attract private investment.
Focus on climate change mitigation and adaptation projects in Asia and the Pacific.

Market Context: The Asia-Pacific region faces a significant climate financing gap, requiring innovative financial solutions to mobilize capital for sustainable infrastructure and climate resilience. Multilateral development banks like the ADB play a crucial role in bridging this gap by de-risking investments and attracting private sector participation.

Source Intelligence

KEY DETAILS

MDBs’ climate finance totaled over USD136 billion, with USD85.1bn going to low- and middle-income economies Climate finance by MDBs in these countries has more than doubled over the past five years, with a 14% increase last year. Of this sum, 69%, or USD58.8bn, went to climate change mitigation, and 31%, or USD26.3bn, went to climate change adaptation. The amount of mobilized private finance for climate investments in these countries stood at USD33bn. In 2024, MDBs’ climate finance for high-income countries totaled USD51.5bn, of which USD46.5bn (90%) supported climate change mitigation and USD5bn (10%) supported adaptation. The mobilized private finance for climate investments in these economies stood at USD101bn.

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Location

The Asian Development Bank’s Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), which uses first-loss guarantees of its sovereign loan portfolios by public, private and philanthropic financing partners to free up regulatory capital and expand its climate lending capacity.

PARTIES MENTIONED IN SOURCE

A

Asian Development Bank lender

"The Asian Development Bank’s Innovative Finance Facility for Climate in Asia and the Pacific (IF-CAP), which uses first-loss guarantees of its sovereign loan portfolios by public, private and philanthropic financing partners to free up regulatory capital and expand its climate lending capacity."

W

World Bank Group lender

"the World Bank Group remaining the single-biggest provider, supplying over 40%"

E

European Investment Bank lender

"The European Investment Bank was the single biggest provider (43%)."

I

International Finance Corporation (IFC) lender

"In particular, it has launched an inaugural securitization of International Finance Corporation (IFC) loans, a step toward an “originate-to-distribute” model for emerging markets, and last September IFC was involved in the first closing under Singapore’s Financing Asia’s Transition Partnership for the Green Investments Partnership, a blended finance partnership supporting Asia’s green and transition financing needs."

I

Inter-American Development Bank Group lender

"The Inter-American Development Bank Group has introduced flagship regional initiatives (e.g., Amazonia Forever and ONE Caribbean) along with risk mitigation instruments such as debt-for-nature swaps and currency-hedging programs, expanding access and affordability and enabling countries to release fiscal resources."

A

African Development Bank lender

"The African Development Bank’s Climate Action Window targets low-income and fragile states in Africa with grant resources and co-financing."

high quality Enriched Feb 27, 2026