PETER DANIEL ONIMISI (Doctorat.) (Ph.D.)
1.0 Background and Context
In today’s global development landscape, climate change has become both a challenge and an opportunity for innovation and investment. From 2030 to 2050, climate change is projected to result in around 250,000 more fatalities annually due to starvation, malaria, diarrhea, and heat stress alone. Health-related direct damage expenses are projected to range from US$ 2 to 4 billion annually by 2030. Regions with inadequate health infrastructure, predominantly in poor nations, will struggle the most to manage without external support for preparation and response[1].
As nations pursue low-carbon, climate-resilient growth, the ability to design and implement bankable climate-financing projects has become a key determinant of success. A bankable project is one that investors and financial institutions regard as credible, technically feasible, financially sound, and capable of generating returns or achieving measurable climate impact[2]. In the context of climate finance, “bankability” extends beyond profitability—it includes demonstrable environmental benefits, clear adaptation or mitigation value, risk management, and alignment with national and international climate goals.
2.0 Understanding Bankability in Climate Finance
A bankable project is traditionally defined by predictable cash flows, a favorable net present value, and controllable risk. In climate finance, the notion includes both financial and developmental returns. A climate initiative must be economically viable while simultaneously facilitating climate mitigation, such as diminishing greenhouse gas emissions, or enhancing adaptation by bolstering resilience to climatic effects. To be eligible for climate funding, a project must demonstrate robust governance, institutional preparedness, a definitive business model, and quantifiable outcomes aligned with the aims of funders, such as the Green Climate Fund, development banks, or private investors.
Africa is the most susceptible continent to the effects of climate change across all scenarios exceeding 1.5 degrees Celsius. Africa, despite contributing minimally to global warming and exhibiting the lowest emissions, encounters significant collateral damage, which poses systemic risks to its economies, infrastructure investments, water and food systems, public health, agriculture, and livelihoods, jeopardizing its modest development achievements and potentially leading to increased extreme poverty levels[3].
In emerging markets in Africa, the ability to develop bankable climate projects is critical. These countries face escalating climate risks, rising adaptation costs, and limited fiscal space to fund the transition to green and resilient economies. International financiers often cite the scarcity of bankable projects—not a lack of capital—as the major barrier to climate investment. Building a robust pipeline of investment-ready projects bridges this gap by connecting strong local ideas with global capital, accelerating national climate commitments, and creating economic opportunities through sustainable infrastructure, renewable energy, and climate-smart agriculture.
When generating bankable climate-ready projects, the following stages must characterize the process[4][5][6]:
2.1 Project Origination and Conceptualization
A viable climate project is grounded in a well-articulated concept that addresses a specific climate issue within a national or sectoral framework. Project developers must determine whether their intervention emphasizes mitigation or adaptation and ensure coherence with national development and climate policies. The origination process includes stakeholder mapping, regulatory framework analysis, market demand assessment, and identification of the specific climate hazards the initiative aims to mitigate. The concept note must explicitly delineate the problem, specify quantifiable climate outcomes, and link these results to broader socioeconomic benefits such as employment, integration, or ecosystem conservation.
2.2 Feasibility and Business Case Development
After defining the concept, the next step is to develop a technically feasible and financially sound business case. This requires a comprehensive feasibility analysis covering technological design, legal and regulatory compliance, market dynamics, institutional capacity, and environmental and social impacts. The financial model must outline anticipated costs and returns, including capital expenditures, operational expenses, income forecasts, and potential funding sources. For adaptation initiatives without immediate financial returns, the model must provide an economic justification through avoided losses, improved productivity, or long-term resilience benefits.
An essential component of the business case is recognizing and mitigating risk. Climate-finance investors meticulously analyze operational, market, regulatory, Environmental Social Governance risk, and political risks. Consequently, developers must propose mitigation strategies, such as guarantees, insurance, or contractual protections. It is crucial to distinguish between the “climate incremental cost” and the business-as-usual cost, as numerous climate grants require evidence of additionality—the extent to which the project’s design and cost framework directly address climate change.
2.3 Structuring the Finance
A meticulously organized finance strategy is essential for bankability. It delineates the sources of capital, the allocation of risks and returns, and the financial instruments employed. The financing structure may integrate various instruments—such as grants, concessional loans, equity, guarantees, or carbon credits—commonly referred to as blended finance. The design must identify the implementing entity, operator, and off-takers, and clarify repayment flows or benefit distribution systems. It is imperative to align the structure with the requirements of investors or funders, including fiduciary standards, environmental and social safeguards, and reporting obligations.
Numerous effective climate initiatives depend on risk-sharing agreements and public-private partnerships that use concessional financing to attract private funding. Using first-loss guarantees or performance-based incentives can enhance the appeal of projects to commercial lenders by mitigating potential losses.
2.4 Implementation Readiness and Governance
Viable initiatives require not only robust financial modeling but also implementation capacity and institutional preparedness. Governance frameworks must explicitly define roles and responsibilities for project owners, funders, contractors, and oversight entities. Project sponsors must demonstrate technical and managerial expertise, transparent procurement processes, and the ability to meet reporting and fiduciary obligations. Legal and regulatory preparedness, encompassing land tenure, permits, environmental approvals, and off-take agreements, must be in place before funding closes.
Stakeholder participation is equally significant. Initiatives that engage communities, local authorities, and the commercial sector at the outset of the design process are more likely to succeed. Transparent consultation builds confidence, improves societal acceptance, and helps identify unforeseen hazards. A comprehensive monitoring and evaluation framework must be built in from the start to assess both financial success and climate outcomes.
2.5 Risk Management and Scalability
Risk management is fundamental to bankability. All projects face risks—technological, market, climatic, political, and financial—that require systematic assessment, quantification, and mitigation. Instruments such as insurance, hedging, diversification, and gradual deployment can mitigate exposure. Investors are especially drawn to initiatives that demonstrate scalability and replicability. A pilot phase that demonstrates technical viability and market potential can serve as a proof of concept, attracting significant investment for expansion. Scalability also improves long-term sustainability, signaling to investors that their capital can have a broader, transformational effect.
2.6 Documentation and Due Diligence
The documentation phase transforms the concept into a comprehensive, bankable proposal. This includes a comprehensive project appraisal report covering the rationale, objectives, technical design, financial estimates, risk matrix, and governance framework. Supporting annexes must include evidence such as feasibility studies, stakeholder commitments, environmental and social assessments, legal agreements, and financial records. Transparency is essential. All expense, income, and external condition assumptions must be pragmatic and substantiated by reliable data. Inadequate paperwork and impractical estimates are common factors that contribute to the failure of potentially attractive projects to obtain funding.
2.7 Engagement, Financing, and Closure
Securing financing requires proactive engagement with prospective investors and financiers. Project advocates should initiate discussions promptly, share initial thoughts, and refine proposals in response to feedback. During due diligence, financiers will assess financial stability, governance, risk management, and adherence to their investment criteria. Successful closure occurs when financial terms are agreed, legal agreements are executed, and disbursement conditions are met. Following closure, effective oversight, clear reporting, and ongoing communication with funders are essential to sustain confidence and ensure long-term success.
3.0 Mitigation and Adaptation: Distinct Pathways to Bankability
Mitigation initiatives, such as renewable energy, energy efficiency, or waste-to-energy systems, are generally easier to finance because they can generate quantifiable earnings from energy sales or carbon credits. Their financial viability depends on explicit off-take agreements and consistent pricing structures. Adaptation projects—such as climate-resilient agriculture, flood management, or ecosystem restoration—often lack immediate revenue sources. Their value is measured by mitigated losses, increased productivity, or strengthened community resilience. Blended financing models that integrate grants or concessional funds with private investment are crucial for achieving financial viability while providing public goods in these projects. In both cases, it is imperative to establish quantifiable climate-effect indicators and include them in the results framework.
In growing economies such as Nigeria, several factors enhance bankability. Conformity with national regulatory frameworks signals strategic significance, while reliable data on climate hazards, market demand, and financial performance bolster investor confidence. Robust institutional collaborations, especially between public entities and private investors, promote risk distribution and leverage. Blended finance mechanisms can mitigate project risks and attract commercial resources. Transparent governance and robust documentation instill confidence in financiers regarding accountability, while incorporating social inclusion and gender equity objectives amplifies developmental effects and expands access to concessional climate finance.
4.0 Common Pitfalls in Developing Climate-Finance Projects
Numerous ventures fail not for lack of merit but because they are inadequately prepared for investor scrutiny. Excessively optimistic revenue projections, insufficient risk assessment, inadequate contractual agreements, and insufficient articulation of climate justification are common shortcomings. Some individuals overlook the need to plan for scalability or investor exit strategies, or fail to meet the criteria set by prospective financiers. Proactively addressing these flaws during the design phase is significantly more cost-effective than rectifying them after project rejection.
5.0 Conclusion
Creating a viable climate-finance enterprise requires a blend of artistry and scientific rigor. It demands a balance among ecological integrity, fiscal prudence, and developmental foresight. Each phase, from inception to completion, requires meticulous preparation, stakeholder engagement, clear documentation, and manageable risk management. Nations and entities seeking climate funding should move from conceptual project ideas to investment-ready pipelines—initiatives that effectively mitigate climate impacts while delivering measurable economic and social benefits. In the context of the global climate transition, bankability encompasses not only the attraction of capital but also the conversion of ambition into tangible, sustainable outcomes.
Furthermore, AADFI (https://adfi-ci.org/) plays a pivotal role in supporting its member institutions through comprehensive hand-holding services that guide projects from early concept development to full investment readiness. The Association provides tailored capacity-building initiatives to strengthen technical, financial, and institutional competencies required for structuring viable climate and green finance projects. AADFI also supports green project initiation by helping members identify strategic opportunities aligned with climate priorities, conducts green project mapping to assess potential pipelines, and offers expert guidance in green project execution to ensure compliance with environmental standards, financial sustainability, and investor requirements. Through these integrated services, AADFI enhances the ability of its members to develop credible, bankable climate-financing projects that attract investment and deliver measurable environmental and developmental impact.
[1] https://www.who.int/health-topics/climate-change#tab=tab_1
[2] https://citiesclimatefinance.org/publications/what-is-bankability
[3] https://www.afdb.org/en/cop25/climate-change-africa
[4] https://sdgfinance.undp.org/news-events/attracting-climate-finance-africa-through-development-bankable-project-pipelines#:~:text=In%20addition%2C%20stakeholders%20like%20governments,progress%20and%20implementation%20post%2Dfunding.
[5] https://niua.in/intranet/sites/default/files/3181.pdf
[6] https://projects.worldbank.org/en/projects-operations/products-and-services/brief/projectcycle#:~:text=Identification,Completion/validation%20and%20evaluation