Domestic Financial Market Development

Domestic savings are expected to play a critical role in meeting EMDE climate finance goals, but domestic markets need assistance to build the necessary breadth and depth to support such engagement.

2030 Goals

Deep and liquid domestic financial markets are capable of providing long-term, affordable financing to climate investments in local currency.
Domestic financial institutions (public and private) are empowered to structure/originate climate investments in line with country-sector plans, with international financial institutions providing co-financing and secondary investment at scale.

Status
No progress

The World Bank, IMF, and other DFIs have supported the development of domestic financial markets in EMDEs for decades. Although progress has been made in strengthening local currencies and increasing locally-issued debt, investors in EMDEs are still heavily reliant on capital markets in advanced economies. The need to quickly scale climate finance in EMDEs adds urgency to this goal.
Domestic financial market development is a long-term effort that will require increased support from DFIs and changes in macroeconomic policy, financial regulation, and sectoral expertise. Coordinated international efforts have been sporadic over the last decade with few exceptions (e.g. Bridgetown Initiative, Addis Ababa Action Agenda).

Relevant Actors & Audiences

Private FIs

DBS Bank, Luxembourg Green Exchange, Caisse de dépôt et placement du Québec (CDPQ), TCX, ARM-Harith, InfraCredit, FrontClear, Africa Investor (Ai) Group, InfraZamin, Standard Bank Group, PIDG

Public FIs

Development Bank of Southern Africa, Brazilian Development Bank (BNDES), African Development Bank (AfDB), Agence Française de Développement, British International Investment, KEPFIC, NSIA

Multilateral Development Banks

European Bank for Reconstruction and Development (EBRD), MIGA

International Organizations

International Monetary Fund, Financial Stability Board, OECD, EAVCA, 3i Advisory

Governments

Reserve Bank of India, Barbados

Leading Countries and Alliances

G20 Ministries of Finance, Bridgetown Initiative