By Chidi Nwafor
In a glass-walled boardroom in Washington, an investment committee at a multilateral development bank works through its quarterly pipeline review. Forty-three proposals sit on the agenda. Solar parks in the Sahel. Green hydrogen hubs in North Africa. Grid modernisation programmes across three continents. By the end of the session, four projects will advance to the next stage of due diligence. The rest will be returned, deferred, or quietly shelved, not because the committee doubts the urgency of the climate transition, and not because the capital isn’t there. The fund in question is oversubscribed. The problem, as one committee member puts it without irony, is that “we have more money than we have projects we can actually put it into.”
This scene repeats itself, with minor variations, inside development finance institutions, climate funds, and infrastructure investment committees around the world. It rarely makes headlines, because it contradicts the story the world has been telling itself about climate finance for the better part of two decades.
The Climate Finance Myth
The dominant narrative is one of scarcity. Every major climate summit produces the same refrain: the world needs trillions of dollars a year to fund the energy transition, and current commitments fall dramatically short. Pledges are tallied, gaps are calculated, and the resulting figure becomes the headline, evidence, apparently, that the fundamental constraint on climate action is the unwillingness of governments and institutions to commit sufficient capital.
This framing is not wrong so much as it is incomplete, and the incompleteness has consequences. It directs political energy toward pledging conferences rather than delivery mechanisms. It allows institutions to measure success in commitments announced rather than capital deployed. And it obscures a more uncomfortable truth: across nearly every category of climate finance- concessional, blended, commercial, sovereign- the binding constraint is not the volume of capital seeking deployment. It is the volume of projects capable of absorbing it on terms that meet institutional investment standards.
This is the distinction between capital availability and capital deployability, and it is the distinction the climate finance conversation has largely failed to make. Availability asks whether the money exists. Deployability asks whether a project has progressed far enough- technically, legally, commercially, institutionally to receive it. Global climate capital has grown substantially over the past decade. Blended finance platforms have proliferated. Sovereign wealth funds and pension funds have built dedicated sustainable infrastructure mandates. Export credit agencies have expanded appetite for emerging market energy assets. And yet deployment rates continue to lag commitments, often by wide margins, year after year, across nearly every region where the transition is most urgently needed.
The Investment Readiness Gap
The reason is not mysterious to anyone who has actually tried to move a climate infrastructure project from concept to financial close. It is, however, largely invisible to the public debate, because the failures occur in a stage of project development that produces no announcements, no press releases, and no photo opportunities.
Consider what stands between a promising concept and an investable asset. Feasibility studies that are rigorous enough to withstand institutional scrutiny, rather than optimistic enough to attract initial interest. Revenue models that survive contact with real offtake negotiations, currency risk, and payment reliability concerns. Environmental and social safeguards documentation that meets the standards of institutions bound by their own compliance frameworks. Legal structures capable of allocating risk in ways that commercial lenders, not just development financiers, will accept. Procurement processes that are transparent enough to survive an investment committee’s diligence without triggering governance red flags. Sponsors with the technical and institutional capability to execute, not merely originate.
None of this is exotic. It is the ordinary machinery of project finance, and it exists in mature markets largely as a matter of course. What is striking about climate infrastructure in emerging and frontier markets is not that these requirements are unusually strict; they are, for the most part, standard, but that the systems needed to satisfy them are frequently absent, underfunded, or fragmented across institutions that were never designed to work together.
The result is a pipeline that looks abundant at the concept stage and collapses at every subsequent gate. Projects arrive at investment committees with ambition intact but preparation incomplete, and the gap between the two is treated as an individual project failure rather than what it actually is: a structural failure in the systems responsible for converting concepts into bankable transactions.
The Missing Middle of Climate Finance
This is the Missing Middle of Climate Finance; the institutional and technical architecture that sits between an ambitious idea and an investment-grade asset, and whose absence explains far more about the deployment gap than any shortfall in pledged capital.
It consists of project preparation facilities capable of funding feasibility work before commercial viability is proven. Transaction advisers who can structure deals that satisfy both development mandates and commercial return requirements simultaneously. Blended finance architecture sophisticated enough to use concessional capital to absorb specific, identifiable risks rather than as a blunt subsidy. Guarantee instruments that convert political and regulatory risk into something a commercial lender can underwrite. Standardised documentation that reduces transaction costs enough to make smaller projects viable at scale. And institutional coordination across ministries, regulators, and financiers, robust enough to prevent a technically sound project from dying in bureaucratic sequencing.
Bankability, in other words, is not a quality that projects either possess or lack from inception. It is built, deliberately and expensively, through a sequence of technical, legal, and institutional work that most climate finance strategies treat as an afterthought to the more visible task of raising funds. Institutions that have understood this, and there are a growing number of them, have begun redirecting resources accordingly, investing not only in capital pools but in the preparation infrastructure that makes those pools deployable.
Why Africa Matters
Africa is where this problem is most visible, and consequently where it offers the clearest opportunity for resolution. The continent’s infrastructure financing need is enormous and well documented. Less understood is that Africa’s climate finance shortfall is disproportionately a preparation shortfall rather than a capital shortfall. Numerous African markets, including Nigeria, have no shortage of interested capital circling energy and infrastructure opportunities; what they lack is a sufficient volume of projects that have moved through feasibility, structuring, and legal readiness to the point of bankability. Nigeria’s experience, where gas-to-power, off-grid solar, and mini-grid initiatives have each demonstrated the same pattern of individual project viability without systemic pipeline scale, illustrates a dynamic playing out, with local variation, across much of the continent.
This need not remain the case. Regions that have built dedicated project preparation facilities, pairing early-stage technical support with structured pathways to commercial and development finance, have measurably improved the rate at which concepts convert into closed transactions. The lesson is transferable. Africa does not need a new theory of climate finance; it needs the deliberate construction of the institutional middle that has, in more mature infrastructure markets, been built gradually and often invisibly over decades.
Investment Implications
For capital allocators, this reframing carries a specific strategic implication: the more valuable position over the next decade may not be raising new climate capital, but building the platforms that make existing capital deployable. Project preparation facilities, transaction advisory platforms, standardised documentation initiatives, guarantee mechanisms, and pipeline aggregation vehicles are not merely supporting infrastructure for climate finance. They are increasingly investable propositions in their own right, generating returns through fees, equity stakes in project development companies, or improved deal flow into an institution’s own mandate. Investors who continue to evaluate opportunities purely on project economics, without assessing the quality of the development system that produced the project, will keep encountering the same bottleneck at diligence.
Policy Implications
For governments and development institutions, the implication is a shift in priority from funding announcements to delivery infrastructure. This means building permanent, adequately capitalised national project preparation facilities rather than one-off technical assistance grants. It means standardising procurement and documentation across sectors so that transaction costs fall and replicability rises. It means coordinating ministries of finance, energy, and environment around shared project pipelines rather than parallel, competing processes. None of this is as politically visible as a pledging summit. All of it is more consequential for whether pledges become power plants.
Strategic Recommendations
Governments should treat project preparation capacity as permanent public infrastructure, not episodic donor-funded activity, and should prioritise investment readiness in public communication as much as commitment totals.
Development finance institutions should expand early-stage development support, standardise documentation across their platforms to reduce duplication, and use concessional capital deliberately to absorb specific risks that crowd in, rather than displace, private finance.
Investors should scrutinise the development systems behind a pipeline as carefully as the underlying project economics, and consider backing platforms and advisers capable of producing repeatable, bankable deal flow.
Project developers should treat governance, technical preparation, and transaction discipline as core competencies from the earliest stage of a project’s life, not as compliance steps to be addressed once financing interest has already been secured.
History is unlikely to remember this era for the amount of climate finance it promised. It will remember whether those promises became power plants, resilient grids, cleaner industries, and stronger economies. Capital has already signalled its willingness. The unanswered question is whether our institutions can build projects worthy of it.
Nwafor is founder and lead strategist at De-Lazuli Consult, an advisory practice focused on energy transition, project finance, DFI engagement, and carbon market strategy. His work supports developers, investors, development finance institutions, and public-sector stakeholders in project preparation, transaction structuring, stakeholder engagement, and capital mobilisation. He writes from Lagos and Abuja. chidi.nwafor@de-lazuliconsult.com, +2348094561290
