Public climate finance interventions often demonstrate the extent to which other public and private money has been ‘leveraged’ or catalysed as a result of their investment: it is often argued that the higher the ratio, the more effective the use of limited public funds and the more attractive an investment. High leverage ratios can demonstrate that public finance was used to de-risk investment and overcome barriers to encourage greater flows of finance to climate-friendly areas. Yet ‘leverage’ means many things to different people.
How are different public finance instruments and institutions performing in terms of leveraging further investment to address climate change? While leverage ratios offer a seemingly useful indicator which can demonstrate the relative success of public instruments in encouraging and unlocking further investment, it is almost impossible to compare leverage ratios across different instruments as each calculates leverage differently.
This paper surveys the different ways leverage ratios are calculated and reported for climate finance instruments and projects. The survey is meant to serve as a useful starting point to understand what is meant by leveraging, and to offer some guidance around how to create a single methodology that could be used more universally to assess leveraging.
Improving the effectiveness of climate finance: a survey of leveraging methodologiesDownload file