The global climate finance landscape is entering a period of heightened uncertainty, as shifts in public funding priorities and skepticism toward sustainability initiatives challenge long-standing international commitments. Evolving US policy positions in particular, including a retreat on foreign assistance and global climate agreements, are raising questions about the reliability of public sector leadership in maintaining commitments to global climate action.
Global flows toward climate finance have been split relatively equally between public and private actors. Yet these recent retractions are creating a gap in funding, and risk slowing the flow of critical public climate finance to vulnerable countries and sectors, especially low- and middle-income countries that rely on foreign aid.
Since private investors already represent a significant share of climate finance contributions and have significantly more capital that could be tapped, it begs the question: How are private investors responding to a shifting public landscape? Also, can they help sustain global momentum for international climate solutions?
In March, Dalberg surveyed 34 climate-focused investors, who collectively manage nearly $1.5 trillion in assets, on how public policy shifts might impact the sector. These investors represented a wide range of climate focus areas, investment strategies and sizes, offering valuable insights from key players across the private climate investing landscape.
Our survey revealed that confidence among impact capital allocators remains high, despite concerns about the broader industry—including their peers—and the decline in public involvement. In fact, most investors expressed their intention to increase their climate action-focused impact investing activities in the next two years. All the remaining respondents indicated that they expect their activities to remain the same over the same period, with no one anticipating a decrease.
This contrasts starkly with the expectations for the broader industry, where the majority of respondents were uncertain or indicated they expect climate action-focused impact investing to decrease. Many attribute this to concerns about market volatility, limited exit opportunities, and uncertain returns are making climate investments less attractive to mainstream capital.
Figure 1: Survey respondent demographics by climate focus, primary investment strategy and climate AUM:
This disconnect between the individual investors’ expectations for themselves and for their peers reflects a dynamic shift in sentiment and strategies for climate-focused investing.
Figure 2: Investor perceptions on how climate-focused impact investing will evolve within own organization and broader industry (e.g. among peers) in the coming two years:
Redirecting climate capital
When asked about the evolution of their climate action-related investment priorities, the highest share of respondents indicated that investments in produced capital would increase, particularly in green materials, improved manufacturing, and renewable energy, over the next two years.
Fewer investors anticipate a rise in climate tech investments.
Many expressed excitement about the acceleration of existing solutions with substantial investment potential, driven by recent technological advancements in renewable energy, AI, remote sensing, and green materials. But others cite carbon markets and weak policy support as key obstacles to the adoption of emerging climate technologies, like carbon capture.
Most investors don’t expect an increase in human capital investments for education and global health, or alternative proteins.
Figure 3: Investor perceptions on how investment activity will evolve for climate action-related investment solutions:
Geographically, most surveyed investors anticipate a decline in North American investment activity over the next two years owing to policy uncertainty created by the US’s change in administration and shifting EU priorities. Both are weakening investor confidence, likely due to regulatory uncertainties such as higher trade barriers and fewer investment incentives.
Most respondents expect increased investment activity in South and Southeast Asia, East Asia and the Pacific. Few investors expect private climate financing to decrease in Latin America, the Caribbean and Africa. In fact, there is growing momentum for nature-based and adaptation solutions, especially in underserved regions, such as Africa.
Challenges: the shortage of growth-stage funding, and the slow adoption of critical technologies. These issues create significant barriers to scaling climate solutions, especially in emerging markets and vulnerable regions.
Figure 4: Investor perceptions on how climate-action related investment activity will evolve by geographical region:
Betting on blended finance
Despite market uncertainty, opportunity abounds for impact investors focused on climate action. Many investors are optimistic about how blended-finance structures are opening new avenues to mobilize capital and support the growth of climate-positive enterprises that can withstand future shocks.
It is encouraging to see that a majority of respondents see blended finance as being highly effective at mobilizing additional resources, and that a significant majority see blended finance as likely to increase in the coming years.
Figure 5: Investor perceptions on if blended finance has been successful in crowding in more investment into climate action over the last four years:
Investor projections for the uses of blended finance models in the climate space remain consistent with current trends, despite recent shifts in the public landscape. In recent years, the use of guarantees and risk insurance has increased, where the proportion of blended finance transactions using these instruments have surged from 14% to 27% between 2020 and 2023.
Many investors believe this trend will continue in the coming years.
Concessional capital remains the dominant archetype in the climate blended finance market, with most investors expecting its role to stay the same or increase. Meanwhile, the use of technical assistance and design-stage grants is expected to continue to decrease.
Figure 6: Investor perceptions on if blended finance supporting climate action will increase, decrease, remain the same or be uncertain in the coming two years:
While uncertainty across the broader climate investment ecosystem is high, investor confidence and commitment to climate action remain resilient. The survey results point to a dynamic shift in strategies—toward existing, scalable technologies, regional diversification, and greater use of blended finance—to overcome emerging barriers. Rather than pulling back, many private investors are stepping up, adjusting their approaches to capitalize on new opportunities.
This continued momentum suggests that private impact capital will increase its role as a critical force in advancing climate solutions amid a rapidly evolving global landscape.
Kusi Hornberger is a partner and Nadia Ralston is an associate consultant at Dalberg Advisors.
