As climate ambition continues to grow, so does the gap between available and required financing. In a context where public funding is becoming increasingly constrained amid geopolitical uncertainties and shifting priorities, the role of innovative financial mechanisms in unlocking investment is more critical than ever. In 2025, the Mitigation Action Facility made significant strides in strengthening how financial mechanisms are designed, implemented, and scaled across its portfolio.
2025 in review: Building the foundation for scale
The past year marked an important step forward in strengthening the strategic design and implementation of financial mechanisms, building on existing efforts to deploy funding while more deliberately shaping financial structures that catalyse investment.
Portfolio results underline the Mitigation Action Facility’s catalytic impact over time:
- EUR 943 million public finance mobilised
- EUR 1.03 billion private finance leveraged
- 11.5x leverage ratio of total (public and private) finance mobilised vs. Mitigation Action Facility funding disbursed
These cumulative results highlight the Mitigation Action Facility’s strong performance in mobilising public finance and exceeding overall leverage expectations, while also pointing to continued challenges in fully unlocking private sector investment at scale. Implementation experience in 2025 revealed a key bottleneck: delays in the operationalisation of financial mechanisms slowed progress in several projects.
To address this, the Mitigation Action Facility significantly expanded its support and achieved some milestones in 2025:
- Development of a comprehensive paper on financial mechanisms (incl. portfolio-wide analysis and lessons learnt)
- Targeted advisory support to 16 projects on financial mechanism design and implementation
- Dedicated workshops and knowledge formats to strengthen capacities across projects
- Enhanced financial mechanisms advisory by the Technical Support Unit (TSU)
This reflects a broader evolution: the Mitigation Action Facility is increasingly positioning itself not just as a funder, but as a Knowledge and Learning Hub for climate finance.
From insights to action: Strengthening financial mechanisms across the portfolio
The Financial Mechanisms Roadmap of the Mitigation Action Facility translates lessons learnt into concrete action. Three priority areas emerged:
| 1. Stronger project design from the outset Ensuring that financial mechanisms are viable early on, through: Clear eligibility and expectations Defined financial delivery channels Stronger alignment with market realities | 2. More strategic use of financial instruments Moving beyond traditional grant structures towards: Blended finance approaches Increased private sector engagement and co-financing Scalable and replicable financial models | 3. Improved execution and accountability Enhancing delivery through: Structured support to projects throughout the lifecycle Clear monitoring frameworks for financial performance Stronger integration of financial mechanisms into implementation processes |
These priorities respond directly to observed challenges in the portfolio, such as late private sector engagement, unclear financial product design, and limited leverage.
Looking ahead: What to expect in 2026 (and beyond)
Building on this foundation, 2026 will focus on operationalising the roadmap and scaling impact. Key areas to watch include:
- Rolling out new tools and guidance, that will (continue to) benefit projects from:
- Tailored guidance on financial instruments and business models
- Enhanced templates and requirements for project design
- Practical tools to assess market potential and financial viability
- Strengthening private sector mobilisation
- Enhancing monitoring and results tracking
- Expanding knowledge exchange
Why this matters
Financial mechanisms sit at the heart of climate action at scale. While grants remain important, systemic transformation requires mobilising significantly larger volumes of capital especially from the private sector.
The Mitigation Action Facility’s work in 2025 shows that designing effective financial mechanisms is complex, but essential. Early-stage project design and market alignment are critical, while targeted support and learning can significantly improve outcomes. With a clear roadmap in place, the coming years will be about turning finance innovation into impact at scale.
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