Scaling Sustainable Impact through a Performance-Based Financial Mechanism

The Latin America and the Caribbean (LAC) region confronts significant hurdles in realizing its climate and nature objectives. Advancement toward these ambitious national targets is hindered by intensifying extreme weather events, compounded by constrained fiscal space, high debt burdens, institutional fragmentation, governance coordination deficiencies, and widening gaps in technical and reporting capacities. Fulfilling regional objectives demands annual investments ranging from $470 billion to $1.3 trillion by 2030, a scale of financing that existing multilateral development bank resources can only marginally address (approximately 3.4% of total needs). Debt markets offer a promising opportunity to mobilize resources at the needed scale through green, sustainability, and sustainability-linked instruments. Capitalizing on these opportunities, however, requires LAC countries to reinforce their frameworks, instruments, and capacities to design, execute, and monitor impacts delivered through bankable resilient green project pipelines. The Inter-American Development Bank is piloting IDB CLIMA, a performance-based program that rewards investments for strengthening governance, transparency, and sectoral ownership of national climate and nature objectives, ultimately enhancing access to green thematic debt markets and accelerating systemic, results-based climate and nature action across the region.