Bapon (SHM) Fakhruddin, PhD

LDCs and SIDS can benefit immensely from a  NextGenerationEU (NGEU) https://lnkd.in/eQj6p_wt) style green bond approach, but it must be customized to their realities. The core idea is to mobilize global investor capital at scale and channel it into climate and green development projects in vulnerable economies, blending public and private finance. By employing credit enhancements (guarantees, subordinated capital) and rigorous standards, the perceived risk goes down and investors become part of the solution, just as the EU bonds “allow investors and markets to be part of the solution” to climate goals.
Such an initiative would bring multiple benefits:

Scaling Climate Action: unlock billions for mitigation and adaptation in countries that have finance gaps, thereby accelerating renewable energy roll-out, protecting communities, and building sustainable growth pathways.

Addressing Debt Burdens: if structured wisely, it can offer cheaper refinancing for expensive debt and create fiscal space (especially if coupled with concessional support) which is a critical need as debt servicing is diverting resources from climate adaptation today.

Global Cooperation: It exemplifies a tangible response to calls for reforming global finance for climate justice – with rich countries, MDBs, and private investors sharing the load. It also strengthens local capital markets and institutions (through capacity building for green project planning and reporting in LDCs/SIDS).

The EU model was backed by strong political agreement and a clear mandate (post-COVID recovery + Green Deal). For LDCs and SIDS, a coalition (possibly G20, UN, and MDBs) could set targets and start with a pilot phase. Early successes will build confidence and can be scaled up.

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