This working paper developed under ADB’s Nationally Determined Contribution (NDC) Advance technical assistance platform sets out the important role that national climate finance vehicles can play in stimulating private investment in LCCR development. The paper also describes key challenges and solutions to successfully establishing and operating a financing vehicle in a developing country. Informed by three case studies of national financing vehicles from Australia, Indonesia, and Thailand, the paper presents a model design framework and key readiness criteria defining the key enabling factors and design choices for national climate finance vehicles to support the achievement of LCCR investment scale-up effectively. The working paper concludes with key recommendations for developing member countries (DMCs) to inform their approach to designing and operationalizing a climate finance vehicle.

This approach is considered a good practice due to its strategic ability to address financing gaps by leveraging public funds to attract private investments for LCCR initiatives. The case studies underscore the importance of sector-specific approaches, innovative financial instruments, and strong governance structures. For instance, Australia’s Clean Energy Finance Corporation demonstrates how blending financial tools can make LCCR projects commercially viable, while Thailand’s Energy Efficiency Revolving Fund highlights how tailored mechanisms can aggregate small-scale projects and build market confidence. These vehicles, when aligned with robust national policies and institutional frameworks, provide an efficient pathway to scale up climate investments and address market imperfections.

Key lessons learned emphasize the importance of readiness assessments to identify gaps in public fiscal and investment management systems and the need for robust governance frameworks to ensure transparency, accountability, and alignment with national climate goals. Capacity building, both in public institutions and private sector engagement, is essential for success. Flexible yet clear mandates for climate finance vehicles ensure adaptability to changing market conditions while maintaining strategic alignment with national priorities. This holistic design approach enables DMCs to mobilize significant financial resources, attract private sector engagement, and achieve transformative impact in their LCCR transitions.