Perspective: Solving the proximity problem of climate finance

In development finance, we tend to describe the financing gap simply as a shortage of money. In frontier markets, it is a more complex challenge. When capital is available, a great deal of it is actively looking for climate-aligned opportunities. What is often missing is the infrastructure that connects that capital to the businesses that need it — and the readiness of those businesses to absorb it. 

I was reminded of this on a recent panel hosted by the Netherlands Enterprise Agency (RVO), where I joined colleagues from FMO and Triple Jump to discuss what it takes to move agri-small to medium sized enterprises (SMEs) from "unbankable" to investable in least developed countries. The conversation surfaced a point that is not talked about enough: the gap is not primarily about capital supply, but absorption. 

Many agri-SMEs in frontier markets operate with limited financial records, governance systems that are still maturing, and business models that need time to prove themselves. Investment readiness has to be built over time. It cannot be assumed or manufactured in a single funding cycle. This is slow, unglamorous, deeply local work—and it is precisely the work that determines whether capital ever reaches the missing middle. 

This is where the role of organisations like ours has evolved structurally. For decades, many in this space have been understood as implementers: organisations that deliver projects funded by grants. That description is genuinely inadequate. Increasingly, the most valuable thing development partners do is not merely implement projects, but build the conditions under which capital can flow responsibly—preparing enterprises, strengthening the surrounding ecosystem, and helping deals reach the point where a bank or an impact investor can say yes. We are catalytic intermediaries. And as official development assistance contracts, and grant monies need to evolve quickly, this shift is no longer optional. 

The central argument of Building the Impact Capital Continuum is that this is a problem of proximity, not just scale. The organisations best placed to close the distance between available investment capital and local businesses that are actually ready to receive and use that capital are not necessarily those with the largest balance sheets. Instead, it is those embedded in local markets and are able to find the right enterprises and walk with them through the years of preparation that investment readiness requires. 

The Dutch Fund for Climate and Development (DFCD) shows what this looks like in practice. Through its origination work, 30 enterprises have been supported across 11 countries, with 45% in least developed countries—a notably high share for a blended finance vehicle. Fourteen have graduated into active investment. To date, around €81 million in private capital has been mobilised, with €124 million projected: roughly ten euros of private investment for every euro of catalytic grant funding. That ratio is not the product of clever financial engineering. It is the product of patient, embedded preparation.

The honest answer is that it requires a deliberate shift, and not a comfortable one. Over the coming ears, NGOs in frontier markets will need to move from project implementer to catalytic intermediary; from grant recipient to co-designer of blended finance; and from running parallel "access to finance" programmes to building shared infrastructure alongside peers rather than competing with them. It also means leveraging our long-term local presence and investing in our financial fluency to be credible partners to investors. The NGOs that thrive through this transition will not be the ones that secure the last available grant. They will be the ones that have made themselves essential to how capital reaches the businesses that need it.

None of this should be framed as grants versus private finance. That is the wrong debate, and it has consumed too much energy already. The future of climate finance in frontier markets depends on deliberate collaboration across the continuum: public and catalytic funding to originate and de-risk; NGOs designing programmes with investment pathways in mind from the start; investors engaging earlier than they are used to; and donors and governments funding the connective infrastructure between actors, not only the final transaction.