As countries prepare their next round of Nationally Determined Contributions, the challenge will be to turn ambition into capital flows, write Darius Nassiry and Ina Hoxha
When governments signed the Paris Agreement in 2015, Nationally Determined Contributions (NDCs) were meant to drive a virtuous cycle of rising ambition. Every five years, countries would set more ambitious pledges to cut emissions and adapt to climate change. NDCs 3.0 represent the current third round of climate pledge submissions.
UNFCCC Executive Secretary Simon Stiell has said: "NDCs need to incorporate investment plans that give a clear signal to the world, to investors, and to donors, of how countries plan to tackle climate change."
In a message to the UNFCCC Parties, he said: "NDCs 3.0 should also help to accelerate implementation of existing commitments and help unlock finance at scale."
In practice, however, most NDCs remain aspirational documents that are too vague to attract investment at scale.
As the first global stocktake confirmed, climate finance flows fall far below what is needed, particularly in emerging markets and developing economies.
With the next round of NDCs due in 2025, governments face a pivotal opportunity. The question is whether NDCs 3.0 will remain statements of ambition or become investable strategies capable of mobilising public and private capital at scale. To achieve the necessary step change in ambition, NDCs 3.0 need to deliver finance in line with their goals.
A key step will be to frame and translate NDCs 3.0 in a way that investors can recognize and respond to as investment opportunities.
A new paper published in cooperation with the NDC Partnership – an initiative launched in 2016 at COP22 in Marrakesh to facilitate accelerated climate action – proposes a new path forward: expand NDCs into Climate Investment Prospectuses (CIPs) to accelerate investment into NDCs 3.0 and National Transition Plans.
The OECD recently noted the potential for CIPs to translate climate goals into bankable opportunities. The City of London published an investment prospectus in 2024.
To be credible, these prospectuses should be part of broader national transition plans. In November Climate Bonds Initiative will release a paper, Unlocking investment for sovereign transition, addressing the pivotal role of NDCs and sovereign transition planning in raising finance for the transition. The CIP would be an important element of the implementation pillar of a national transition plan.
In a nutshell, CIPs translate climate goals into pipelines of projects, sectoral pathways, and financial structures in terms that investors can recognize and respond to as investment opportunities. CIPs would present the full set of NDC-related investment opportunities in the context of a national transition plan.
Prepared in the form of a financial prospectus, CIPs would also provide transparency on risks and opportunities, specify country value propositions, and build credibility with markets.
"Most NDCs remain aspirational documents that are too vague to attract investment at scale"
For ministries of finance, CIPs help align climate strategies with debt management and fiscal planning and assist in coordinating investment planning across government.
For investors, they create consistency and comparability across time horizons and countries, improving the ability to assess risk and opportunity.
CIPs would be an output of sovereign transition planning and represent an important element of the implementation pillar of a national transition plan.
Sustainability-linked bonds as the instrument of choice
The next step for countries – particularly to emerging markets and developing economies as well as for investments in adaptation and resilience – will be to use investment prospectuses to generate actual capital flows.
Sustainability-linked bonds (SLBs) are emerging as one of the most promising instruments for this task. Unlike green bonds, which earmark proceeds for specific projects, SLBs allow governments to use funds flexibly across their budgets.
The discipline comes from the structure: interest costs are tied to meeting agreed sustainability targets. Miss the target and borrowing becomes more expensive; meet it and the sovereign issuer pays less.
This design offers governments flexibility, accountability, and credibility. Flexibility comes from the wide range of eligible spending. Accountability arises from coupon step-ups or step-downs that embed financial consequences. Key performance indicators (KPIs) drawn from the NDC or CIP would reinforce credibility for investors.
"Sovereign SLBs signal to markets that NDC commitments are not simply policy pledges but binding frameworks with measurable outcomes"
In this way, sovereign SLBs signal to markets that NDC commitments are not simply policy pledges but binding frameworks with measurable outcomes.
Recent examples show how powerful SLBs can be. Chile's sustainability-linked issuances, which now exceed $10 billion, tie coupon payments directly to its emissions budget and renewable electricity targets.
Uruguay has issued SLBs that link debt costs to both emissions reduction and forest conservation, verified independently by the United Nations Development Programme.
In June, Slovenia raised €1 billion from the issuance of a 10-year SLB, the first ever SLB from a European sovereign, in an offering that was six-times oversubscribed.
These precedents demonstrate that transparent, rigorous sovereign SLBs can mobilise billions, while anchoring accountability that extends beyond political cycles.
Earlier this year Côte d'Ivoire published its sustainability-linked finance framework as a step to becoming the first sub-investment grade sovereign SLB issuer.
The institutional architecture of investment
To scale this approach, institutional scaffolding is essential. Country platforms – the multi-stakeholder policy and financing coordination mechanisms promoted by the Green Climate Fund and other institutions – are the natural home for CIPs and SLBs.
Country platforms can also play a key role in coordinating development of NDCs and national transition plans, identifying potential investment projects, facilitating development of CIPs, and mobilizing finance.
Platforms convene ministries of finance, planning and environment, development banks, and private investors. By embedding CIP preparation and SLB issuance at their core, they can move from being discussion forums to becoming engines of investment. Investor-relations functions, clear reporting frameworks, and adherence to international standards such as the Climate Bonds Standard V4.3 are all part of building the trust needed for capital flows.
Finance ministries have a particularly strategic role. Integrating SLBs into sovereign debt management ensures they are part of broader fiscal strategy, not isolated experiments. The Climate Bonds Initiative's Entity Certification framework provides investors with further assurance that issuers have the strategy, action plan, systems and governance capacity to deliver on their commitments.
How fast can the market go?
As with any new instrument, the market will need more issuances for it to take shape and build confidence. Rapid growth of the SLB market will raise concerns about quality and integrity. Weak targets risk undermining credibility; poorly structured issuances could taint SLBs before the market matures.
Countries therefore must set targets that are both ambitious and achievable, backed by independent verification and transparent reporting.
Fortunately, standards are evolving. The Climate Bonds Initiative's SLB guidance and SLB Certification framework (currently only applicable to corporates), ICMA's updated principles, and detailed analysis from the Anthropocene Fixed Income Institute all provide roadmaps for high-quality issuance.
If countries get this right, the demonstration effects will be transformative, and early dialogue with governments in Africa and Asia have revealed the interest and potential. Just as the first wave of sovereign green bonds reshaped markets by proving feasibility, early SLBs tied to CIPs that in turn support achievement of an NDC and transition plan could set powerful precedents.
Success would build investor confidence, create benchmarks for pricing and liquidity, and show peers that stronger NDCs can unlock capital for climate investments.
Governments that see others raising billions on favorable terms are more likely to strengthen their own NDCs and prepare CIPs robust enough to support issuance. Over time, this dynamic will create a virtuous cycle in which ambition, investment, and replication reinforce one another.
The risks of delay are clear. Climate pledges that remain disconnected from financing strategies will not mobilise the trillions required. Platforms that fail to raise capital for climate priorities will miss the opportunity to drive their country's transition, while missed opportunities to establish credible precedents could slow momentum in the broader market.
Yet the opportunity is undeniable. By expanding NDCs into CIPs, linking them to SLB programmes, and embedding both into transition plans and country platforms, governments can demonstrate that climate commitments are not just aspirational – they are bankable.
Done well, this approach can accelerate investment flows, strengthen fiscal credibility, and raise ambition across borders. It can show that NDCs are not simply promises for the future but credible frameworks for mobilising capital at the scale and speed to fulfill the promise of the Paris Agreement.
Darius Nassiry is a Senior Fellow with the Columbia Center on Sustainable Investment. Ina Hoxha is Deputy CEO of the Climate Bonds Initiative.
Annotated References and Further Reading
- Anthropocene Fixed Income Institute. Sustainability-Linked Bond Handbook. Provides technical depth on SLB structuring, ambition, and integrity safeguards for sovereign and corporate issuers. https://anthropocenefii.org/resources/sustainability-linked-bond-handbook
- Climate Bonds Initiative. Climate Bonds Standard V4.3. Sets updated criteria for green and sustainability-linked issuance, providing benchmarks for sovereign credibility. https://www.climatebonds.net/files/documents/CBI_Standard_V4.3_FINAL_2025-08-20-102147_gbqn.pdf
- Climate Bonds Initiative. SLB Certification Checklist. Provides assurance on governance and systems, helping investors judge non-financial corporate's (including State Owned Entities) capacity to deliver on sustainability targets linked to SLBs. https://www.climatebonds.net/files/documents/CBSv4_0-SLD-Certification-Checklist.pdf
- Climate Bonds Initiative. Sustainability-Linked Bonds: Building a High-Quality Market. Guidance on target-setting, verification, and reporting to ensure integrity in the growing SLB market. https://www.climatebonds.net/files/documents/publications/Sustainability-Linked-Bonds-Building-a-High-Quality-Market.pdf
- Climate Bonds Initiative. Sustainability-linked Bond Dataset (SLBD) Methodology. https://www.climatebonds.net/data-insights/market-data/slb-dataset-methodology
- Climate Bonds Initiative. Unlocking Investment for Sovereign Transition. Guidance to enhance sovereign transition planning and plans, building on NDCs, to deliver access to finance for the transition. Forthcoming in November 202
- Grantham Research Institute, LSE. Explainer: What Are Sustainability-Linked Bonds and How Can They Help Developing Countries? Accessible overview of SLBs, their mechanics, and their potential for emerging markets. https://www.lse.ac.uk/granthaminstitute/explainers/what-are-sustainability-linked-bonds-and-how-can-they-help-developing-countries/
- Green Climate Fund. Country Platforms for Climate Finance. Explains how multi-stakeholder country platforms can serve as hubs for CIP preparation and SLB issuance. https://www.greenclimate.fund/sites/default/files/document/country-platforms-climate-finance-en-web.pdf
- Green Finance LAC. Chile Becomes the First Country in the World to Issue a Sustainability-Linked Sovereign Bond. Covers Chile's pioneering SLB issuance, a precedent for linking sovereign debt to NDC targets. https://greenfinancelac.org/resources/news/chile-becomes-the-first-country-in-the-world-to-issue-a-sustainability-bond/
- NDC Partnership. Bridging the Gap: National Transition Plans and Climate Investment Prospectuses. Proposes expanding NDCs into Climate Investment Prospectuses to make national pledges investment-ready. https://ndcpartnership.org/sites/default/files/2025-03/bridging-gapntps-and-cipsfinal-a4.pdf
- OECD. Investing in Climate for Growth and Development: The Case for Enhanced NDCs. Provides new evidence that accelerating climate action is not only feasible, it also makes economic sense – driving growth, unlocking development dividends and preventing losses from climate disasters. https://www.oecd.org/en/publications/investing-in-climate-for-growth-and-development_16b7cbc7-en.html
- UNFCCC. Nationally Determined Contributions (NDCs). Provides the official background on NDCs as the foundation of the Paris Agreement. https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs
- UNFCCC. NDC Registry. A central repository of country submissions, showing the current state of NDC ambition and detail. https://unfccc.int/NDCREG
- UNFCCC. NDC 3.0: Raising Climate Ambition Through Implementation. Outlines the next generation of NDCs due in 2025, highlighting the opportunity to link ambition with credible implementation. https://unfccc.int/ndc-3.0
- UNFCCC, Building Support for More Ambitious National Climate Action Plans. https://unfccc.int/news/building-support-for-more-ambitious-national-climate-action-plans
- UNFCCC. Message to Parties and observer States - From Vision to Reality: NDCs 3.0 – bending the curve. https://unfccc.int/documents/637412 and https://unfccc.int/sites/default/files/resource/message_to_parties_ndcs_%203.0.pdf
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