30 Jun 2025
ICC urges targeted reforms to global banking rules, especially Basel III, to unlock climate finance for emerging markets. The brief proposes near-term fixes and deeper changes to ease capital barriers without risking financial stability.
Targeted adjustments to global banking rules could mobilize billions for climate investment without compromising financial stability.
The International Chamber of Commerce (ICC) has released a new policy brief outlining how targeted reforms to the global banking regulatory framework could dramatically increase the flow of private capital to climate projects in emerging markets and developing economies (EMDEs).
Launched this week alongside the FfD4 conference in Seville, the brief—titled Enhancing Climate Finance in EMDEs through Prudential Regulatory Clarification and Reform—provides concrete recommendations to align prudential rules with climate and development goals. At the heart of the brief is a simple but urgent message: if we want to reach net zero globally, we must unlock more finance for the countries that need it most—and current banking rules are getting in the way.
Why this matters
Despite representing 25% of global GDP, EMDEs attract only 14% of international climate finance. According to the Independent High-Level Expert Group on Climate Finance, these economies need an additional $450–550 billion per year in external finance by 2030 to stay on track with global climate goals.
However, ICC’s global business network reports that banks face major obstacles when trying to finance climate-aligned projects in EMDEs—primarily due to how the Basel III framework treats project finance, credit enhancements, and country risk. These technical rules significantly raise capital requirements for EMDE exposures, even when strong risk mitigants are in place. As a result, banks are either exiting these markets or passing on high risk premiums that cancel out the benefits of concessional finance.
What ICC proposes
The policy brief sets out a two-step reform agenda:
Quick Wins: Technical Clarifications and Adjustments These include:
Updating Basel guidance to better reflect how credit guarantees, political risk insurance, and blended finance structures actually work in practice.
Recognizing partial guarantees and borrower-level protections (like power purchase agreements and FX hedging) when calculating capital relief.
Automatically extending favorable risk treatment to all multilateral development banks (MDBs) with AA- credit ratings or higher.
Longer-Term Structural Reforms These include:
Revising how project finance is treated across its lifecycle, given evidence of strong performance and high recovery rates in EMDEs.
Rethinking the use of country risk ceilings to better differentiate project-level risk from sovereign risk.
Exploring a “climate supporting factor” for EMDE investments, similar to how SMEs and infrastructure receive adjusted risk weights in some jurisdictions.
A call to action
ICC is calling for a structured dialogue under the Baku to Belém Roadmap—bringing together financial regulators, development institutions, and the Basel Committee on Banking Supervision. The aim: implement near-term fixes and build momentum toward broader alignment between prudential rules and climate goals.
“Finance is the lifeblood of the climate transition,” said ICC Secretary General John W.H. Denton AO. “If we want private capital to flow to the right places, the rules must work with—not against—climate ambition.”
The full policy brief is available here:
