Climate Finance
Concessional capital
Funding provided on terms more favourable than the market, such as below-market interest or grant elements.
Concessional capital lowers the cost of capital for activities with public benefit that markets underprice. It may come as soft loans, guarantees or grants.
Its justification is additionality of finance: it should enable something that would not otherwise happen, not merely improve returns on a project that was already bankable.
Frequently asked questions
Is it always public money?
Mostly, though philanthropic foundations and some development banks also provide it.
How is concessionality measured?
By comparing the terms with market equivalents to quantify the grant element.