Trust sounds like a soft word until you see it priced. In climate finance it is priced every day, and the price is written in basis points.
Take this eye-opening example. Climate Policy Initiative’s June 2023 paper on the cost of capital for solar in developing economies compares the same solar project across countries. In Germany, investors required an 8.3 percent return on equity. In Zambia, 51.0 percent. Debt tells the same story: 2.8 percent against 45.4 percent. Same panels, same sun physics, same proven technology. What differs is the confidence that the off-taker will pay, that the currency will hold, that the rules will not change halfway through, and that the community will not stop the trucks at the gate. In other words, the spread is what the market charges for the absence of trust.
Our own region sits on that ladder too. The same paper puts required equity returns at 12.6 percent in the UAE, 14.3 percent in Saudi Arabia and 35.1 percent in Egypt. Anyone who has tried to reach financial close between the Gulf and North Africa knows these numbers from the inside.
We have seen this movie
The negotiated side of climate finance carries the same disease at a larger scale. Developed countries promised 100 billion dollars a year by 2020 and delivered it two years late. At COP29 in Baku the parties agreed a new goal of 300 billion dollars a year by 2035, with a roadmap toward 1.3 trillion. I wrote about the Baku numbers in my last piece, so I will not re-run the scorecard here. The point for this article is simpler. When delivery lags promises for a decade, every party starts to price the other side’s follow-through. Billion-level delivery against trillion-level need is quantified mistrust, and it flows straight down into the cost of capital of a solar plant in Lusaka.
What twenty years of projects taught me
None of this is theory to me. In years of building power generation projects, I learned that the projects that stall usually have the best technical plans. What they lack is someone who built trust before they needed it. The turbine is the most predictable part of a wind farm. The people around it are the delivery risk: the mayor worried about local jobs, the community worried about land, the ministry worried about grid costs, the lender worried about all three. Every one of them needs the answer to one question before they move: what is in it for me to change with you?
Stakeholder engagement can be framed as four practices: early involvement, participatory decision-making, transparency, and benefit-sharing. Trust is infrastructure. It just does not show up on the balance sheet until it is missing.
Trust can be engineered back in
The good news is that trust repair is measurable too, and the tools already exist.
Guarantees. At COP28’s Greening the Grid roundtable, the UK’s Room2Run guarantee unlocked 169 million dollars of additional African Development Bank lending for transmission in Kenya and Mauritius. A guarantee, not a loan, created new lending capacity. CPI’s paper proposes the same logic at scale: a 6.6 billion dollar guarantee facility, 10 percent paid in, that would backstop about 120 billion dollars of solar debt in developing economies.
Transparency. An IMF working paper by Choi and Hashimoto (WP/17/74, 2017) found that emerging market sovereigns that adopted data transparency reforms saw their bond spreads fall by around 15 percent within a year. Publishing better data is cheaper than any subsidy, and it moves real money.
Markets that reward follow-through. Article 6 was finally operationalized in Baku. If it works, it gives countries a way to earn from delivered emission reductions rather than promised ones. That is trust with a price tag, in the right direction for once.
Each of these tools substitutes institutional trust where relationship trust does not yet exist, and each of them stops at the sovereign or off-taker level. My addition from the field is that de-risking cannot stop there. A project with weak stakeholder alignment carries execution risk that shows up as a higher cost of capital whether or not anyone names it.
Bankability is downstream of trust.
The test for Antalya
In my last piece I argued that COP31’s shared presidency gives implementation a dedicated owner for the first time. Here is how I would evaluate that owner: less by the size of the number announced in Antalya, and more by whether the Climate Implementation Bridge and the finance package actually narrow the spread between Germany and Zambia, between the UAE and Egypt. Every guarantee signed, every data reform adopted, every Article 6 deal that closes is a few basis points of trust engineered back into the system. That is what a COP of implementation looks like when you measure it.
We spent thirty years perfecting the megawatts. The harder work now is the trust between countries, between companies and communities, between generations. The window is open. Let’s make this count and let’s never forget. Action fuels hope, hope fuels action.
The views expressed in this article are solely my own and do not represent the positions of any employer, company, or institution with which I am or have been affiliated.
