Bridging the Funding Gap for Climate - Focused Companies in Emerging Markets
The global transition to clean energy is gathering pace, but financing solar at scale remains one of the toughest challenges. Africa, with some of the world’s richest solar resources, is also where this gap is most pronounced. Projects are abundant, but capital often hesitates - citing risks, fragmentation, and lack of bankable structures.
The story of Nuru Energy in the Democratic Republic of Congo makes the same point. Despite having strong investor backing - including global names in climate and impact finance - the project struggled to move forward. The issue wasn’t capital scarcity, but the lack of affordable risk mitigation solution that could de-risk investments and accelerate execution.
Across Africa, this story repeats itself. Despite the continent’s vast solar potential and more than 660 million people lacking stable access to electricity, Africa today accounts for just ~1% of global installed solar capacity and receives less than 1% of global solar investment.
This is where the Global Solar Facility (GSF) comes in. Conceived with the International Solar Alliance (ISA) and structured by ProsperETÉ, the facility was designed to do more than finance a few projects. It was built to be a global blueprint: starting in Africa, but ready to be replicated across Asia, Latin America, and other emerging regions. The guiding principle throughout was simple - think scale, manage risk, and execute with discipline.
Presented below are the key takeaways from our analysis:
Gap at Growth Stage: Based on interviews with climate entrepreneurs, investors, fund managers and policymakers, we estimate a significant challenge for climate start-ups at the growth stage in EMs to achieve scale and thereby have impact. Several of the Seed and Series A companies (110+) we interviewed mention that while they were able to get initial capital at the early and seed stage, their growth has been stifled by the lack of growth stage capital. In our interviews with large scale investors (commercial private sector investors such as Brookfield, TPG Rise, KKR, Blackrock) there is a lack of scaled companies (providing an investment opportunity of $100 million) in the climate tech sectors. Based on a deep dive study in India, there are around 30 early stage funds with a capital available of about $500 million and only 3 funds, including Prosperete, with a funding requirement of more than $6.5 billion.
Poor Survival Rate of companies in the climate space: Our research highlights the difficulty, with only 9% of EMs’ companies in the climate space successfully transitioning to Series B after seed funding, compared to the global average of 27% for similar companies.This stark difference underscores the critical funding gap hindering the efforts of promising climate start-ups to expand and scale operations, often leading to premature closure. This also implies that scarce early-stage capital being invested in climate sectors in EMs will face challenges in producing expected returns as they are challenged by the lack of growth capital.
Additional $5.2 billion growth capital was needed: During 2017 – 2022, only $2.4 billion was invested in the climate sector, falling short of the $7.6 billion required. This created a significant capital gap at the growth stage, further hindering much needed climate action. An additional $5.2 billion of growth capital would be needed for EM companies to match the trajectories of their counterparts in developed markets.
Opportunity for New Funds: Our analysis reveals a clear whitespace in equity funding for growth-stage companies in EMs in the climate sector. This further reinforces the pressing need for additional growth capital, presenting an opportunity for new funds specialized in climate solutions.
The urgency is clear. With rapid economic growth projected in emerging markets, the funding gap for climate solutions is expected to widen significantly in the coming years. Coupled with the devastating effects of climate change already felt in these regions, the need for dedicated growth capital funds specifically designed for emerging market climate start-ups is undeniable.
Drawing insights from discussions with stakeholders in the climate ecosystem, we pinpoint key challenges and propose a fund specifically tailored to address them. The proposed solution: establishing multiple new growth funds tailored to empower these innovative companies. This will not only unlock their potential but also trigger a virtuous cycle:
Empower Innovation: Growth capital will enable climate solutions to scale, accelerating the development of innovative technologies and approaches to combat climate change.
Thriving Ecosystem: By supporting these ventures, we can cultivate a vibrant climate ecosystem in emerging markets, attracting further investment, talent, and collaboration.
Attractive Returns: Successful exits from these companies will generate attractive returns for investors, further fuelling the growth capital pool and driving future investments in climate solutions.
Accelerated Climate Action: This cycle leads to a significant increase in climate solutions, contributing to global goals.
Establishing these dedicated funds paves the way for a more sustainable future.
Research Methodology
The study investigates the key roadblocks hindering the scalability of climate solutions developed by young start-ups in EMs with a focus to India. We employ a multi-pronged research approach to analyse the factors limiting growth within the climate tech sector of these regions.
Stakeholder Insights: Conversations with Climate Ecosystem Leaders: To gather qualitative data and gain a deeper understanding of the challenges faced by young climate tech startups in EMs, we conducted in-depth conversations with over 120 key stakeholders within the climate ecosystem. This diverse group included entrepreneurs, investment bankers, and other influential individuals actively involved in climate-related initiatives. Through these conversations, we aimed to gain valuable insights into the challenges faced by companies as they attempt to scale their solutions and navigate the complexities of fundraising within the climate tech space
Comparative Analysis of Start-up Mortality Rate in Climate Sector: To corroborate the findings from interviews with climate ecosystem leaders, we conducted a comprehensive analysis of 843 climate companies which raised capital during 2017 – 2022 period, in the selected EMs between 2017 and 2022, focusing specifically on companies offering climate solutions. We examined company mortality trends across different stages of company development. By comparing these trends to the global benchmark, such as global data from a well-recognized investment database, we aimed to identify any potential discrepancies in the funding funnel specific to EM climate tech companies.
Quantification of Funding Gap: To assess the disparity in funding available to start-ups in the climate sector in EMs compared to developed markets, we analysed 1,697 funding deals data to estimate capital funding allocated to such companies within the selected EMs during the period 2017-2022. Additionally, we utilized data on climate investments in the US market during the same period as a benchmark representing developed markets. The US market serves as a reference point due to its established climate ecosystem. By comparing the total capital invested in the EM climate market to the estimated total investment required to reach US market funding levels, we were able to quantify the potential funding gap.
Landscape Analysis of VC and PE Funds: To gain a comprehensive understanding of the current funding environment for climate start-ups in the selected EMs, we conducted a comprehensive analysis of the VC and PE landscape. This analysis involved mapping the activities of over 80 VC and PE funds operating within these regions. Our focus was on examining the investment focus areas to identify potential gaps in the market and areas requiring additional resources for robust growth in climate solutions.
6. A Blueprint Beyond Africa
While Africa is the starting point, the GSF was never meant to stop there. Its structure is deliberately replicable. The same blended finance model, governance design, and project pipeline approach can be applied in Asia, Latin America, and Small Island States.
In this sense, the GSF is more than a fund - it is a financing model for the global energy transition, one that takes lessons from Africa facility and scales them worldwide.
Conclusion: Scale Meets Structure
ProsperETÉ’s journey with the Global Solar Facility is not a one-off project but part of a larger legacy. Over the years, our team has successfully set up eight investment and financing platforms — from India’s first infrastructure-focused fund with SBI Macquarie to pioneering programs such as Scaling Solar Africa. Each initiative reinforced a core belief: when scale meets structure, and risk meets resilience, global capital flows to climate solutions.
The Global Solar Facility embodies this belief — starting in Africa, but with the potential to transform solar investment across the world.