All areas of climate crisis response require some level of innovation—ranging from small improvements in standard practices to transformational technological upgrades. For most institutions, including households, this entails some level of cost.

Standards for assessing return on investment, and for structuring financial arrangements, should consider this, value all forms of progress, and reward actions that build climate value.

The big challenge with any innovative technology or business practice is risk of financial loss or inefficient market adjustment. Even where bilateral de-risking, in the form of public sector payments to ensure private sector investors against losses, could normally support targeted resource mobilization, the vastness and complexity of the climate crisis means public resources will never be sufficient to cover all areas of risk in this way.

Cooperative financing approaches go beyond bilateral de-risking, and beyond standard blended finance, to address risk, build capacity, unlock wider flows of financing through constructive sequencing, and deliver enhanced market opportunity across value chains.

Earth Civics and the Climate Value Exchange suggest policy-makers apply some version of the following multilayered strategy in their context to ensure timely and effective mobilization of the unprecedented levels of financing needed to fully meet the climate transformation challenge and secure the best-case returns on investment from climate-resilient development:

1. Assessment of the balance of hidden costs and co-benefits (BHC) – An integrated assessment examining market forces, secondary and wider ripple effects, resulting costs and risks, identifiable embedded costs, and contributions to non-financial co-benefits to third parties, Nature, and society as a whole.
2. Fiscal resilience analysis – Examining trends in public spending and public budget liabilities, including impacts from climate disruption on livelihoods, macroeconomic forces, nutrition, and human health, and the related impacts on fiscal stability.
3. Realign public budgets – Assigning to each item in the budget an area of climate-resilient or sustainable development, using as a reference the Sustainable Development Goals, to more easily demonstrate universal non-financial value creation and the stabilizing effects of public policy decisions, while making it easier to fund new programs or to group respnosibilities under new headings.
4. Map value chains – To understand where each stakeholder sits, what their respective capacities or needs are, and how the overall value chain can be more effectively de-risked and empowered to make progress by steering toward stated climate and sustainability goals.
5. Consult stakeholders – Hold open public meetings in affected communities, to ensure policy decisions are rooted and relevant, and funding decisions support clear benefits to the improvement of lives and livelihoods, both in the short-term and durably over time.
6. Activate cooperative de-risking (CDR) strategies – Use all of the above information to make targeted investments that reduce risk across value chains, to ensure compounding effects are positive, rather than negative. Leverage discrete funds from public, private, multilateral, and philanthropic sources, to achieve CDR benefits and prime both large and small economies for transformational co-investments.
7. Mobilize co-investment mechanisms (CIM) to ensure the most efficient and effective possible use of public resources to drive private investment, to improve BHC and Fiscal Resilience metrics, to cooperatively de-risk and strengthen value chains, and to sustain investment through multiple constructive phases of resilience-building local innovation.

One of the critical ingredients for mobilizing this kind of cooperative financing is an agreed vision of a better future. Because it is not possible for everyone to have the same understanding or mentality about a given set of system-level changes, the approach to finding an agreed vision should aim to pull insights from stakeholders across regions, markets, and value chains, so their respective contributions to the vision agree with each other, so the overall formula adds up.

Local experience can inform policy choices that ultimately foster climate-smart trade relations, expanding the overall amount of durable value that can be achieved on both sides of the trading relationship. By aligning incentives, evaluating the balance of hidden costs and co-benefits, and investing wisely, trading partners can eliminate embedded climate-related costs from their traded goods and services, and improve the value-building efficiency of their economies.

The best-case development scenarios—for high-income and low-income countries, for countries that are perilously dependent on fossil fuels for industrial output and government revenues, and for countries that still depend heavily on agriculture—can be most effectively funded, and accelerated, by cooperative de-risking and co-investment mechanisms. This is the trade and development equivalent of looking under the hood, to make sure the car is primed to run smoothly, safely, and durably.

The five COP31 formal negotiating agendas can serve as a kind of roadmap for co-financing efforts involving national and subnational jurisdictions, large and small-scale value chain actors, and investors seeking reliable sustainable returns. Climate-smart agriculture, infrastructure, technology, and business model innovation, all present opportunities to reduce risk at value-chain level and accelerate the creation of new, additional financial value.