The International Monetary Fund estimates that emerging markets and developing economies (EMDEs) require at least USD 1.1 trillion annually for climate mitigation and adaptation. Yet, investments fall short by about USD 800 billion every year. While private sector financing drives investments in “hard” sectors like energy and transport due to stable business models and predictable cashflows, the responsibility for mitigating socio-economic disruptions (such as job losses) and for building community resilience largely rests with the public sector. Yet, government balance sheets in EMDEs remain strained by public debt accumulated during the global pandemic, as well as macroeconomic factors, including high interest costs and growing external debt service burdens.

A just transition in emerging markets therefore calls for a “co-investment” approach that embeds justice considerations within energy transition planning, making them an integral part of the overall investment strategy and objectives. This integrated approach channels capital not only into hard transition assets, such as renewable energy, but also into complementary just transition priorities, such as stakeholder capacity building and strengthening local community resilience, by leveraging both public and private funding and by drawing on a mix of concessional and non-concessional capital.

How just energy transition partnerships act as co-investment platforms

Since the 2015 Paris Agreement, many EMDEs have taken proactive steps to transition to low-carbon development pathways. Dedicated country-level financing platforms known as just energy transition partnerships (JETPs) have emerged as a viable option to facilitate co-investments in just transition–related assets and economic activities. South Africa, Indonesia, and Vietnam have already set up JETPs in collaboration with international development partners, and a similar programme exists in the Philippines. These JETPs have been able to mobilise substantial finance commitments, develop detailed investment frameworks, and act as catalysts for private sector engagement. They hold significant potential to de-risk investments and crowd in blended finance at scale for long-term transition planning.

A key win for JETPs has been the creation of detailed and unified investment plans outlining specific projects, financing needs, and social co-benefits.

However, despite these efforts, financing gaps persist—especially for the softer just transition aspects, such as stakeholder capacity, building community resilience, and supporting small businesses. For instance, Indonesia and Vietnam face overall financing gaps of around 70% to 90%, despite large pledges, and current funding significantly lacks grant capital, which is critical to fund the “just” elements of the plan.

JETPs have struggled to translate plans into action

A key win for JETPs has been the creation of detailed and unified investment plans outlining specific projects, financing needs, and social co-benefits. Developing such investment plans is a foundational step in mobilising co-investments at scale. The Philippines’ accelerating coal transition investment plan and South Africa’s just energy transition investment plan are notable examples.

However, while JETPs have been successful in producing investment plans, that alone is not sufficient. A major barrier in EMDEs—and the key reason just transition plans end up remaining on paper—is the lack of well-prepared investment pipelines. Often, co-investment planning suffers from poorly designed projects that have not adequately understood and mitigated real or perceived risks tied to specific assets and activities requiring capital. These shortcomings typically arise from limited project preparation capacity, weak coordination, and insufficient early-stage concessional funding to develop bankable, well-structured projects.

South Africa offers a compelling example of the potential drawbacks of poorly planned investment pipelines. The repurposing of the Komati coal plant, intended to be the first real-world test case for South Africa’s just transition, suffered from poor planning and limited community engagement. Local communities were deeply impacted when coal jobs were lost before alternative employment was created. The National Union of Mineworkers even called for the JETP’s suspension. Beyond this, Eskom (the developer) faced political backlash over the retirement of coal assets, and the JETP grant allocation process was criticised for lacking transparency. Because social, political, and funding transparency risks were not proactively addressed, the implementation of Komati’s repurposing into renewable energy assets, as outlined in the investment plan, has been delayed.

Another example that illustrates how unanticipated risks can stall implementation is the early retirement of the 660-MW Cirebon-1 coal plant in Indonesia under its JETP and the Asian Development Bank’s Energy Transition Mechanism. The project faced limited and poorly designed community engagement, which fuelled distrust and civil society criticism. The investment plan also downplayed potential environmental and social impacts by assigning low safeguard categories, and failed to clearly define “clean energy” for repurposing, leaving room for potentially contentious options such as carbon capture and storage. Lastly, legal and contractual uncertainties, in particular around renegotiating the power purchase agreement, added delays, compounded by fears of political or legal repercussions for officials if the deal was deemed to cause “state losses.” The result has been slow fund disbursement, minimal local jobs creation, and continued community opposition, with critics warning of greenwashing and missed socio-economic benefits.

Targeted de-risking can help JETPs scale up beyond plans

Investment plans that proactively address de-risking and embed just transition objectives are key to successful JETPs. The Zero-Budget Natural Farming (ZBNF) initiative in Andhra Pradesh, India—though not framed as a just transition initiative and outside the energy sector—offers valuable lessons on how structured planning and long-term vision can mobilise capital and scale up just transition efforts. Backed by philanthropic funding and a EUR 90 million performance-based loan from Germany’s state-owned development bank Kreditanstalt für Wiederaufbau in 2019, ZBNF aimed to eliminate synthetic fertilisers and pesticides, thereby reducing greenhouse gas emissions and replacing the traditional risk-heavy distributed model, where farmers bear input costs. Under this initiative, crop risk was shouldered by farmers, philanthropic institutions supported pilots and technical assistance, while governments and lenders financed large-scale capacity building. By planning targeted funding, the state government aligned the priorities of capital providers with specific parts of the programme.

Experiences from South Africa and Indonesia highlight how poor planning and weak community engagement can stall progress and erode investor confidence.

The programme’s goal was a self-sustaining model. Although farmers did not contribute capital directly, investments went into capacity building for natural farming, developing supporting infrastructure, and facilitating market access until farmers no longer needed support—demonstrating how blended finance can provide temporary assistance through grants and public budgets to establish lasting systems that no longer rely on concessional funding.

The programme addressed critical risks that could have undermined its feasibility. These included the input cost burden on farmers, which threatened the model’s viability; the risk of limited capacity and knowledge among farmers to scale ZBNF beyond initial pilots; and challenges stemming from misalignment among capital providers and the absence of demonstrable results for raising capital in future. These lessons show that JETPs can be designed to anticipate and manage critical risks to operationalising and scaling up such mechanisms.

The way forwards

JETPs demonstrate that mobilising capital for a just transition goes beyond creating investment plans; it requires well-prepared, de-risked project pipelines and strong institutional capacity. Experiences from South Africa and Indonesia highlight how poor planning and weak community engagement can stall progress and erode investor confidence. To reduce perceived risk and accelerate deployment, it will be helpful in such cases to establish dedicated facilities for early-stage project preparation and technical support to build a robust pipeline of de-risked, investment-ready projects.

In contrast, Andhra Pradesh’s ZBNF shows how structured, inclusive planning aligned with funder priorities can scale efforts effectively. It also shows the importance of structuring blended finance mechanisms that use concessional capital strategically to fund non-commercial components (such as capacity building), to create self-sustaining models.

Governments in EMDEs play a pivotal role in developing project pipelines and shaping initiatives of this nature. To do so effectively, they must evolve from their traditional policy-making role into that of proactive investment facilitators. This requires a clear understanding of the risks and bottlenecks faced by investors, supported by robust governance mechanisms.

Shantanu Srivastava is responsible for leading the sustainable finance and climate risk initiatives at IEEFA South Asia. He specialises in the financing, policy and technology aspects of the Indian electricity market. 

Soni Tiwari is an Energy Finance Analyst with IEEFA India, examining the energy sector with a particular focus on renewable energy transition and the opportunities and barriers for different states and companies.