Why South-South investment will define the next wave of climate capital 

For much of the past two decades, climate investing has followed a familiar pattern: capital, technology and expertise originating in developed markets flowed into emerging economies in pursuit of decarbonization and development. This model helped establish the early foundations of renewable energy and climate infrastructure across many parts of the Global South.

The next phase of climate growth will be different. It will be defined by the scaling of proven solutions from one emerging market into another.

Many of the climate technologies needed in emerging markets are already commercially proven. Across Africa, Southeast Asia, Latin America and South Asia, companies have demonstrated viable models in distributed energy, battery storage, electric mobility, industrial decarbonization, energy efficiency, water management and adaptation. The challenge is no longer invention, but replication and scale.

South–South climate technology investing reflects a structural shift in how innovation, infrastructure and capital are evolving across emerging markets, and presents a significant commercial opportunity driven by returns rather than philanthropy.

Historically, investors have tended to underestimate the extent to which emerging market operators are often better positioned than their OECD counterparts to solve climate and infrastructure challenges. Frugal innovation, for example, shows that companies built in the Global South are typically designed in environments with under-built infrastructure, fragmented logistics networks, and constrained consumer affordability. These businesses develop operating models that are cost efficient, resilient and adaptable – often more so than imported solutions from developed markets.

This creates a unique advantage when such models are transferred into comparable markets. A distributed solar technology provider from India entering East Africa, or an electric mobility platform from Southeast Asia expanding into Rwanda, often carries lower technology risk, lower costs and a stronger understanding of how to scale in infrastructure-constrained environments than a traditional foreign entrant. In many cases, these businesses are not introducing new technologies, but simply transferring proven models into similar markets.

The economics of this are powerful. South–South replication reduces execution risk because models have already been validated. It shortens time to revenue, lowers development costs, improves adoption predictability and increases capital efficiency.

The most successful South–South climate investment strategies recognise that value creation in emerging markets rarely comes from technology alone, but from integrating infrastructure, financing and operations into a coherent growth system.

Take electric mobility. Southeast Asia has demonstrated scalable electric two- and three-wheeler models. East Africa shares many of the same structural conditions, so the opportunity is not simply to export vehicles, but to replicate the broader ecosystem – including battery swapping, financing, fleet management and renewable charging infrastructure.

From an investment perspective, the integration of energy infrastructure is an enabler in and of itself. In many emerging markets, unreliable grids and volatile power prices create significant operational risk for scaling businesses. Investors who pair climate technology deployment with dedicated renewable power generation and storage solutions are able to stabilise operating costs while simultaneously improving asset bankability. Energy becomes not just an infrastructure investment, but a direct enabler of growth.

What makes these models powerful in emerging markets is their network effect across systems and value chains. Innovations introduced in one part of the value chain generate spillover benefits across others. More affordable and reliable mobility can improve market access for smallholder farmers and lower delivery costs for small businesses. Battery infrastructure also enables cold storage, reducing food loss and extending shelf life. Mobility therefore becomes an enabler of broader economic resilience and productivity.

This principle extends well beyond mobility. India’s commercial and industrial solar market offers another strong example. Over the past decade, Indian solar developers refined highly scalable operating models around long-term power purchase agreements, industrial offtakers and efficient project execution. In markets with rising electricity tariffs, utility shortfalls and industrial energy insecurity, private power solutions are in high demand. Again, the opportunity lies in transferring a proven operating and financing model into structurally similar markets that are easily deployable and can meet immediate needs.

Equally important is the role of financing innovation itself to meet the needs of end-consumers. Some of the most successful climate businesses in emerging markets have succeeded because they solved affordability constraints through financing structures rather than through technological breakthroughs. Pay-as-you-go solar businesses in East Africa are a prime example. Their innovation lay not in the solar panel, but in combining mobile payments, consumer financing and decentralized distribution. Similarly, micro-consignment models in Central America enabled local entrepreneurs to distribute solar energy products into remote communities by providing inventory on credit, helping to reduce upfront financial barriers while expanding last-mile access and creating local income opportunities.

One of the greatest constraints facing climate deployment in emerging markets today is not necessarily the absence of capital, but rather the mismatch between available capital and investable structures. Traditional financing models often struggle because they transplant OECD risk assumptions into fundamentally different markets. In many cases, investors price risk too broadly, rely excessively on external advisory, or underestimate the importance of local operating knowledge.

For investors, this creates an important strategic insight. The most scalable climate opportunities in the Global South are often not frontier technologies requiring high venture risk. Instead, they are proven business models that require growth capital, infrastructure integration and intelligent risk structuring to expand into adjacent markets. Some investors, for example in the Gulf, are taking notice of this: Between 2012 and 2022, Gulf countries invested more than $100 billion across Africa across renewables, logistics, ports and industrial infrastructure. This highlights how emerging-market investors are transferring both capital and operational expertise in infrastructure-constrained environments.

However, many capital providers still approach emerging markets through fragmented, country-specific strategies rather than regional replication thinking. Understanding which operating models are transferable across markets with similar demographics, infrastructure constraints and industrial profiles requires investors to think in systems rather than individual projects.

Crucially, South–South climate investing is not simply about development impact. It is increasingly about competitive advantage and resilience of local economies. Emerging market climate businesses, for example, build operational capabilities that are highly relevant to the future global economy and become core drivers of long-term competitiveness. And they do it, often, with risk profiles aligned with those that investors might find in more developed economies.

The future of climate investing may not ultimately belong to those inventing entirely new technologies in developed markets. It may instead belong to those capable of identifying what already works in one emerging economy and scaling it in another. Those who continue to view the Global South primarily through a lens of aid, concessionary capital or isolated country risk may miss one of the largest structural investment opportunities of the energy transition.

The Global Future Council on Energy Nexus shares ideas and examples through its Energy Nexus Insights series, comprising blogs, articles and infographics; guides for public and private sector decision-makers; and sector analyses.