Guarantees are legally binding agreements under which guarantors agree to pay part or the entire amount due on a loan, equity or other instrument in the event of non-payment, or a loss of value in the case of an investment. In recent years, their use as a financial instrument in international development and climate finance has been increasing.

This report provides an overview of the current landscape in order to raise awareness of the potential impact of an increased issuance of guarantees for development and climate action. It provides a mapping of the providers of guarantees, introducing three guarantee-issuing organisations: the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA); the EU’s European Fund for Sustainable Development Plus (EFSD+); and the Swedish International Development Cooperation Agency (Sida).

Based on the existing evidence, the analysis goes on to explore the opportunities and the risks that these instruments pose from a development and climate justice perspective. It finds that there is still a case to be made. More transparency and evidence are needed on the exact nature and role of individual guarantees; the institutional mandate; and their long-term financial and development additionality. This is key to ensuring that guarantees for development and climate do not divert attention from unmet commitments and undermine development and sustainability objectives.

Report by Eurodad