LEVERAGEIs used in the context of climate finance in which it refers to public finance (e.g. from international finance institutions) that is used to encourage private investors to back the same project. This can be in the form of loans, risk guarantees and insurance or private equity. This is also intended to reduce the perceived risk for the private sector. Financial institutions apply the terminology ‘leveraging’ to understand how their core contributions (for example, money provided by donor governments to a multilateral development bank) can be invested in capital markets to create an internal multiplier effect.
Source: Center for Global Development