Periodic Reporting for period 4 - LINKS (Kick-starting global cLimate Investments:uncovering hidden liNks in climate finance and exploring dynamic evolution of investment networKs for policy deSign)
Reporting period: 2024-03-01 to 2025-04-30
The ERC-funded project LINKS addresses a central challenge of the low-carbon transition: why global financial systems continue to fall short in delivering the scale, speed, and equity of investment required to meet climate goals. Conventional climate-policy assessments focus on aggregate investment needs and assume that financial markets will align smoothly with policy signals. In reality, climate investment emerges from heterogeneous financial actors embedded in complex, interconnected, and evolving networks, whose interactions shape real-world outcomes.
These network dynamics determine which technologies scale, how quickly markets develop, and which countries gain - or are excluded from - access to affordable capital. Despite growing policy attention, the lack of a systemic understanding of investor networks, risk perceptions, and institutional biases limits our ability to explain persistent underinvestment in low-carbon technologies and the uneven geography of climate finance.
This challenge is of fundamental societal importance. Without a transformation in how finance is mobilised and allocated, the transition risks being too slow, too costly, and deeply unequal. High capital costs, rating distortions, perceived investment risks, and path dependency systematically disadvantage emerging and developing economies, reinforcing global inequalities. LINKS set out to address this gap by establishing a new analytical framework—climate finance networks—integrating complexity science, empirical finance, and policy analysis to inform more effective and equitable financial system reforms.
These network dynamics determine which technologies scale, how quickly markets develop, and which countries gain - or are excluded from - access to affordable capital. Despite growing policy attention, the lack of a systemic understanding of investor networks, risk perceptions, and institutional biases limits our ability to explain persistent underinvestment in low-carbon technologies and the uneven geography of climate finance.
This challenge is of fundamental societal importance. Without a transformation in how finance is mobilised and allocated, the transition risks being too slow, too costly, and deeply unequal. High capital costs, rating distortions, perceived investment risks, and path dependency systematically disadvantage emerging and developing economies, reinforcing global inequalities. LINKS set out to address this gap by establishing a new analytical framework—climate finance networks—integrating complexity science, empirical finance, and policy analysis to inform more effective and equitable financial system reforms.
LINKS has delivered a step change in how climate finance is analysed by modelling financial systems as complex, evolving networks of heterogeneous actors, rather than as frictionless markets. Using large-scale investment data and network methods, the project established the foundations of the emerging field of climate finance networks, showing how financial structures, investor behaviour, and policy interventions jointly shape low-carbon investment outcomes.
In its first phase, LINKS mapped global co-investment networks across low-carbon technologies, countries, and time. This work showed that investment is organised through highly structured and unequal networks, where a limited number of actors exert disproportionate influence over deployment pathways. The analyses identified early movers, scale-up enablers, and the distinct roles of local and international investors across regions and technologies.
LINKS then examined network evolution over two decades of investment data. A key result is the identification of strong path dependency: once investment patterns are established, they tend to reinforce themselves - accelerating deployment in some contexts while systematically excluding others. At the same time, the project demonstrated the existence of positive financial tipping points, whereby small changes in expectations, coordination, or policy signals can trigger non-linear increases in low-carbon investment once key thresholds are crossed.
The final phase of LINKS focused explicitly on the investment challenge in developing and emerging economies. Building on earlier work on cost-of-capital disparities, LINKS showed that the main barrier is often no longer technology cost, but perceived and interacting investment risks embedded in global financial networks. Empirical analyses demonstrated how suitability criteria, risk perceptions, and investor learning perpetuate unequal mitigation finance flows and reinforce cross-country disparities.
LINKS further showed that policy effectiveness depends critically on financial network structures. Disclosure initiatives alone are insufficient to shift capital unless they interact with underlying market architectures. A major study on banking finance demonstrated why fossil fuel lending remains resilient even under phase-out commitments, due to syndicated lending structures that dilute unilateral withdrawals. Phase-out accelerates only when regulatory stringency reaches a systemic tipping point, particularly when large banks lead.
Sectoral analyses highlighted additional dynamics, including evidence that banks increasingly price climate performance at the corporate rather than asset level, and that rapid renewable energy scale-up can generate social trade-offs if financial flows are poorly governed.
In its first phase, LINKS mapped global co-investment networks across low-carbon technologies, countries, and time. This work showed that investment is organised through highly structured and unequal networks, where a limited number of actors exert disproportionate influence over deployment pathways. The analyses identified early movers, scale-up enablers, and the distinct roles of local and international investors across regions and technologies.
LINKS then examined network evolution over two decades of investment data. A key result is the identification of strong path dependency: once investment patterns are established, they tend to reinforce themselves - accelerating deployment in some contexts while systematically excluding others. At the same time, the project demonstrated the existence of positive financial tipping points, whereby small changes in expectations, coordination, or policy signals can trigger non-linear increases in low-carbon investment once key thresholds are crossed.
The final phase of LINKS focused explicitly on the investment challenge in developing and emerging economies. Building on earlier work on cost-of-capital disparities, LINKS showed that the main barrier is often no longer technology cost, but perceived and interacting investment risks embedded in global financial networks. Empirical analyses demonstrated how suitability criteria, risk perceptions, and investor learning perpetuate unequal mitigation finance flows and reinforce cross-country disparities.
LINKS further showed that policy effectiveness depends critically on financial network structures. Disclosure initiatives alone are insufficient to shift capital unless they interact with underlying market architectures. A major study on banking finance demonstrated why fossil fuel lending remains resilient even under phase-out commitments, due to syndicated lending structures that dilute unilateral withdrawals. Phase-out accelerates only when regulatory stringency reaches a systemic tipping point, particularly when large banks lead.
Sectoral analyses highlighted additional dynamics, including evidence that banks increasingly price climate performance at the corporate rather than asset level, and that rapid renewable energy scale-up can generate social trade-offs if financial flows are poorly governed.
LINKS advances the state of the art by moving beyond aggregate and linear models of climate finance to an explicitly network-based and complexity-informed framework. Rather than treating finance as a single constraint, the project shows how system-level outcomes emerge from micro-level interactions among heterogeneous actors. The network models developed within LINKS identify structurally influential investors, critical relationships, and leverage points that shape capital allocation in ways invisible to standard approaches.
These advances have direct policy relevance. LINKS demonstrates that effective climate-finance interventions must target network leverage points, bottlenecks, and tipping dynamics, rather than relying on uniform price or disclosure signals. The project also provides the first integrated framework to explain why disparities in climate finance between developed and developing economies persist, linking them to path dependency, risk perception, currency exposure, and institutional biases embedded in financial networks.
In conclusion, LINKS shows that climate finance outcomes are not accidental but emerge from the structure and evolution of financial networks. By making these mechanisms visible, the project provides a robust foundation for designing financial and regulatory reforms capable of accelerating low-carbon investment while improving equity - particularly by enhancing access to capital in the world’s most vulnerable economies.
These advances have direct policy relevance. LINKS demonstrates that effective climate-finance interventions must target network leverage points, bottlenecks, and tipping dynamics, rather than relying on uniform price or disclosure signals. The project also provides the first integrated framework to explain why disparities in climate finance between developed and developing economies persist, linking them to path dependency, risk perception, currency exposure, and institutional biases embedded in financial networks.
In conclusion, LINKS shows that climate finance outcomes are not accidental but emerge from the structure and evolution of financial networks. By making these mechanisms visible, the project provides a robust foundation for designing financial and regulatory reforms capable of accelerating low-carbon investment while improving equity - particularly by enhancing access to capital in the world’s most vulnerable economies.