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Climate finance

With a focus across adaptation, mitigation & development, the climate change guide covers agriculture & food security, natural resource management, poverty & vulnerability, governance, health, gender, finance, & low carbon energy.
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Climate finance is a ‘hot topic’ in the current international climate negotiations: after all, without adequate financial resources and investments how can countries sufficiently reduce GHG emissions and respond to a changing climate? The main principles of climate finance, which determinate the relationship between economically developed and developing countries, are drawn from international agreements both within and outside the United Nations Framework Convention on Climate Change (UNFCCC).

After the 2014 climate discussions , it is hoped that progress will be made so that a new climate deal is reached at the 2015 COP in Paris. This should come into force in 2020. After the Fast Start Finance commitments of 2010-2012, which were reported to exceed the US$ 30 billion target (although some questions remained on whether that funding was “new and additional”), there is a need to mobilise further international funding for supporting developing countries in their response to climate change. There is also a need to move closer towards meeting the commitments, under the UNFCCC, to mobilise US$100 billion a year by 2020. The pledge of US$ 9.3 billion to the Green Climate Fund (GCF) – the newest financial mechanism of the UNFCCC, from developed and developing countries alike – and its aim to allocate 50:50 over time to adaptation and mitigation, are encouraging signs of commitment to climate action and mobilisation of much needed resources.

The total climate finance flows are much broader than current dedicated climate change funds. Estimated at more than USD 300 billion in 2013 this captures public and private finance, in many forms, that is both domestic and international in developed and developing countries. The dedicated climate funds represent a fraction of this amount, but have been instrumental in channelling international public finance over the last decade to developing countries.

The architecture of the dedicated climate funds consists of Multilateral Funds (both within and outside the UNFCCC), National Climate Change Funds (e.g. Amazon Fund) and Bilateral Funds and initiatives.

Between 2003 and late 2014, US$18 billion has been pledged to these funds. Finance has reached 147 countries with the majority of climate finance targeting mitigation activities (53 per cent) but a growing share is directed to adaptation (24 per cent) followed by REDD+ (Reducing Emissions from Deforestation and Forest Degradation plus conservation) activities (15 per cent) and multiple foci (7 per cent). The effectiveness of this finance is hard to measure, but evidence suggests that climate funds have spent money in places that need it, on activities that can reduce emissions and increase resilience to climate change.

This key issues guide focusses on public finance and dedicated climate funds. It notes key sources of funding and trends in spending in the efforts of governments, organisations and communities in adapting to and mitigating climate change.
The Global Landscape of Climate Finance 2014
Counting money
M. Henley / Panos Pictures
In  2015, countries will gather in Paris to finalize a new global agreement to tackle climate change. Decisions about how to unlock finance in support of developing countries’ low-carbon and climate-resilient development will be a central part of the talks. But key questions about how to finance the larger, global transition, will remain largely unresolved. These include, how much climate finance is needed around the world to deliver low-carbon energy systems and climate-resilience? How much investment is already flowing? Who are the key actors? And what is the optimal balance between public and private resources? The Global Landscape of Climate Finance 2014 draws together climate finance data from numerous sources to present policy makers with the most comprehensive information available about the scale, key actors, instruments, recipients, and uses of finance supporting climate change mitigation and adaptation outcomes.

Adaptation Finance

small agriculture and womanAdaptation finance supports activities to build resilience to the impacts of climate change. The need for adaptation finance is particularly high in Sub-Saharan Africa and other Least Developed Countries (LDCs), and a number of countries are committed to financially supporting these actions under the UNFCCC. More . . .

REDD+ Finance

small deforestationThe land use sector is responsible for as much as 25 per cent of global greenhouse gas emissions. Reducing Emissions from Deforestation and Forest Degradation plus Conservation (REDD+) offers incentives for developing countries to reduce carbon emissions through slowing deforestation. More . . .

Mitigation Finance

small handshakeAmbitious mitigation actions are critical to avoid dangerous climate change. Mitigation finance represents more than half of the public climate finance flowing through dedicated climate funds monitored by Climate Funds Update. Between 2004 and 2014, mitigation finance from climate funds approved US$6.63 billion. More . . .

Image credits: Sébastien Duyck | Flickr  / P. Casier (CGIAR) | Flickr  / Marco Simola (CIFOR) | Flickr  / Flazingo Photos | Flickr

Latest Documents

Financing readiness: insights from the Amazon Fund and Congo Basin Forest Funds' efforts to reduce emissions from deforestation and degradation
C. Watson; S. Nakhooda / Overseas Development Institute 2014
Finance to reduce emissions from deforestation and forest degradation, forest conservation, sustainable management of forests and the enhancement of forest carbon stocks (REDD+) has been innovatively structured to support ‘readi...
The State of REDD+ Finance
M. Norman; S. Nakhooda / Center for Global Development, USA 2014
This paper presents a thorough synthesis of available data to illuminate the current global state of finance for reducing emissions from deforestation and degradation (REDD+). It adds to a growing body of work that seeks to understand...
REDD-plus Finance Briefing Paper
S. Nakhooda; A. Caravani; L. Schalatek / Overseas Development Institute 2014
This brief looks at Reduce Emissions from Deforestation and Forest Degradation plus conservation (REDD+) finance. Seven major bilateral and multilateral funding initiatives have been recently created to support REDD+. Brazil has recei...
Climate finance:is it making a difference? A review of the effectiveness of Multilateral Climate Funds
S. Nakhooda; M. Norman / Overseas Development Institute 2014
International efforts to tackle climate change are at a critical juncture. This report provides a critical review of the climate finance architecture. It examines more than a decade of experience of multilateral climate funds includin...
The Global Landscape of Climate Finance 2014
B. Buchner; M. Stadelmann; J. Wilkinson / Climate Policy Initiative 2014
 In December 2015, countries will gather in Paris to finalize a new global agreement to tackle climate change. Decisions about how to unlock finance in support of developing countries’ low-carbon and climate-resilient devel...
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