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| Climate finance | |
|---|---|
| Name | Climate finance |
| Jurisdiction | International |
| Established | 1990s |
Climate finance describes funding flows toward activities that reduce greenhouse gas emissions, enhance resilience to climate impacts, and support low-carbon development pathways. It intersects with international negotiations such as the United Nations Framework Convention on Climate Change, multilateral institutions like the World Bank and International Monetary Fund, and national policies exemplified by the Paris Agreement and the Green Climate Fund. Practitioners include multilateral development banks, bilateral agencies, private investors, and philanthropic organizations such as the Bill & Melinda Gates Foundation.
Climate funding mobilization emerged during negotiations at the United Nations Conference on Environment and Development and matured through milestones such as the Kyoto Protocol and the Paris Agreement. Key actors include the United Nations Environment Programme, the European Investment Bank, the Asian Development Bank, and national entities like the United States Environmental Protection Agency and the Ministry of Environment, Forest and Climate Change (India). Thematic areas encompass mitigation projects in sectors such as energy and transport linked to portfolios managed by the International Finance Corporation and adaptation work supported by the Global Environment Facility. Measurement relies on frameworks developed by the Intergovernmental Panel on Climate Change and reporting under the Conference of the Parties.
Funding sources span public bilateral channels like the United Kingdom Department for International Development, multilateral vehicles such as the European Commission instruments, and private finance from institutional investors including the BlackRock and Norinchukin Bank. Instruments include grants from the Green Climate Fund, concessional loans offered by the Asian Infrastructure Investment Bank, equity investments spearheaded by the International Finance Corporation, guarantees from the Multilateral Investment Guarantee Agency, and market instruments listed on exchanges such as the New York Stock Exchange and the London Stock Exchange. Innovative tools include green bonds issued by entities like the World Bank and blended finance structures coordinated with the Organisation for Economic Co-operation and Development.
Public finance actors comprise national development agencies such as the Agence Française de Développement, multilateral development banks including the Inter-American Development Bank, and funds like the Least Developed Countries Fund and the Adaptation Fund. Commitments are negotiated through forums like the United Nations Climate Change Conference and operationalized by institutions such as the Green Climate Fund and the Global Environment Facility. Public instruments range from concessional lending by the European Investment Bank to fiscal measures adopted by countries like Germany and Japan aimed at incentivizing low-carbon infrastructure, often coordinated with national planning agencies and ministries of finance.
Private actors include asset managers such as Vanguard Group, commercial banks like HSBC, corporate emitters such as Maersk, and energy companies including Ørsted and ExxonMobil engaging in transitions. Private flows are mobilized via corporate bonds, green bonds under standards developed by the International Capital Market Association, equity financing on markets like the NASDAQ, and climate risk transfer through insurers including Munich Re and Swiss Re. Philanthropic foundations, for example the Rockefeller Foundation, often co-finance pilot projects with private actors and public institutions to de-risk early-stage investments.
Mechanisms include carbon pricing systems such as the European Union Emissions Trading System, offset markets governed by standards like the Verified Carbon Standard, and climate derivatives traded on platforms associated with the Chicago Mercantile Exchange. Green bond markets have grown with issuances by supranationals like the World Bank and sovereign issuances by countries including France and Chile. Financial innovations draw on models from the Global Green Growth Institute and instruments such as climate-linked loans adopted by banks like ING Group.
Tracking methodologies rely on guidance from the International Panel on Climate Change and reporting under the United Nations Framework Convention on Climate Change transparency framework, with statistical inputs from institutions like the Organisation for Economic Co-operation and Development and the World Bank. Allocation decisions are influenced by priorities identified in national plans such as Nationally Determined Contributions and regional strategies like the European Green Deal. Monitoring and verification involve auditors and standard-setters including the Climate Bonds Initiative and independent registries maintained by organizations such as the Gold Standard.
Critiques target adequacy of commitments made at forums like the United Nations Climate Change Conference (COP26) and perceived shortfalls in pledges by countries such as debates around developed country finance obligations; implementation challenges are highlighted in assessments by the Intergovernmental Panel on Climate Change. Concerns include additionality disputes involving bilateral donors like United States Agency for International Development, transparency issues flagged by civil society groups including 350.org and Greenpeace, and market integrity problems in carbon offset schemes scrutinized following investigations into projects linked to corporations such as Shell and BP. Equity debates center on loss and damage discussions led by coalitions such as the Alliance of Small Island States and financing gaps identified by the World Resources Institute.
Category:Climate policy