Climate finance

Climate finance

Subclass of	investment
Facet give	climate change mitigation
Studied in	environment and climate finance
Used by	Q10546259

Investments for sustainable energy (be clean energy) be an example for climate finance. For 2023, dem increase am due to high fossil fuel prices den growth policy support wey dey go across various nations insyd.^[1]

Climate finance be umbrella term give financial resources such as loans, grants, anaa domestic budget allocations give climate change mitigation, adaptation den/anaa resiliency. Finance fi cam from private den public sources, wey dem fi channel am by various intermediaries such as multilateral development banks anaa oda development agencies. Development agencies be particularly important insyd de transfer of public resources from countries dem develop to countries dem dey develop for light of dema UN Climate Convention obligations insyd.^[2]

Dem get two main sub-categories for climate finance insyd dey base for different aims top. Mitigation finance be investment wey dey aim make e reduce global carbon emissions. Adaptation finance dey aim say ego respond to de consequences for climate change.^[3] Globally, dem get much greater focus for mitigation, wey dey account for over 90% spending for climate top.^[4][5] Renewable energy be important growth area for mitigation investment den e get growing policy for support.^[6]

Finance fi cam from private den public sources, den sam times de two fi to join sure say dem fi create financial solutions. Ebe widely recognized say public budgets go be insufficient wey ego meet de total needs give climate finance, den dat private finance go be important to close de finance gap.^[7] Na dem dey use chaw different financial models anaa instruments give financing climate actions. For example, green bonds (anaa climate bonds), carbon offsetting, den payment give ecosystem services be sam solutions dem promote. Der be considerable innovation for dis area insyd as well as transfer of solutions wey dem no develop am specifically give climate finance, such as public–private partnerships den blended finance. Der sanso be chaw challenges wey dey include dat of dem dey measure den dey track financial flows, for equitable financial support to countries wey dey develop for cutting emissions den adapting to impacts, den for incentivizing further private sector investments top.

De Definition den context

Climate finance be "finance dat dey aims dey reduce emissions, den enhancing sinks for greenhouse gases den aims at reducing vulnerability for, den maintaining den increasing da resilience for, humans den ecological systems to negative climate change impacts", as ebe defined by da United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance.^[8]

De UNFCCC obligations

For de UN Climate Convention insyd, climate finance be da transfer of public money from high income countries to a low den middle income countries. Dis would be dema obligations sure say dem go provide fresh den additional financial resources. Den for 2015 insyd, United Nations Climate Change Conference introduced de new era for climate finance, policies, den markets. Da Paris Agreement, which dem adopted at da conference, defined a global action plan wey edey put de world on track sure say ego avoid dangerous climate change wey ego limit global warming to well below 2 °C above pre-industrial levels. Da agreement dey cover climate change mitigation, adaptation, den finance. Da financing element dey include climate-specific support mechanisms den financial aid for mitigation den adaptation activities. Da aims for da activities for dey speed up de energy transition towards low-carbon economy den climate-resilient growth.^[9]

For de 16th Conference insyd for Parties in 2010 (Cancun 2010) dem develop countries wey dem make committed to da goal for mobilizing joint USD 100 billion year by 2020 wey ego address de needs of developing countries insyd. De decision by de 21st Conference for de Parties (Paris 2015) dem sanso atache commitment make dem continue dema existing collective mobilization goal for 2025 insyd.^[10][11] For 2025 insyd new goal go be expected to be adopted.

However, de amount of finance wey dem provide dem estimate am to be below what dem target. According to OECD figures, climate finance dey provid den mobilized catch $83.3bn for 2020 den $89.6bn for 2021 insyd.^[4][12] Dis dey mean dat de US$100 billion per year by 2020 target has been missed.

De Global estimates for financing needs insyd

For de Global climate finance insyd,dem estimate am to reached around $1.3 trillion per year in 2021/2022. Sometimes, much more dey need to keep global temperature wey edey rise for 1.5°C den avoid da worst impacts for climate change insyd. For 2024 report insyd, dem estimate am dat climate finance flows for increase by sixfold on 2021/2022 levels, wey ego reach $8.5 trillion per year by 2030.^[2]

European Investment Bank Investment Survey for 2020 on green firms investing den climate

Subcategories Dis

Dem get two main sub-categories for climate finance insyd dey base on different aims. Mitigation finance be investment wey edey aim to reduce global carbon emissions. Adaptation finance dey aim say ego reduce da consequences for climate change insyd.^[3] Globally, dem get greater focus for mitigation, accounting for over 90% spending wey edey go climate insyd.2590  Renewable energy be important for growth area for mitigation investment den e get growing policy for support.

De Finance for mitigation

For Global climate finance be heavily focused for mitigation. Key sectors wey dey invest be renewable energy, energy efficiency den transport.^[3] : For 1549, 1564  Dem increase international climate finance towards de 100 billion target. Most of de estimated US$83.3 billion wey dem dey provide to developing countries for 2020 insyd, be targeted at mitigation (US$48.6 billion, anaa 58%).^[4] For worldwide scale, mitigation financing accounts for be over 90% of investment for climate finance insyd. Around 70% for dis mitigation money dey go towards renewable energy, however low-carbon mobility be key for da development sector.^[13][6] Global energy investment dey increased since de 2020 COVID-19 pandemic crisis. Sometimes, de crisis dey place great additional strain for de global economy, debt den de availability of finance, wich dem go expect say ego be felt in years wey edey come.^[3]

De Mitigation costs den mitigation financing needs insyd

For 2010 insyd, de World Development Report en preliminary estimates for financing needs for de mitigation den adaptation of activities in developing countries wey edey range from $140 to 175 billion per year for mitigation over de next 20 years where en associated financing needs for $265–565 billion den $30–100 billion a year over de period for 2010–2050 for adaptation.^[14]

De International Energy Agency's 2011 World Energy Outlook (WEO) dey estimates dat in order say dem go meet de growing demand for energy through 2035, $16.9 trillion be new investment for new power generation wey edey project, de renewable energy (RE) wey edey comprising of 60% of de total. De capital dey require say dem go meet projected energy wey ego demand through 2030 amounts to $1.1 trillion a year for an average, distributed (almost evenly) between de large emerging economies (like China, India, Brazil, etc.) den de remaining developing countries. We for believe dat over de next 15 years, de world will require about $90 trillion in new infrastructure – most of it in de developing den middle-income countries.^[15] De IEA dey estimate dat limiting de rise of global temperature for below 2 Celsius by de end of de century dey require an average of $3.5 trillion a year in energy sector investments until 2050.^[15]

De meta-analysis for 2023 wey investigated dey "require technology-level investment shifts for climate-relevant infrastructure until 2035" within de EU, den found say des be de "most drastic for power plants, electricity grids den rail infrastructure", ~€87 billion above de planned budgets in de near-term (2021–25), den in need of sustainable finance policies.^[16]

De Finance for adaptation

For Finance ebe de important enabler for climate adaptation insyd, for both de developed den developing countries.^[5]  e fit to come from a variety of sources. Public finance dey come directly from da governments or via intermediaries like development finance institutions (e.g. MDBs den oda development agencies). Dem fi to channel am through multilateral climate funds insyd. Some multilateral climate funds get specific focus for adaptation for dema mandate insyd. Des dey include de Green Climate Fund, de CIFs den de Adaptation Fund. Private finance fit to come from commercial banks, institutional investors, oda private equity den oda companies den from household den community funding. De vast majority of tracked finance (around 98%) dey come from public sources. Dis be partly because of de lack of a well-defined income stream den business case wey edey bring an attractive return on investment on projects.^[5][17]

Finance be delivered through a range of instruments including grants den subsidies, concessional den non-concessional (i.e. market) loans for oda debt instruments, equity issuances ( wey dem get listed or unlisted shares) den can be delivered through own funds, like savings.^[5]  for de largest proportions of adaptation finance wey dem invested for infrastructure, energy, built environment, agriculture, forestry/nature den water-related projects.^[5]

Ebe around 4-8% for de total climate finance has been allocated to adaptation. De vast majority dem allocate dem to mitigation plus only around 1-2% for multiple objectives.^[5]

De Adaptation costs den adaptation financing needs insyd

Adaptation costs be de costs of planning, preparing for, facilitating den implementing adaptation.^[7]  Adaptation wey en benefits be estimated in de terms wey efi fit to reduce damages from de effects of climate change. For economic terms, de cost wey edey benefit de ratio for adaptation dey show dat each dollar can deliver large benefits. For example, dem estimate say every US$1 billion wey dem invest for adaptation against coastal flooding wey dey lead to a US$14 billion reduction for economic damages.^[7]  Investing for more resilient infrastructure for developing countries wey dey provide an average for $4 wey edey benefit for each $1 invested.^[18] For oda words, ebe small percentage increase in investment costs dey mitigate de potentially very large disruption to infrastructure costs.

For 2023 insyd, dem do study wey dem find de overall adaptation costs for all de developing countries wey ebe around US$215 billion for a year wey de period be up to 2030. De highest adaptation expenses dey from river flood protection, infrastructure den coastal protection. Dem also see dat most cases, be adaptation costs go go higher by 2050.^[7] 

Ebe difficult say you fi to estimate both de costs of adaptation den de adaptation finance needs. De costs of adaptation varies plus de objective den de level of adaptation required dan what be acceptable for residual, i.e. 'unmanaged' risk.^[7]  Similarly, adaptation finance dey need to vary depending on de overall adaptation plans for de country, city, or region. Edey also dey depend on de assessment methods used. For 2023 dem do study wey e analyse country dem ma level of information wey dem submit give UNFCCC for de National Adaptation Plans den Nationally Determined Contributions (85 countries). Dem estimate de global adaptation needs for developing countries annual average be US$387 billion, for de period wey edey go to 2030.^[7] 

Both de cost dem estimates den needs estimates get high uncertainty. Adaptation costs dey usually be derived from economic modelling den analysis (global or sectoral models). Adaptation needs dey base on programme den project-level costing.  Des programmes dey depend on de high level adaptation instrument – wey be plan, policy or strategy. For many developing countries, de implementation for certain actions specified for de plans be conditional for receiving international support. For des countries insyd, de majority (85%) for finance needs dey expect say ego met dem from international public climate finance, i.e. funding from developed to developing countries.^[7]  Der be less data available for adaptation costs den adaptation finance needs in high income countries. Data dey show dat per capita needs dey increase plus income level, but des countries fit to afford to invest more domestically.^[7] 

Current levels of financing den de finance gap

Between 2017 den 2021, total international public finance to developing countries for climate adaptation dem remained well below US$30 billion per year.^[7]  Dis equals about 33% for de total public climate finance, for an additional 14% spending on cross-cutting activities (supporting both adaptation den mitigation). Dis includes finance from multilateral development banks, bilateral agencies den multilateral climate funds be de three largest types of provider. 63% of de adaptation-specific funding was provided as loans, den 36% as grants. ^[7]  Disbursement of funds for adaptation, at 66% for de amounts committed, be much lower dan for mitigation. Dis indicates difficulty den complexity of implementation.^[7] 

De adaptation finance gap be de difference between de estimated costs den adaptation den de amount of finance available for adaptation. ^[7]  Based on data over 2017-2021, De estimated costs den needs dey around 10-18 times for much as current levels insyd of public flows. Domestic budgets den private climate finance for adaptation dem no include for des figures insyd. De gap dey widened as we dey compare am to previous assessments. Increasing both international den domestic public finance den mobilising private finance dey help to close de finance gap. Oda options include remittances, increased finance for small businesses, den reform of de international financial system, for example dey go through changes in managing vulnerable countries' debt burden.^[3][7] 

De Types of finance

De Multilateral climate finance

De Multilateral climate funds

De multilateral climate funds (i.e. governed by multiple national governments) ebe important for paying out money for climate finance.For 2022 insyd, dem get five multilateral climate funds wey ebe coordinated by de UNFCCC. Des be de Green Climate Fund (GCF), De Adaptation Fund (AF), de Least Developed Countries Fund (LDCF), de Special Climate Change Fund (SCCF) den de Global Environment Facility (GEF). De largest for des be, de GCF, na dem form am insyd 2010.^[19][20]

De oda main multilateral fund, Climate Investment Funds (CIFs), be coordinated by de World Bank. De Climate Investment Funds be important for climate finance since 2008.^[21] Edey comprise of two funds, de Clean Technology Fund den de Strategic Climate Fund. De latter sponsors innovative approaches wey existing climate change challenges, wey de former invests for clean technology projects for developing countries insyd.

For 2022 insyd, nations dey agree for a proposal sure say dem fi to establish a multilateral loss den damage fund to support communities averting, minimizing, den dey address damages den risks den where adaptation no dey der enough or dey come late.^[22]

Some multi-lateral climate change funds dey work through grant-only programmes. Oda multilateral climate funds dey use a wider range of financing instruments, which dey including grants, concessional loans, equity (shares for an entity) den risk mitigation options.^[5] Des be intended to crowd in oda sources for finance, weda ebe from domestic governments, oda donors, anaa de private sector.

De Multilateral development banks

Multilateral development banks (MDBs) be important providers for international climate finance. MDBs be financial vehicles created by governments to support economic den social efforts, predominantly in developing countries. de MDBs goals usually dey mirror de aid den collaboration regulations of deir founding members.^[23] Dey complement de programmes for (national government) members' bilateral development agencies, wey ego allow dem to work for more countries dan for larger scale.^[24] De Paris Agreement also dey provide momentum for de MDBs sure say ego align plus dema investments den strategies plus climate goals, den for 2018 insyd de MDBs collectively announced de joint framework for financial flows insyd.^[3]  De MDBs use de widest range for financing instruments wey edey include grants, investment loans, equity, guarantees, policy-based financing den results-based financing.^[5]

De World Bank dey use money contributed by governments den companies for OECD countries dey purchase project-based greenhouse gas emission reductions in developing countries den countries plus economies in transition. Dis dey include de BioCarbon Fund Initiative, wey public-private partnership providing finance for de land use sector. De Partnership for Market Readiness dey focuse on market-based mechanisms. Den Forest Carbon Partnership Facility explores de use of carbon market wey revenues dey reduce emissions from deforestation den forest degradation (REDD+).

De Bilateral climate finance

De Financial flows for climate change mitigation den adaptation for developing countries insyd

Bilateral institutions dey include development cooperation agencies den national development banks. Until quite recently dem get de largest contributors for climate finance, but since 2020 bilateral flows dey decrease whilst multilateral funding dey grow.^[3] Some bilateral donors get thematic anaa sectoral priorities, whilst many dey have geopolitical preferences for working for certain countries den regions.^[5]

Bilateral institutions dey include donors like de USAID, de Japan International Cooperation Agency (JICA), Germany ein KfW Development Bank den de UK Foreign, Commonwealth and Development Office (FCDO). Many bilateral agencies dey make donations for multilateral channels den dis dey allows dem to work for more countries dan at a larger scale.^[24] Sometimes de overall international climate finance system (for financial flows for developed to developing countries) be complex den fragmented, for overlapping mandates den objectives. Dis dey create significant co-ordination problems.^[25][26]

De Domestic public climate finance

Financial flows den expenditures by national governments for climate be significant. Domestic targets for addressing climate change be set out for national strategies den plans, dey include those dem submit am to de UNFCCC under de Paris Agreement. For many developing countries insight, de plans submitted dey include targets attached to international financial den technical support (i.e. conditional targets).

De National-level coordination for climate funding be important for meeting dese domestic targets, den in de case of developing countries, also for accessing international funding.^[26]  For all countries den regions, Dem recognised dat public funding no go be sufficient to meet all finance needs. Dis means Dat policy makers for make strategic approach for using public funding to leverage additional private finance. Oda funding fit to come from financial institutions like banks, pension funds, insurance companies den asset managers. Sometimes public den private sources for funding, wey we fi to blend into single solution, for example for insurance we go make public funds provide part of de capital.^[3]

De Private climate finance

Public finance get traditional significant for source infrastructure investment. Sometimes, public budgets dey often be insufficient for larger den more complex infrastructure projects, particularly for lower-income countries. Climate-compatible investments often have higher investment needs dan conventional (fossil fuel) measures,^[27] dis dey also dey carry higher financial risks because sake of technologies no be proven den de projects get high upfront costs.^[28] If countries dey go access de scale of funding required, ebe critical say de full spectrum of funding sources den dema requirements, as well as de different mechanisms available from dem, den how dem fit to combined.^[29] Dem get growing recognition for private finance wey ego need cover to finance shortfall.^[30]

Private investors fi to support sustainable urban infrastructure projects where a sufficient return for investment be forecast based on project income flows den low-risk government debt repayments. Bankability den creditworthiness dey hia waa sure say ego attract private finance. Potential sources for climate finance like commercial banks, pension funds, insurance companies, asset managers, sovereign wealth funds, venture capital (such as fixed income den listed equity products), infrastructure funds den bank lending (wey dey include loans wey dey come from credit unions). Edey also include companies from oda sectors insyd such as renewable energy den water companies, den individual households den communities.^[3] Des different investor types dey have different risk-return expectations den investment horizons, den projects will need to be structured appropriately.^[31]

During de COVID-19 pandemic, climate change be one thing wey ebe addressed by 43% of EU enterprises. Sake-off de pandemic's effect for businesses dema top, de percentage of firms wey dem dey plan climate-related investment go upto 47%. Dis be a rise from 2020, when de percentage of climate dey relate to investment be at 41%.^[32][33] Climate investment for Europe has been growing in de 2020s. However, de need for de EU's "Fit for 55" climate package dey remain 356 billion euros for every year insyd. For 2020, US firms' dey won innovate get increased, wey European firms' dey decrease.^[34] For 2022 insyd, spending for climate for European enterprises climbed by 10%, reaching 53% on average. Dis has been especially noticeable by Central den Eastern Europe at 25% den be small den medium-sized firms (SMEs) plus 22% for increase in climate financing.^[35]

Carbon offsetting dey go through voluntary carbon markets as way for private sector enterprises wey dem go invest in projects dat avoid den reduce emissions elsewhere. De original carbon offsetting den credit mechanisms be "flexibility mechanisms" defined in de Kyoto Protocol. Edey comprise de compliance for carbon market, focusing on trading/crediting (obligatory) emission reductions between countries. For voluntary carbon markets, companies or individuals dey use carbon offsets to meet de goals dey set dema body for reducing emissions. Voluntary carbon markets are growing significantly. Mechanisms like REDD+ wey edey include private sector contributions via voluntary carbon markets.^[3] However, de relative flows of private finance from developed to developing countries remain quite small. Dem estimate say over 90% of private climate flows remain within national borders.^[3]

De Financial instruments

More different financial models den instruments get financing climate actions. De overall business model dey include chaw financing mechanism wey dem put am togeda sure say we fi create climate solution. Financial models fit to belong to different categories e.g. public budgets, debt, equity, land value capture den revenue generating models etc.

De Debt-for-climate swaps

Debt-for-climate swaps dey happen where debt accumulated by country be repaid upon fresh discounted terms agreed between de debtor den creditor, repayment funds for local currency dey redirected to domestic projects dat dey boost climate mitigation den adaptation activities. Climate mitigation activities wey edey benefit from debt-for-climate swaps dey include projects dat dey enhance carbon sequestration, wey ebe renewable energy den conservation of biodiversity as well as oceans.

For instance, Argentina succeed dey carrying out such swap which dem implement am by de Environment Minister at de time, Romina Picolotti. De value of debt addressed was $38,100,000 den de environmental swap was $3,100,000 which dem redirected am to conservation of biodiversity, forests den oda climate mitigation activities.^[36] Seychelles in collaboration plus de Nature Conservancy also undertook similar debt-for-nature swap where $27 million of debt be redirected to establish marine parks, ocean conservation den ecotourism activities.

De Green bonds (anaa climate bonds)

Oda financial instruments

De following financial instruments can be used for climate finance but were not developed specifically for climate finance:

• De Revenue-generating models (subscription business model, fee-for-service); Revenue generation through for example water-user fees den tariffs can incentivise investment in climate projects.
• Revolving Loan Fund
• Public–private partnership
• Blended finance
• Land Value Capture

De Finance dem commit den disperse

For 2019 insyd, de CPI estimat say annual climate finance reached more dan US$600 billion.^[37] Data for 2021/2022 show ebe almost USD 1.3 trillion, plus most of de increase coming from acceleration in mitigation finance (renewable energy den transport sectors).^[6] Des figures dey take into account all countries wey be both private den public finance. De bulk for dis finance dey raise den spend domestically (84% in 2021/2022). De International public climate finance wey be developed to developing countries dem found am to be well below US$70 billion per year for de period 2017-2021.^[7]  De OECD, which dey include export credits den mobilised private finance, dem estimate 2021 flows to be USD$89.6 billion.^[12] Dem get differences in estimates due to different definitions den methods used.

For November 2020, development banks den private finance no reach de US$100 billion per year wey dema investment stipulated by de UN climate negotiations for 2020.^[11] Sometimes, in de face of de COVID-19 pandemic's economic downturn, 450 development banks dey pledge to fund "Green recovery" for developing countries insyd.^[11]

For 2016, de four main multilateral climate funds approved $2.78 billion for project support. India received de most single-country support, followed by Ukraine den Chile. Tuvalu received de most funding per person, followed by Samoa den Dominica. De US be de largest donor across de four funds, while Norway makes de largest contribution relative to population size.^[38] Climate financing by de world's six largest multilateral development banks (MDBs) rose to a seven-year high of $35.2 billion in 2017. For to OECD figures, climate finance dey provide den mobilized reached $83.3bn in 2020. Anoda study dey report say de money given for climate change was only worth about a third of what was said ($21–24.5bn).

For 2009 insyd, developed countries had committed to jointly mobilize $100 billion annually in climate finance by 2020 sure say we fi support developing countries in reducing emissions den adapting to climate change.^[39]

De European Investment Bank

For 2012 insyd, de European Investment Bank (EIB) dey provide €170 billion in climate funding, which dem take fund over €600 billion programs wey dem go take stop emissions den help people respond to climate change den biodiversity depletion across Europe den de world.^[40][41] For 2022, De Bank's funding for climate change den environmental sustainability projects be €36.5 billion. Dis includes €35 billion for initiatives supporting climate action den €15.9 billion for programs supporting environmental sustainability goals. Projects wey dey combined climate action den environmental sustainability advantages received €14.3 billion for funding. For 2021-2030, de Bank dey want assist €1 trillion for green investment.^[42] Currently, 5.4% per of de Bank ein loans for climate action dem dedicate to climate adaptation, secof funding increase significantly for 2022 insyd, dey reach €1.9 billion.^[43]

De Challenges

De Tracking climate finance flows

Information for climate finance flows be better for international climate finance dan for domestic climate finance.  International public finance from multilateral den bilateral sources we fi tag am to specify that efi to target climate mitigation den adaptation or both (i.e. is cross-cutting).^[44] Number of initiatives wey dem dey monitor den track flows for international climate finance. For example analysts for Climate Policy Initiative (CPI) dey track public den private sector climate finance flows for a variety of sources on a yearly basis since 2011.

Dis work be fed into de United Nations Framework Convention on Climate Change Biennial Assessment den Overview of Climate Finance Flows^[45] den in de IPCC Fifth Assessment Report den IPCC Sixth Assessment Report chapters on climate finance. Des suggestion dey need for more efficient monitoring for climate finance flows. In particular, dey suggest dat funds can do better at synchronizing deir reporting of data, being consistent in de way that dey report dema figures, den providing detailed information on de implementation of projects den programs over time. Der is also a need sure say we fi to improve reporting den tracking by domestic den private climate finance actors. Dis could be achieved through national regulations for mandatory den standardized disclosure. ^[17]

De Climate finance gap

Research dey find say substantially lower bilateral climate finance numbers dan current official estimates.^[46][47] Reasons be among oda lack of universally agreed-upon definitions for what qualifies as international climate finance den no oversight. Dis has led to an inclusion of non-climate projects, a lack of transparency den ultimately a credibility issue regarding official international climate finance reporting.

De estimates for de climate finance gap - dat be, de shortfall for investment - vary according to de geographies, sectors den activities included, timescale den phasing, target den de underlying assumptions. De 2018 Biennial Assessment estimated financing needs for mitigation between 2020 den 2030 to be USD$1.7-2.4 trillion per year.^[45]

De Moral responsibility den legal obligation

For Developed countries dem be responsible for de majority of cumulative greenhouse gas emissions since de industrialization den generally get greater capacity to provide support. Sometimes, dem dey argue say dem get a moral responsibility den legal obligation wey dem go provide finance sure say dem fi to help developing countries dey undertake climate action.^[10] For de 16th Conference of de Parties for 2010 developed countries committed to de goal of mobilizing jointly USD 100 billion per year by 2020 to address de needs of developing countries, den de decision by de 2015 United Nations Climate Change Conference also dey included de commitment to continue dema existing collective mobilization goal for 2025.^[10] Sometimes, des agreements no offer guidance for how we fi to allocate climate finance responsibility to individual countries.

Several institutions den researchers dem developed methodologies wey dem determine country-specific contribution for shared equity-principles. All models get in common dat dem at least use one wealth variable (e.g. share of GDP den GNI) to consider de ability to pay den an emission variable (share for CO2 den GHG) to reflect emission responsibility.^[10] Some models additionally consider countries' population den dier willingness to pay.^[10] Furthermore, anoda proposal for a mechanism suggests to incorporate forward-looking data in so-called dynamic model. For de dynamic components, de share for GDP be determined for 2030 forecast we dem adjust for expected climate damages den de share of GHGs covers future emissions up to 2030 den accounts for unconditional emission reduction targets submitted by de countries where available.^[48]

De Incentivizing private investment for adaptation

For Climate change adaptation be more complex investment area dan mitigation. Dis be mainly because for de lack of well-defined income stream den business case for an attractive return on investment on projects. Dem get several specific challenges for private investment insyd:^[49][50]

• For adaptation be often needed for non-market sectors den edey focus on public goods wey edey benefit chaw menez. So dem get shortage of projects wey ebe attractive to de private sector;
• Der be mismatch between de timing of investments needed for de short term den de benefits dat may occur for de medium den long term. De future returns be less attractive to investors dan short-term returns;
• Dem dey lack information about investment opportunities. Dis dey concerns uncertainties associated plus future impacts den benefits. Des be key considerations when returns may accrue over longer timeframes;
• De gaps in human resources den capacities wey edey design adaptation projects den understand financial implications for legal, economic den regulatory frameworks.

Sometimes, dem get considerable innovation for dis area. Dis be increasing de potential for de private sector finance sure say dem fi to play a larger role in de closing of de adaptation finance gap.^[51] Economists dey talk say climate adaptation initiatives for be urgent priority for business investment.^[52][53]

See also

• Adaptation Fund
• Carbon emission trading
• Climate Investment Funds
• Climate finance in Jamaica
• Climate-related asset stranding
• Eco-investing
• Fossil fuel divestment
• Global Environment Facility
• Green Climate Fund
• Sustainable finance

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External links

• Climate Finance Landscape - Global Landscape of Climate Finance 2019
• Bryant, Gareth; Webber, Sophie (2024). Climate Finance: Taking a Position on Climate Futures (open access). Newcastle upon Tyne, United Kingdom: Agenda Publishing Limited.