Transformative Climate Finance: A framework to enhance international climate finance flows for transformative climate action
Despite the sizable growth in climate finance over the past decade, finance volumes fall far short of investment needs for developing countries and emerging economies to achieve low-carbon climate-resilient development in line with the Paris Agreement. This report examines how international climate finance can be used in more transformative ways to overcome the disparity between available international climate finance and investment needs.
This report defines eight sets of climate actions and examines how climate finance can be used within them to support transformation for LCCR development: (a) Project-Based Financing; (b) Financial Sector Reform; (c) Fiscal Policy; (d) Sector Policies; (e) Trade Policy & Green Trade; (f) Innovation; (g) Carbon Markets; (h) Climate Intelligence & Data.
Within each of these sets of actions, government and private sector interventions can reduce emissions and build climate resilience both directly and indirectly – but public and private actors in developing countries face a range of barriers that deter their pursuit of these climate actions. The report consider how a range of climate finance instruments can be deployed to address the barriers that impede the interventions that drive climate action, including investment financing (grants, loans, equity, guarantees), results-based financing, policy-based financing, trade finance, and technical assistance.
The report identifies that there is an opportunity to re-allocate and re-prioritize programming of climate finance to enhance transformative climate actions, in particular through a shift away from typical project-based interventions and climate finance strategically directed through one or more of the other seven areas of climate action.