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Climate Finance: Why, where, and when?

Climate finance played a central role in the COP26 discussions, and unfortunately, not much was accomplished. This article will provide a brief overview of 3Ws of climate finance; why, where, and when.

Developed countries expressed their ‘deep regrets’ for their inability to provide the previous yearly target of $100bn to developing nations. Trite pledges were repeated— $100bn climate financing will be made available through to 2025 —to the countries that have been the victims of the prodigality of the developed nations.


Climate change is a global issue, yet countries are affected at varying levels. It may mean warmer summers for some, while it means slowly getting swallowed by the ocean for others. The differences are mainly the result of geographical and economical conditions. The latter is a critical factor in determining a country's ability to mitigate climate change and adapt to its negative consequences. There is, however, a great disparity between countries' economic capabilities. Unfortunately, the tonnes of greenhouse emission produced by a country does not directly correlate to the adverse impacts they face, creating further inequity between the ones causing the climate change and the ones suffering heavier consequences.

For instance, despite their relatively minimal contributions, Small Island Developing States (SIDS) and least developed countries (LDCs) are acutely vulnerable to the warming of the planet. As a percentage of GDP, they suffer higher annual losses and more severe social consequences compared to the global average. Considering the fact that they represent less than 1 per cent and 3-6 per cent of global greenhouse emissions respectively, the inequity is indisputable. The disproportionate impacts of climate change as felt by such countries draws a deeper gap between the understanding of the consequences of climate change as perceived by developed nations and as perceived by developing countries.


It is clear that these countries and SIDS require financial support by means of investments from wealthier countries in the global efforts to fight climate change. Realising this, rich countries pledged in the 2009 UN climate summit in Copenhagen to provide $100bn per year to the Non-annexe 1 parties of the UNFCCC — developing countries — by 2020. They channeled the funds through existing aid programmes, development banks, and the UN's dedicated institution named the Green Climate Fund (GCF). However, after failing to meet the target of $100bn, the same pledge was repeated at COP26 instead of increasing the amount as envisaged at the Paris climate change summit. This was welcomed with some suspicion and disappointment by nations whose GDP fails to meet the dire needs for climate mitigation and adaptation.


It is unclear when this amount will be reached. Lack of accountability for the failure to mobilise funds and the voluntary nature of the climate finance investments curbs the hopes of the countries in need. As a final point, it is important to note the financial attractiveness of these investments. According to the World Bank, an investment of $1 on climate adaptation projects would yield $4 in return on average, which begs the question 'what are we missing?'



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