Making sense of climate finance - and why is it important?

4th June 2015
shaking hands
2015 is a big year across the development sector, with discussions around the post-2015 agenda and the climate negotiations in Paris. But all the agendas and activities discussed will require dedicated resources in order to see change happen. Evidence shows us that climate change has had, and will continue to have devastating impacts for many people around the world – but is enough being invested where it’s really needed? As people who are not experts in climate finance, it can be difficult to understand the nitty gritty of this area; it isn’t always clear as to what has been promised and whether these promises have become reality. The new Eldis Key Issues Guide to Climate Finance provides an overarching insight into some of the key issues and themes.

We have produced this guide in collaboration with the Climate Funds Update project, which is supported by the Overseas Development Institute and Heinrich Boll Foundation. The co-authors, Alice Caravani and Charlene Watson have used relevant data and credible research from a rich range of diverse sources, including multimedia, to further support understanding of this complex issue. It’s also important to note that this key issues guide is not analysing the politics of climate finance decision making – this would need a guide in itself!

We are also excited to present a short five minute film where Alice Caravani talks through some of the key components of the guide. The film can be watched at the same time as interacting with the content of the guide itself.

What is in the guide?

This key issues guide focuses 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 authors present the global financial architecture that has been put in place for the coordination and organisation of the multiple available funds. For instance, between 2003 and late 2014, USD 18 billion has been pledged to a range of funds – the visual architecture attempts to capture who is involved and how the amount pledged has been or will be distributed.

The guide is broken into three main themes: adaptation finance, REDD+ finance and mitigation finance which the guide analyses in more detail.
  • Adaptation finance supports activities to build resilience to the impacts of climate change. Needs for adaptation finance are 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.
  • The land use sector is responsible for as much as 25 per cent of global greenhouse gas emissions. REDD+ (Reducing Emissions from Deforestation and Forest Degradation plus conservation) offers incentives for developing countries to reduce carbon emissions through slowing deforestation and pursuing environmentally and socially sustainable use and conservation of forest resources.
  • Ambitious 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.

Conclusions from the guide

The guide highlights that financial support is not just about providing cash, but a much more complex process where a variety of actors work together to strengthen local and national institutions, and to integrate climate policies into national priorities. Additionally, the total climate funds are much larger than the dedicated climate funds. For instance, domestic finance constitutes a big part of the available funds and has immense national implications beyond what is available from other regional/international funds. Another key point noted is that while the effectiveness of climate finance is hard to measure, there are studies that are starting to show some of this evidence of impact.

We hope you find this key issues guide and film informative and useful.

Key resource links:

Image credits: Flazingo Photos | Flickr (CC BY-SA 2.0)