Climate finance encompasses the diverse financial resources, including those from public, private, and alternative sources, that aim to support mitigation and adaptation efforts to combat climate change. Recognising the varying capacities of countries to address climate change, the global climate agreements emphasise providing financial assistance from wealthier nations to more vulnerable ones. This financing is crucial for making significant investments in reducing emissions and mitigating the adverse impacts of a changing climate.
The financial mechanism established under the United Nations Framework Convention on Climate Change (UNFCCC) operates through several specialised funds, including the Global Environment Facility (GEF), the Green Climate Fund (GCF), the Special Climate Change Fund (SCCF), and the Least Developed Countries Fund (LDCF). Additionally, the Adaptation Fund (AF) is crucial in financing adaptation projects in developing countries. These funds operate under the guidance of the Conference of the Parties (COP) and are pivotal in supporting climate action at both the local and global levels.
To facilitate coordination and coherence in climate finance, the Standing Committee on Finance (SCF) was established, supporting the COP in mobilising financial resources and ensuring transparency in financial support. This committee also conducts regular assessments of climate finance flows and fosters collaboration with various stakeholders.
The long-term finance process aims to enhance the mobilisation of climate finance from diverse sources, including public and private entities. This process includes biennial high-level ministerial dialogues and annual workshops to assess progress in meeting the goal of jointly mobilising USD 100 billion annually by 2020, as committed by developed countries. The COP has also emphasised the importance of setting a new collective quantified goal post-2025.
For improved accessibility and transparency, the UNFCCC website hosts a climate finance data portal that offers comprehensive information on climate finance activities. The portal includes three modules: the National Communications Module, the Fast-start Finance Module, and the Funds Managed by the GEF Module, which provide detailed insights into the financial resources and projects to combat climate change. This comprehensive information is a valuable resource for understanding and monitoring global efforts in climate finance.
Loss and Damage Fund
Last year, the UNFCCC COP27 concluded with a historic agreement to provide “loss and damage” funding for vulnerable countries affected by climate disasters, marking a significant step forward in addressing the impacts of climate change.
The conference reaffirmed the commitment to limit global temperature rise to 1.5 degrees Celsius and bolstered actions to reduce greenhouse gas emissions and adapt to climate change. Notably, a dedicated fund was established for loss and damage, with plans for a transitional committee to operationalise it. Additional decisions included the establishment of the Santiago Network for Loss and Damage and progress on the Global Goal on Adaptation, with increased funding pledges for the Adaptation Fund.
Earlier this month, COP28 President Sultan Al Jaber announced the conclusion of a significant UNFCCC meeting related to implementing the Loss and Damage Fund. The US was absent during the agreement of the draft document. Participants agreed on recommendations, including that the World Bank temporarily host the fund for the next four years. The draft document will be raised at the COP28 for official sign-off.
Read more about the negotiations on climate finance in the UNFCCC here. (nsh)