What are the new approaches to climate finance?
Climate finance is vital to transforming the global economy to meet the challenge of climate change. It has been one of the key factors in ‘unlocking’ the climate negotiations for many years. This looks set to continue at the UN Climate Change Conference this year (COP23) in Bonn, Germany.
Over 130 Nationally Determined Contributions (which can be seen as country-driven ‘climate investment plans’) are conditional on receipt of climate finance. A previous commitment made at climate change talks in Copenhagen and Cancun to raise US$100 billion per annum by 2020 was built on during the negotiation of the Paris Agreement at COP21. It became a recognised ‘floor’ for climate finance commitments, with finance being escalated for successive Nationally Determined Contributions beyond 2020, and a new climate finance goal established by 2025.
For African nations, the availability of climate finance is particularly important, with funds required for mitigation and adaptation. Climate finance has played and will continue to play a role in developing renewable and sustainable energy sources. For example, the Moroccan Agency for Sustainable Energy raised US$118 million at COP22 by way of the country’s first ever green bond issue, the proceeds of which will be used in part to fund three solar plants forming the Noor PV1 solar power project which will have a total capacity of at least 170 MWs. As well as larger projects, local initiatives have also received funding. Examples of this include IFC’s funding in 2015, via its IFC Cleantech Innovation Facility, of the solar home systems start-up Off Grid Electric in Tanzania, enabling Off Grid Electric to rapidly expand its business across the region. Similarly in 2017 FinnFund increased its financing facility for Mobisol, a fast-growing provider of solar battery system for homes and small businesses across East Africa.
For more information on innovative approaches to climate finance, please see our briefing New approaches to climate finance.