How far has global climate finance come since COP27? With exactly 100 days to go until the COP28 global climate summit in the UAE, we’re taking a look at what’s changed in the world of climate finance since the last COP summit. At COP27 in Sharm El Sheikh last year, big pledges were made by developed nations to help their developing counterparts adapt to a changing climate. So what’s happened since? And what should we expect on the climate finance front out of Dubai?

What counts as climate finance: Climate finance is any and all money that flows to green projects. Those projects are generally grouped into two main categories. Mitigation projects try to reduce the amount of greenhouse gases being released into the atmosphere — think renewable power plants, sustainable transport infrastructure, or making buildings more energy efficient. Adaptation projects help countries handle the changing climate — for example, by growing crops that can handle higher temperatures or building sea walls to reduce flooding risks amid rising sea levels.

And where it comes from: Climate finance can come through bilateral institutions funded by one country, from multilateral lenders, or from dedicated regional or country-specific funds. Climate Funds Update has a detailed map of many of the key sources. The finance could come in the form of concessional loans, debt swaps, grants, private equity, or other types of lending. Often, the focus is on how public institutions — whether individual countries or multilateral organizations — can use climate finance to de-risk green projects, helping to mobilize private lenders to come onboard in their wake.

Climate finance is a key issue for emerging markets: Climate finance is needed everywhere — but debates around global climate finance have focused on how developed countries can make financing for green projects accessible in and emerging markets (EMs). There are several reasons for that. It’s often more expensive to finance infrastructure projects in EMs because borrowers pay a premium to cover the risk investors take on by investing in less established markets. At the same time, public money is stretched further in many EMs, meaning governments may not be able to fund the projects they need for the green transition — especially when many are already carrying heavy debt burdens, much of it owed to richer countries. Finally, there’s a moral argument, with EMs saying that they should not have to bear the full cost — or become even more indebted — to solve a crisis largely created by developed countries, who have historically been responsible for the vast majority of greenhouse gas emissions.

COP27 saw a victory for EMs on the climate finance front: Last year’s COP summit was billed as the summit for developing nations — and their demands on climate finance were front and center. At the summit, a landmark agreement was reached to create a loss and damage fund that will see developed countries pledge funds to “save lives and livelihoods from climate change related disasters” in climate-affected countries.

Where the loss and damage fund stands now: The agreement to set up the fund was hard-won at last year’s COP — but it doesn’t nail down any of the details on who will pay into it, its target value, who will be eligible to receive the funds, and how it will operate. Those details are being hashed out by a transitional committee of 24 member states including Egypt. Since COP27, the committee has held two meetings and another two workshops, and is set to meet again in the Dominican Republic next week — but they’ve been tight-lipped on how the talks are progressing. In recent months, dozens of developing nations have submitted case studies on their own loss and damage from climate change to help inform the committee’s decisions.

Some want to see more action: “Please do not operate in ‘UNFCCC time’ which would mean talking and talking for years before a penny is available in the fund,” Saleemul Huq, director of the International Centre for Climate Change and Development in Bangladesh, tells COP delegates in an article published by Climate Home News. “Please try your best to get something up and operational by COP28 rather than COP29 or COP30.”

So will the loss and damage fund be finalized in Dubai? It doesn’t look too likely as of now, though COP-watchers are hoping to see at least some progress. COP28 could bring “some sort of a structure of governance and identification as well of the sources of funds,” Egyptian climate czar Mahmoud Mohieldin told Enterprise Climate recently — but suggested delegates may stop short of pinning down who signs up, who is eligible, and who monitors the fund.

Meanwhile, the most famous pledge in climate finance still isn’t being met: Developed countries are yet to make good on their biggest commitment to funding climate projects abroad. Richer countries pledged to mobilize USD 100 bn per year in climate finance to developing nations by 2020, a goal that was extended until 2025 at COP21 in Paris. As of 2020, they were still some USD 17 bn short of that goal, according to OECD figures. President Abdel Fattah El Sisi urged world leaders to redouble their efforts to fulfil that pledge at the Paris Summit for a New Global Financing Pact back in June — a summit that was widely criticized for failing to secure more concrete commitments from developed nations on climate finance.

But there are some positive signs: While the landmark, UN-led agreements on climate finance are slow to implement, there are signs that more and newer kinds of climate finance are coming onto the global stage. In one recent example, Gabon just became the first country in Africa to agree a debt-for-nature swap. Under this type of climate finance, the heavily indebted country is getting better terms on USD 500 mn of its debt, in return for spending at least USD 125 mn to protect endangered dolphins.

Your top green economy stories for the week:

  • Gov’t wants more for the Gabal El Zeit wind farm: The government is in talks with emerging markets private equity giant Actis to up its bid for the 580-MW Gabal El Zeit wind farm to USD 600-800 mn.
  • License renewals for Benban firms: The Egyptian Electric Utility and Consumer Protection Regulatory Agency (Egyptera) approved license renewals for 14 solar energy companies working in Benban. (Al Borsa)
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