Financing climate targets: a study of select G20 countries

Policy brief

Countries will need significant financial resources to face climate-induced events and transition to a low-carbon economy. There is a vital need for climate finance narratives to focus on the qualitative aspects of money flowing in, along with increasing the quantum of financial flows. The varied financial requirements to support climate targets of developing G20 countries shed light on the differing contexts and needs as far as the sectoral allocation of the finances is concerned. The data indicate a marked imbalance between funds channelled toward mitigation as compared to adaptation sectors. They also highlight a general predominance of financial flows taking the form of concessional loans as opposed to grants. There are underlying risk-return profiles associated with climate-relevant projects (both mitigation and adaptation). The choices of instruments and sources are determined based on how these match with the return expectations and risk appetites of international climate finance sources. Similar to the heterogeneity of sectors from which climate needs emanate, the instruments of climate finance are also dissimilar. Therefore, when talking about fund flowing to developing countries, broad-brushing all instruments to be the same is erroneous.