What is Climate Finance?


What is Climate Finance?

Climate finance refers to local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change. This encompasses schemes anywhere from large and small scale renewable energy projects that offset fossil-fuel power generation, to land-reclamation projects that reduce the risk of flooding or forest fires. 


Addressing climate change requires significant investment

The planet’s carbon budget is approximately 420 gigatons (GT) – this is the amount of carbon emissions we can emit while having a chance to limit temperature rise to 1.5°C. Unfortunately, at current rates of carbon emissions, we will exhaust our carbon budget in the next 10 years.

Slowing down our emissions rate and the impacts of climate change will require a significant amount of investment in climate mitigation and climate adaptation projects. In 2017, global climate finance flows surpassed $500 billion, however, the latest IPCC report estimated that the investment required to remain within the 1.5°C to 2°C scenario should be between $1.6 to $3.8 trillion per year.


New business models, financial innovations and new sources of capital are creating opportunities

The battle against climate change is one of the greatest challenges of our time – but it is also a chance to capitalise opportunities at the intersection of finance and climate change. New technologies, business models, policies and regulations are creating investment opportunities and transforming the ways projects are financed. Innovation will play a crucial role mobilising capital, scaling-up private investment and making currently un-bankable projects bankable.

The transition to a low-carbon economy requires new mechanisms to increase the universe of attractive projects. At the same time, climate-related projects are gaining traction and growing interest from investments banks, hedge funds, infrastructure funds and pension funds.

Need inspiration to develop an idea?

Join an Ideas Webinar 

Join us for a webinar to find out what a wining idea looks like and what it takes to submit a winning idea. We will be presenting last year’s best and most innovative ideas and describing which ideas worked and which didn’t.

Need more inspiration and climate finance resources?

Final report of the High-Level Expert Group on Sustainable Finance


Global Climate Finance Landscape


The EBRD’s Green Economy Transition


Global Innovation Lab for Climate Finance


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