The trillion-dollar climate finance challenges (and opportunity) |


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Investments in renewable energy and sustainable infrastructure are increasing, but from January 2020 to March 2021, globally, more money has been spent on fossil fuels, which when burned produce harmful gases that lead to climate change.


Women build levees in Nepal to prevent the river from flooding and flooding neighboring villages.

United Nations Development Program / Azza Aisha

Women build levees in Nepal to prevent the river from flooding and flooding neighboring villages.

Many countries lack the financial resources to transition to clean energy and a sustainable lifestyle that can reverse climate change. The UN says climate finance is the answer because not investing will cost more in the long run, but also because there are great opportunities for investors.

What is climate finance?

Broadly speaking, climate finance is about money that must be spent on the full range of activities that will contribute to slowing climate change and that will help the world reach the goal of limiting global warming to an increase of 1.5°C above. pre-industrial levels.

To achieve this goal, the world needs to reduce greenhouse gas emissions to practically zero by 2050; The term net-zero is also heard a lot in the context of climate action finance (You can read more about it Here).


Women in rural Costa Rica are planting trees to help fight climate change.

United Nations Development Program in Costa Rica

Women in rural Costa Rica are planting trees to help fight climate change.

Initiatives that must be funded to get to net zero include those that reduce emissions of harmful gases as well as promote or protect natural solutions that capture those gases, such as forests and oceans.

The funding also aims to build the resilience of the population most affected by climate change and help them adapt to changing weather conditions, measures that will in turn help reduce warming.

Funding is in place and so are solutions, for the transition to what the United Nations calls a green economy. Renewable energy that provides electricity without producing carbon dioxide or other forms of air pollution is an essential building block for promoting sustainable economic growth.

Why is it important?

With rising global temperatures, along with changing weather patterns, rising sea levels, and increasing droughts and floods, the world’s most vulnerable populations face ever-increasing risks, food insecurity, and have fewer opportunities to break out of poverty and build a better life.


Floods in Bangladesh have destroyed homes in remote villages of Islampur.

UN Women / Muhammad Rakib Al-Hassan

Floods in Bangladesh have destroyed homes in remote villages of Islampur.

In fact, the United Nations estimates that climate change could push an additional 100 million people into poverty by 2030.

Significant financial resources, sound investments and a systematic global approach are needed to address these troubling trends.

So how much is required?

Significant investments are needed and international cooperation is critical. More than a decade ago, developed countries committed to jointly mobilizing $100 billion annually by 2020 to support climate action in developing countries.

It might sound like a lot but compare that to Global Military Spending in 2020 That has been estimated at less than $2 trillion or $2000 billion, or trillions of dollars that developed countries have spent on coronavirus-related relief for their citizens.


Solar panels are being used in Cambodia to help meet the country's energy demand.

UNDP/Manoth Booth

Solar panels are being used in Cambodia to help meet the country’s energy demand.

according to expert report Set up at the request of the UN Secretary-General, the $100 billion target has not been met (the latest data available for 2018 is $79 billion), although climate finance is on an “upward trajectory”.

Therefore, there is still a huge funding gap.

Does it have a financial meaning?

The real question is whether the world can afford not to invest in climate action.

Societies around the world are already suffering from the financial impacts of climate change, whether it’s the loss of crops due to drought, or the massive damage to infrastructure caused by floods or other extreme weather.

The UN Special Envoy for Climate Action and Finance, Mark Carney, says the massive amount of investment required represents An opportunity, not a risk, arguing that the benefits that flow from these investments greatly outweigh any initial costs.


Air pollution from coal-fired power plants is associated with global warming and other harmful consequences for the environment and public health.

Unsplash / Koji Tsuru

Air pollution from coal-fired power plants is associated with global warming and other harmful consequences for the environment and public health.

It is also increasingly accepted that climate investments make economic sense. The financial and commercial issues of clean energy are stronger than ever. In most countries it is now cheaper to use solar energy than to build new coal-fired power plants. Clean energy investments also drive economic growth, with the potential to create 18 million jobs by 2030; This includes the inevitable job losses in fossil fuels.

Where does the money come from?

This is where it gets complicated, but in general, funding comes from a wide range of public and private funding sources, which support innovative climate action initiatives at the local, national or transnational level.

A variety of financial instruments can be used to provide climate finance from green bonds to direct project-based loans to direct investments in energy or technology providers.


Wind farms have been built in offshore locations across the UK.

Unsplash / Nicholas Doherty

Wind farms have been built in offshore locations across the UK.

It is worth remembering here that adaptation is only one part of the complex puzzle of climate action. Once mitigation, decarbonization, and global resilience efforts, in both the developing and developed worlds, are taken into account, the annual cost would significantly exceed $500 billion and possibly over a trillion dollars.

But the benefits of the investments will be much greater – shifting to a green economy could lead to direct economic gains of $26 trillion through 2030 than business as usual.

The United Nations says it seeks to combine “public sector design with private sector entrepreneurial capabilities,” supporting governments in making climate investments easier and more attractive to private companies.

Fortunately, the UN reports that “efforts to engage the private sector in achieving the Paris goals are gaining momentum.”

Much climate finance is channeled through various UN funds and programmes.

What’s Next?

The annual commitment of $100 billion, “is a floor, not a ceiling” for climate finance, according to the United Nations.

United Nations Environment Program (UNEP)United Nations Environment Program) that the adaptation costs alone that only developing countries will face will be in the range of $140 billion to $300 billion annually by 2030, and $280 billion to $500 billion annually by 2050.


The coastal regions of the Pacific Ocean are among the most vulnerable in the world.

UNDP/Andrea Egan

The coastal regions of the Pacific Ocean are among the most vulnerable in the world.

It is worth remembering here that adaptation is only one part of the complex puzzle of climate action. Once mitigation, decarbonization, and global resilience efforts, in both the developing and developed worlds, are taken into account, the annual cost would significantly exceed $500 billion and possibly over a trillion dollars.

But the benefits of the investments will be much greater – a shift to a green economy could lead to direct economic gains of $26 trillion through 2030 than business as usual.

UN-backed international climate funds

Countries have recognized the need for climate finance in Paris Agreement The legally binding treaty adopted by the international community in December 2015.

It calls for “making financial flows consistent with a path toward lower greenhouse gas emissions and climate-resilient development.”

Climate Investment Funds (CIFs): The $8 billion fund “accelerates climate action by enabling transitions in clean technology, energy access, climate resilience, and sustainable forests in developing and middle-income countries.”

Green Climate Fund (GCF): Describing itself as the “world’s largest climate fund,” the Green Climate Fund invests in the built environment; Energy, industry, human security and land use.

Adaptation Fund (AF): The Fund has allocated approximately $830 million since 2010 to help vulnerable communities in developing countries adapt to climate change.

Global Environment Facility The GEF aims to “catalyze transformative change in major systems that result in significant environmental loss,” particularly energy, cities and food.

UN-REDD: Three United Nations agencies (United Nations Environment Programme, United Nations Development Programme And the FAO) a decade ago to protect forests, a landmark “nature-based solution to the climate emergency”.

Clean Technology Fund (CTF): $5.4 billion is “Enabling transformation in developing countries by providing resources for scaling up low-carbon technologies.”


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