Climate finance Mobilising private-sector capital

At the 2009 United Nations Climate Change Conference held in Copenhagen, the industrialised countries pledged to mobilise, beginning in 2020 (and up to 2025), 100 billion US dollars annually from public and private sources for climate change mitigation and adaptation in developing countries. In 2015 this 100 billion dollar target was enshrined in the Paris Agreement. Article 2.1.c of the Agreement (third long-term goal) implies that all finance flows must contribute to climate-neutral and climate-resilient development.

Furthermore, the debate on blending has gained importance ever since adoption of the Addis Abeba Action Agenda in 2015. Blended finance is “the strategic use of development finance for the mobilisation of additional finance towards implementation of the sustainable development goals (SDGs) in developing countries” (OECD (External link)).

According to the July 2022 OECD report (External link) on climate finance, the international climate finance provided and mobilised by industrialised countries rose in 2020 to 83.3 billion US dollars (2019: 80.4 billion US dollars). Mobilised private climate finance amounted to some 13.1 billion US dollars in 2020. Multilateral public climate finance has exerted the greatest leverage upon private-sector investment up to now, accounting for eight billion US dollars in 2020.

In 2021 the German government provided some 8.1 billion euros for climate finance. Of this, about 170 million euros (approx. 2.1 per cent) consisted of private resources mobilised by public interventions.

Since 2017 there is a uniform OECD attribution methodology for private-sector finance mobilised by guarantees, interest-subsidised loans, direct investment in companies, credit lines and structured funds. Germany applies this methodology when reporting on private-sector resources mobilised for climate finance by KfW Entwicklungsbank and DEG (German Investment and Development Company).

Germany does not include in its own annual reporting those private-sector resources that are mobilised by multilateral development banks and multilateral climate funds such as the Green Climate Fund (GCF), Global Environment Facility (GEF) and Climate Investment Funds (CIF) and to which Germany makes financial contributions.

At the United Nations Climate Action Summit in September 2019 the multilateral development banks announced their resolve to provide at least 65 billion US dollars for climate finance annually up to 2025. Moreover, they formulated a shared goal of leveraging 40 billion US dollars in private-sector capital.

The joint report by multilateral development banks on their climate finance activities in 2021, presented in 2022, indicates a slight upward trend in mobilised private-sector climate finance. Overall co-financing arrangements totalled some 112 billion US dollars, whereby 45 billion US dollars (approximately 40 per cent; 2020: 31.67 billion US dollars) were leveraged by the private sector.

As at: 29/09/2023