Climate Finance

Abstract

• Net climate finance, defined as the value of climate finance flows minus financial flows to high-emissions and maladaptive activities, continues to be heavily skewed toward dirty investments. • With the strong focus on scaling up climate finance within the United Nations Framework Convention on Climate Change (UNFCCC), it has been somewhat forgotten that " making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development " (Paris Agreement Article 2.1[c]) also requires scaling down flows to fossil energy finance and other high-emissions or maladaptive activities. • There is no singular approach to calculating the negative side of the climate finance ledger. Given the various definitions and approaches to calculating climate finance, any attempt to define its opposite will inevitably provoke debate. • However, the preliminary comparisons of clean and dirty energy sources in this paper suggest that net climate finance is in the red by almost any measure. The balance of investments, including via public finance, are pointing in the wrong direction at a critical juncture for climate action. • The concept of net climate finance offers a promising way to track progress against Paris Agreement objectives on shifting financial flows. However, much methodological work remains to construct true apples-to-apples comparisons between clean and dirty finance. • The fact that net climate finance is in the red underscores an opportunity for the climate finance community to engage directly in outside efforts to restrict high-emissions finance via policies at multilateral and bilateral finance institutions, and the elimination of domestic fossil fuel subsidies.