Context:
Global climate finance crossed $2 trillion for the first time in 2024, reaching $2.008 trillion, according to the Climate Policy Initiative. However, the slowing growth of climate investment and the persistent shortage of adaptation finance threaten the achievement of global climate goals.
Explanation:
- Climate finance refers to local, national or international financial flows supporting actions that address climate change.
- It may come from public, private and alternative sources, including governments, development banks, commercial banks, companies and households.
- Its two principal components are mitigation finance and adaptation finance.
- Mitigation finance reduces greenhouse-gas emissions through renewable energy, electric mobility, energy efficiency, green buildings and low-carbon industry.
- Adaptation finance strengthens resilience against floods, droughts, heatwaves, sea-level rise and water stress.
- Climate finance may be provided through grants, concessional loans, equity, guarantees, bonds and blended finance.
- It includes domestic finance, international climate finance and South-South financial flows.
- Its objective is to facilitate the transition towards low-carbon, climate-resilient development.
- It also seeks to implement Nationally Determined Contributions, promote climate justice and support vulnerable developing countries under the principle of Common but Differentiated Responsibilities and Respective Capabilities.
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