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REPORT: CDKN publishes new policy brief on climate finance challenges

CDKN is pleased to announce the publication of its latest policy brief Climate Finance: Challenges and Responses by Ari Huhtala and Neil Bird of Overseas Development Institute and Celine Herweijer of PwC.  This paper summarises the thinking on climate finance among CDKN Alliance members and suggests areas for prioritisation and action by the international community.

The paper’s key messages are:
At the international level:

  • Despite fiscal austerity and the tightening credit context, public sector funding for and private sector investment in low-carbon and climate-resilient development has continued to increase. However, it still falls short of the volumes required to limit global temperature rise to below two degrees Celsius.
  • Least developed countries, small island developing states and other vulnerable groups need to be heard in the design and operationalisation of the emerging international climate finance architecture, including the Green Climate Fund.
  • While the Green Climate Fund is being operationalised and capitalised, and the international climate finance architecture streamlined, developing countries need immediate support in their transition to climate compatible development.
  • From the outset, the private sector must play a critical role in developing the Private Sector Facility of the Green Climate Fund. This will ensure its design is fit for purpose in order to maximise capitalisation from the private sector.

At the national level:

  • Climate change needs to be seen primarily as a ‘crisis multiplier’ – an economic concern that warrants the attention of national ministries of finance and planning.
  • Local government also plays an important part in the national response to climate change, and will require strengthened flows of public funding at national to local levels.
  • The relative scarcity of public funds should be regarded as an opportunity for the private sector: if the private sector becomes more involved, then small public funds will be able to stretch further, to leverage a broader range of low carbon, climate resilient investments.
  • There are existing examples of public finance unlocking private finance for low-carbon and climate-resilient investment in developing economies effectively: these need to be documented, multiplied and mainstreamed.

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