## Climate Financing That Puts People First

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### Urgency and scope of the climate crisis
- “An unprecedented number of calamitous climate events—floods and heat waves, superstorms, droughts, and uncontrollable forest fires, all connected to human activity”—put lives, economies, and the natural world at risk.
- The need for climate action has never been more pressing; resources must be allocated equitably and generously—putting people and the planet first.

### Regional imbalances in climate finance
- “Over 75 percent of global climate financing is spent in the countries where it is raised.”
- Africa contributes less than 8 percent of global greenhouse gases but receives less than 5.5 percent of global climate financing.
- The UN characterizes Africa as a “highly vulnerable region.”

### Funding needs and current spending
- Climate investment needed: “$4.5 trillion a year by 2030 and rise to $6 trillion a year by 2050.”
- Current annual spending on climate: “$632 billion.”
- About 60 percent of developing economies’ needs are not included in their Nationally Determined Contributions.
- The $100 billion pledge made in 2009 at COP15 in Copenhagen is described as “pitifully inadequate.”

### Adaptation and resilience financing
- “Just 7 percent of climate financing today is earmarked for resilience and adaptation.”
- Global Commission on Adaptation (2019) estimate: investing “$1.8 trillion in initiatives such as early-warning systems and climate-smart practices over 10 years could yield $7.1 trillion in total benefits.”

### Compounding global shocks and development impacts
- COVID-19 pandemic and Russia’s invasion of Ukraine led to higher food and energy prices and tighter financial conditions, increasing fiscal burdens on emerging market economies and siphoning resources from sustainability projects.
- World Bank estimate: climate change could push “132 million people into poverty by 2030,” particularly in Africa and South Asia.

### The financing gap and leverage opportunities
- If multilateral development banks dedicated all their funds to the green transition, it would amount to about “4 percent of the financing needed” (World Bank 2020).
- Shifting “only 1–1.5 percent of global private sector assets—worth over $450 trillion—would… bridge the climate financing gap” (FSB 2021).
- Philanthropic climate-mitigation financing in 2020 ranged between “$6 billion and $10 billion,” which is “less than 2 percent of all philanthropic financing worldwide.”

### Barriers: credit ratings, information gaps, and risk perception
- “77 percent of developing economies’ sovereign credit ratings are ‘non-investment grade’ and hence associated with high risk.”
- Large information gaps about opportunities, investor appetite, and investment impact inhibit mobilization of private finance.
- Closing information gaps can illuminate risk-return profiles, lower transaction costs, enable new financing mechanisms, and generate high-impact investable, Paris-aligned projects that contribute to country priorities.

### Country-led, programmatic solutions: Egypt’s experience
- Egypt launched the Country Platform for the Nexus of Water, Food and Energy (NWFE) during COP27 to emphasize country ownership and adopt a country-led, programmatic, bottom-up approach.
- NWFE addresses the missing link of investable projects and bridges the information gap by harmonizing stakeholder efforts and preparing concrete mitigation and adaptation projects.
- NWFE mobilized concessional financing and catalyzed private investment using innovative financing, including blended finance and debt swaps for climate action (Al-Mashat and Berglöf 2023).

### Global initiatives and institutional reform
- Calls for a restructured global financial architecture to step up climate action and crowd in private investment include the Bridgetown Initiative and the G20 Capital Adequacy Framework.
- The Sharm El Sheikh Guidebook for Just Financing (launched by Egypt during COP27 presidency) aims to move stakeholders from pledges to implementation by identifying climate capital providers and clarifying opportunities, risks, and potential partnerships.

### Just Financing: principles and objectives
- First definition of “just financing” introduced in the guidebook to transcend climate justice and just transition.
- Focuses on putting people first: equitable allocation of benefits and burdens, and safeguarding the social dimension of the transition.
- Operationalizes “common but differentiated responsibilities and respective capabilities” by addressing:
  - country ownership,
  - access,
  - affordability, and
  - resource allocation bias.
- Promotes “additionality”—benefits attributable solely to an intervention—and good governance.
- Just financing “accounts for historical responsibility for climate change while ensuring equitable access to quality and quantity climate financing that supports resilient development pathways, leaving no one behind.”
- The guidebook includes “12 corresponding guiding principles.”

### Recommendations and next steps
- Accelerate knowledge sharing and take stock of successful country experiences ahead of global negotiations (e.g., COP28).
- Unlock funds from public, private, and philanthropic actors through multistakeholder partnerships.
- Close information gaps to clarify risk-return profiles and enable bankable, Paris-aligned projects.
- Scale up concessional and innovative financing instruments (blended finance, debt swaps) to mobilize private investment and catalyze concessional resources.
- Adopt and operationalize “just financing” principles to ensure equitable allocation, additionality, and governance in climate finance.

*Rania Al‑Mashat, Point of View (SEPTEMBER 2023).*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2023/september/al-mashat-pov.pdf_