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  • AutorenbildMako Muzenda

Financing a green future

COP27 officially starts in three days, Sunday 6 November 2022. As national delegations, business leaders and global media converge on Sharm El-Sheikh for the 12-day climate summit, the stakes have never been higher. The 2015 Paris Agreements set a target of limiting global warming to between 1.5°C and 2°C, but a 2021 statement by the Intergovernmental Panel on Climate Change (IPCC) highlights that the world is currently on track to surpass both targets. In the year since the last COP, there have been droughts, wildfires, hurricanes, flash floods and mudslides – events that have far-reaching economic, social and political consequences. As the world seemingly sleepwalks down the path of its own destruction, there have been a range of solutions for how to pivot away from fossil-based economies and support countries hardest hit by climate change.

Read more about the world of finance and digital currencies here.

A particular solution has gained traction over the years, especially since COP26. It has many names: green finance, sustainable finance, adaptation finance and climate finance. There are distinctions between each: sustainable finance encompasses ESG-compliant investment, climate finance focuses specifically on funding climate change adaptation and green finance broadly covers the environment. However, they are united under the same principle: that finance can be an important tool in combating climate change and support those most affected by it. The latest concept to support this argument is loss and damage finance. In fact, one of COP27’s targets are “action to clarify support for loss and damage.” It’s simple: loss and damage finance is about holding top polluting countries accountable. The actions and inaction of these countries has led to disastrous consequences for others, especially in the Global South. From the worst floods in 20 years in Bangladesh to a record drought in Somalia that is ringing alarm bells across UN agencies, countries that have contributed the least to global warming are paying the biggest price. Proponents of loss and damage finance argue that wealthier nations should pay for the damage.

Why is finance such an integral component of climate action and policy? According to the Green Climate Fund, finance can support countries to achieve their Nationally Determined Contributions (NDCs). As set out in Article Four of the Paris Agreement, each country is expected to establish a plan to reduce its greenhouse gas emissions and climate change adaptation policies. Although this applies to countries the world over, some will find it easier than others to finance the changes necessary to achieve their NDCs. Established in 2010 by the Cancún Agreements, the Green Climate Fund supports developing nations* and the implementation of the NDCs. The GCF funds projects ranging from water security and sustainable cities to clean energy and resilience building.

There are other funds and initiatives for financing a green future. Established in 2021, The Climate Finance Fund supports “innovative finance and the systemic decarbonization of capital” and focuses its efforts in China, the European Union and America. The African Development Bank’s Africa Climate Change Fund supports projects in 16 African countries and invests in resilience building and sustainable development. The OECD compiled a Climate Fund Inventory, a database of 99 climate funds across the globe.

As heads of state, business leaders, media and climate advocates come together in Sharm El-Sheikh, finance plays a critical role in implementing previous agreements and significantly shifting away from fossil-based economies. COP27 is a chance to truly embrace financing a greener future, but the slim window of opportunity is closing fast.

*developing country is defined by the UN asa nation with a less developed industrial base and a low Human Development Index (HDI).”


1.Lüdemann, C., & Ruppel, O. C. (2013). International Climate Finance: Policies, structures and challenges. Climate Change: International Law and Global Governance, 375-408. doi:10.5771/9783845242774_375

2.Pekkarinen, V., Toussaint, P., & Van Asselt, H. (2019). Loss and damage after Paris: Moving beyond rhetoric. Carbon & Climate Law Review, 13(1), 31-49. doi:10.21552/cclr/2019/1/6

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