Humanity is at a crossroads – a moment of great risk and great opportunity. One path leads to attractive growth and development; the other to great difficulties and destruction. As shown by each successive report from the Intergovernmental Panel on Climate Change, climate change is occurring at a faster pace than previously anticipated, the impacts and damage are greater than foreseen, and the time for remedial action is rapidly narrowing.
This report of the Independent High-Level Expert Group on Climate Finance is intended to provide a framework for finance for climate action, covering the overall needs for the comprehensive approach embodied in the Paris Agreement and UNFCCC. All the elements are necessary and urgent and most of the actions must start now; it is the science and the world’s perilous condition that set the urgency and timing.
The logic of this paper follows from the logic of delivering on the goals of the Paris Agreement and the Glasgow Pact. The first part focuses on the purpose and necessary investment and actions, drawing on earlier work on the analysis of investments. The second part is about the scale and nature of the different forms of finance that are necessary and how they complement each other. The final part is on how the framework and the key elements described can be taken forward through our systems for international collaboration.
Main messages
- Acting on climate is about transforming our economies, particularly our energy systems, through investing in net zero, adaptation, resilience and natural capital. Achieving this transformation will not be easy. It requires strong investment and innovation, and the right scale of finance of the right kind and at the right time.
- The failure to deliver the climate finance commitment of $100 billion per year by 2020 made by developed countries at successive COPs has eroded trust. The world needs a breakthrough and a new roadmap on climate finance that can mobilise the $1 trillion per year in external finance that will be needed by 2030 for emerging markets and developing countries (EMDCs) other than China.
- A major, rapid and sustained investment push is needed to drive a strong and sustainable recovery out of current and recent crises, transform economic growth, and to deliver on shared development and climate goals.
- The key investment priorities must encompass transformation of the energy system, respond to the growing vulnerability of developing countries to climate change, and restore the damage to natural capital and biodiversity.
- Country/sector platforms driven by countries can bring together key stakeholders around a purposeful strategy, scaling up investments, tackling obstacles or binding constraints, ensuring a just transition and mobilising finance, especially private finance.
- The scale of the investments needed in EMDCs over the next five years and beyond will require a debt and financing strategy that tackles festering debt difficulties, especially those of poor and vulnerable countries, and that leads to a major expansion of both domestic and international finance, public and private, concessional and non-concessional.
This report was prepared by the Independent High-Level Expert Group on Climate Finance, co-chaired by Dr Vera Songwe and Professor Lord Nicholas Stern, at the request of the Egyptian Presidency of COP27, the UK Presidency of COP26 and the UN Climate Change High Level Champions for COP26 and COP27.