Climate finance Mobilising private-sector capital

    At the 2009 Climate Conference held in Copenhagen, the industrialised countries pledged to mobilise, beginning in 2020 (and up to 2025), 100 billion US dollars annually from public and private sources for climate change mitigation and adaptation in developing countries. In 2015, this 100 billion dollar target was enshrined in the Paris Agreement. Article 2.1(c) of the Agreement (third long-term goal) implies that all finance flows must contribute to climate-neutral and climate-resilient development.

    Investment needs for realising the goals of the Paris Agreement are high in developing and emerging economies. According to independent calculations, investment requirements up to 2030 are around 2.4 trillion US dollars a year. The Independent High-Level Expert Group on Climate Finance has confirmed these figures. The Expert Group was launched by the presidencies of COP 26 and COP 27 and by the UN Climate Change High-Level Champions. Its task was to draft policy recommendations to make headway on public and private investment towards implementing the Paris Agreement.

    A debate that has become more significant after the adoption of the Addis Ababa Action Agenda in 2015, which provides a global framewok for directing financial flows towards sustainable development, is the discurssion on blending. According to the OECD definition, blended finance is “the strategic use of development finance for the mobilisation of additional finance towards sustainable development in developing countries”.

    According to the May 2024 OECD report on climate finance, the international climate finance provided and mobilised by industrialised countries rose in 2022 to 115.9 billion US dollars (2021: 89.6 billion US dollars). This means that the international community reached its goal for the first time in 2022. Mobilised private climate finance amounted to 21.9 billion US dollars in 2022 (in 2021, the level was still at 14.4 billion US dollars). Multilateral official climate finance has exerted the greatest leverage upon private-sector investment up to now.

    In 2023, the German government provided some 9.94 billion euros for climate finance. Of this amount, some 475 million euros (about 4.8 per cent of the total) was private climate finance that had been mobilised by the German government through official funding deployed via DEG and KfW.

    Since 2017, there has been a uniform OECD measuring methodology for private-sector finance mobilised by guarantees, interest-subsidised loans, direct investment in companies, credit lines and structured funds. Germany applies this methodology when reporting on private-sector resources mobilised for climate finance by KfW Development Bank and DEG.

    Germany does not include in its own annual reporting those private-sector resources that are mobilised by multilateral development banks and multilateral climate funds – such as the Green Climate Fund (GCF), the Global Environment Facility (GEF) and the Climate Investment Funds (CIF) – to which Germany makes financial contributions.

    At the United Nations Climate Action Summit in September 2019, the multilateral development banks announced their resolve to provide at least 65 billion US dollars for climate finance annually up to 2025. Moreover, they formulated a shared goal of leveraging 40 billion US dollars in private-sector capital.

    The joint report by multilateral development banks on their climate finance activities in 2022, presented in 2023, indicates a slight upward trend in mobilised private-sector climate finance. Overall co-financing arrangements totalled some 120 billion US dollars, including an amount of 69 billion US dollars (approximately 58 per cent; 2021: 45 billion US dollars) in mobilised private finance.


    As at: 27/09/2024