Ambitious Climate Funds are Showing a Promising Future; but, Where Do the Funds Go?
Overview:
Recently, the UAE and World Bank announced billion-dollar climate pledge plans for 2030. These amounts are more than 3x the amount comparable to the Green Climate Fund, the world’s largest multilateral fund with pledges from 32 countries that amount to over 20 billion dollars (the United States being a leader in contributions with 3 billion dollars). This funding dedicates itself to helping developing countries address the climate crisis by investing in decarbonizing eight key areas: energy, transport, forests/land usage, health, food/water, livelihoods of people and communities, ecosystems, and the built environment. As these new organizations promised their climate pledge, let’s where climate funds are invested towards.
The World Bank
The World Bank increased its climate pledge ambitions, investing more than $40 billion into a climate pledge fund by 2023, this measure is more than $9 billion more than previously promised. This mandate aligns with the World Bank’s goals of devoting 45% of its annual financing to climate-related projects for the 2024-2025 fiscal year. These funds will aid the World Bank’s initiatives of boosting resilience and adaptation to climate among those hardest hit by the effects of climate change. These funds will play a crucial role in bolstering resilience, adaptation, and combating various facets of climate change, from extreme weather to biodiversity loss and agricultural instability.
The European Union
As of November, the EU added $4 billion toward its 2023 innovation fund for the purpose of supporting the deployment of innovative decarbonization technologies. This fund is specifically from revenue from the EU Emissions Trading System, the EU’s cap and trade program - which started in 2005. The investment will go toward developing companies that have technologies associated with decarbonization or cleantech manufacturing. The projects will be assessed based on their potential to reduce greenhouse gas emissions, degree of innovation, maturity, replicability, and cost of efficiency. This fund will spur innovation and lead toward technological advancement in the fight against climate change.
Source: nl.government
The UAE
The host of the COP28 memorably started the conference by pledging an over $30 billion investment plan, the largest investment tool for climate action yet, aimed at driving capital towards climate investments. This platform, called ALTERRA, has a goal of improving access to climate finance in emerging markets, especially in the global south. This investment platform has two structures: ALTERRA acceleration and ALTERRA transformation. Acceleration is a $25 billion component that will serve as an anchor investor in climate strategies to help steer institutional capital toward climate investments that support the meet zero transition and climate resilience. Transformation is a $5 billion program that will provide risk capital to incentivize capital flows into the Global South and to attract climate investment to Least Developed Countries and Small Island Developing States. Additional partners alongside BlackRock, Brookfield, and TPG are expected to join the increasingly growing fund. It is an exciting next step in the world of climate finance and is an opportunity for meaningful development.
Source: Reuters
Summary
These three funds showcase the difference in investment allocation and showcase examples of three organizations targeting the mitigation of climate change differently through climate finance.
