What is climate finance?

Climate finance are those financial resources which fund actions that mitigate and adapt to the impacts of climate change in developing countries. Climate finance includes among others public climate finance commitments by developed countries under the United Nations Framework Convention on Climate Change (1992), the Kyoto Protocol (1997) and the Paris Agreement (2015). Mitigation finance is used to reduce emissions, while adaptation finance is required to adapt to the climate induced effects and impacts. Developing countries are also calling for additional finance to address climate change loss and damage already occurring in their countries as a result of climate change impacts.

According to UNFCCC, ‘Climate finance refers to local, national or transnational financing—drawn from public, private and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change’. The Convention, the Kyoto Protocol and the Paris Agreement recognize that capacity to mitigate and adapt to climate change differ between countries and call for provision of financial assistance from Parties with more financial resources to those more vulnerable (Global Climate Finance Architecture, 2019).