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Sustainability Monitor

Climate Finance: a Matter of Justice?

How much? What for? Who is going to pay for it?

Although climate finance is always on the agenda at annual world climate conferences, a common understanding of what it means is still lacking. Systemic risks continue to plague financial engagement in the Global South - and the risk of corruption is also mounting with the ever-increasing sums of money involved. The effectiveness of climate finance depends not only on the amount of money committed, but also on good governance and accountable institutions.

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Climate financing is a recurring topic in annual negotiations at UN climate conferences. Views differ on what it means, however. Nonetheless, agreement on an understanding of climate finance would be a crucial step in order to promote the instrument itself. Time is running short: The UN estimates that developing countries will need at least USD 6 trillion by 2030 to achieve half of their national climate targets.

Focusing on more and more public funding will not solve the global energy transition though. For more private capital to be committed to developing and emerging countries, however, the underlying conditions have to be right. Systemic risks continue to constrain the commitment of financial resources there.

At the same time, there is a need to place a greater focus on adaptation. Although it is assigned overriding importance in the Paris Agreement, financing in developing countries lies below the threshold required to enable an effective response to climate change, while the financing gap is growing. However, the risk of corruption is also mounting as amounts of financial resources involved continue to rise. The effectiveness of climate finance hinges not only on the amount of money committed, but also on good governance and accountable institutions.

China's financial participation in the multilateral climate fund would also be pivotal for a fairer energy transition. But because Beijing clings to its status as a developing country, it sees no reason to make such a move. However, the United Arab Emirates' pledge at COP28 to pay into the fund for loss and damage could put China on the spot and possibly initiate a paradigm shift in international climate finance with a view to the post-2025 financing target.

Read the entire Monitor: "Climate Finance: a matter of justice?" from our Sustainability Series here as a PDF.

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Gisela Elsner

Gisela Elsner kas

Global Sustainability

gisela.elsner@kas.de +49 30 26996-3759

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About this series

The publications of the Sustainability Monitor are part of our Monitor publication series. The Monitor series deals with one main topic at a time from the perspective of KAS experts and places it in the political and social context on the basis of a few key points.