Climate change is happening now and it is already having severe consequences for societies and people’s livelihoods all around the world. Many politicians, civil society organizations and advocacy groups such as the Heinrich Böll Stiftung, as well as communities around the world, are grappling with these impacts and costs. There are potential solutions for a sustainable and just future, but moving away from fossil fuels and building resilience in communities, ecosystems, and economies is costly. The financing for climate action has not been sufficiently pledged and raised to ensure that funds are available for the necessary changes.
But where does the money come from?
The main idea is that the money should come from the countries that are responsible for the damage and have the capacity to make it right. This is a matter of justice -climate justice. The Paris Agreement established in 2015 is a statement of mutual responsibility. Industrialized economies such as the United States, England and Germany have profited from carbon intensive economic development. But this development path is no longer an option for poor countries that need to skip a few steps and go directly to using clean, renewable energy. And climate change aggravates local existing problems such as inequality, discrimination in poverty.
Therefore climate finance target to help vulnerable populations groups (Green Climate fund for example). Rich countries owe developing countries a historic climate debt. Based on the key principle of climate justice the polluters must pay. It is their obligation to help pay for the costs of addressing climate change.
So, how much money is needed?
In 2009 in Copenhagen, industrialized countries committed to contributing hundred billion dollars annually by 2020 to address the issue. Since then, many climate funds and finance initiatives have sprung up, but rich countries contributions have yet to reach the goals, and the long-term future of mini climate funds is not secure. While which countries are supposed to take the lead, most of the money today comes from the private sector.
In governments increasingly give loans that need to be paid back. However, loans place a strain on poor recipients, and investors often have priorities that do not align with the needs of communities in countries. PwC has identified more than 3,000 climate technology start-ups worldwide, with $87.5 billion invested in climate technology in the second half of 2020 and the first half of 2021. (The U.S. accounts for 65% of all funding during this period).
But what is this money for in practice?
Climate finance is used to fund projects in mitigation or adaptation, and more and more in cross cutting activities that combine both. Funding for adaptation bills hurricane shelters or sea walls. It restores mangrove forest and wetlands, helps manage water systems to deal with severe drought or floods; and provides farmers with better seed and forecasts to improve that year despite in predictable weather.
When done well, these projects allow communities to bear the worst effects of climate change and adjust their livelihoods to an uncertain future. Mitigation projects reduce greenhouse gas emission by shifting energy production towered sustainable sources. These projects can address energy poverty in rural areas by distributing renewable energy to people who have never had electricity and they also provide entrepreneurs with the cheap loans needed to buy energy efficient equipment.
However, not all mitigation projects are good projects. Large hydroelectric dams can displace people and destroy their livelihoods, while growing food crops for biofuel can increase food insecurity. Misguided climate mitigation can easily make things worse. The most successful projects put people first plus give communities and marginalized groups the strong voice in designing and selecting them. With so little money available for climate projects, only the ones that do not harm to people or the environment, and ones that benefit human rights and gender equality should be founded.
This is what did the Green Climate Fund. The fund was formally established during the 2010 United Nations Climate Change Conference in Cancun as a fund within the UNFCCC framework. Its governing instrument was adopted at the 2011 United Nations Climate Change Conference (COP 17). The current Executive Director is Yannick Glemarec.
GCF tries to learn from the past mistakes of other organizations where climate projects had harmful consequences such as environmental degradation or human rights violations. While there is always room for improvement, the GCF has the potential to set an example of best practices for transformative climate finance. The GCF is expected to be the centerpiece of efforts to increase climate finance under the UNFCCC. It’s objective is to "support projects, programs, policies and other activities in developing country Parties using thematic funding windows. A quarter of all its funding is reserved for the poorest countries.
It has committed itself to protecting and promoting human rights and has strong safeguards to avoid harm. Furthermore, the GCF is committed to accountability. It has several independent units responsible to protect integrity and for monitoring and evaluation. It gives the opportunity to complain and ask for compensation if projects go wrong and cause harm. As it grows and matures, the largest challenge the fund faces is replenishment, as the demand far outstrips the money available. Securing new founding is a long and difficult political process. There is intense competition for public funding and developed countries are not generous enough to fulfill their international obligations. The continued success of the GCF is therefore crucial for achieving the goals of the Paris Agreement.
However, all of those achievements will also include the need of private capital support . Start ups around the world are coming up with innovations that, if scaled, have the potential to push back climate change, helping to restore balance and put the world on a sustainable path. 90% of the start up fails, not because a lack of idea but because they do not possess the right marketing skills or the right partnerships, or because they run out of money.
Traditionally private capital has been driven by financial gain. But as the threat of climate change moves ever closer individuals and institutions are Other funds issued from the private sector has been realizing that prosperity has to go hand in hand with sustainability. Which is why , at the start of 2020, one in three dollars under professional management globally employed a sustainable investing strategy. And 70% of investors believe their investment choices can impact climate change.
Private sector can go even further. Because new ideas need more than just money to make the leap from a great idea to solution that can change the world. Transformative ideas need to connect with established players, other industries, and other thinkers from many different sectors. Because only the highest form of collaboration can help breakthrough innovations scale in a way that would change every detail and every habit of the way we live today, and replace them with sustainable solutions for tomorrow.
Few funds to check out: Carbon tracker initiative, Climate investment fund, Global canopy, Planet fund
In conclusion, during those difficult economic times, and despite these market challenges, governments are still mobilizing to continue to invest in climate research and technology, bringing with them leaders of private funds such as Planet Fund: "Partnering with Sky will allow us to invest in and nurture the best climate entrepreneurs." (Mr. Hoberman VP of Founders Factory)