Making Sense of the Vast Global Landscape of Climate Finance

photo credit: Harvard Business Review

Climate finance is central to developing climate resilience and pursuing a just transition to low-carbon economies in the face of climate change. The vast range of climate finance initiatives and donors continues to challenge efforts to coordinate effective and complementary climate finance. The International Climate Initiative (IKI) is a key climate financing instrument of the German government with a total funding volume of over EUR 4.5 billion, operating in more than 60 countries between 2008 and 2020. This makes it a major player in the climate finance landscape alongside multilateral development banks, multilateral environmental funds, bilateral development banks, and philanthropic organisations. Operating within the frameworks of the UNFCCC and the Convention on Biological Diversity (CBD), the IKI has four funding priorities:

  • climate mitigation (i.e. reduction of greenhouse gases)
  • adaptation to climate change
  • protection of biodiversity
  • natural carbon sinks (e.g. forest-related climate finance, such as REDD+)

Funding is channelled via two funding pillars: thematic and country-specific. Thematic refers to the funding of new and innovative concepts, while the country-specific pillar focuses on providing funding for the specific climate priorities of a particular country. The IKI also channels funding into smaller-scale projects through the IKI Small and Medium Grants mechanism that aims to strengthen smaller stakeholders’ capacities and provide for more inclusive climate finance in developing and emerging countries. With the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) and ZUG, PlanAdapt is working on a project for the IKI to review the state of the climate finance landscape, explore key trends and establish opportunities and develop recommendations for the strategic approach of the IKI.

The project will begin with a kick-off co-designed workshop in collaboration with the BMU and ZUG to co-define the scope, research questions and vision guiding the project’s activities. Informed by this, PlanAdapt will undertake a mapping analysis of relevant actors and initiatives operating within the existing international donor landscape, before conducting an in-depth analysis of key actors within this landscape. This in-depth analysis will be directed by an analytical matrix informed by a list of indicators determined by PlanAdapt and its partners. Building on the previous tasks, this in-depth analysis will work to understand the rationale behind funding decisions and reveal more information about drivers and barriers to funding. This work will enlighten the gap analysis that will consider both the knowledge gathered, and the lessons learned by other actors and initiatives to determine recommendations for the strategic approach of the IKI going forward.

As the impacts of climate change intensify, the funding needs for mitigation, adaptation, biodiversity and natural carbon sinks (not forgetting many others) will only grow. When this is coupled with the complexity of the climate finance landscape, it highlights the importance of projects like this which can enable a better understanding of the landscape and provide valuable knowledge to inform the strategic direction of climate finance mechanisms like the IKI. With this knowledge, climate finance can be better mobilised, not only to support adaptation and mitigation efforts but also to benefit the economic and social wellbeing of communities most affected by climate change.

For more info and overviews of the climate finance landscape, see also the OECD Climate-Related Development Finance, Climate Funds Update, the Donor Tracker, Climate Finance Landscapes (by Climate Policy Initiative) or the AidAtlas.