Climate finance, whether of the homegrown or international form, is typically sourced from government or private outfits, and is aimed at pushing mitigation and adaptation actions intended to address climate change.
Climate Finance finds its inception in the United Nations Framework Convention on Climate Change, while the Kyoto Protocol and Paris Climate Agreement all call for the transfer of financial assistance moving from advanced to developing regions.
The way climate finance is set up means that countries are expected to do their utmost best to salvage the climate situation before it is too late whilst dealing with its effects. The idea is that large investment can significantly reduce emissions (mitigation), also adjust to (adaptation), and alleviate the negative effects of climate crisis (Unfcc, n.d.).
According to the Convention’s principle of “common but differentiated responsibility and respective capabilities” advanced nations must take the lead on mobilizing funding from a plethora of sources like public funds and strategies like country-driven approaches that take into consideration the needs of the developing countries.
All these activities are necessary to achieve the global climate goal of keeping the global temperature well below 2 degrees Celsius and preferably, below 1.5 degrees Celsius, a pressing challenge the world faces. Even more specifically, the aim of climate finance in the global climate space is to allow for investments into new energy systems and infrastructure to address this global challenge.
The development of new energy systems borders on energy transitions – whereby energy sectors move from fossil-fuel dependent systems (oil, natural gas and coal) to renewable energy sources (solar, hydro, wind etc.).
Other major drivers of the energy transition include the onset of electrification, the use of technologies to improve energy efficiency and advancements made in energy storage.
Globally, the era of energy transitions also includes a commitment to decarbonization that many businesses and organizations seek to achieve in the longer term as they work towards sustainability.
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