Climate financing: Progress made at COP28, but is it enough?

New Delhi, India

Climate financing remains one of the major impediments in tackling the effects of climate crisis around the world. Combating climate change and its consequences would need an enormous amount of money — much more than the world has budgeted. 

The aim of climate financing is to make it easier for developing and poor countries to address the climate crisis, because they suffer the most. 

"The impacts of climate change are particularly severe in emerging economies, where the adverse effects are felt more strongly," Saurabh Kumar, Vice President- India of Global Energy Alliance for People and Planet (GEAPP) told WION. 

"These countries are more vulnerable to the physical effects of climate change, such as rising sea levels, extreme weather events, and water stress, and are at risk of suffering lower crop yields and economic sensitivity due to their sectoral structure," he further said.  

Also read: Calls rise to phase out fossil fuels, but it remains a challenge to devise a formal plan at COP28 

What is climate financing?

Climate financing means money drawn from public, private and alternative sources to support the planning and process of mitigation and adaptation actions to address climate-related issues. 

World bodies have been urging nations and other stakeholders with more financial resources to contribute to help those who are more vulnerable. 

At COP28, this year's UN climate summit in Dubai, countries, financial institutions, development agencies and businesses have pledged more money. The money will focus on energy transition, healthcare initiatives, technology investments, disaster relief, and more.

Hosts the United Arab Emirates (UAE) said more than $83 billion had been mobilised during the first five days of the event, with UAE banks pledging to mobilise 1 trillion dirhams (around $270 billion) in green finance. 

The World Bank said that its objective is to increase climate funding to 45% of its total lending, which equates to an increase of $9 billion annually. 

The Development Bank of Latin America and the Caribbean (CAF) announced that it will invest more than $2 billion per year in Latin America until 2030 to combat climate change. There are several others with significant donations. But that's not enough. 

Also read: Explained | Global CO2 emissions due to fossil fuels hit new record. Will world leaders at COP28 act now? 

How will the funding process work? 

Kumar talked about the role of GEAPP to explain why there's a need for a new approach to address unreliable energy access and ensure a just energy transition. 

He noted that GEAPP's catalytic capital or philanthropic fund, which operates without the expectation of a financial return on investment, makes it different from other institutions. 

"The strength of philanthropic capital lies in its capacity to make early investments, take calculated risks, and pioneer innovative models. With the freedom to absorb setbacks without adverse consequences, our primary objective is to contribute to broader development goals," he said. 

"GEAPP aims to unlock renewable energy access in emerging economies, with a focus on extending sustainable, reliable, productive-use energy to 1 billion underserved people and enabling 150 million green jobs that generate inclusive economic growth," Kumar added. 

Watch: Discussing climate change with Pleistocene Park director Luke Griswald 

High-income countries fail to meet annual goal 

It may look simple, but the process of climate financing is way more complex. There is a lack of transparency and dishonesty. Several reports have suggested that many rich countries use deceptive and misleading accounting to misrepresent their contributions to climate funding for developing countries. Many have also failed to meet their annual goals. 

"Climate financing is crucial to combat climate change and meet our net-zero targets. A successful energy transition across the globe would require considerable investments in developing and installing renewable energy sources," Per Heggenes, the CEO of IKEA Foundation, the philanthropic arm of the Swedish home furnishings company, told WION. 

"Of course, the onus of responsibility to drive this transition lies on the governments of the world. However, without private capital, it would not be possible to address the rising challenges of climate change," Heggenes added. 

Also read: Data lab | India saw at least one major weather event each day in 2023. Cyclone Michaung adds to the tally 

'Need to work together' 

Explaining that climate change is not a national problem but a global challenge, Kumar suggested that to combat the crisis, "we need to work together as partners". 

"Partnerships between high-income and low-income countries can play a crucial role in achieving climate goals by leveraging resources, expertise, and technology to support sustainable development for all the countries involved," Kumar said. 

"Unlocking the full potential of the Sustainable Development Goals (SDGs) requires the establishment of multistakeholder partnerships. These partnerships play a crucial role in leveraging the interlinkages between the SDGs, enhancing their overall effectiveness and impact, and accelerating progress toward achieving these goals," Kumar added. 

He said it's important for developed countries to fulfil their climate change and finance commitments, actively supporting sustainable development initiatives in emerging economies. 

Heggenes said that with further research and development of technologies, the initial investment costs are bound to decline, thereby welcoming more investments in the renewable sector. He said, "Beyond this, communities need to be included in the energy transition process, especially in developing and under-developed countries." 

"Distributed renewable energy systems need to be developed with a direct involvement of the concerned communities. A coalition of philanthropic organisations, private capital, and local communities, along with assisting governments, can address the financing of the energy transition," said the IKEA Foundation CEO. 

Heggenes said that this year, along with the SELCO foundation, his organisation has committed itself to sustainably upgrading 25,000 primary healthcare facilities in India by 2026. 

He noted that the 'Energy for Health project' has received initial funding of 48 million euros from the IKEA Foundation and the project is expected to mitigate over three million tonnes of CO2 emissions over a 20-year period.