Global Landscape of Climate Finance 2023

Climate finance flows have doubled compared to previous years, reaching an average annual flow of $1.3 trillion in 2021 and 2022, according to a recent analysis by the Climate Policy Initiative (CPI). However, these funds have been distributed unevenly across geographies and sources.

Key Findings of the Report

Rapid Growth in Climate Finance:

The average annual flow of climate finance in 2021 and 2022 doubled compared to the $653 billion observed in 2019 and 2020.

Drivers of Growth:

The increase in climate finance was primarily driven by the escalation in mitigation finance, which saw a $439 billion increase from 2019 and 2020.

Improved Data Collection:

The report noted improved data coverage in three sectors: agriculture, forestry, and other land use (AFOLU); buildings and infrastructure; and waste. Approximately 28% ($173 billion) of the increase in the last year can be attributed to improved data collection, indicating positive progress in the availability of high-quality climate finance data.

Global Significance:

While the increase in climate finance flows is significant, it represents only 1% of the global gross domestic product (GDP). This underscores the need to scale up climate ambition rapidly across countries.

Projected Needs:

The report projects that average estimated annual climate finance needs will increase to $9 trillion by 2030, highlighting the urgency of mobilizing more funds to address climate challenges.

Sectoral Distribution:

Renewable energy (RE) and transport sectors displayed the most growth in mitigation finance, with RE comprising 44% of total mitigation finance and transport 29%. Private financing dominated these sectors.

Geographic Distribution:

Developed countries, with significant private sector contributions, mobilized the majority of climate finance. East Asia and the Pacific, the US and Canada, and Western Europe accounted for 84% of all climate finance. China led in domestic resource mobilization for climate finance, contributing 51% of all domestic climate finance globally.

Challenges in Distribution:

Developing and low-income countries continue to face a scarcity of funds. Less than 3% of a total $30 billion went to or within least developed countries, and 15% went to or within emerging markets and developing economies (excluding China). The 10 countries most affected by climate change received less than 2% of total climate finance.

Role of Private Actors:

Private actors contributed 49% of total climate finance, amounting to $625 billion. The highest growth in private finance came from household spending, particularly from electric vehicle sales, which doubled from 2020 to 2021.

Recommendations for the Future:

The report suggests measures to enhance the scale and quality of climate finance, including transforming the financial system, bridging climate and development needs, mobilizing domestic capital, and improving climate finance data.



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