Global Climate Finance Report
The Climate Policy Initiative (CPI) released a global climate finance report, aiming to analyze the development status and existing problems of global climate finance.
The global climate finance report found that the scale of global climate financing reached US$1.3 trillion, nearly double that of two years ago. However, this scale only accounts for 1% of the total global GDP. To achieve net zero, climate finance needs to exceed US$8 trillion in 2030 and reach US$10 trillion in 2050.
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Public Finance and Private Finance in Climate Financing
In global climate finance report, CPI believes that the scale from public finance and private finance is basically the same, at US$640 billion and US$625 billion respectively.
Under public finance, state financial institutions (USD 238 billion), state-owned enterprises (USD 110 billion) and government departments (USD 100 billion) account for a relatively high proportion. Public financing, mainly in the form of low-cost debt, can promote the development of low-carbon and climate-resilient economies.
Under private finance, commercial financial institutions (USD 235 billion), enterprises (USD 192 billion) and individuals (USD 185 billion) account for a relatively high proportion. These financing directions are mainly renewable energy, low-carbon transportation and energy-saving buildings, and more consideration is given to environmental, social and governance factors as well as the net-zero goals.
Three Types of Uses in Global Climate Finance
Global climate finance has three types of uses, first is climate change mitigation, second is climate change adaption and the third is dual benefits. Currently, 91% of climate finance is used for climate change mitigation, totaling US$1.15 trillion. Only $63 billion is allocated for climate change adaptation and only $51 billion for dual benefits.
When it comes to mitigating climate change, funds are mainly invested in the energy industry and the transportation industry. Net-zero investment in the energy industry reached US$510 billion last year, accounting for 44% of total global financing, of which US$490 billion was used for renewable energy generation. Photovoltaic investment accounts for the highest proportion of energy investment, reaching US$251 billion, followed by wind power investment (US$131 billion). Currently, global renewable energy power generation accounts for 30% of the global total. In addition to the energy industry, the transportation industry also attracts a large amount of funds (US$334 billion, accounting for 29%).
In terms of climate change adaption, although the number of funds increased by 30% compared with last year, there is still a large financial gap exists. CPI predicts that developing countries will need US$212 billion in funding per year in 2030, which is 3.5 times the current global financing scale. These are currently dominated by public financing (98%), with national financial institutions dominating (42%). CPI recommends that private financing increase investment in order to reduce losses and increase productivity. Research suggests that investing one dollar in climate change adaptation can generate economic benefits from 2 dollars to 10 dollars.
In terms of dual benefits, investment has tripled from two years ago, mainly led by public financing. 57% of financing went to the nature sector, with many projects related to biodiversity.
Asset Classes and Geography of Global Climate Finance
In terms of asset classes, debt financing accounts for the highest proportion (USD 766 billion, 61%), followed by equity financing (USD 422 billion, 33%) and subsidy financing (USD 69 billion, 5%). Among debt financing, financing based on market interest rates was the highest ($561 billion), followed by preferential financing (11%) and low-cost debt (6%). CPI expects subsidy financing from the government sector to continue to grow in the future.
84% of climate finance is raised domestically, with the remaining 16% coming from international sources. Climate financing for emerging markets and developing economies mainly comes from international channels, but there is still a large gap. Only 2% of financing goes to least developed countries, which have lower emissions of their own but are most affected by global climate change.
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