• Climate change is a global problem that requires huge amounts of money to transform production and consumption patterns around the world.
• Climate change related cost is higher for developing countries, which are often the most vulnerable to this phenomenon.
• Climate financing will allow mitigation and adaptation.
• There is a requirement of $2-2.8 trillion per year by 2030 as the climate-related investment required by for emerging markets and developing countries (EMDCs) other than China.
• The amount is equivalent to 6-8.5% of gross domestic product (GDP).
• Investments in developmental activities for climate mitigation accounts for around 75% of the initial estimate, the rest is meant for loss and damage, adaptation and resilience, which undermines the importance in funding of rest three activities.
• About $ 1 trillion of it shall come from international transfers of funds.
• The Green Climate Fund (GCF) exhibits limited transparency and accountability with respect to how approved funding for adaptation is spent, particularly for projects that claims to generate local level adaptation outcomes.

Climate Finance

• According to the United Nations Framework Convention on Climate Change (UNFCCC), climate finance is local, national, or transnational funding from public, private, and alternative sources.
• It seeks to support climate change mitigation and adaptation actions.
• Climate finance aims at reducing emissions, and enhancing greenhouse gas sinks.
• It also aims at reducing vulnerability and maintaining and increasing the resilience of human and ecological systems to negative climate change impacts.
• Climate finance will play an important role in the forthcoming meeting of the UN Framework Convention on Climate Change (UNFCCC) in Dubai in December 2023.
• Some of the countries that are most seriously threatened by effects of climate change tend to be those that cause the least pollution.
• Relocation of manufacturing sector to countries with cheap labour, such as China and India, among others, has skyrocketed their greenhouse gas emissions (GGE).
• Finance and economics of the network are key components to consider for climate action.

• The challenge with the fund is to determine the quantum and the funding responsibilities in order to transfer funds from developed to EMDCs for climate-related actions.

Climate finance sources and instruments:

• Green bonds
• Debt swaps
• Guarantees
• Concessional loans
• Grants and donations

Funds for Climate Finance:

Green Climate Fund (GCF):

• It is the world''s largest fund devoted to help developing countries reduce their Greenhouse Gas emissions and adapt to the impact of climate change.
• GCF was set up by the UNFCCC in 2010.
• It pays particular attention to the needs of the most vulnerable countries.
• It plays an essential role in compliance with the Paris Agreement, channeling climate finance to developing countries.

Special Climate Change Fund (SCCF):

• It offers four different financial services:
• Adaptation to climate change
• Technology transfer
• Energy, transport, industry, agriculture, forestry, and waste management
• Economic diversification for countries dependent on fossil fuels.
• It is administered by the Global Environment Facility (GEF).

Least Developed Countries Fund (LDCF):

• Its aims to support 50 countries classified as least developed by the United Nations to tackle their high vulnerability to climate change and implement their national adaptation plans.
• LDCF is also administered by Global Environment Facility (GEF).

UN-REDD Programme:

• It aims to reduce the emissions caused by deforestation and forest degradation in developing countries, by helping governments to prepare and implement national REDD+ strategies.
• It was established in 2008 as a part of the UN.

Country Climate and Development Reports (CCDRs):

• It analyses the achievements of a country’s development goals of mitigating and adapting to climate change.
• In the first round, these estimates have been prepared for 24 countries and shows variation for the investment between 2022 and 2030 as a percentage of GDP required.
• 1.1% for upper-middle-income countries (UMI)
• 5.1% for lower-middle income countries (LMI)
• 8% for low-income countries (LI).

• Reason for the difference is the inclusion of requirements to close existing development and infrastructure gaps in most LIs and LMIs.

Nationally Determined Contributions (NDC):

• Nationally Determined Contributions were submitted to the UNFCCC.
• India’s NDC submitted in 2015 indicates preliminary estimates of $206 billion between 2015 and 2030 for implementing adaptation actions in agriculture, forestry, fisheries infrastructure, water resources, and ecosystems and $834 billion until 2030 for mitigation activities for moderate low carbon development.
• NDCs of India are the following:
• To reach cumulative electric power installed capacity from non-fossil sources to reach 50%.
• To reduce the emissions intensity to 45% of GDP by 2030 as compared to 2005 levels.
• To increase forest and tree cover for creation of an additional carbon sink of 2.5 to 3 billion tonnes of CO2 equivalent.

Investment in Renewable Energy:

• It will replace carbon-emitting fossil fuel used for electricity generation.
• The net investment requirement for renewable energy should be higher than the usual business alternative of fossil-fuel-based power plants.

Suggestions for improvement in climate related fundings

• Adaptation and mitigation processes require financing, and this flow of money can come from both private and public sources.
• The international commercial flow can be directed by the private corporate and finance institutions by accepting environmental principles and climate mitigation targets as done by following:
• Science Based Target Initiative (SBTI) promotes best practices in emissions reductions and net-zero targets in line with climate science.
• The Glasgow Financial Alliance for Net Zero (GFANZ) is a global coalition of leading financial institutions to accelerate decarbonization of the economy.
• It was formed during the COP26 climate conference in Glasgow.
• Force for Good Initiative (FFGI) is an impact-driven institution that focuses on transforming capitalism for a secure, sustainable, and superior future.
• The UNFCCC, is responsible for supervising transfers of funds from developed to developing countries.
• Any significant movement on climate finance in the UNFCCC must consider the following:
• Climate finance, essential for mitigating and adapting to climate change
• Social transformation Economy Climate action

The governments shall focus on the financial assistance required to cope with emerging climate risks. There should be an agreement on principles of climate justice that not only work for the contributory obligations of each country but also for the recipient rights of the country. A more difficult task is the country-wide allocation of obligatory funding requirements for adaptation and resilience measures and for unavoidable loss and damage.