CLIMATE FINANCE TERMS AND TALKING POINTS
Global climate finance can seem opaque, but you don’t need to be an economist tounderstand key concepts and levers of change. This resource was designed to help
advocates break down the jargon and foster an understanding of this topic in order toclearly communicate about it, not only how climate finance works today, but how to
advocate for transparency and equity both internationally and in your own community.
We hope you utilize this guide for your own education and to improve climate financeliteracy in your network, sharing facts and statistics that help you illustrate clearly why
increasing climate finance is imperative to solving the climate crisis.

GENERAL CLIMATE FINANCE TALKING POINTS•

Wealthier nations have been failing to keep up with a pledge made in 2009 to provide$100 billion USD in climate finance to developing countries per year by 2020, which
was later extended for the period of 2020 to 2025, and adding a goal to set a newtarget in 2025. While it’s possible that the pledge may be met for the first time in2023, developing countries, including the most vulnerable to climate and economicshocks, were at a climate finance deficit of $381.6 billion from 2013 to 2020 andcontinue to fall well short of what is needed.

•Developing countries, especially those in Africa, often borrow at a rate up to eighttimes higher than developed countries. The affordability of the clean energy
transition will depend on reducing the cost and increasing the availability of capital.

•The world is projected to invest a record $1.8 trillion USD in clean energy by theend of 2023. In order to at least triple renewable energy capacity by 2030 – a vitalaction to keeping the goals of the Paris Agreement within reach - global clean energy
investment will need to climb to around $4.5 trillion USD per year by the early 2030s.

•More than 80% of clean energy investment today is occurring in advanced economies
and China. More is needed in emerging and developing economies – clean energy
investment required to help achieve net zero emissions by 2050 in these economies isestimated to be about $2 trillion USD annually by 2030.

•Developing countries are estimated to require up to $300 billion a year by 2030 inclimate finance to adapt agriculture, infrastructure, water supplies, and other aspectsof their economies to properly adapt to the impacts of climate change.

1•Rising temperatures have very likely made poor countries even poorer and richcountries richer, exacerbating economic inequality. Greenhouse gas emissions today
can be linked to a nation’s wealth – the richest countries represent only 16% of theglobal population, but around 40% of emissions. The world’s poorest countries also
have large populations depending directly on activities impacted by climate change,such as agriculture, forestry, and fishing.

•The world’s poorest countries are disproportionately burdened by climate impacts,despite contributing the least to climate change – while historically high emitters
continue to fall short on providing their fair share of climate finance. Developing
countries, especially in the Global South, often lack resources to sufficiently adapt
to climate change, which increases the risks of greater economic loss and humanmisery.

•The majority of climate finance provided to developing countries has been in the formof loans, many with high interest rates, forcing these countries to prioritize servicing
their debts rather than investing in sustainable development. A country struggling
to pay its debt may look to exploit its natural resources – including fossil fuels – inorder to generate revenue, further contributing to climate change.

•G20 countries and major multilateral development banks are estimated to haveprovided at least $55 billion USD per year in finance for fossil fuel projects from 2019
to 2021, almost double that of clean energy investments.

•Developing economies are projected to account for the bulk of greenhouse gas
emissions growth in the coming decades unless stronger action – and an associatedincrease in financing – is implemented to transform their energy systems. An
unprecedented increase in clean energy financing to over $1 trillion USD by theend of the 2020s is required to put countries on a pathway to achieve net zero by
midcentury.

•While the amount of financing needed for the global energy transition is profound,the average cost of reducing emissions in developing economies is expected to be half
the cost required for emissions reductions in advanced economies. Energy transitions
often bring new economic opportunities – decarbonization strategies are expected tocreate new employment opportunities throughout the world.

•The Green Climate Fund (GCF), the world’s largest fund dedicated to helping
developing countries respond to climate change, has yet to reach its full potential.
While its portfolio of projects has increased since its formation in 2010, researchsuggests that nearly half of the 37 most climate vulnerable nations (including 13 of
the 30 least developed countries in Africa) did not receive GCF funding during thefirst round of disbursement.

•Thirty-nine countries and institutions pledged to end international public finance forfossil fuels by the end of 2022 and focus investments on clean energy instead. As of2

March 2023, eight countries have adopted policies toward these goals, transitioning
an estimated $5.7 billion USD annually from fossil fuels to clean energy.
•From 2020 to 2022, multilateral development banks provided an average of $3.3
billion USD per year to fossil fuel projects, while MDB support for clean energy
was $20.3 billion USD per year during the same timeframe - with $26 billion USD
provided in 2022 alone.

KEY TERMINOLOGY
Adaptation – actions that build resilience - and decrease risk - to impacts of climatechange faced by communities, economies, environments, and infrastructure throughchanges and enhancements to structures, processes, and practices.
Adaptation Finance – finance for projects or actions that help communities (people,infrastructure, jobs) reduce the risks they face as a result of climate change. Examples
can include financing to protect and expand a mangrove forest to buffer wave energy
from ocean-based storms, and stronger and more resilient housing.
Adaptation Fund – a mechanism that finances projects and programs aiming to help
vulnerable communities in developing countries as parties to the Kyoto Protocol andParis Agreement adapt and become more resilient to climate change.
Capital – financial assets or resources, such as money, used to generate income, invest
in projects, or support business or government operations. The amount of capital
available to an individual, business, organization, or government often represents theability of those entities to finance a project or pursue a goal.
*lack of capital can often represent one reason why developing countries or otherentities seek financing assistance to advance projects elsewhere – like through a MDB in the form of loans, bonds, or grants.
Climate Finance - the disbursement of money to projects that seek to address climatechange through the support of adaptation and mitigation actions.
Climate Investment Funds – a multilateral climate fund working through six
multilateral development banks to mobilize investments into climate solutions andinnovation in middle- and low-income countries.
Concessional Finance – finance provided below market rate, provided by major financial
institutions such as development banks, to accelerate development objectives incountries that could not complete the projects without specialized support.
Concessional Loan – a loan provided by an institution that typically has no or below
market interest and an extended repayment schedule.

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Non-concessional Loan – loans with a market-based interest rate and often lessgenerous terms when compared to concessional loans.
Development Finance Institution – an institution that provides financial and often
technical support for development activities in developing countries.
Grant – funds for projects that do not need to be repaid, with eligibility criteria definedby the donors.
Green Climate Fund (GCF) – the world’s largest climate fund, created under the UNFCCC
and serving the Paris Agreement, that is mandated to support developing countries inrealizing their climate goals as outlined by their Nationally Determined Contributions.
Developed countries and others pay into the fund, and the GCF also helps mobilizefinance from the private sector into projects and programs across the globe.
International Financial Institutions – global organizations that provide financial
assistance, advice, and expertise to member countries while working to promoteeconomic cooperation.
Interest Rate – a percentage of an amount borrowed that must be paid back.
Loan – a lump-sum of money provided in exchange for future repayment withadditional charges for interest or other finance charges.
Loss & Damage – impacts of climate change that are unavoidable - occurring despite,
or in the absence of, adaptation and mitigation. (Impacts of climate change that
communities cannot mitigate or adapt to.)Mitigation – the key solution to combatting climate change; reducing greenhouse gas
emissions released into the atmosphere through phasing out fossil fuels, transitioning
to low or no-carbon energy sources, and enhancing “sinks” that can sequester carbon
dioxide from the atmosphere (forests, mangroves, etc.).
Mitigation Finance – finance for projects that aim to reduce greenhouse gas emissions.
Examples include finance for the energy transition, such as the construction of a solar orwind farm or the manufacturing of electric vehicles.
Multilateral Development Bank (MDB) – international financial institutions thatprovide financial (often in the form of loans, bonds, or grants) and technical assistanceto support development projects and initiatives in multiple countries. The World Bank is
an example of an MDB.
Private Finance – financing provided from the savings of individuals and corporations
as opposed to government funds.

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Public Finance – financing of goods, services, and projects that is issued by agovernment and generated through taxation or other means.
Public Finance Institution (PFI) – a financial institution that specializes in thepublic sector and is primarily responsible for supervising the financial activities ofgovernments and public entities.
Financial Risk – potential financial loss due to uncertainties in markets, business
operations, or outcomes of a project.
Subsidy – a form of financial aid or support typically given to an institution, business,or individual. There are two kinds of subsidies – direct (cash grants, interest-free loans)and indirect (tax breaks, insurance, low-interest loans, depreciation write-offs). Subsidy
money is often generated through tax payments to the government by individuals.

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