Climate Finance: Challenges and Responses

This policy brief by the Climate and Development Knowledge Network (CDKN) examines the challenges of mobilising and managing climate finance for developing countries. It emphasizes the need for a coordinated international architecture, the strengthening of national public finance management systems, and the creation of stable frameworks to attract private sector investment, which is expected to provide the bulk of necessary funding.

• While public and private funding for climate-resilient and low-carbon development is increasing despite global fiscal austerity, the current volumes are insufficient to keep global temperature rise below two degrees Celsius.
• The international community agreed at the 2009 Copenhagen and 2010 Cancún UNFCCC conferences to mobilise US$100 billion annually by 2020, though the exact composition of these funds remains unclear.
• Climate change should be treated as an economic issue and a 'crisis multiplier', requiring the direct involvement of national ministries of finance and planning, as well as increased funding flows to local governments.
• Developing countries, particularly least developed countries (LDCs) and small island developing states, face significant institutional and technical capacity gaps in planning and managing climate finance, and need a stronger voice in the design of the Green Climate Fund (GCF).
• Private sector investment is critical for meeting climate goals, with the UNFCCC estimating that over 85% of all climate finance must come from the private sector.
• Several barriers hinder private sector investment in developing countries, including a lack of long-term transparent public policy, domestic market risks (such as inflation and currency risks), a shortage of 'investment ready' projects, and low carbon prices.
• To attract private capital, national governments should implement stable investment frameworks featuring 'long, loud and legal policies', targeted subsidies with sunset clauses, and national measurement, reporting, and verification systems.

APA

Huhtala, A., Bird, N., & Herweijer, C. (2013). Climate Finance: Challenges and Responses. Climate and Development Knowledge Network. http://cdkn.org/wp-content/uploads/2013/02/CDKN_ClimateFinance_PolicyBrief-FINAL.pdf

Chicago

Huhtala, Ari, Neil Bird, and Celine Herweijer. Climate Finance: Challenges and Responses. Climate and Development Knowledge Network, 2013. http://cdkn.org/wp-content/uploads/2013/02/CDKN_ClimateFinance_PolicyBrief-FINAL.pdf.

Wikipedia

{{cite report |last1=Huhtala |first1=Ari |last2=Bird |first2=Neil |last3=Herweijer |first3=Celine |title=Climate Finance: Challenges and Responses |publisher=Climate and Development Knowledge Network |date=February 2013 |url=http://cdkn.org/wp-content/uploads/2013/02/CDKN_ClimateFinance_PolicyBrief-FINAL.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{huhtala2013climate, author = {Huhtala, Ari and Bird, Neil and Herweijer, Celine}, title = {{Climate Finance: Challenges and Responses}}, institution = {Climate and Development Knowledge Network}, year = {2013}, month = feb, url = {http://cdkn.org/wp-content/uploads/2013/02/CDKN_ClimateFinance_PolicyBrief-FINAL.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }