The role of international climate finance for bridging the low carbon investment gap

The report argues that current NDCs and financial frameworks are insufficient to reach net-zero emissions, particularly in developing and emerging economies facing high debt. It proposes nine principles for international climate finance, emphasizing that developed countries must scale up support based on common but differentiated responsibilities (CBDR). Key recommendations include adopting bottom-up, sector-specific finance needs, utilizing innovative mechanisms like debt-for-climate swaps, and aligning finance with national policy processes to avoid carbon lock-ins. The report highlights the importance of 'just transitions' and the synergy between mitigation, adaptation, and loss and damage funding.

• Current Nationally Determined Contributions (NDCs) and pledged actions are insufficient to reach net-zero emissions, and many NDCs do not align with the long-term vision of net-zero targets.
• Developing and emerging economies cannot rely on national budgets alone due to high debt distress, which limits their access to global debt markets and domestic resources.
• There is a significant gap between the net-zero targets submitted by developed countries and those based on fairness and historical responsibility; for example, some effort-sharing approaches suggest developed countries should have reached net-zero in the past.
• Immediate investment in low-carbon transformations reduces long-term costs by avoiding carbon lock-ins and leveraging technological learning, such as the cost reductions seen in photovoltaics (PV).
• International climate finance needs are often poorly articulated in NDCs, which vary in precision and rarely provide detailed estimates of the specific role international finance should play.
• A sector-level approach to finance is necessary because different sectors have different asset types, capital intensities, and innovation stages; for instance, the energy supply sector is more advanced than the industry sector.
• Just Energy Transition Partnerships (JET-Ps), such as those in South Africa, Indonesia, and Viet Nam, are innovative but have been criticized for focusing too heavily on the power sector at the expense of other needs.
• Innovative financial mechanisms, such as debt-for-climate swaps (DBCS) and results-based finance linked to mitigation targets, are needed to address sovereign debt burdens and high investment risks.
• Higher mitigation ambition in the present can significantly reduce the future financial requirements for adaptation and loss and damage (L&D) finance.
• To ensure accountability and trust, the international community should develop commonly agreed goals and criteria for climate finance, potentially under the UNFCCC, to avoid new carbon lock-ins.

APA

Hagemann, M., Outlaw, I., & Röser, F. (2023). The role of international climate finance for bridging the low carbon investment gap. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2023/06/230608_Report_Synthesis_Y3.pdf

Chicago

Hagemann, Markus, Imogen Outlaw, and Frauke Röser. The role of international climate finance for bridging the low carbon investment gap. Climate Strategies, 2023. https://climatestrategies.org/wp-content/uploads/2023/06/230608_Report_Synthesis_Y3.pdf.

Wikipedia

{{cite report |last1=Hagemann |first1=Markus |last2=Outlaw |first2=Imogen |last3=Röser |first3=Frauke |title=The role of international climate finance for bridging the low carbon investment gap |publisher=Climate Strategies |date=June 2023 |url=https://climatestrategies.org/wp-content/uploads/2023/06/230608_Report_Synthesis_Y3.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{hagemann2023role, author = {Hagemann, Markus and Outlaw, Imogen and Röser, Frauke}, title = {{The role of international climate finance for bridging the low carbon investment gap}}, institution = {Climate Strategies}, year = {2023}, month = jun, url = {https://climatestrategies.org/wp-content/uploads/2023/06/230608_Report_Synthesis_Y3.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }