What is climate finance?

This briefing by the Climate Policy Initiative (CPI) clarifies the terminology and definitions used to track climate finance. It distinguishes between project-level costs and revenues and whole-economy perspectives, explaining how public interventions can address 'viability gaps' to mobilize private investment. The document specifically outlines the definition of climate finance used in CPI's Global Landscape of Climate Finance reports to ensure consistent tracking and avoid double counting.

• Climate Policy Initiative (CPI) defines climate finance for its Global Landscape of Climate Finance reports as the sum of total investment costs and public framework expenditures. This definition includes both public and private finance but excludes revenue support, such as carbon credits or feed-in tariffs, to prevent double counting since these revenues pay back investment costs.
• A 'viability gap' occurs when the total costs of a project exceed the total revenues it can generate, including market returns and avoided costs. This gap serves as a primary obstacle to profit-oriented investment from both public and private sectors.
• Public sector interventions to scale up climate finance can target viability gaps in three ways: by increasing project revenues (e.g., through subsidized power purchase agreements), by reducing project costs (e.g., via concessional loans or investment grants), or by improving the overall investment climate through public framework expenditures.
• Public framework expenditures are defined as public spending that addresses sector, system, or economy-wide climate finance needs. These expenditures are distinct from individual project investment costs and do not function as revenues to pay back those costs; examples include the development of national climate strategies and capacity building to close knowledge gaps.
• CPI distinguishes between total investment costs and 'incremental investment costs,' the latter being the difference in investment costs between a low-carbon ('green') project and a comparable high-carbon ('brown') project.

APA

Falconer, A., & Stadelmann, M. (2014). What is climate finance? Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf

Chicago

Falconer, Angela, and Martin Stadelmann. What is climate finance? Climate Policy Initiative, 2014. https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf.

Wikipedia

{{cite report |last1=Falconer |first1=Angela |last2=Stadelmann |first2=Martin |title=What is climate finance? |publisher=Climate Policy Initiative |date=July 2014 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{falconer2014what, author = {Falconer, Angela and Stadelmann, Martin}, title = {{What is climate finance?}}, institution = {Climate Policy Initiative}, year = {2014}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2014/09/Climate-Finance-Brief-Definitions-to-Improve-Tracking-and-Scale-Up.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }