Reducing climate risk: climate finance and carbon markets

This research synthesis brief from the Stockholm Environment Institute (SEI) outlines the organization's work on climate finance and carbon markets, focusing on the governance of adaptation finance, the limitations of private sector investment in vulnerable regions, and the environmental integrity of the Clean Development Mechanism (CDM).

• Adaptation finance priorities cannot be determined by objective scientific measurement because vulnerability to climate change is not objectively measurable. Consequently, the process for setting these priorities must be political and involve value judgements, as existing indices that claim to rank vulnerability scientifically actually make political and ethical judgments.
• Transparency and accountability are essential in climate finance to prevent corruption and build trust between developed and developing nations. SEI developed a methodology for tracking bilateral finance institutions—which exceeded € 7.3 billion in 2008—that was subsequently adopted by the United Nations Environment Programme Climate Change Working Group for Bilateral Finance Institutions.
• Private sector funds are unlikely to provide significant long-term finance for adaptation. Research indicates that market mechanisms are not viable for adaptation, and private investments in developing countries often fail to address the primary needs of the poor and vulnerable. Specifically, in African Least Developed Countries (LDCs), foreign direct investment (FDI) accounts for less than 1.5% of global total FDI flows and rarely overlaps with adaptation priorities.
• The Clean Development Mechanism (CDM) has faced issues with environmental integrity and efficiency, with projects concentrated in a few emerging economies like China and India. SEI has advocated for improving the CDM by excluding or phasing out problematic project types, such as coal power and large-scale power projects.
• There is no objective measure for what constitutes a "fair share" of climate finance, as definitions of the term vary. In the case of Sweden, SEI suggested the country could lead by defining its own ambitious "fair share" and improving reporting transparency.
• China's goal to establish a national emission trading system by 2015, utilizing pilots in seven provinces and cities, is viewed as very difficult to achieve.

APA

Stockholm Environment Institute (2014). Reducing climate risk: climate finance and carbon markets. https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-RSB-2014-Climate-finance-carbon-markets.pdf

Chicago

Stockholm Environment Institute. Reducing climate risk: climate finance and carbon markets. 2014. https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-RSB-2014-Climate-finance-carbon-markets.pdf.

Wikipedia

{{cite report |author=Stockholm Environment Institute |title=Reducing climate risk: climate finance and carbon markets |date=2014 |url=https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-RSB-2014-Climate-finance-carbon-markets.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{stockholmenvironmentinstitute2014reducing, author = {{Stockholm Environment Institute}}, title = {{Reducing climate risk: climate finance and carbon markets}}, institution = {Stockholm Environment Institute}, year = {2014}, url = {https://www.sei.org/mediamanager/documents/Publications/Climate/SEI-RSB-2014-Climate-finance-carbon-markets.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }