Boosting Climate Finance to Reach $1.3 Trillion by 2035, According to a Report

Boosting Climate Finance to Reach $1.3 Trillion by 2035, According to a Report

In a recently published report, climate change think tank E3G has outlined a comprehensive strategy to address the persistent climate finance gap in developing countries. The strategy aims to mobilize resources, create an enabling environment for climate action, and ultimately bridge the gap by 2035.

The report emphasises the importance of international public finance, private capital mobilization, and regulatory reform in achieving this goal.

## International Public Finance

The report encourages developed countries to increase their commitments to provide climate finance, moving closer to the estimated $1.3 trillion needed annually by 2035. Strengthening partnerships among international organizations, such as the World Bank and IMF, is another key strategy to enhance their role in providing climate-related financial assistance. Tailoring financial support to address specific needs of developing countries, focusing on renewable energy infrastructure and climate resilience measures, is also highlighted as crucial.

## Private Capital Mobilization

Developing clear, investable Nationally Determined Contributions (NDCs) that provide detailed sectoral pathways and investment needs is one of the strategies proposed to attract private investors. Implementing transition plans that align companies with climate goals and encourage impact investors to advocate for climate-positive infrastructure investments in developing economies are other measures suggested.

## Regulatory Reform

Rethinking international investment treaties to phase out protections for fossil fuel assets is one of the regulatory reforms proposed. Establishing supportive regulatory frameworks that encourage private investment in climate solutions, such as green bonds and carbon pricing mechanisms, is another key recommendation. Strengthening governance structures and coordination between governments, stakeholders, and international organizations is also crucial to ensure effective implementation of climate policies.

The report acknowledges existing barriers, including sovereign debt burdens, limited fiscal space, investor uncertainty, and ineffective public finance systems. It stresses that a siloed approach will fail in reaching the $1.3 trillion annual target and concludes that coordinated, simultaneous action across fiscal, regulatory, institutional, and multilateral areas will be crucial.

In the near term, impact investors are in the best position to recognize and value the non-financial benefits, according to the report. The report also suggests measures to increase project pipeline and data flow for impact investment, including capacity building, adoption of investment taxonomies, and risk-sharing actions by public actors.

It is clear that the climate finance gap in developing countries is a pressing issue. By implementing the strategies outlined in E3G's report, it is possible to bridge this gap effectively by 2035. This requires a coordinated effort across public, private, and regulatory sectors to mobilize resources and create an enabling environment for climate action.

1. The report recommends developed countries to increase their climate finance commitments, approaching the estimated $1.3 trillion necessary annually by 2035, which would be further bolstered by strengthened partnerships among international organizations like the World Bank and IMF.
2. To attract private investors and mobilize venture capital, clear, investable Nationally Determined Contributions (NDCs) need to be developed, detailing sectoral pathways and investment needs, while transition plans aligned with climate goals can encourage impact investors in developing economies.
3. The report suggests rethinking international investment treaties to phase out protections for fossil fuel assets, and establishing supportive regulatory frameworks that would encourage private investment in climate solutions like green bonds and carbon pricing mechanisms.
4. In the fight against climate change, the report acknowledges existing barriers such as sovereign debt burdens, limited fiscal space, investor uncertainty, and ineffective public finance systems. It stresses that a coordinated, simultaneous action across fiscal, regulatory, institutional, and multilateral areas will be crucial to reach the $1.3 trillion annual target.
5. The report suggests measures to increase project pipeline and data flow for impact investment, including capacity building, adoption of investment taxonomies, and risk-sharing actions by public actors, thus emphasizing the important role impact investors play in recognizing and valuing the non-financial benefits of investing in climate solutions and environmental science.

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