The Climate Finance Reform Compass

CPI has created the Climate Finance Reform Compass to facilitate consensus and coordinate action among governments, civil society, and the private sector on the full range of international financial architecture reforms needed to meet the global climate challenge. It identifies pragmatic goals and milestones for action across nine thematic areas aligned with the COP28 UAE Global Climate Finance Framework. Within these, we identify 29 key reforms, noting the current status, key resources, and where we need to be by 2030. Our hope is that this information will help to focus efforts on actions where change could happen.

Commitments and ambition

To ensure an equitable global climate transition, developed countries need to deliver on their goal of mobilizing $100bn in climate finance for emerging markets and developing economies. In addition to increasing mitigation finance, this includes doubling adaptation finance and operationalization of arrangements for responding to loss and damage.

Fiscal Space

Fiscal authorities around the world must prepare for more frequent and severe climate-related shocks, as well as for large financing needs. Reform topics in this theme are intended make sovereign balance sheets more resilient and robust to achieve climate goals.

Concessional Finance

Establishing the foundations of climate-smart growth in some areas and sectors may not consistently generate the returns required by private investors. Concessional finance, including guarantees and other de-risking mechanisms, as well as emissions pricing and taxation, can help bridge this gap.

Just Transition

While the global climate transition presents significant opportunities for resilient economic growth, we must take care to ensure that vulnerable populations are not left behind. In developing countries, this may include transferring knowledge, skills, and technology at scale, and will depend on strong policy frameworks and adaptation strategies.

Country Platforms

Country-owned investment platforms are an essential starting point for aligning stakeholders and building investment pipelines across sectors. To establish such platforms, countries must commit to ambitious but achievable transition pathways that are in line with their circumstances.

MDB Reform

MDBs are central actors in the international financial architecture and have begun work on a reform agenda to respond to the scale of the climate challenge. MDBs need to work as a cohesive system to support country-led climate strategies, including by streamlining access and scaling innovative risk-sharing mechanisms.

Domestic Mobilization

A significant portion of total climate finance needs will come from domestic savings, including in emerging markets and developing economies. Key steps necessary to build and mobilize domestic savings include strong macroeconomic policies and financial-sector development.

Private Finance

The majority of financing for the climate transition will come from the private sector, but in many cases, private actors will need guidance, de-risking, and appropriate incentives from the global public sector to deliver at the necessary speed and scale. In particular, catalytic financial and policy mechanisms can help reduce the cost of capital where it is currently too high to achieve climate results.

Carbon Markets

Carbon markets remain an essential component of the climate finance architecture, but unlocking their potential requires transparency and high-integrity standards across the value chain. At the domestic and international levels, policies to achieve real emissions reductions, in line with country circumstances, can help build supply and demand for carbon credits.

Explore the roadmap by event

The Compass aims to facilitate consensus and coordinate action among public and private stakeholders on reforms to the international financial architecture needed to meet the global climate challenge. It identifies pragmatic goals and milestones to focus efforts on actions where change could happen.

October

October 21 2024Cali, Colombia

Convention on Biological Diversity COP16

Go to event

Milestones

Loss & Damage

  • L&D as it relates to biodiversity and ongoing ecosystem stress is a key topic of discussion.

Debt-for-Climate Swaps

  • There is an interest in standardizing and simplifying debt for climate swaps, including a legal framework that can provide the foundation for a swap agreement.
October 25 2024Washington DC, US

WBG/IMF Annual Meetings 2024

Go to event

Milestones

Loss & Damage

  • World Bank Group's role as L&D fund host comes into sharp focus and planning is well underway for COP29.

Sovereign Debt Architecture

  • An expert group is established to review the Common Framework.

November

November 11 2024Baku, Azerbaijan

UNFCCC COP29

Go to event

Milestones

Loss & Damage

  • The L&D fund design and execution are agreed with the World Bank Group as host and the fund is substantially further capitalized.

Sovereign Debt Architecture

  • Developed and developing economy actors discuss the regulatory barriers to international investment, along with potential solutions.
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