A Framework for Enhancing International Climate Finance Flows

The mobilization and disbursement of climate finance at the scale and speed required to meet global targets is hindered by high cost of capital. At the root of this high cost are the perceived high risk of investment, institutional ambiguities across sectors and countries, and the fact that countries are politically accountable to their domestic stakeholders who may disapprove of such risk. Absent a transition from old business models to new low-carbon ones—a step that requires changes in the political economy—this perception will persist. Climate finance flows would be much better if governments are open to working on these new models. This Policy Brief proposes an institutional arrangement that can build on existing practices, institutions, and domestic acceptance to create a global network of risk reduction instruments for climate finance.