Climate finance: quantity matters, but so does quality

June 5, 2023

Last week, Reuters released a major investigative piece on climate finance The authors examined 10% of climate finance flows reported by developed countries to the UN, finding that:

“at least $3 billion spent not on solar panels or wind farms but on coal-fired power, airports, crime-fighting or other programs that do little or nothing to ease the effects of climate change.”

Some examples? A U.S. $19.5 million loan to support a developer building a Marriott hotel in Haiti:

“A U.S. State Department spokesperson said the loan for the hotel counted as climate finance because the project included stormwater control and hurricane protection measures.”

An Italian $4.7 million equity investment to help an Italian chocolatier open new stores in Asia and separately, a whopping $9 billion in Japanese financing for fossil fuels.

None of this is particularly surprising to those of us who have been following climate finance for years. We tend to focus our advocacy on getting more money flowing – the U.S., after all, owes tens of billions of dollars (or much, much more, depending on your methodology and assumptions) in climate finance per year but struggles to appropriate more than a few million. But part of the advocacy is also about quality. What is climate finance paying for? Who is benefiting?

The Reuters analysis looks only at bilateral climate finance, which is the least transparent and accountable form of international financing. This is a big reason we have long been saying multilateral, democratically governed institutions like the Green Climate Fund should be the primary channels for climate finance.

If governments just gave those billions that they are wasting on luxury hotels, chocolate shops, and fossil fuels to the Green Climate Fund, we would immediately have much more transparency over how that money is spent. Developing countries would have a powerful say in what the money goes to. Of course there would still be struggles over what projects are supported, who benefits, and who the money is ultimately accountable to. 

The GCF is not perfect – even it doesn’t prohibit support for fossil fuels (despite our efforts to the contrary almost 10 years ago). But it would be a far cry from the ridiculous “Wild West” patchwork of unaccountable nonsense that is the current state of bilateral climate finance.