5 December 2014: The Overseas Development Institute (ODI) and UN Environment Programme’s Finance Initiative (UNEP FI) convened experts from the private and public sector for a side event on ‘Climate Finance: What Is It Worth?’ Organized on the sidelines of the Lima Climate Change Conference, the event reflected on a decade of finance for climate action in developing countries. Participants discussed the role of public and private sectors in effective finance and regulation, focusing on major achievements and shortcomings.

Smita Nakhooda, ODI, presented an ODI report “Climate Finance: Is it making a Difference?” that reviews the effectiveness of multilateral climate funds. She stressed that climate fund flows are increasing, although they are still a small part of the climate finance landscape. Nakhooda suggested there is room for improvement in, inter alia: risk allocation; support for innovation; regulation and institutional capacity at the national level; assigning the right types of finance to their appropriate purposes; and creation of new incentives.

Tao Wang, Director of Adaptation and Mitigation, Green Climate Fund (GCF), explained the GCF’s allocation framework, investment criteria, strategic impact areas and the GCF Readiness programme. He observed that: direct access currently plays a minor role in climate finance; climate finance should be mainstreamed into the overall finance system; and different climate finance mechanisms must enhance coordination.

Remco Fischer, UNEP FI, addressed transformational change in the private sector, calling for reallocating private capital at unprecedented scales. He stressed that it is not a question of prioritizing private over public finance, but of finding the smartest use of public finance to achieve transformation.

Karsten Loeffler, Allianz, observed that the private sector only constitutes a small part of the finance chain, mainly comprising investment and insurance. On insurance, he proposed enhanced collaboration with governments for risk mapping.

Anton Hilber, Swiss Agency for Development and Cooperation (SDC), characterized climate change as a big market failure, underscoring that the role of the private sector in addressing energy and resource efficiency is often underestimated. Noting constant difficulties in the past in generating sufficient private sector engagement, Hilber expressed confidence that this problem will be overcome during the GCF project implementation phase.

In the ensuing discussion, participants addressed, inter alia: country versus sectoral context; formalities for GCF support; and non-financial instruments to address existing barriers. [IISD RS ENBOTS Coverage] [IISD RS Coverage of Lima Climate Change Conference] [ODI Event Announcement] [UNEP FI Website] [ODI Report Website]