5 December 2014: The UN Environment Programme’s (UNEP) Finance Initiative has published a report, titled ‘Demystifying Private Climate Finance,’ which discusses the concept of private finance, how it links with climate change mitigation and adaptation, and how public actors can mobilize it. The report aims to increase policymakers’ understanding of private finance and introduce an approach that climate policy makers can follow when designing public interventions for unlocking private climate finance.

The report examines how scarce public financial resources can best be used to unlock mitigation and adaptation investment, as it is increasingly being recognized that addressing climate change will not be possible without mobilizing or ‘re-channeling’ private finance.

The report, which was presented during the UN Climate Change Conference in Lima, Peru, in December 2014, is divided into two sections. The first aims to demystify private finance to climate change negotiators by explaining the different types of private finance, and describing the variety of sources, intermediaries, legal considerations and investment objectives across the private finance landscape. The second examines the types of private finance relevant to a range of mitigation and adaptation activities, and explains why different project types require different forms of private finance to succeed. It also describes how specific characteristics of different projects affect the type of public interventions needed to attract private sector finance.

The report also identifies barriers to private climate finance, including: instability of legal, economic and regulatory frameworks; shortcomings in the reliability and longevity of regulatory schemes; and commercial viability, bankability and/or creditworthiness of the project. However, the study explains that different project types have diverse financial characteristics, and face different financing barriers, which means that the public interven­tions required to overcome these barriers must be tailored to the specific project type in question.

This report goes on to: present three types of climate change-related mitigation and adaptation projects; discuss how they are typically financed; and identify specific barriers encountered when attempting to mobilize private finance. The three types of projects are large-scale renewable energy infrastructure projects, energy efficiency improvements in corporate operations and production processes, and projects that climate-proof existing infrastructure.

UNEP FI UNEP FI is a global partnership between UNEP and the financial sector, where over 200 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. [Publication: Demystifying Private Climate Finance] [UNEP FI Website]