As world leaders sought to strengthen efforts to combat climate change in 2017, climate finance remained a prominent theme of international discussions between developed and developing countries – both as a tool for renewed collaboration, and as a potential point of friction.

COP23 premise and key climate finance themes

In November, leaders gathered for the 23rd annual Conference of the Parties (COP23) global climate negotiations in Bonn, Germany. At the outset, negotiators hoped to focus efforts on operationalizing the Paris Agreement, including progressing the implementation guidelines (known as the Paris Agreement Rulebook) and defining the 2018 global stocktake process (known as the Talanoa Dialogue Approach in recognition of the Fijian COP presidency).

Amidst these goals, several key climate finance themes loomed large over the COP, and resonated in discussions throughout the year:

• “Loss & Damage” and increasing investments for climate resilience and adaptation. In a year of extreme, record-breaking weather disasters in developed and developing countries alike, ongoing conversations about compensation to the countries that will suffer disproportionate economic losses and damages from climate change remained important. Related, high-profile discussions around private and public sector investments needed for adaptation, current levels of adaptation investment, and how to close the finance gap also remained crucial.
• The “$100 billion by 2020” pledge, the Green Climate Fund, and maintaining international momentum. Since 2009, when developed countries first committed to jointly mobilize “USD 100 billion a year by 2020 to address the needs of developing countries,” defining how the world will achieve this goal has remained complex. Rising nationalism around the world, and the decision from the U.S. to renege on Green Climate Fund and Paris Agreement commitments make the need to strengthen international cooperation even more urgent.

COP23 progress

While a lot of work remains, leaders at COP23 made significant progress on several key themes within the ongoing climate finance discourse.

The decision that the Adaptation Fund “shall serve the Paris Agreement” helps to reiterate the continued importance of adaptation finance as a means of creating a low-carbon, climate-resilient sustainable future in both developed and developing countries.

Loss and damage remained contentious and didn’t make it into the agenda for 2018 efforts to solidify the Paris Rulebook; however, there will be an “expert dialogue” during mid-2018 intersessional meetings where finance discussions can resume. In addition, InsuResilience Global Partnership, a private sector initative that aims to extend insurance access to 400 million people living in climate vulnerable countries by 2020, launched. The UNFCCC also released its own Clearing House for Risk Transfer platform, to provide to both connect insurers and vulnerable populations, and to provide technical assistance to countries seeking to implement new risk solutions.

Efforts to bolster cooperation in the face of U.S. obstruction and decrease barriers to fulfilling climate finance pledges also had significant success. Syria and Nicaragua, the lone Paris Agreement holdouts, both signed, and the U.S. “We Are Still In” coalition reiterated U.S. commitment to meeting climate goals. Leaders from California established new channels for international cooperation with the EU and China on carbon markets, and former New York City Mayor Michael Bloomberg and others in the so-called “shadow delegation” strengthened ties to the international community, and suggested an established role for sub-national actors in future negotiations.

Macron summit premise & key announcements

Following COP23, French President Emmanuel Macron held the One Planet Summit, marking the 2-year anniversary of the Paris Agreement. This event gathered heads of state, investors, and other leaders to mark the progress made since Paris, and generate ambition towards 2020 climate goals. It produced a number of key announcements that continued to build on progress from the COP, while engaging investors, corporations, and governments to redirect finance from dirty investments towards low-carbon, climate-resilient activities.

• The World Bank announced that it would end oil and gas exploration and production projects, and increase transparency on greenhouse gas emissions from the rest of its portfolio.
• 225 investors and asset managers representing more than USD 26 trillion in assets. launched Climate Action 100+ to engage the world’s largest corporate greenhouse gas emitters on climate-related financial disclosure.
• 237 companies with a combined market cap greater than USD 6 trillion, pledged to support greater climate-related financial disclosure through the TCFD.
• ING announced its decision to accelerate the reduction of financing for coal power generation, and to eliminate it by 2025.
• French insurance multinational AXA announced both divestment of more than EUR 2 billion of coal holdings and oil sands, and tripling its green investments to more than EUR 3 billion.

What to watch for in 2018

In 2018, it will be essential to build upon the progress coming out of COP23 and the Macron Summit. Countries must continue to work towards the ”$100 billion by 2020” goal, however, they must also engage the private sector in order to build on current momentum, and “shift the trillions” in assets from high-carbon to low-carbon pathways as effectively as possible.

There are several key climate finance developments to track in the coming year:

• UNFCCC’s Standing Committee on Finance will publish its next Biennial Assessment and Overview of Climate Finance Flows in 2018, which can help countries glean greater insight on the how, where, and from whom finance is flowing toward low-carbon and climate-resilient actions globally, and how it can be scaled-up.
• Further advancements in climate-related financial disclosures for public companies and improved portfolio transparency of climate impacts among international development finance institutions can help investors and shareholders understand embedded risks more effectively, and help to shift assets towards low-carbon, climate-resilient growth.
• Expanding roles of subnational actors – for example, California’s upcoming Global Climate Action Summit – can continue to overcome political barriers, facilitate collaboration between governments and private sector actors, and can help to mobilize needed investments.