The necessary move towards a low carbon and climate resilient economy comes at a high cost, one which is difficult for any country, especially the developing ones, to bear. This is made much worse in the current situation, with the pandemic still raging across the world, and all countries facing conflicting pressures of prioritizing financing of emergency measures, economic development and recovery packages, and climate actions. While it is encouraging to see the growing discourse around a ‘green recovery’, the urgency of addressing the climate crisis with enhanced efforts, necessitates a concentrated global effort to rapidly mobilize adequate finance, which is a key catalyst for ambitious climate actions.

As anticipated by scientists and researchers, climate change has now become one of the biggest threats to future economic growth and development across the world. This was clearly evident over the last few years, where adverse climate events, in the form of forest fires, cyclones, draughts and floods have significantly impacted countries’ GDP and social infrastructure. In the face of this rapidly worsening scenario, the need for enhancing and accelerating mitigation efforts, to be able to meet the “less than 2 degrees” goals, is at the forefront of global discussions and negotiations on climate change, with a range of actors, including cities and businesses stepping in to further drive national actions. At the same time, the need to adapt and build resilience for climate shocks has become the utmost priority for the highly vulnerable countries, including India. However, the key issues around mobilizing climate finance have largely remained the same. There is still a large gap between the available and required climate finance, there is limited clarity on long-term availability of green finance to enable enhanced actions, and the rules for carbon markets and thus the role they can play remains ambiguous.

To address these issues several initiatives have been formed in the recent years, aimed at greening the financial sector, improving climate risk assessments and disclosure for investments, and mobilizing green finance through voluntary climate commitments. There have also been some successes over the last five years. One of the most notable is the transitioning of the electricity sector to lower carbon pathways, which has been successful to varying degrees across the globe. This had been possible through a comprehensive and inter-related framework of policy actions, regulations, finance instruments and private sector engagement, and there are lessons to be learnt and applied to other sectors from here.

Climate finance can especially play a deeper role in supporting and influencing the climate actions at global and national levels, by impacting the policy and regulatory frameworks of a country. Supportive measures for mitigating financial risk and accelerating the deployment of green finance for newer technologies, business models and solutions, are the need of the hour. This requires instruments such as risk guarantees, super-funds, green funds or tailored special purpose vehicles with support from the public sector.

With the Paris Agreement coming into force at this critical time, it is vital to deliberate on both, the measures to drive the mobilization of green finance, and ways of leveraging green finance to drive enhanced climate actions.

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