7 Things You Need To Know To Get Climate Finance

7 Things You Need To Know To Get Climate Finance

The contributions of different countries to climate change and their capacity to mitigate and adapt to its effects vary widely. Therefore, the Framework Convention provides in its general principles for a financial obligation on richer countries to help poorer (or more vulnerable) countries to cope with the harmful effects of climate change and to reduce their greenhouse gas emissions.

Climate finance support

At present, only the countries covered by Annex II of the Framework Convention (the countries that are part of the OECD, excluding the economies in transition) are obliged to provide financial support to developing countries. However, even individuals can make a difference, if they have the means to help financially. For example, what happens when you win the lottery? Sure, you will use some of it for yourself, but you can use an important amount to support a cause.

To this end, the Treaty has created a financial mechanism managed by several international entities. Traditionally, the main channel of that mechanism has been the Global Environment Fund, better known as GEF (Global Environment Facility).

Over the years, the Parties to the Convention have expanded this financial mechanism to include four special funds:

  • The Least Developed Countries Fund (LDCF), managed by the GEF;
  • The Special Climate Change Fund (SCCF), managed by the GEF;
  • The Adaptation Fund;
  • The Green Climate Fund (GCF), which should eventually become the largest multilateral channel for international financial support for the climate.

The policies, priorities and eligibility criteria of those Funds are agreed upon by the Conference of the Parties (COP).

In addition to the institutions under the protection of the Convention, many other actors play an important role in financing climate change mitigation and adaptation activities in developing countries. International climate finance mainly takes place via multilateral (the World Bank or other development organisations) or bilateral actors (the development cooperation services).

International climate finance not only plays a crucial role in the fight against climate change in the poorest and most vulnerable countries, but also strengthens trust between the different countries negotiating the new climate agreement and thus also increases the final ambition level of this agreement. However, discussions on the subject are anything but straightforward, as the amounts available are currently insufficient to meet the needs and expectations of developing countries, and the rapid developments in the international economic situation make the situation even more complicated.

7 things you need to know to get climate finance

Here are the seven key points for accessing international climate fund resources:

1. Size does not matter: companies of all sizes can receive investments

Companies of any size can access climate funds, as long as they meet the specific criteria for each one. For this, it is necessary to study the required details, evaluate the conditions and plan the implementation.

2. It is necessary to give economic guarantees to the investor

There are several forms of economic guarantees required by investors, which can be real guarantees, such as a mortgage, pledge and fiduciary property, or personal guarantees.

3. The presentation and quality of your project counts

Your project is competing for funding with many others. Therefore, it needs to be well structured to attract investors. If necessary, it is possible to hire specialized assistance from outside the organization to carry out the work.

4. The selection criteria for each investment fund vary

Some climate funds prioritize investments in economic sectors with less socio-environmental risks. However, the criteria vary by investor.

There are funds dedicated to investing in projects to reduce the emission of greenhouse gases in energy-intensive sectors, for example. Knowing a little about the profile of the investor group makes your bid more assertive.

5. The greater the risk of the project, the greater the demand for climate funds

The greater the risk involved in the project, the more detailed the analysis and the greater the number of requirements that need to be met. Even the simplest projects must prove that they are up to date with legal requirements, such as environmental licensing.

6. It's good to prepare for climate change

Having a good climate change adaptation plan demonstrates that the company has a strong risk prevention culture and greater planning for long-term sustainable actions.

This profile can give the entrepreneur access to more attractive interest rates.

7. Environmental goes hand in hand with social and governance

Showing results in reducing greenhouse gas emissions or measures to contain the impacts of climate change on projects is important. However, there are investors who are keen to know if the projects bring solutions to social problems and if there is transparency.

ESG indicators (environmental, social and governance) are increasingly observed by national and international funds, especially in development banks, where the largest amounts of financial resources are offered for application in the low carbon economy.