Society & Community Sustainable Development Policies & Frameworks Financing for Sustainability

Making finance flows consistent with the Paris Agreement

Financing for Sustainability

Summary

Recent discussions and reports assessing the effectiveness of climate finance flows to meet an increasing global need reveal a growing momentum for aligning such flows with the ultimate objective of the UNFCCC. This policy brief casts these developments against the goal of “making finance flows consistent” with the Paris Agreement on climate change.

Perspectives and insights

  • The European Investment Bank decided to end financing for fossil fuel energy projects by 2022
  • The bank aims to unlock EUR 1 trillion in investments in climate action and environmental sustainability in the decade to 2030.

Xoologue - a discussion between Xoo and Moo

Xoo: Try visualising a trillion dollars from dozens of countries and flowing along hundreds of pathways to diverse investment destinations. What do you see, Moo?

Moo: I see lots of unscrupulous people getting rich.

Xoo: You’re worldly wise, Moo. I admit there’ll be a good amount of unintended recipients, but leaving that aside, I’m wondering how much inefficiency and misalignment are present in these flows, and more important, how do the top guys know if there’s something going wrong.

Moo: Surely all these investment intelligence will be present in some central database, from which such inferences can be made?

Xoo: Oh yes, they will exist, the databases. They will be able to tell us how the flows are happening. But will they be able to provide intelligence on what have been the “return on these investment flows”?

Moo: That can be quite complex if not infeasible. Because the returns for such investments aren’t measured in hard financial metrics alone.

Xoo: And that’s precisely the point I’m driving at, Moo. The top honchos might be able to precisely correlate finance sources & destinations, but not the intentions & the results. But what good are investments if they can’t produce intended results!

Moo: So what do you suggest they do?

Xoo: Develop a comprehensive analytical tool that at least reasonably accurately measure the results of global climate finance.

Moo: Perhaps they already have it

Xoo: Perhaps!