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In the absence of a proper definition of what constitutes ‘climate finance’, anything can be passed off as that. In view of this, the United Nations Framework Convention on Climate Change (UNFCCC), in its recently concluded 28th Conference of Parties (COP28), requested the Standing Committee on Finance (SCF) “to prepare a report on common practices regarding climate finance definitions, reporting and accounting methods among Parties and climate finance providers.”
There has been much talk about developed countries’ claim of having mobilised $100 billion in climate finance in 2022 — a claim for which the COP28 final text has sought “further information”. The rich countries also claim to have mobilised $89.6 billion in climate finance in 2021.
This brings into focus the age-old question—what constitutes ‘climate finance’? In the absence of a tight definition, there have been instances when, for example, loans given for laying a railway line were called ‘green finance’ — because the railway line would reduce road traffic, bringing down fuel consumption.
The final text of COP28 has taken due note of the “diversity of definitions of climate finance”. The mention (para 84) was a condensation of an earlier COP28 agreement on ‘Matters relating to the Standing Committee on Finance’, which dwelt substantially on the subject.
The report of the Committee, released on December 12, took note of the “complexities” in relation to accounting of, and reporting on, climate finance.
Common practices
The COP also requested the Committee to “prepare a report on common practices regarding climate finance definitions, reporting and accounting methods among Parties and climate finance providers.” The report is expected to be placed for consideration of the Conference of the Parties at its 29th session (COP29, to be held at Baku, Azerbaijan).
However, this is not the first time a COP has considered definitions of climate finance. COP27 (Sharm el Sheikh, Egypt, 2022) asked the Standing Committee “to prepare a report for consideration at COP28, building on the work of the SCF on definitions of climate finance, on clustering types of climate finance definitions in use that could be considered within the UNFCCC process.”
The Committee has been working on definitions of climate finance for at least three years. One of its reports, dated November 9, 2023, notes that so far 21 submissions have been received, in response to its calls, giving views on definitions of climate finance, since 2020. These views have since been synthesized into a ‘report on clustering types of climate finance definitions in use.’
These reports of the SCF are also to be discussed at the Sixth Biennial Assessment and Overview of Climate Finance Flows, scheduled to happen in 2024.
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