Financing: a key issue in the fight against climate change

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France has made financing the fight against climate change a priority since its COP21 Presidency. It is aiming to re-channel public and private financial flows towards climate investment, which is one of the goals of the Paris Agreement.

In this respect, the Green Climate Fund is the leading multilateral instrument to finance climate policies for developing countries. It is one of the instruments of the United Nations Framework Convention on Climate Change (UNFCCC) financial mechanism. It contributes to financing the commitments made under the Paris Agreement. For that reason, in his speech on 23 September 2019 at the UN Secretary-General’s Climate Change Summit, the President of the French Republic stated that the “immediate priority is the Green Climate Fund”. The role of the Green Climate Fund is crucial in creating trust and mobilizing private investors. Climate financing in the longer term must also be strengthened and clarified in order to provide better visibility and generate momentum towards investing in a low-carbon economy.

Mobilizing climate finance for developing countries: a renewed commitment by developed countries at COP21

In 2009, developed countries committed to providing $100 billion dollars each year in climate finance for developing countries in 2020. In 2015, at COP21 in Paris, they confirmed and extended the commitment to 2025. The Agreement stipulates that a balance between mitigation finance and adaptation finance must be sought, and notes that a new joint quantitative objective will be set by 2025.

In 2019, the climate finance from developed countries to developing countries reached $79.6 billion*, a slight increase on 2018 (+2%), following two years of growth (of almost 30% between 2016 and 2018). This climate finance is dedicated to:

• mitigating the causes of climate change ($50.8 billion),
• adapting to its effects ($20.1 billion),
• adapting and mitigating simultaneously ($8.7 billion),

The joint effort of the developed countries was not enough to mobilize finance to support the climate in developing countries. It is unlikely that the target of $100 billion in 2020 will be reached, given the trajectory between 2018 and 2019. With this in mind, developed countries, including France, decided to publish the implementation plan for their collective commitment from 2021 to 2025, showing that the target of $100 billion will be reached in 2023.

The EU and its Member States are today the leading contributor to international climate finance, dedicating €21.9 billion in 2019 to public funding for the fight against climate change in developing countries (EU27). This financial support has more than doubled since 2013.

Several channels are used to deliver finance: developed countries offer finance via their official bilateral development agencies, as well as through multilateral development banks such as the World Bank and multilateral climate funds like the Green Climate Fund and the Global Environment Facility.

Climate finance: France’s commitment

To limit the increase in temperatures to 2°C, or even 1.5°C, by the end of the century, France believes it essential to adopt a comprehensive and integrated approach to development and the fight against climate change via the “greening” of national development assistance policies. This approach, which promotes defining and implementing new low-carbon, climate-resilient development strategies, also requires better coordination among donors.

Commitments met and exceeded

In this framework, France committed to increasing its climate finance for development countries from €3 billion in 2015 to €5 billion in 2020, including an increase in adaptation finance to €1.5 billion per year (as against the 2010-2015 average of €400 million).

France achieved and exceeded this target a year early: in 2019, France’s climate finance for developing countries reached €5.96 billion, including €1.5 billion dedicated to climate change adaptation. In 2020, France’s climate finance reached €5.05 billion, including €1.96 billion for adaptation. Despite the COVID-19 crisis, France has respected its commitment made at COP21.

France has since stepped up and extended its commitment, increasing it to €6 billion a year between 2021 and 2025, a third of which is dedicated to adaptation.

The role of the Agence Française de Développement (AFD) and various funds

The AFD, an agency of the Ministry for Europe and Foreign Affairs, makes a major contribution to this goal. Despite an increase in the volume of its activity, it has achieved its target of 50% of finance having climate co-benefits. It was the first international financial institution to announce 100% Paris Agreement alignment. While chairing the International Development Finance Club (IDFC), the AFD mobilized the global ecosystem of public development banks through the November 2020 Finance in Common summit, leading them to act for a green recovery addressing both climate objectives and the Sustainable Development Goals (SDGs).

The French Global Environment Facility (FFEM), created in 1994, also contributes to deployment of finance for the environment and the climate in developing countries. It has already worked in 120 countries since its creation, through more than 330 projects.

France’s commitment also involves a major contribution to multilateral climate finance funds. It is one of the leading contributors to the Green Climate Fund, the main financial mechanism of the Paris Agreement. France also contributes to:

• the Global Environment Facility,
• the World Bank climate funds,
• the Adaptation Fund (2018), the Least Developed Countries Fund (2018-19),
• the Multilateral Fund for the Implementation of the Montreal Protocol,
• Several thematic initiatives (International Solar Alliance, CREWS - Climate Risk Early warning Systems, Central African Forest Initiative, etc.).

Ambitious action and promotion of innovative climate finance

The One Planet movement

The One Planet Summits (OPS) were launched in partnership with the United Nations and the World Bank in order to mobilize finance to effectively combat climate change and biodiversity loss. The OPS are innovating by encouraging multiple stakeholders to make commitments. National and local governments, companies, banks, insurers, investment funds and philanthropists are uniting within coalitions for climate action.

Action at European level

France is also working at European and international level to align financial flows with climate goals. It supports swift, ambitious implementation of the European Green Deal proposed by the European Commission, particularly as regards public and private financing of climate action, through further greening of the EU’s Multiannual Financial Framework as well as the ongoing transformation of the European Investment Bank into the EU climate bank. This transformation should help raise a trillion euros by 2030 to foster the ecological transition and the EU taxonomy for sustainable activities.

This taxonomy, which will take effect in January 2022, will impose ambitious transparency requirements on businesses and market actors as regards the compatibility of their activities with the environment and the climate. That will create a harmonized framework across the EU for the development of sustainable finance.

As the first country worldwide to carry out an environmental audit of the government budget, France has analysed the €574 billion of expenditure in the 2021 finance bill and the €100 billion of the recovery plan from the perspective of six environmental objectives. The presentation of this “green budget” is a major step forward in improving the clarity and transparency of environmental information, in order to inform Parliament and citizens on the environmental aspects of public spending.

Almost $10 billion for the Green Climate Fund

The creation of the Green Climate Fund, based in the Republic of Korea, was decided at the Copenhagen Conference of the Parties session in 2009. The Fund has been operating since 2015. As the main multilateral fund dedicated to financing the fight against climate change in developing countries, it acts as a catalyst for large-scale mitigation and adaptation activities, bringing added value in three respects:

1. Increased financing for the fight against climate change;

2. Deployment of financial instruments (grants, concessional loans, equity, insurance, risk-sharing, performance-based incentive mechanisms, budgetary assistance, etc.) via a large network of implementing entities and intermediaries at international, regional and national levels;

3. Better coverage of needs that are currently insufficiently covered such as adaptation for the most vulnerable.

The Green Climate Fund finances projects and programmes with maximum transformational potential to foster low-carbon, resilient economies suited to national needs.

What are the criteria for investments?

The Green Climate Fund invests based on the following initial criteria:

• Expected project impact;
• The paradigm-shift potential,
• Sustainable development potential
• Beneficiary needs
• National ownership
• Effectiveness and efficiency.

Funds are not allocated to countries in a pre-determined manner. The allocation rules do however set indicative objectives aiming for:

• A balance between mitigation and adaptation;
• A minimum of 50% of adaptation resources for the most vulnerable countries, including the least developed countries, African States and Small Island Developing States,
• A significant resource allocation to the private sector facility, aimed at increasing private participation in mitigation and adaptation projects.
• A fair and balanced geographical distribution, maximizing the transformational impact and project scale.

The Green Climate Fund’s governance and budget

The Green Climate Fund is governed by a Board representing developed and developing countries equally. France has a seat on the Board and is Co-Chair with Mexico in 2021.

For the period 2015-2019, the Green Climate Fund’s initial pledges stood at $10.3 billion. France was the fifth-largest contributor, bringing €774 million.

The replenishment process began in 2018 at the 21st Board meeting, and ended with the replenishment conference hosted by France in October 2019. Thanks to France’s efforts, 28 countries contributed to the replenishment for the period 2020-2023, bringing $9.8 billion.

France announced the doubling of its contribution at the G7 Summit in Biarritz in August 2019. With its contribution of €1.5 billion, it became the Green Climate Fund’s second-largest contributor for the period 2020-2023. Three quarters of contributing countries increased their contributions in national currency, and half went as far as to double them. The United Kingdom, France, Germany, Sweden and Japan are among the leading contributors.
The Green Climate Fund continues to receive contributions. A number of commitments have been announced since the replenishment conference, bringing the total endowment to almost $10 billion, close to the initial mobilization, despite the absence of a contribution from the United States. As at October 2021, 190 projects in almost 100 countries have been financed by the Green Climate Fund, totalling $10 billion.

* (OECD figures)

For more information:

Updated: October 2021

Additional information

• Useful websites
o United Nations Framework Convention on Climate Change (UNFCCC)
o COP26
o COP25
• Publications
o Retrospective analysis of COP21 and the Paris Agreement (July 2017) (in French)
• Reference texts
o Paris Agreement (PDF, 563 Ko)
o United Nations Framework Convention on Climate Change (PDF, 68,7 Ko)
o Kyoto Protocol
o Bali Action Plan
o Copenhagen Accord