Blended finance not a silver bullet to solving the climate financing gap

THE failure of the recent United Nations’ annual climate conference to secure a climate finance target of US$1 trillion – which economists said is required annually to help developing countries cut their emissions and manage climate disasters – has now meant that blended finance schemes have become even more important to meet the shortfall in the climate financing gap.

That is because blended finance structures – when designed well – should be able to attract and crowd in private investments that would otherwise not have taken place, without catalytic or concessional funds coming in from capital providers such as development funds and philanthropists or governments that typically take on higher risks.

The new climate finance agreement hammered out at COP29 – which came about after two weeks of intense negotiations in windowless tents with some negotiating parties staging a walk-out – eventually settled on a quantum of US$300 billion per year till 2035, more than 32 hours after the summit overran in Baku, Azerbaijan.