Bridging the gap: high-level climate & development finance commitments and the reality on the ground
The 4th International Conference on Financing for Development (FFD4) in Seville represents a milestone for delivering on development (including climate action) goals, a decade after the adoption of the Sustainable Development Goals and the Paris Agreement. The “Seville Commitment” was adopted on June 30th, albeit in the absence of the United States – demonstrating that widespread support remains for a comprehensive package to finance development. However, the outcome also embodies the growing chasm between high-level commitments and the reality of financing for development and climate action on the ground. Recent research by I4CE attempts to bridge this gap on two crucial issues.
The first issue concerns financing needs estimates in Emerging Markets and Developing Economies (EMDEs). Our report below questions whether headline figures on climate financing needs in EMDEs – useful to raise ambition in global commitments – can also drive actual finance mobilisation. These estimates can vary by a factor of five, due to incomplete underlying data and different methodological choices. They often mix two approaches: one based on incremental climate action costs to attract new finance, the other on broader, climate-aligned development needs to steer systemic shifts in finance flows. Crucially, most studies ignore borrowing costs, despite the real challenges posed by debt crises and capital costs in EMDEs. Yet the real costs of capital will vary depending on the mix of instruments and sources deployed. The omission of these costs from the high-level estimates shows that there is still a long way to go before achieving the COP targets through effective mobilisation strategies.
The second issue concerns the role of public development banks (PDBs). As highlighted in the “Seville Commitment”, international PDBs face high expectations for leveraging SDG-oriented finance and aligning existing finance flows with climate and development objectives. Our recent publication examines how PDBs providing international development finance can support Paris alignment of financial flows entrusted to financial intermediaries (FIs). This research compares practices for engaging with FIs and makes recommendations for how this engagement can maximise climate and development outcomes.
As international attention moves towards the implementation of climate ambition, these publications contribute to an essential understanding of financing needs and mobilisation strategies.
