COP27 AIIB Flagship Session: Scaling Climate Finance-Bridging the Gap Between Concessional and Private Finance

The financing gap to address climate change and keep to 1.5 degrees is trillions of dollars. Current funding amounts are not meeting needs nor is the pace of capital mobilization increasing sufficiently to meet future requirements. Given the current macro-economic situation and continued impacts of various crises, it can be expected that the availability of near-term climate finance will be further constrained. It is therefore more important than ever that all parties work together to develop and implement effective structure to mobilize capital and in particular increase private sector financing.

Considering the inherent characteristics of climate finance, and in particular financing in developing countries, the role of concessional finance is critical to enabling and growing private sector involvement. Sources of concessional finance for climate change are growing in number and size. Traditional bilateral sources from governments and international agencies are increasingly supplemented by private foundations and philanthropy. Although the need for and role of concessional financing is well known, a mismatch continues to exist between concessional finance providers and private financiers. MDBs have a critical role to play in bringing parties together and in enabling a more effective deployment of concessional finance aimed at maximizing private capital mobilization.