Climate finance encompasses funding and resources directed towards addressing climate crisis. These funds originate from diverse sources, including national governments, international entities, private enterprises, and grassroots fundraising initiatives. Climate finance has held a significant role in global climate negotiations since 1992, predominantly linked to the aim of mobilising $100 billion annually from developed nations to support developing countries by 2020. Initially established in the 2009 Copenhagen Accord and further detailed in the Cancun Agreements of 2010, this objective led to the creation of the Green Climate Fund (GCF) as a primary delivery mechanism. Reinforced and extended to 2025 by the Paris Agreement in 2015, the target wasn't achieved by 2020, prompting developed nations at COP26 to devise a delivery plan to meet this goal.

The $100 billion target was a result of political negotiations, only partially grounded in the scientific assessment of the actual requirements of developing nations, which, in reality, are considerably larger.

Climate finance holds immense potential to revolutionise how communities brace for and manage climate-related disruptions. However, numerous nations grappling with the impacts of climate crisis lack sufficient financial support.

The most vulnerable countries often receive inadequate climate financing, with fragile nations receiving substantially less. Conflict-affected and climate-hit nations, in particular, receive 66 per cent less climate funding per capita compared to those without conflicts. A substantial portion of aid directed to these countries often misses its mark, veering away from its intended goals. Instead of prioritising climate adaptation, resilience, and proactive measures, a significant focus lies on emission mitigation.

Climate finance took a prominent role at the UNFCCC COP28, marked by substantial support for various funds. It saw the Green Climate Fund (GCF) receiving a significant boost in its second replenishment, with six countries committing new funding, bringing the total pledges to an all-time high of $12.8 billion from 31 countries, with further contributions anticipated. Additionally, commitments to the Least Developed Countries Fund and Special Climate crisis Fund exceeded $174 million to date, while new pledges, nearing $188 million, were made to the Adaptation Fund during COP28.

However, despite these highlighted pledges during the global stocktake, they fall considerably short of the trillions needed to support developing nations in their transition to clean energy, execution of national climate plans, and bolstering adaptation efforts. Bridging this gap emphasises the critical importance of overhauling the multilateral financial system and expediting innovative finance mechanisms, as underscored by the global stocktake.

Member nations have also finalised an agreement to put into action the Loss and Damage (L&D) fund, designed to provide compensation to countries dealing with the impacts of climate crisis. A designated portion of the fund is allocated to Least Developed Countries and Small Island Developing States. Initially, the World Bank will administer the loss and damage fund.

Moreover, in the quest to harness private finance, a collaborative initiative emerged, spearheaded by private sector participants and endorsed by multiple Parties, with support from High-Level Champions. This collective endeavour strives to enhance the supportive ecosystem, expediting the flow of private finance towards adaptation and resilience. Its primary focus lies in mobilising private funds specifically earmarked for adaptation measures.

COP28 concluded by deferring most finance-related matters to COP29, highlighting the adoption of a significant climate finance objective known as the New Collective Qualitative Goal (NCQG) as the key agenda for the upcoming year. This fresh goal will replace the existing commitment of developed nations to provide $100 billion annually in climate finance to developing countries, initially established in 2009. In developing this new goal, the aim is to consider the needs and priorities of developing nations, estimated to range between $5.8 trillion to $5.9 trillion until 2030. During discussions in Dubai, negotiators clarified the process for establishing this new goal instead of delving into specifics like its duration, transparency arrangements, funding sources, and structure.

In essence, it boils down to a straightforward reality: the world's attainment of its climate objectives hinges on where investments are directed. Should these investments fall short or miss the mark, the consequence could be a surpassing of the critical 1.5 degrees Celsius global temperature rise. This overshoot would unleash intensified climate repercussions, jeopardising the health, employment, and overall welfare of people on a global scale. Hence, strategic and targeted investments are paramount for steering clear of such a perilous outcome. COP28 in a sense fell short of its promise of delivering a just climate finance architecture.

This article is authored by Ananya Raj Kakoti and Gunwant Singh, scholars, international relations, Jawaharlal Nehru University, New Delhi.