find out what all these abbreviations & acronyms mean
Global Climate Finance is total worldwide spending on mitigation and adaptation. The UNFCCC estimated that Global Climate Finance was $681bn in 2016.  The UN estimated that climate spending by 2030 should be a total of $90 trn. So, annual climate finance has to increase many times over.
 
This should be quite affordable within the world economy currently estimated to be spending $80trn per year. However, a tectonic shift is needed in how private investment is allocated. The encouraging thing is that the seriousness and the scale of the challenge are acknowledged at the very top of global financial systems. However, the right structures and a relentless focus on the issue are both needed to make this transformation happen.  Here are some figures.  
 
Size of world economy
What spending is needed?
Costs of inaction
Things that need to change  

Tracking climate finance is complex. Some types of climate spending are well documented, such as the money passing through international bodies e.g. UN, international banks, climate funds, development funds. However, there are a lot of uncertainties around private spending and domestic spending. Here are some of the reasons for the uncertainties: 
 
1. Projects with multiple goals
Funds may go to a project that is not only benefiting the climate but has other aims, so estimates have to be made of what proportion is supporting climate action.
 
2. Incomplete and inconsistent figures
When money is raised and spent in the same country, this is often not recorded or is recorded in different ways. So, global figures for ‘domestic climate finance’ are incomplete and inconsistent. The same applies to a lot of private investment in climate projects. Private spending on renewable energy and public transport is usually recorded, but spending on energy efficiency, land use and adaptation is often not. The CPI outlines the main information gaps on page 15 of  2019 Landscape of Climate Finance.

3. Double-counting
This can occur when money passes through one or more intermediaries such as a development bank and/or a climate fund.
 
4. Deciding what to include
Organisations tracking climate finance make different judgement calls on what data sources are best and which figures are robust enough to include – Table 1 of the Independent Expert Group on Climate Finance report outlines the assumptions used by different climate finance trackers, including the UN, OECD, CPI, Oxfam and the Indian Ministry of Finance. Also, see an overview of the thinking behind the figures in an article by the Climate Finance Advisory Service.
 Estimates of global climate spending use information from official country reports to the UN (BRs, BURs, NCs), multilateral development banks (MDBs), the OECD, the International Energy Agency (IEA) and information gleaned from the in-depth analyses of individual countries. The UNFCCC estimate for global climate finance is based on the CPI analysis of these figures (see the Landscape of Climate Finance). It then draws on research from the Frankfurt School and Bloomberg NEF, and adds in estimates for private spending and domestic public spending. For a fuller explanation, see section 1.5 of the 2016 Biennial Report.
 
Here are the UNFCCC estimates of where global climate finance was spent in 2016.
Type of investment  
$bn 
per year
Renewable energy
270
Energy efficiency
258
Sustainable transport
106
Other sectors
 48
Total of global climate finance
681

Renewable energy and energy efficiency are mostly privately funded, whereas sustainable transport is mainly funded by public spending. For both developed and developing countries, the majority of public climate spending is funded locally, rather than by international finance. However, this ‘domestic climate spending’ is often not recorded, especially in developing countries. The extensive under-reporting is the reason why domestic public spending is not generally included in the Global Climate Finance figure (although the UNFCCC gives a figure for this of $67bn in 2016).

Organisations tracking climate finance have differing estimates for Global Climate Finance. But they all show the same pattern, with spending that is increasing, but a long way short of the trillions of dollars of climate spending that is needed. See the chart below from CPI’s Updated 2019 Landscape of Climate Finance.
Climate finance is provided by public and private bodies. Some is spent domestically and some is spent abroad. Often the money passes through intermediaries, such as development banks and climate funds. Funds may be in the form of a grant, a loan or an equity investment (i.e. buying a share in a venture). CPI has put all of this information into the infographic below, depicting the flow of global climate finance (averaged for 2017 and 2018).

Here are some observations about the $579bn of global climate spending, looking at:

type of finance
  • 66% ($380bn) was in the form of debt - $316bn at a market rate, just $64bn was low cost debt
  • 29% ($169bn) was equity (a share in a project/company)
  • 5% ($29bn) was grant, mainly from the public sector
  • 56% of global climate finance was from private sources, 44% from public sources

how it is spent
  • 93% ($537bn) of global climate finance was spent on mitigation, just 5% ($30bn) on adaptation
  • 61% was spent in developing countries
  • 76% was spent in the same country from which it was sourced
 
The reporting of climate finance is improving, becoming more consistent and covering more types of spending. The Climate-aligned Finance Tracking Group was launched in 2019 to encourage further improvements and the harmonisation of climate finance tracking. The UNFCCC has indicated that more comprehensive and better quality data will soon become available in the following areas:
  • domestic climate finance
  • climate finance received by developing countries
  • EV charging infrastructure
  • non-energy infrastructure investment
  • spending by cities
 
Also, there are various initiatives to channel more funds into climate investment. As ever, the challenge is to ensure that these are robustly managed and can be accurately measured, avoiding double-counting and greenwashing. Expect to see data from some of the following initiatives:

  • EU Taxonomy – this is the European Union classification system for deciding whether an activity is environmentally sustainable.
  • Carbon Border Adjustment Policy – part of the EU’s green deal. This places a carbon price on certain imports,  discouraging companies from avoiding EU climate standards, by relocating production to countries with lower standards
  • Green Bonds – bonds are a form of debt issued by companies and local or national governments. Green Bonds have grown hugely, from $2.6bn in 2012 to $250bn in 2019, but lack of oversight has meant there has been widespread mis-use of this classification. The Climate Bonds Initiative has developed the Climate Resilient Principles to improve standards and stop green bonds from being used to fund greenwashing.
  • TCFD recommendations – these provide a framework for climate reporting for businesses, making it easier to assess and compare the climate readiness of different organisations.
  •  Carbon Markets - these have been beset by multiple problems including pricing that is too low, double-counting and poor methodology. As a result, they have failed in their aim to de-carbonise industry. The Taskforce on Scaling Voluntary Carbon Markets is now looking at making carbon markets work more effectively.
FURTHER INFORMATION

Global Landscape of Climate Finance  2019- summary
CPI
https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2019/

Roadmap for  Financing the  2030 Agenda for Sustainable Development
UN
https://www.un.org/sustainabledevelopment/wp-content/uploads/2019/07/UN-SG-Roadmap-Financing-the-SDGs-July-2019.pdf

Better Business, Better World
Business & Sustainable Development Commission
https://sustainabledevelopment.un.org/content/documents/2399BetterBusinessBetterWorld.pdf

Risks associated with global warming of 1.5°C or 2°C
Tyndall Centre
https://www.tyndall.ac.uk/sites/default/files/publications/briefing_note_risks_warren_r1-1.pdf

Update on Global Landscape of Climate Finance 2019
CPI
https://www.climatepolicyinitiative.org/wp-content/uploads/2020/12/Updated-View-on-the-2019-Global-Landscape-of-Climate-Finance-1.pdf

Delivering on the $100bn Climate Finance Commitment and Transforming Climate Finance
Independent Expert Group on Climate Finance
https://www.un.org/sites/un2.un.org/files/100_billion_climate_finance_report.pdf

Preparation of the Fourth Biennial Assessment
UNFCCC
https://unfccc.int/topics/climate-finance/resources/biennial-assessment-of-climate-finance

Global Landscape of Climate Finance 2019
CPI
https://www.climatepolicyinitiative.org/wp-content/uploads/2019/11/2019-Global-Landscape-of-Climate-Finance.pdf

Biennial Assessment of Climate Finance 2016
UN
https://unfccc.int/files/cooperation_and_support/financial_mechanism/standing_committee/application/pdf/2016_ba_technical_report.pdf

Biennial Assessment of Climate Finance 2018
UNFCCC
https://unfccc.int/sites/default/files/resource/2018%20BA%20Technical%20Report%20Final%20Feb%202019.pdf

Standing Committee on Finance Recommendations on 2016 Biennial Report
https://unfccc.int/files/cooperation_and_support/financial_mechanism/standing_committee/application/pdf/presentation_of_2016_ba_summary_and_recommendations.pdf

Climate-aligned Finance Tracking Group
CPI
https://www.climatepolicyinitiative.org/press-release/cpi-launches-climate-aligned-finance-tracking-group/

Standing Committee on Finance - Webinar on 2020 Biennial Report
https://newsroom.unfccc.int/sites/default/files/resource/BA_Webinar.pdf

Carbon Border Adjustment Mechanism
https://www.europarl.europa.eu/committees/en/carbon-border-adjustment-mechanism/product-details/20201009CDT04181

Green Bond
https://www.investopedia.com/terms/g/green-bond.asp

Climate Bond Standard
Climate Bond Initiative
https://www.climatebonds.net/climate-resilience-principles

Taskforce on Scaling Voluntary Carbon Markets
https://www.iif.com/Portals/1/Files/TSVCM_Summary.pdf