Simon Jessop & Andrea Januta

GLASGOW (Reuters). – In order to meet the climate goals of the planet, wealthy countries need to assist less developed countries in switching to clean energy, renewable agriculture and transport.

It all costs a lot and this is a crucial issue being discussed at the COP26 United Nations global climate negotiations in Glasgow.

However, the amount of actual funding available to date is far below the $1 trillion per year needed.

Last week, $130 trillion was at the disposal of investors, banks and insurers. However, it’s not yet clear how and when they will help green investment.

It is also unclear how the money will reach its destination, although discussions have covered several options. Below are some possible institutions and funds that might be able to help.

DEVELOPMENT BRANKS

These banks finance social and economic progress through state-backed loans. They have increased their emphasis on climate projects. Eight of the top multilateral development banks in the world committed $66 million to climate finance projects in 2020. This is an increase from $61.6 billion in 2019.

World Bank, the biggest development bank in the world, stated that last year it went beyond climate finance, such as renewable energy, and into recycling innovations, post-COVID-19 economic recovery, and other areas.

GREEN CLIMATE FOUND

Green Climate Fund, a multibillion-dollar fund that was created in 2010 for climate finance dispersion, is one of several vehicles to handle the $100 billion pledged annually by wealthy nations to the poor.

These funds will be used to fund clean energy transitions and to support projects that help poor countries adjust to a warming world. Many at the talks in Scotland this year were disappointed by rich nations’ inability to meet their 2020 deadlines for providing full funding. Now, rich countries claim they will cover the whole amount by 2023.

Blended Finance

Private sector investors are often concerned about the risks involved in projects in emerging market markets. These concerns can be alleviated by blended finance initiatives, in which public or charity investors are paired with the private sector. These schemes often require that the public investor takes the loss portion.

RESPECT FOR DEBT

Even though it is not a cash transfer directly, many developed countries have given billions of dollars in loans to emerging markets. The loan could be written down, written off or repaid with more climate-friendly terms. For example, the repayment could require protection for natural resources. One recent agreement saw Belize offer debt relief in return for promising to help protect the barrier reef.

SPECIAL DRAWNING RIGHTS

Recent statements by the G20, a group representing some of the largest economies in the world, stated that they would seek to improve access for countries with low income to Special Drawing Rights or SDRs. This is a reserve asset that’s available for emergencies. It was issued by International Monetary Fund and has an initial goal to disburse $100 billion from the $650 million in newly-created SDRs.