Mainstreaming climate finance into international public financial flows: What role for the G20?

The adoption of the Paris Climate Agreement and the Sustainable Development Goals in 2015 firmly anchored the issue of climate change at the centre of international and national development policy. These agreements set out an ambitious set of universal targets, as well as national policy engagements (in the field of climate change, nationally determined contributions). The issue of finance is at the heart of these policy agendas. This Issue Brief examines the role of the G20 and related institutions in driving the mainstreaming of climate change into international public finance. The transition to low-carbon, climate-resilient economies will require a large-scale shift of investment from high to low-carbon sectors. The scale of this shift means that private (and mostly domestic) capital will be crucial to this transition. In line with this, the Paris Agreement sets the objective of “making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” (UNFCCC 2015, Article 2.1c). However, domestic public capital can provide an important catalyst; and international public flows will be even more important for poorer, vulnerable countries; and for activities where market failures mean that private capital will not invest. This paper argues that the G20 can make an important contribution to this objective of mainstreaming climate concerns into public financial flows. This holds also of private financial flows, although this paper limits itself to public financial flows.