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Climate and Development Finance Institutions

Linking climate finance, development finance and the transition to low-carbon, climate-resilient economic models

Development finance institutions (DFIs) are in a position to be key actors in aligning development and the 2° challenge. One of the principal challenges today is to scale-up the financial flows to the trillions of dollars per year necessary to achieve the 2°C long-term objectives. Achieving this transition to a low-carbon, climate resilient (LCCR) economic model requires the integration or ‘mainstreaming’ of climate issues as a prism through which all investment decisions should be made.

Key points

This report from the Institute for Climate Economics (I4CE) presents an overview of the opportunities and challenges of linking a LCCR transition with the objectives of development finance. It first presents the two-fold challenge of climate change and development for countries around the world. Second, the paper explores the role of development finance institutions and their support for the transition to a low-carbon, climate-resilient economic model. Finally, it examines a necessary paradigm shift to integrate climate and development objectives to establish a ‘LCCR development model’ able to simultaneously tackling development priorities and needs for resilient, low-carbon growth.