There are growing concerns that rising ambition on international climate finance will squeeze out a focus on poverty reduction. This is understandable: total official flows have risen more slowly than reported increases in climate finance demonstrating that climate finance has not been ‘new and additional’.
Observed increases in climate finance do not appear to have come about because of squeezing finances in sectors less relevant to climate. Increases in climate finance have primarily resulted from an increase in the proportion of investment in energy and transport sectors being designated as climate finance.
Understanding the impact of this shift on development depends upon what is driving the increase in climate finance. Finance could be ‘repurposed’ to new objectives, ‘realigned’ where new technologies are being used to meet the same objectives or ‘rebadged’ where all that is changing is approaches to accounting.
In lower-income countries, both ‘climate finance’ and ‘development finance’ should focus on supporting development in a climate-changed world.