July 23, 2024
As the world reflects on the outcomes of COP28, "climate finance" has emerged as a critical term in global discussions about environmental sustainability. Despite its broad and complex definition, it is crucial to understand what climate finance entails. This note aims to demystify the concept and shed light on the United Arab Emirates' contributions to financing the global battle against climate change.
Defining Climate Finance
Climate finance lacks a rigid definition but is commonly understood within the framework provided by the United Nations Convention on Climate Change (UNFCCC). It encompasses financing from public, private, and alternative sources at local, national, or transnational levels, through the issuance of new instruments (i.e., green bonds), aimed at supporting actions that mitigate climate change effects and promote adaptation efforts. This financial support is foundational to moving towards a net-zero emissions goal by addressing the undeniable need for increased funding in environmental protection and sustainability efforts.
The Role of Climate Finance
Key international agreements, including the UNFCCC, the Kyoto Protocol, and the Paris Agreement, stress the necessity for financially capable countries to substantially contribute to climate finance. This support is vital for assisting less developed nations in their climate change mitigation and adaptation initiatives. The concept of "common but differentiated responsibility and respective capabilities" highlights the varied contributions and vulnerabilities of countries to climate change, promoting a fair distribution of financial burdens.
Financial Requirements for Climate Action
Recent evaluations by the UNFCCC and the Independent High-Level Expert Group on Climate Finance indicate a pressing need for substantial financial investments. Developing countries alone require around $600 billion annually, a figure that is likely underestimated. Moreover, projections suggest that developed countries will need to significantly increase their contributions to meet the escalating financial demands of combating climate change and fostering sustainable development in less affluent nations.
Introducing Alterra
At the heart of COP28, the UAE unveiled Alterra, a pioneering $30 billion green investment fund. Spearheaded by UAE President His Highness Sheikh Mohamed Bin Zayed Al Nahyan, Alterra represents a significant stride in global climate finance, aiming to mobilize up to $250 billion by 2030. This fund focuses on closing the climate finance gap by investing in green enterprises and facilitating capital inflow towards climate investments, particularly in emerging markets and developing countries. Alterra's primary mission is to catalyze investment in climate action, with a special focus on supporting developing economies.
Climate Initiatives at Abu Dhabi University
Abu Dhabi University stands as a testament to the UAE's commitment to climate finance and sustainability education. By offering a wide range of sustainability-focused academic programs, the university plays a crucial role in preparing future leaders in environmental stewardship. Through innovative research and academic programs, Abu Dhabi University contributes to the broader efforts of enhancing climate action and sustainability in the UAE and beyond.
Prof. Charilaos Mertzanis
Professor of Finance