By switching to dark mode you can reduce the energy consumption of our digital service.

When does private finance count as climate finance? Accounting for private contributions towards international pledges

This discussion brief examines different types of international private finance and asks questions about their suitability for being counted towards the Copenhagen commitment.
Multiple Authors
michelo simweete


In 2009, as part of the Copenhagen Accord, developed countries committed to “a goal of mobilizing jointly USD 100 billion dollars a year by 2020 to address the needs of developing countries” (UNFCCC 2009). In subsequent decisions, the Parties to the United Nations Framework Convention on Climate Change have said this includes from both public and private funds (see, e.g., UNFCCC 2011). Yet precisely which kinds of private finance might be counted still remains vague.

At least part of the challenge is that even delineating climaterelevant private finance can be difficult, since private investments are rarely, if ever, tagged as “adaptation” or “mitigation”. This is especially challenging for adaptation, as gauging the contribution of specific activities to adaptation requires a deep understanding of the local context. While renewable energy investments might be generalizable as consistent with mitigation objectives, making similar generalizations is not possible for adaptation.

Globally, the scale of private finance that in some way may be supporting climate change objectives is estimated to be larger than public finance flows (Buchner et al. 2015). However, those estimates include in-country flows and a very broad range of instruments.

In this discussion brief we examine different private financial flows for climate related activities on the basis of how the investors’ motives connect with the recipients’ objectives. We present an analysis of accountability chains (see Box 1), focusing on two accountability parameters: (i) the degree to which different actors in the finance chain share similar “end goals” for the funds; and (ii) the degree to which the final expenditure contributes to climate-related outcomes beyond a single private entity, which is of particular relevance for adaptation objectives. Different types of private finance can then be compared with the features of public finance, as a reference point.

The concluding summary of this discussion brief, an output of the SEI Initiative on Climate Finance, is provided below. The discussion brief can be downloaded in full from the right-hand column of this page, or viewed online via the links provided under further resources.


Our analysis is based on the notion that not all finance is the same, and that the characteristics of different types of finance are important to consider in discussions about “what counts” towards the 100 billion USD commitment. Our analysis is not meant to advocate for the use of any one or more specific criteria, but rather to contribute to ongoing discussions by highlighting one issue in particular: the extent to which actors along the finance chain have shared or disparate objectives for the use of the funds.

We used a simple “accountability chain analysis” to examine different types of private financial flows from this perspective: traditional debt instruments, “green bonds”, equity instruments, philanthropy and remittances. Our goal was to understand whether there is shared (and hence “continuous”) notion along the chain of actors about what “effective finance” looks like. In international public climate finance, such a shared expectation does exist: while any one investment may have multiple objectives, all actors, from taxpayers in developed countries, to citizens in the recipient countries, expect a meaningful contribution to achieving public benefits related to climate change mitigation, adaptation, or both.

Our analysis shows that the degree to which actors in the private finance chain share goals depends on the type of financial flow. For commercial debt, actors along the chain do not share a common goal, as the investors’ focus is on achieving financial returns, not on how the money is actually used. For other types of private finance, such as green bonds and philanthropy, the different actors’ goals appears to be more consistent. Private equity needs further consideration, since there appears a stronger link between the investor’s finance and its effectiveness in delivering meaningful outcomes on the ground, but there are perhaps other complexities that need to be unpacked, such as transparency and reversibility.

Our findings, while very preliminary and explorative, suggest the need for closer consideration of differences among private financing instruments and the circumstances in which they are applied. Policy-makers may find these issues relevant both to the question of which financial flows should be “countable” towards the 100 billion USD commitment, and what logistical issues might arise in trying to account for those flows.

The discussion on “what counts” as private finance is important because it directly affects the amount of public finance that developed countries still need to provide to meet their Copenhagen commitment. It will also help governments to understand what types of private flows may best help them achieve climate objectives, so they can develop policies and incentives to mobilize such investments. That, in turn, will require a better understanding of what motivates climate-related private investments in different contexts.

At the same time, we need to focus on an equally important question: How do we ensure that climate finance – public and private alike – actually achieves its purpose? This will require a much broader conversation about the effectiveness and efficiency of climate finance, with a strong focus on the needs and priorities of developing countries.

The Clean Technology Fund is helping India to catalyse investment in clean energy, off-grid access, and energy efficiency. Photo credit: Climate Investment Funds / flickr

This discussion brief was written by Aaron Atteridge and Adis Dzebo as part of SEI’s Climate Finance Initiative. To learn more, visit:

Twitter: @SEIresearch, @SEIclimate

Suggested Citation:

Atteridge, A. and Dzebo, A. (2015). When does private finance count as climate finance? Accounting for private contributions towards international pledges. SEI discussion brief. Stockholm Environment Institute, Stockholm.

Related resources

Add your project

Exchange your climate change adaptation projects and lessons learned with the global community.