This technical note provides a brief overview of the state of climate finance at the start of the 2020s. Catastrophes such as the Texas power grid failure and widespread wildfires in other western states have highlighted the increasing financial costs of climate change. The material includes market failures that have constrained the financial sector’s response to the challenge of climate change, along with different methods that have been used to target funding toward climate-related opportunities. It offers consideration of the roles of public, private, and blended finance products to provide the trillions of dollars necessary to meet the needs of the Paris Accord.
The note can be used both as background material or as a discussion topic itself, in which students might consider how best to address these market failures, how public finance might mobilize private capital, the benefits and drawbacks of vehicles used to date, and the innovative vehicles they might design. The depth of financial detail discussed in the class can be customized to reflect student knowledge.