Nations have agreed to $300B for climate funding. How will they pay for it?

To help narrow the substantial gap between what's needed and what governments can provide, there’s an increasing push to use something called blended finance to raise public funds.

The trillion-dollar question these days is where the huge sums of money needed to address climate change are going to come from, especially for developing countries.

Getting governments to put up more was the big focus at the UN climate conference that wrapped this week, but as seen by a wave of criticism about weak funding commitments, alternatives are needed too.

“There’s just not enough money from government sources,” Catherine McKenna, chief executive of Climate and Nature Solutions and former federal environment minister, said in an interview.

To help narrow the substantial gap, there’s an increasing push to use something called blended finance, which uses scarce public dollars to sweeten the financials of a project enough that it makes sense for the private sector to invest.

“We need to be creative to get the incentives right to make it happen,” McKenna said before countries agreed on the weekend to pool at least $300 billion a year by 2035.

The model is especially needed in developing countries, where the risks are higher and so the business case is harder to make.

This helps explain why such a big group of countries are only getting about 15 cents of every dollar spent globally on clean energy.

Aiming to put a dent in the shortfall, FinDev Canada announced a blended finance platform just as COP29 got underway. In partnership with Mitsubishi Financial Group and anchored by a Green Climate Fund investment, the platform has set a $1.5-billion funding target to assist up to 25 developing countries.