Bridging the Climate Finance Gap
A blog by FT coaches Nathan Kably and Pritika Kasliwal, and technical expert Alison Filler
The Global South faces urgent climate challenges, alongside which it also offers significant potential for climate mitigation and adaptation through its ecosystems. However, this potential is untapped, and although efforts like the Green Climate Fund aim to bridge the gap, they struggle to engage local communities in impactful ways. Today, Africa receives just 3% of global climate finance.
This tension was on display at COP29 in Baku, Azerbaijan, where global leaders convened last month to coordinate policies and financing to address climate change. After days of intense negotiation, a final agreement was reached requiring wealthier nations to pay at least $300 Billion per year until 2035 to low- and middle-income countries to assist with adaptation efforts and the clean energy transition. While this represents a 3x increase over the previous commitment of $100 Billion per year for LMICs, it is a far cry from the $1.3 Trillion that emerging economies sought to secure.
Another more encouraging development from the COP29 summit was the agreement to operationalise Article 6 of the Paris Agreement. Nine years after the text was initially adopted, countries may now finally use independent crediting standards (ICPs), such as Verra and Gold Standard, that operate in the voluntary carbon market (VCM), to meet their Nationally Determined Contributions (NDCs) for emissions reductions. In effect, this integration of voluntary and compliance mechanisms may help scale the growth of carbon markets and channel more carbon finance to projects in LMICs.
Climate finance needs support to prioritise high-quality investments that drive sustainable development and climate resilience and move away from extractive practices.
Carbon markets and Results-Based Financing show positive potential for empowering and rewarding practical community-focused projects, but persistent barriers have prevented solutions from scaling globally. These include inconsistent impact data, inconsistent quality standards and practices, fragmented and opaque market structures, barriers to participation, and a limited pool of bankable projects.
We explore these barriers in more detail in our latest research into the Voluntary Carbon Market.
Frontier Tech for the Voluntary Carbon Market
This report explores the ways in which frontier technologies can help to unlock the potential of the Voluntary Carbon Market (VCM) as a mechanism for supporting the transition to Net Zero.
To overcome these, we see a need to build up a climate finance landscape that not only promotes carbon sequestration but also delivers a broad array of mitigation and adaptation solutions that support livelihoods, biodiversity, climate resilience, and ecosystem health. We need to look beyond optimising isolated solutions towards creating a cohesive system – in which finance, policy, technology, and local engagement work together to support resilient, scalable, and community-centred climate solutions.
We see an opportunity, so we’re stepping up our response to this need
Frontier technologies hold the potential to unlock barriers to scale and localise climate finance and carbon markets in LMICs. We seek to build on the extensive work already done to identify why systematic and localised efforts are not yet paying big dividends.
To unlock the potential we see, we are embarking on a collaborative journey alongside the FCDO and technical experts Alison Filler, Dr. Abrar Chaudhury, and Carolina Douek.
Between November 2024 and March 2025, we will be:
Defining a Future System: We’ll envision a localised and scalable climate finance landscape and identify today’s entry points to make this future possible.
Engaging the Ecosystem: Collaborating with stakeholders, we will validate potential interventions and define roles for FCDO and the FT Hub.
Building a Roadmap: We will outline actionable steps and a robust value proposition for future work under the FT Hub.
Tech innovation in the sector has yielded thousands of new tools and approaches addressing challenges from accurate monitoring and cost to transparency to scalability. Digital marketplaces, satellite monitoring, and distributed ledger technologies hold promise to solve issues such as fragmented data reporting, yet they have remained limited. And a localisation agenda is needed to make these tech innovations contextually relevant and meaningfully driven by the people at their centre.
What we have learned in this space already
We have funded pilot projects to test innovative climate finance ideas, gathered extensive insights from our portfolio and led in-depth analysis of the role of tech within climate finance and the voluntary carbon market. But across all of these efforts, we have often bumped up against system-level barriers, resulting in fragmented innovations that struggled to scale or create meaningful impact for the most vulnerable.
Our Vision
Climate finance is a major priority for the UK government, with significant portions of programming dedicated to advancing this agenda. FCDO has already invested circa £6m in digital technology in this space, DESNZ developed dedicated teams around the voluntary carbon markets.
Our vision is to unlock climate finance access at scale for the most vulnerable, supporting tech solutions that align with local needs and priorities and contribute to FCDO’s commitment to driving resilient, inclusive climate action.
We have come to understand that achieving scale requires systemic change: collaboration across sectors, robust evidence, and an understanding of the factors that lead to both the adoption and impact of these climate solutions. There are still many addressable challenges for technology to support in this space, including a lack of transparency around benefit sharing, limited tools to measure sustainable development impacts, and a need for solutions adapted to local contexts.
We believe the FT Hub could address some of these systemic challenges by coupling investment in a diverse portfolio of grantees with targeted ecosystem engagement and advocacy.
If you’re interested in partnering with us, sharing insights, or learning more, we’d love to hear from you.
Get in touch with nathan@hellobrink.co.
