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Germany’s private climate finance support: mobilising private sector engagement in climate compatible development

Working papers

Written by Shelagh Whitley

At the UN Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen in 2009 (COP15),developed countries committed to mobilise long-term climate finance to address the needs of developing countries until 2020. The Copenhagen Accord suggested that this ‘funding will come from a wide variety of sources, public and private’. The High-Level Advisory Group on Climate Change Financing (AGF) to the UNFCCC (among others) has since emphasised the need to mobilise private sector finance – a response, in part, to the scarcity of public resources (UNFCCC, 2010 and AGF, 2010).

This makes it imperative to understand the early efforts of Germany and other donors in mobilising private sector engagement in climate compatible development (CCD), and to identify key trends. 

In the absence of agreed definitions for private finance activities in the climate finance literature and community of practice, this Background Note proposes a definition for Private Climate Finance Support (PCFS) and reviews interventions by German actors to mobilise private sector activity.It finds that Germany has a number of channels and instruments through which it is supporting private sector action on climate change. However, information about the role of private sector co-financiers is limited. Even where it may be possible to determine that there was a private sector contribution to CCD, there is no information on who provided it or how much was provided. Most of the private cli­mate finance support (PCFS) identified is channelled towards one kind of technology (solar power) and one country (India) with very little finance directed toward mobilising the private sector in adaptation activities.It finds that Germany has financed a number of interventions that support private sector action on climate change. The majority of these involve coordination by multiple German public sector entities, and a significant number involve a portfolio of activities (as opposed to individual projects), either through loans facilities or funds. As a result, the identification of the specific countries and supported technologies is a challenge,although the majority of finance appears to be supporting mitigation in upper-middle-income countries, primarily in Europe and Central Asia (with a focus onTurkey), and with an emphasis on renewable energy. 

Shelagh Whitley and Rohan Mohanty