Greater Transparency and Better Policy for Climate Finance

Abstract

Many developing countries face substantial challenges from climate change and need significant financial resources to fund essential mitigation and adaptation efforts. Mobilizing more private sector resources requires balancing economic incentives and policy choices to encourage long-term investment in a financial system that prices the physical and transition risks from climate change adequately and allocates capital efficiently. Such a practice of finance would focus on strategic fundamentals and fully integrate sustainability considerations into its operations, including the full costing of positive and negative externalities under comprehensive disclosure. In this context, funding reliable, low-carbon infrastructure is an essential step toward addressing climate risks at scale and building resilient societies in developing countries to generate sustainable, long-term growth. This article explores how the World Bank Group supports the development of climate risk management and funding mechanisms through its own market operations (as financial institution) and client country engagements (via capacity building and infrastructure projects) to green the financial system against the background of an evolving climate finance paradigm.

Keywords: climate change, sustainability, infrastructure

JEL Classification: F63, F64, H54, O13, O16, O18, O19