Climate funds are pots of money earmarked for measures that address climate change, although their scope varies considerably. Funds can target mitigation, adaptation or both. Specialist funds, including those focused on Reducing Emissions from Deforestation and forest Degradation (REDD) are also in operation. Some funds explicitly aim to provide money that is additional to Official Development Assistance (ODA) aid programs, but this is not universally the case. Other criteria also vary, such as whether or not investments are made in fossil fuel infrastructure.
Climate funds are organized at multilateral, bilateral and national levels. The largest multilateral funds are the Climate Investment Funds, coordinated by the World Bank and a number of other multilateral development banks. These should be surpassed by the Green Climate Fund, agreed under the auspices of the United Nations Framework Convention on Climate Change, which is scheduled to become fully operational from 2014.
At present, more money passes through bilateral rather than multilateral funds, which provide finance directly from donor countries to the developing world. Japan, UK, Norway, Germany and the USA run the largest of these funds, although most of the money is repackaged ODA expenditure. Bilateral channels are often favored by donor countries because these allow them more control over the use to which funds are put. In some cases, financing is tied to purchases of technology from the donor-country – an arrangement similar to those made by export credit agencies.
National climate funds are established in developing countries to pool and coordinate financing from multilateral and bilateral funds, often blended with private sector sources.