Glossary

Gross Capital Formation

Gross capital formation measures how much investment is made in fixed assets (e.g. infrastructure, livestock, equipment, etc.) and inventories (goods held in stock) by companies within a country. Low levels of capital formation indicate that there are fewer formal investment opportunities, and there is a close relationship between this figure and lower income countries.

Given this comparison, measures to leverage private sector climate finance are likely to disproportionately benefit upper-middle and high income countries, according to Friends of the Earth USA. This assessment is backed up by research on how existing Development Finance Institution (DFI) support to developing countries is distributed.