This occasional paper reflects on the impacts of COVID-19 on climate finance and how governments and financial institutions have responded to the challenge. It does so in the context of the upcoming COP26 in Glasgow, prior to which countries must make commitments to increase their mitigation ambition. Developed countries will also be assessed on the extent to which they have fulfilled their climate finance obligations. The paper reflects on material trends in climate finance that are likely to influence these negotiations, with a particular focus on the position of African countries, including the definition of climate finance and the extent to which historical climate finance targets have been met. It asks whether climate finance can be used better and discusses how stimulus packages can respond to both socio-economic and climate imperatives. It questions whether stimulus packages are in fact meeting this objective, but also observes a desire to do so, particularly in Africa. In addition, the paper reflects on other pandemic-initiated developments in climate finance, including renewed attention to adaptation, and attempts to bolster and mainstream private sector climate finance. It concludes that the pandemic has brought about a number of positive developments from a climate finance perspective, including an increased focus on and rise in commitments for adaptation expenditure. There is also a potential for large-scale stimulus measures to inject the necessary capital to realise both socio-economic development and climate-related goals. Challenges remain in overcoming national tendencies to support fossil fuel industries as part of stimulus packages, declines in public climate finance flows and a lack of consensus on the definition of climate finance.
