(GIST OF YOJANA) Climate Finance

GIST OF YOJANA : Climate Finance

JANUARY-2026

Climate Finance

Context:

As the quote emphasises SDG 6 and SDG 2, that is quality food and potable drinking water, respectively. These are the two important jewels of climate, directly related to SDG 13, which focuses on climate and environmental issues. Climate finance may play a pivotal role in dealing with climate issues like climate change, rising temperature, global warming, and various natural hazards.

Climate Finance

“Climate finance refers to local, national, or transnational financing—drawn from public, private, and alternative sources of financing—that seeks to support mitigation and adaptation actions that will address climate change (Introduction to Climate Finance, 2001].”

As per the report of Introduction to Climate Finance, 2001, “the Paris Agreement, the Kyoto Protocol, and the Conventions all require Parties with greater financial means to provide financial support to those who are more vulnerable and less well-off. This acknowledges that nations’ contributions to climate change, as well as their ability to stop it and deal with its effects, differ greatly. Since large expenditures are needed to achieve meaningful emission reductions, climate finance is essential for mitigation. Since substantial financial resources are required to adapt to the negative effects and lessen the repercussions of a changing climate, climate finance is equally vital for adaptation. It operates on the principle of “common but differentiated responsibilities and respective capabilities,” which states that wealthy nations should contribute funds to help underdeveloped nations achieve their goals.”

“Article 9 of the Paris Agreement reaffirms the obligations of developed countries while, for the first time, encouraging voluntary contributions from other parties. Developed country parties should also continue to take the lead in mobilising climate finance from a variety of sources, instruments, and channels, recognising the significant role of public funds by taking several steps, such as assisting nation-driven plans and taking the developing country parties ‘needs and goals into account This kind of climate finance mobilisation ought to be an advancement over earlier initiatives. In general, the Paris Agreement’s goal of aligning financial flows with a path toward low greenhouse gas emissions and climate-resilient development serves as a direction for its activities. The Agreement’s global stocktake also includes evaluating the state of support mobilisation and provision. The Paris Agreement also places a strong emphasis on improved predictability and transparency in financial support (UNFCCC, 2015).”

“Every government and stakeholder must comprehend and evaluate the financial requirements of developing nations and know how to mobilise these resources. Achieving equilibrium should also be the goal of resource provision between adaptation and mitigation (UNFCCC, 2015].”

Financial Mechanisms and Other Funds Related to Climate Finance

A financial mechanism is set up to facilitate the provisions related to climate finance and serve the purposes of the Kyoto and Paris Agreements, which provide the financial resources to developing countries.

Climate Finance Funds at the International Level

Some of the famous policies and funds provided at the global level are:

Global Environment Facility: started in 1992, has operated as the financial mechanism’s operational entity for a number of environmental conventions.
Green Climate Fund: established in 2010 by the Conference of the Parties, organised in Cancun, and has become the world’s largest climate fund. It also became an operating entity of the financial mechanism in 2011. It uses flexible funding options, climate investment knowledge, and a country-owned partnership approach to expedite revolutionary climate action in developing nations.
Special Climate Change Fund: established in 2001 to support the climate adaptation programmes of developing countries. It serves as part of the financial mechanism, which is managed by the Global Environment Facility (GEF).
Least Developed Countries Fund (LDCF): established in 2001 under the Kyoto Protocol to support the climate adaptation programmes of least developed countries. It serves as part of the financial mechanism, which is managed by the Global Environment Facility (GEF).
Adaptation Fund: The Adaptation Fund (AF) is an international climate financing system created in 2001 under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). The fund, which became operational in 2007, provides financing for specific adaptation projects and programmes in developing nations that are highly susceptible to the negative impacts of climate change.
Fund for Responding to Loss and Damage: established in 2023 by the Conference of the Parties 28 (COP 28), assisting developing economies that are particularly vulnerable to the adverse effects of climate change. As part of this, the World Bank was invited to operationalise the fund.

Issuance of Green Deposits and Green Bonds

A “green deposit is a type of fixed deposit where the funds are specifically earmarked for financing eco- friendly projects,” while the “green bond is a debt security issued by an organisation for the purpose of financing or refinancing projects that contribute positively to the environment and/or climate.”
India’s first green bond was issued by Yes Bank in February 2015 as a Rs 1,000 crore 10-year issue, oversubscribed nearly twice, with proceeds directed to renewable energy projects such as solar, wind, and biomass. Yes Bank followed with another Rs 315 crore 10-year issue in August 2015, fully subscribed by the International Finance Corporation.
Sustainable Finance Group (SFG): The Sustainable Finance Group within the Reserve Bank of India (RBI) was established in May 2021 to address climate-related financial risks and lead regulatory initiatives in sustainable finance. Its primary goal is to promote environmentally sound financial practices and support the transition to a low-carbon economy.
Network for Greening of Financial System (NGFS): NGFS is an association between central banks and supervisors that works to expedite the scaling of green finance and evolve the recommendations for the role of central banks in addressing climate change. The RBI joined the Network for Greening of Financial System on 23 April 2021.It provides a better platform for central banks and financial supervisors across the world to share and learn from each other in this area.
Climate Risk Information System: When evaluating the hazards associated with climate change, data is essential. There are a number of restrictions and gaps in the data available for assessing the risk of climate change. To close data gaps and standardise datasets, the RBI has announced the creation of the RB-CRIS (Climate Risk Information System), which will ensure the comparability of financial impact assessments related to climate change. The carbon emission factor database, transition risk assessment, and physical risk assessment data are all expected to be covered by RB-CRIS.
Sovereign Green Bonds: These are the debt securities issued by the Union government to allocate the funds for green initiatives, including renewable energy, sustainable agriculture, waste management, etc. The Union Budget 2022-23 announced sovereign green bonds for green infrastructural investments, which will encourage energy efficiency, reduce carbon emissions and greenhouse gases (GHGs), promote climate resilience and/or adaptation, etc.
Climate Change Finance Unit: Established in 2011, this key institution under the Department of Economic Affairs, Ministry of Finance, serves as the nodal point on all climate change financing matters.

Conclusion:

Despite some global climate improvements, much more needs to be done. Governments and organizations must take strong actions to address climate issues, incorporating policies and programs like NGFS and Sovereign Green Bonds to make Viksit Bharat a reality.