Why undertake an assessment of Investment and Financial Flows?
A key challenge for countries is understanding the magnitude of national efforts needed to reduce greenhouse gas emissions and to adapt to the adverse impacts of climate change.
As countries implement their national climate targets (Nationally Determined Contributions), information on the monetary requirements and questions of how to finance the necessary action becomes paramount.
To address this issue, UNDP has developed a methodology to carry out Investment and Financial Flows to address climate change.
What does a national assessment of investment and financial flows seek to answer?
With support from UNDP, countries assess the adaptation and mitigation measures that are required to address climate change.
Using UNDP’s finance assessments, countries assess a baseline and a target scenario to identify the financial reallocations and additional investments needed to implement mitigation and adaptation actions. This enables countries to determine specific measures and policies that induce the necessary change and mobilize finance.
The assessments help decision makers identify current and future climate change-related investments and financial flows, as well as their timing, sources and investment entities, enabling effective climate change adaptation and mitigation action.
The finance assessments help countries to:
- Nationally organize financial flows effectively
- Mobilize additional resources
Since 2008 countries have carried out around 60 assessments across the globe.
Teams comprised of Ministries of Planning, Finance, and Environment and others, together with the private sector, academia and non-governmental organizations, apply UNDP’s Investment and Financial Flows assessments, analyzing the following questions:
- What are the adaptation/ mitigation options for selected key sectors in the next 25 years?
- Who is currently investing in the sector? Who are the major players & funding sources within government, private sector and households?
- What shifts and increases in investments and financial flows will be needed in the sector?
- What will be the required additional investments and financial flows to address climate change?
- What policies and incentives are suitable to induce the necessary shifts and changes in investments and financial flows?
The financial assessments can be an integral part of the Integrated National Financing Frameworks that counties develop to implement the Sustainable Development Goals. The Integrated National Financing Frameworks provide a framework for financing national sustainable development priorities and the SDGs at the country level.