It is time to really accelerate the greening of the finance sector for our climate, people and our planet.

Seoul has experienced its hottest September ever. It was sweltering. Farmers here and in other parts of the world are changing the crops they plant because the weather is now unfavorable for some crops to grow well. For people in poor countries extreme weather events often mean that families are pushed deeper into poverty.

I trained as an environmental economist and what we do at the Global Green Growth Institute is my passion. I love working with other mission-driven colleagues to keep pushing the frontiers of green growth and climate change actions. One of the areas I can see has the most potential to realize rapid global impact is work that is being done by us and others on sustainable finance.

One of the three main goals of the Paris Agreement, an international treaty on climate change, is to make all financial flows consistent with the world’s climate goals. As of 2022, climate finance reached $1.27 trillion, nearly double climate finance in 2020. This represents a major step change in the greening of the financial sector, yet it is a far cry from the estimated $9 trillion needed each year until 2030 and $10 trillion required annually from 2031-2050 to protect us all from the most devastating effects of climate change.

If that reality check wasn’t sobering enough, there’s another critical issue: climate finance isn’t reaching those that need it the most. A staggering 84 percent of climate finance is mobilized in the more developed countries; in Western Europe, North America, and East Asia, leaving only 16 percent for the rest of the world. Even more concerning is that a mere 3 percent reaches the least developed countries. To make matters worse, of the $1.27 trillion mobilized, only $62 billion — just 5 percent — was invested in building the adaptation and resilience of vulnerable communities and essential infrastructure.

Each year governments congregate at formal climate meetings known as COPs or Conferences of Parties to assess progress and negotiate additional commitments to reduce greenhouse gas emissions. This year the COP29 taking place in Baku, Azerbaijan, has been tagged the “Finance COP." The focus is on agreeing on new climate finance targets to help bridge the gap between current climate finance flows and what is needed.

Last year I visited Papua New Guinea where the first climate refugees were forced to leave their homes as the shoreline was washed away. I saw cemeteries washed into the sea and a school that would need to be vacated soon as 30 meters of land is eroded each year.

So what can be done to increase climate finance flows and make sure those that need it most have access?

I take the view that there is not a lack of money in the economy, but money is a) concentrated in the hands of a relative few and not evenly spread and b) not being spent on green activities. Whilst wealthier governments should dedicate more investment in climate-related activities this will remain a relatively small part of the solution. The broader financial sector must also play a part.

With operations in over 50 countries spread across Africa, Asia, Europe, Latin America and the Caribbean, the Middle East, and the Pacific, GGGI has a long record of experience in sustainable finance. Just last year, we mobilized 1.9 billion in Green Investment Commitments. Sustainable finance is an increasingly important part of our work. In 2021 we supported Peru in the issuance of the largest sovereign green bond at that point in history -- for over $3.2 billion.

The Peru green bond used a relatively small amount of grant money provided by the UK government -- a few hundred thousand dollars -- but had a leverage ratio of almost 6,000 times the initial public investment. Expected impacts will be considerable including supporting almost one million people to cope with climate change, over 486,000 hectares of avoided deforestation or reforested land, and over 136 million tonnes of carbon emissions avoided.

Accelerating greening of the global financial sector

What happened next is a ripple effect both within Peru and across Latin America and the Caribbean region. Demand for green and sustainable bond issuances accelerated. Commercial banks as well as national development banks wanted to learn how to green their operations. We then consciously, through the support of the Grand Duchy of Luxembourg, Green Climate Fund, European Union and KOICA pursued transferring this learning to Asia, the Pacific and Africa. Since this first Peru green bond, we have supported issuances that are first in the market in the Dominican Republic, ($750 million), Cambodia ($10 million green bond -- relatively small but a very significant first in the market for this LDC) and Uzbekistan (over $800 million), to name a few. We have mobilized over $7 billion in sustainable and green bond issuances and are now, through our Luxembourg Global Trust Fund on Sustainable Finance and EU Sustainable Bond Initiative, working in over 30 countries on green bond issuances.

It's work like this that can further accelerate climate finance flows and bridge the gap between the $9 trillion we need each year and the 1.27 billion we have.

What we all must do as a global community is look at radical solutions to the challenges facing the world. Whether it is climate change, biodiversity loss or plastics pollution. We need to push our own frontiers and together accelerate the green economic growth transition that will protect the planet and its people.

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Helena McLeod is deputy director general and head of the Green Growth Planning and Implementation Division at the Global Green Growth Institute. The views expressed here are the writer's own. -- Ed.