This week, I decided to look at climate finance – investments, loans, grants and other forms of financial transfers directed towards climate-related projects.
Although there are many datasets available on climate funds, I tried to look for more comprehensive datasets, both capturing longer time-period and wider scope of environmental projects. My choice is data by Climate Funds Update, website maintained by Heinrich-Böll-Stiftung and Overseas Development Institute.
Dataset provides the longest coverage of international climate funds, ranging from 2003 to 2019. It dissects every climate-related investment into specific projects and gives information about:
- the gross amount of funds (in millions USD) for each project;
- the year the fund was approved;
- to which climate sector funds were directed to, and
- who is recipient.
Dataset provides information about 4 types of funds: pledged (non-formal promise of funds), deposited (funds that have been transferred from a donor to a recipient without earmarking for a specific project) and disbursed (funds that have been already spent by recipients), however, among these only approved amounts have been officially signed and earmarked for specific climate projects. I did not use pledged funds as they does not represent an actual transfer of funds, while deposited funds are not directed toward specific projects. Since many of climate projects in the dataset are still ongoing, I also did not use disbursed funds as they will not give us a full picture as well. As such, for the purpose of this data visualization exercise, I use only approved funds.
Focusing on Energy
First, I decided to look at top sectors that received the highest amount of funds over the years. Since the unit of analysis in the dataset is a project, I aggregated approved funds for projects and grouped them by sectors that they belong to and years in which their funds were approved. After a bit of cleaning, I got a list of 10 sectors that represent wider general umbrella terms for more specific climate issues-focused projects. Of those, I selected top 5 sectors within each year from 2006 to 2019. Results are in the graph below.
Two things can be noticed from the graph above.
Firstly, until 2009, all of top 5 highest invested climate sectors were receiving less than 200 millions USD and in 2009 there was a dramatic increase in funds size, with logistics (transport and storage) and energy sectors going 200m USD and beyond. While I do not know exactly what caused this increase, I found out that a political declaration between 192 governments called the Copenhagen Accord was signed at UN Climate Summit in Copenhagen in 2009. Although the accord never achieved its goal of paving the way for a global agreement on climate, it may have led to more awareness and investments, which is why (possibly) size of funds increased over time. If you have different explanation for this, let me know.
Secondly, not only renewable energy always appears in the list of top 5 highest invested climate sectors throughout 2006-2019, but starting 2010 it consistently – with the exception of few years – receives the highest amount of funds, peaking with around 800m USD in 2017. Second energy-related category that appears each year on the graph is Energy (General), which is I assume a more broader category for energy-related funds that do not included renewable or non-renewable energy sources. Forestry comes third as the most frequent highest invested sector.
Whom You are Paying?
Next, I looked at 10 countries that received the highest amount of funds throughout all years in the dataset. Results are in the graph below that shows the total amount of approved funds for all projects throughout all years combined for each country. Numbers inside bubbles show the total number of climate projects (for which funds were approved).
As it can be seen, Brazil received the highest amount of funds and implemented the highest amounts of climate projects in the dataset. India falls behind Brazil by a bit ( 1253.930m USD for Brazil and 1241.969m for India). Indonesia is second in terms of numbers of climate projects implemented, but it is third by the total amount of climate funds received. Interesting to note a huge gap between the top two funds destinations and the rest: Brazil and India receive almost a double of what other countries or group of countries (regional and global funds) receive.
To further unpack to which sectors exactly these funds go, I selected top 5 countries from the graph above and dissected the funds they received by sectors. The results are reported in the graph below. Bubbles represent the amount of approved funds for each sector, the size of bubbles reflect the size of funds. Lastly, approved amounts that exceed 190m USD shaded in a darker color.
It appears Brazil receives around 90% of its funds for forestry-related projects. It is also the only country among top 5 that receives funds for green finance initiatives. India and Indonesia have the most diversified portfolios among others, getting funds for 14 climate-related sectors out 18. Both of them also receive the highest amounts of funds for renewable energy projects, which is also true for South Africa. India receives the second largest amount of funds for multisectoral projects, whereas Indonesia receives it for forestry projects. Mexico's largest share of funds is divided between logistics and general energy sectors.