Private-sector finance has been widely embraced as an important part of efforts to scale up resources for developing countries to respond to climate change. Yet there has been very little analysis of what private finance means for developing countries, and whether it will really deliver what is intended.

The author finds that private-sector finance is unevenly distributed among countries and among sectors, and it often does not match developing countries’ most pressing needs. Also important is to differentiate between different financial flows – foreign direct investment equity vs. portfolio equity, for example, and equity vs. lending – and more closely scrutinise both financial flows and outcomes.

These observations have important implications for those tasked with designing an international regime that will stimulate, govern and account for climate finance flows to developing countries. It should not be taken for granted that the private sector will succeed in tackling adaptation challenges where in the past it has, on the whole, failed to alleviate poverty and livelihood threats in many of the poorest parts of the world.

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