CREO: Understanding the Climate Finance Gap

This document, “Understanding the Climate Finance Gap” by CREO Advisory, analyses the need for increased investment in climate-related technologies and initiatives to achieve global net-zero goals. It highlights the significant gap between the current annual climate finance flows of $1.4 trillion and the estimated $8.6 trillion needed by 2030, with the public sector alone unable to bridge this deficit. The report focuses on the critical role of private sector investment in scaling climate solutions, particularly in sectors with significant mitigation potential like agriculture and land use. It identifies the “missing middle” of capital, where there’s a lack of growth equity and private equity (PE) funding crucial for scaling proven climate solutions. The document then analyses the trends in climate finance, revealing a growing emphasis on mega-funds, which may be better suited for later-stage investments. The report emphasizes the need to actively consider investment returns alongside mitigation potential, advocating for catalytic investments in sectors with high mitigation potential but lower current returns. Ultimately, the report calls for increased capital flows into climate investments, prioritizing genuine climate initiatives, addressing the “missing middle,” and aligning capital sources with market needs, ultimately urging private investors to play a catalytic role in driving progress towards a sustainable future.