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{4.8.1} C.7.2 Increased access to finance can build capacity and address soft limits to adaptation and avert rising risks, especially for developing countries, vulnerable groups, regions and sectors (high confidence). Public finance is an important enabler of adaptation and mitigation, and can also leverage private finance (high confidence). Average annual modelled mitigation investment requirements for 2020 to 2030 in scenarios that limit warming to 2°C or 1.5°C are a factor of three to six greater than current levels56, and total mitigation investments (public, private, domestic and international) would need to increase across all sectors and regions (medium confidence). Even if extensive global mitigation efforts are implemented, there will be a need for financial, technical, and human resources for adaptation (high confidence). {4.3, 4.8.1} C.7.3 There is sufficient global capital and liquidity to close global investment gaps, given the size of the global financial system, but there are barriers to redirect capital to climate action both within and outside the global financial sector and in the context of economic vulnerabilities and indebtedness facing developing countries.

Reducing financing barriers for scaling up financial flows would require clear signalling and support by governments, including a stronger alignment of public finances in order to lower real and perceived regulatory, cost and market barriers and risks and improving the risk-return profile of investments. At the same time, depending on national contexts, financial actors, including investors, financial intermediaries, central banks and financial regulators can shift the systemic underpricing of climate-related risks, and reduce sectoral and regional mismatches between available capital and investment needs. (high confidence) {4.8.1} C.7.4 Tracked financial flows fall short of the levels needed for adaptation and to achieve mitigation goals across all sectors and regions. These gaps create many opportunities and the challenge of closing gaps is largest in developing countries. Accelerated financial support for developing countries from developed countries and other sources is a critical enabler to enhance adaptation and mitigation actions and address inequities in access to finance, including its costs, terms and conditions, and economic vulnerability to climate change for developing countries.

Scaled-up public grants for mitigation and adaptation funding for vulnerable regions, especially in Sub-Saharan Africa, would be cost-effective and have high social returns in terms of access to basic energy. Options for scaling up mitigation in developing countries include: increased levels of public finance and publicly mobilised private finance flows from developed to developing countries in the context of the USD 100 billion-a-year goal; increased use of public guarantees to reduce risks and leverage private flows at lower cost; local capital markets development; and building greater trust in international cooperation processes. A coordinated effort to make the post-pandemic recovery sustainable over the longer-term can accelerate climate action, including in developing regions and countries facing high debt costs, debt distress and macroeconomic uncertainty. (high confidence) {4.8.1}

55 Finance originates from diverse sources: public or private, local, national or international, bilateral or multilateral, and alternative

sources. It can take the form of grants, technical assistance, loans (concessional and non-concessional), bonds, equity, risk insurance and financial guarantees (of different types). 56 These estimates rely on scenario assumptions. Subject to Copyedit

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Approved

Summary for Policymakers

IPCC AR6 SYR

C.7.5 Enhancing technology innovation systems can provide opportunities to lower emissions growth, create social and environmental co-benefits, and achieve other SDGs. Policy packages tailored to national contexts and technological characteristics have been effective in supporting low-emission innovation and technology diffusion. Public policies can support training and R&D, complemented by both regulatory and market-based instruments that create incentives and market opportunities. Technological innovation can have trade-offs such as new and greater environmental impacts, social inequalities, overdependence on foreign knowledge and providers, distributional impacts and rebound effects57, requiring appropriate governance and policies to enhance potential and reduce trade-offs. Innovation and adoption of low-emission technologies lags in most developing countries, particularly least developed ones, due in part to weaker enabling conditions, including limited finance, technology development and transfer, and capacity building. (high confidence) {4.8.3} C.7.6 International cooperation is a critical enabler for achieving ambitious climate change mitigation, adaptation, and climate resilient development (high confidence).

Climate resilient development is enabled by increased international cooperation including mobilising and enhancing access to finance, particularly for developing countries, vulnerable regions, sectors and groups and aligning finance flows for climate action to be consistent with ambition levels and funding needs (high confidence). Enhancing international cooperation on finance, technology and capacity building can enable greater ambition and can act as a catalyst for accelerating mitigation and adaptation, and shifting development pathways towards sustainability (high confidence). This includes support to NDCs and accelerating technology development and deployment (high confidence). Transnational partnerships can stimulate policy development, technology diffusion, adaptation and mitigation, though uncertainties remain over their costs, feasibility and effectiveness (medium confidence). International environmental and sectoral agreements, institutions and initiatives are helping, and in some cases may help, to stimulate low GHG emissions investments and reduce emissions (medium confidence). {2.2.2, 4.8.2}

57 Leading to lower net emission reductions or even emission increases.

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