Public financial institutions and climate change

Lina Xie, Bert Scholtens, Swarnodeep Homroy

Research output: Chapter in Book/Report/Conference proceedingChapter


The climate crisis is a result of market failure. Climate change caused by anthropogenic emissions is an externality that the market can not automatically correct without public agencies’ intervention. Public financial institutions (PFIs), owned or supported by governments with official missions to serve public policy objectives, play a key role in addressing such market failures. The government ownership and guarantee enable PFIs to facilitate capital for underfunded climate projects that private banks may find too costly. More importantly, PFIs’ involvement performs the de-risking role and makes certain climate projects financially attractive for private investors. Therefore, they help increase the total volume of available climate financing. We document that, despite their important role in climate finance provisions, PFIs’ climate finance allocation is highly skewed among countries and between mitigation and adaptation purposes. Most funds flow to large emitters for mitigation purposes, while limited adaptation finance does not necessarily reach the most vulnerable countries. We draw attention to the importance of considering the country’s climate priority and achieving a balance between mitigation and adaptation when PFIs allocate climate finance.

Original languageEnglish
Title of host publicationThe Routledge handbook of green finance
EditorsOthmar M. Lehner, Theresia Harrer, Hanna Silvola, Olaf Weber
Place of PublicationAbingdon, Oxon
PublisherTaylor and Francis
Number of pages12
ISBN (Electronic)9781000966169
ISBN (Print)9781032385297, 9781032385334
Publication statusPublished - 8 Nov 2023

Publication series

NameRoutledge international handbooks


Dive into the research topics of 'Public financial institutions and climate change'. Together they form a unique fingerprint.

Cite this