Fossil fuel subsidies alone in 51 major countries during the same period (2011-20) were 40% higher than total global climate investment. Moreover, nearly 80% of climate finance comes in the form of debt, mostly originating in and destined for East Asia and the Pacific, North America, and Western Europe, followed by Central Asia and Eastern Europe. As it were, the majority of Global South countries still do not figure prominently as origin or destination countries for climate finance, save from international donors.

For a more detailed discussion, we refer to the work of Transparency International (Germany, global):

“Considering that energy markets and climate finance instruments are embedded in the international financial system, some forms of grand corruption related to climate change policies have a transnational character. (…) For example, in the case of state capture, if it is foreign actors (e.g. multinational firms) that try to exert undue influence on policymaking processes in a particular country, this means that state capture has a transnational aspect. (…)
As with any significant economic transformation, energy transition disrupts the existing power structures and creates new winners and losers. Thus, at the outset, it is important to keep in mind that contextual factors, such as levels of economic development and quality of institutions can influence how powerful political and business interests will react to new constraints and opportunities that the energy transition brings. These factors may intervene and shape the impact that grand corruption has on the efforts to achieve green transition, as well as the likelihood of it materializing. (…)

[As] a capital-intensive sector, energy markets are prone to control by a small number of actors, especially regulators (making it vulnerable to regulatory capture) and government, which can pursue policies that limit the ability of private companies to implement projects. (...) [The] sector is characterised by a close cooperation between political and business actors, which opens a space for collusion between these networks. (...) [It] includes large value public procurement contracts, which are particularly vulnerable to corruption risks.
Climate finance consists of huge money flows, which is attractive to corrupt actors. Additional characteristics inherent to climate finance may also exacerbate corruption risks, including unclear and changing regulations, improper monitoring, the field’s highly technical nature, a spending imperative due to urgency, and others. (…)

Considering the role of international finance, including private sources, one potential challenge refers to the concept of 'concessions for aid'. Namely, donors may require certain concessions in exchange for financing, such as tax breaks or favourable legislation, which increase the risks of state capture with a transnational component. (…) Further, climate finance is a prominent segment of blended market finance. An important challenge of blended finance is the large number of participants and complex financing arrangements which make monitoring much harder. (…) An additional challenge is the different priorities of donors and recipient countries, which may result in projects favouring narrow interests of western donors and firms.”

Finally, the role of private capital in both fossil fuel and environmental, social, and governance (ESG) investments in the climate transition deserves more attention. “When the general public experiences a crisis, private capital investors often spy opportunity. They typically invest in distressed assets or exploit price differences across securities, seemingly without regard for collateral damage to people or planet. For example, following divestment in fossil fuels by investors in public markets, private equity investors began to purchase these once-stranded assets at a significant discount, arguably propagating the climate crisis.”

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