Climate Finance Action Fund (CFAF)

Source- This post on the Climate Finance Action Fund (CFAF) has been created based on the article “UN COP29 Azerbaijan: Will the new Climate Finance Action Fund (CFAF) help developing countries?” published in “Down to Earth” on 29 July 2024.

Azerbaijan, the host of the 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change, has announced the establishment of the Climate Finance Action Fund (CFAF).

About the Climate Finance Action Fund (CFAF):

1.  Azerbaijan will be a founding contributor to the fund, which will be supported by contributions from fossil fuel-producing countries and companies in the oil, gas, and coal sectors.

2. The fund’s secretariat will be based in Baku, Azerbaijan.

3. The CFAF is one of 14 initiatives launched under the framework of the COP29 thematic days.

4. Purpose: It aims to mobilize the private sector and de-risk investment through a public-private partnership model.

5. The fund will include special facilities providing concessional and grant-based support to address natural disasters in developing countries.

6.  The initial fundraising round seeks to raise $1 billion, and the fund will become operational once 10 countries have committed as shareholders.

7. Capital Allocation:

i) 50% of the capital will be directed towards climate projects in developing countries, focusing on mitigation, adaptation, and research and development.

ii) The remaining 50% will support countries in meeting their Nationally Determined Contributions (NDCs) to achieve the 1.5°C temperature target.

8. Revenue Allocation:  20% of the revenues generated from investments will go to a Rapid Response Funding Facility (2R2F) that offers highly concessional and grant-based support.

UPSC Syllabus: International Organisation