Scaling Climate Finance: an Analysis of co‐financing Trends in the Global Environment Facility

Current estimates of the climate finance gap range from $4 to $6 trillion in annual funding requirements throughout the next decade. Achieving the goals negotiated in the recent 30th Conference of the Parties (COP 30) requires a coordinated finance mobilization campaign. Scaling climate finance can be achieved extensively and intensively. Extensively, climate finance growth occurs through an increase in the volumes of funding from donor countries and institutions. However, a key component of long‐run growth is intensive climate finance. We examine the co‐financing multiplier — the ratio of co‐financing mobilized per dollar of GEF grant — across projects in the Global Environment Facility (GEF), as a proxy for intensive climate finance growth. The choice of this multilateral fund as the object of this study is justified by the following: first, it is the core of the global climate finance architecture, second, it is the longest existing climate finance fund with ample data on projects dating back to the early 1990s; third, its impacts on climate mitigation and adaptation are measurable and its funding targets align with current climate finance demand. With an analytical sample of 5,066 projects across 8 replenishment phases spanning almost 35 years, three ordinary least squares (OLS) regression models were estimated to examine the determinants of absolute co‐financing volumes. This study provides an overview of the basic determinants of co‐financing and tests hypotheses using omnibus tests for group differences in parametric and nonparametric settings. Results suggest that larger project sizes tend to attract more co‐financing controlling for agency and focal area dummy variables; multifocal area projects on average mobilize more co‐financing than single‐focal area projects; multilateral development bank (MDB)‐implemented projects outperform United Nations (UN) agencies in additional finance mobilization, and projects that deploy non‐grant instruments, such as debt and equity, attract greater co‐financing from private and public institutions. This paper concludes by identifying various challenges in scaling climate finance.