The Paris UN Climate Agreement in December 2015 refocused attention on the need to mobilise substantial private capital flows into climate solutions at the pace and scale required to combat climate change with the required urgency.

Implementation of national clean energy or ‘green’ infrastructure plans will require unprecedented levels of private investment, not only for climate reasons, through nationally determined contributions (NDCs), but also to deliver energy security and access to energy for those who lack them, as well as creating the conditions for sustainable development.

Now, more than ever, it is critically important for policymakers and non-financiers to understand and interface with the financial community to establish effective conditions at national level, where the investment case will have to be made.

As a practical contribution, this finance guide provides a factual overview of the landscape of finance – sources of capital, what the capital markets do, how transactions work – and more broadly sets common finance terms in context.

The guide reflects recent changes in market conditions, financing structures, and relevant policy debates. Topics covered include:

• How finance generally works;
• What the different parts of the finance sector do;
• What issues financiers consider when investing, including the role of policy and regulation;
• Capital markets and where, for example, ‘green bonds’ fit in;
• The variables affecting finance decisions;
• Energy efficiency – an expanded section, and an update on issues relating to emerging or developing-country markets;
• A practical focus on ‘climate finance’, including finance-sector-led initiatives that are accelerating actions at both the low- and high-carbon end of the spectrum.