Climate finance can be effective in many ways, for instance, directly by reducing GHG emissions or, indirectly, by promoting structural change, by creating an enabling environment, by building capacity and institutions and by catalyzing private investment. A better understanding of these dimensions and impacts, particularly if translated into key principles than can be applied, will likely contribute to more effective spending.

Improving effectiveness requires considerable changes in institutions’ and countries’ mindsets, particularly related to transparency, mutual account­ability and opening up to a wider range of actors.