Managing Finance for a Net-Zero Transition: A Global Political Economy of Risk Governance in Climate Finance

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Large volumes of finance need to be mobilised if countries are to achieve increasingly ambitious Nationally Determined Contributions (NDCs- non-binding commitments to reduce national emissions and adapt to the impactsof climate change) to address the climate crisis. States in the Global North and global financial institutions are now committed by the Paris Agreement mobilising $100 billion per year to providing climate finance to support the Global South. Given the volume of finance required, states use public funds to mobilise private finance to meet the target of achieving 'net-zero'. To do this, Global North actors use a set of technical instruments that translate the uncertainties of financial allocation into calculable risks. Global public actors are therefore increasingly embroiled in the 'financialisation' of climate governance through 'financial risk', a trend that remains understudied.To interrogate the relationship between the political economy of financial risk and NDC financing, this project will build on the theoretical insights of Global Political Economy (GPE) and Global Environmental Politics (GPE). Using a constructivist lens to understand the construction and effects of dominant discourses, I will trace how the mobilisation of risk by global financialinstitutions is shaping the allocation of climate finance- in particular studying the Climate Investment Fund's (CIF) mitigation financing in India. The CIF's mitigation finance is emblematic of the emergence of a development orthodoxy focused around the 'de-risking' state (Gabor, 2021a & 2021b). The investment of CIF climate finance in India has been selected as the CIF is a principal multilateral institution of climate finance and has arguably been a primary driver of the blended finance approach. India, meanwhile, has experienced the largest inflow of climate finance from global donor organisations totalling $2.6bn per year on average since 2015 (CIF, 2022a). CIF alone has provided $794 million, with $9.54 billion of co-financing, to India since its establishment (CIF, 2022a). I will use this case study to interrogate how financial risk impacts the allocation of the Fund's mitigation financing inIndia, and the distributional impact of this model of climate governance.I will employ a process tracing methodology, 'following the finance' from the Global North donors through the CIF, and to India. This will allow me to trace how risk concepts and tools is influencing how public actors perceive where they should spend capital, which projects are rendered legible, and how this impacts the distribution consequences of climate finance allocation. The analysis will be principally qualitative, conceptualising risk as a 'social fact', to unpick how it is mobilised by the CIF and key partner organisations. The research will include conducting interviews with key actors at decision points in the flow of mitigating financing, for its inception to implementation, to theorise how they mobilise risk tools to make decisions about where to allocate capital and why. Furthermore, interviews with individuals from the communities impacted CIF mitigation financing will allow me to conceptualise its distributional consequences in India. Using this approach, I will answer the following research question- 'To what extent does the political economy of financial risk impact the governance of climate finance, and with what distributional impact on climate finance in India?'.GPE, through its stress on politicising seemingly technical phenomena in climate governance, offers theoretical resources to unpick the politics of the net-zero transition. By doing so, the project will provide valuable insights into the socio-economic impacts of NDC financing. Furthermore, the projectwill provide resources to understand and engage with complex and abstract representations of risk.