Digitally Driven Model of a Climate-Neutral Economy in Terms of Global Financial Capacity

Abstract

The article explores the conditions and drivers for the development of a climate-neutral economy model, emphasizing the pivotal role of digital transformation. A crucial lever in deploying this model is the proactive engagement of international financial entities within the realm of global green financing. The study highlights the instrumental role of green funds as key players in shaping global financial capacity and providing multilateral support for climate change adaptation worldwide. It delves into the overarching frameworks and mechanisms of such assistance. Employing a systematic analysis alongside case studies of the Green Climate Fund's projects, the authors aim to identify the most impactful sectors for cultivating a climate-neutral economy. The research identifies four essential segments for achieving climate neutrality: digitalization for climate, strengthening the financial capacity and business sustainability, rethinking ecosystem development, and community empowerment. The investigation draws on extensive data regarding the execution of 240 climate projects across major beneficiaries of climate finance in Eastern Europe, Africa, the Asia-Pacific, and Latin America. It shows that modern climate finance demonstrates signs of geopolitical dependency and polarization in global influence. The findings argue for bolstering the regional presence of climate funds to increase the financial capacity to implement climate-neutral projects at the local level. The article underscores the scale of financial support required across each segment, as well as the leading role of pre-project preparation. The authors substantiate the overarching and twofold role of digitalization in the model of a climate-neutral economy. The digital transformation produces a whole cluster of independent and versatile IT products for green businesses, industries and governance. On the other hand, digitalization creates an informational environment and a powerful digital infrastructure for better efficacy of other crucial segments. Specifically, it provides digital decisions for financial solvency and sustainability of green businesses in terms of green lending, grants and Fintech; strengthens information awareness and involvement of vulnerable communities in green economy processes; promotes digital support for overall ecosystem adaptation.