Is Climate Finance Actually Working for the Most Affected Countries?
At COP29, developed countries pledged to take the lead in mobilizing at least $300 billion annually by 2035 to help developing nations tackle the climate crisis.
It might sound impressive, but we've been here before. Back in 2009 at COP15, the pledge was $100 billion a year by 2020, a target that was ultimately missed by two years. Even then, many have disputed whether this goal had actually been reached, citing some questionable accounting methodologies. All this raises a bigger question – what actually counts as climate finance? And who decides?
What is climate finance?
The UNFCC defines climate finance as “local, national or transnational financing – drawn from public, private and alternative sources of financing – that seeks to support mitigation and adaptation actions that will address climate change”.
Simply put, it's money to fight climate change – funds to help countries reduce emissions (mitigation) and adapt to the damage that's already happening (adaptation).
Developed countries are supposed to provide a significant portion of these financial resources to developing countries, in line with the principle of "common but differentiated responsibilities" (CBDR) of the UNFCCC. This is critical to support developing countries in achieving climate goals without compromising their basic development goals.
But key problems remain:
- How much money is actually reaching developing countries?
- Is this money coming as helpful grants or burdensome loans?
- How easy is it for countries to access funds?
- Are donors being held accountable for paying what they promise?
The Funding Gap
How much finance is required?
To meet the targets set by the Paris Agreement, developing nations (excluding China) require a yearly investment of $2.4 trillion by 2030. Of this total, about $1 trillion needs to be sourced externally.
How much was pledged?
COP29 increased the ambition of fund flows from developed countries under the New Collective Quantified Goal from $100 billion to $300 billion annually by 2035. However, a 'Baku to Belém Roadmap to $1.3 Trillion' was also launched to scale up climate financing ambition to match the required investment in the years ahead. This roadmap is being developed this year and will be presented at COP30 in Belém, Brazil, in November.
How much was delivered?
As per OECD, developed countries provided and mobilized $115.9 billion in 2022, reaching their collective annual goal for the first time. However, various developing countries and other stakeholders have noted the following issues with this estimation that inflates the reported amount:
- Possibility of overstating the climate relevance of projects in self-reporting by bilateral aid agencies and multilateral development banks (MDBs)
- Inclusion of public finance provided at market rates,
- Possible reclassification of existing developmental aid as climate finance
- Counting of commitments (which are not backed by actual flows) under the reported climate finance figures.
Correcting for (1) and deducing the grant equivalent amounts for (2), Oxfam has reported that the real value of climate finance support was between $27.9 and $34.9 billion, excluding private finance mobilised by public capital.
How was it delivered?
Only a quarter of the public climate finance was provided as grants, the majority of it being delivered as loans without concessions. This is particularly detrimental for the countries most affected by climate change, which are already facing a debt crisis.
“These (debt stress) challenges severely affect young children in our country... we face numerous problems: schools lack basic necessities like desks and books, and we have a shortage of teachers. The situation is even worse for people with disabilities, who receive virtually no support.
The healthcare sector is equally concerning. Our country lacks specialized children's hospitals, forcing sick children to wait in lines with adults – a situation that could be fatal. The shortage of medicines in hospitals is another critical issue contributing to increased child mortality rates.
Social welfare is also struggling. The Social Cash Transfer program, designed to help families living in poverty, is no longer effective.”
Barriers to access and accountability
Even when climate funds exist, frontline communities face several challenges in accessing them. Most of the finance flows (not just international public finance) are skewed too strongly towards mitigation and not enough towards adaptation.
Financing is also skewed towards sectors such as energy and transport and lags behind in agriculture, food systems and small industries that matter most for day-to-day survival in vulnerable communities.
These sectors are critical for emission mitigation and for simultaneously advancing other Sustainable Development Goals (1, 2, 8, 9, 11, and 12) in developing nations.
Small Island Developing States (SIDS) and the Southern African nations are among those most affected by climate change, and yet they face particularly significant barriers to accessing climate finance. Institutional constraints hinder project development and implementation, including limited technical and human capacity, bureaucratic approval processes, and difficulties meeting fiduciary requirements.
Additionally, fragmented climate finance systems, regulatory gaps, high transaction costs, and a lack of tailored financial mechanisms reduce funding opportunities, making it crucial to strengthen political commitment, streamline processes, and create an enabling environment for effective climate finance mobilization.
And let's not forget: these systems were built without the input of those whose fortunes are most closely tied to them.
“The core issue isn't a lack of money in the world. Rather, the problem lies in the fact that the current global economic and financial system is outdated, flawed, and deeply unfair... This system systematically undermines the most vulnerable, including women, children, and young people... despite political commitments to the contrary, private rules and mechanisms in development finance...
This injustice stems from the fact that decisions on development, finance, and economic issues are made in non-inclusive forums where global powers dominate the agenda and decision-making. Global South countries cannot participate on an equal footing, and the voices of the most vulnerable are not truly represented.”
Why should we remain hopeful for reforms in climate finance?
Addressing these barriers requires coordinated action, even when multilateralism is seen as faltering. Despite current concerns, several factors suggest that driving consensus and action is still possible:
Interconnected global systems
Our economies, supply chains, and ecosystems are closely linked, so climate impacts and economic shocks in one region can quickly affect others. Collaborative efforts in climate finance help mitigate risks that no nation can face alone.
Historical progress of UN processes
Past UN platforms, such as the COP meetings and the Addis Ababa Action Agenda, have successfully set global priorities and raised ambitions for sustainable development. These processes have driven measurable (albeit slow) progress and established international norms, proving that coordinated global action can yield results.
Setting global norms through Outcome documents
While not legally binding, outcome documents of UN processes shape international expectations and generate peer pressure. They rely on reputational incentives to encourage countries to honour their commitments, reinforcing collective accountability in climate finance.
Innovation and youth engagement
Advances in technology and the rising influence of youth are transforming how we address climate challenges. New tools for transparency, data tracking, and digital communication are making it easier to hold nations accountable, while young activists are pushing for bold, innovative solutions that drive systemic change.
A window of opportunity: The Fourth International Conference on Financing for Development and the Road to COP30
From June 30 to July 3, the UN will bring together various stakeholders at the Fourth International Conference on Financing for Development (FfD4) in Seville, Spain. It's a chance to demand better systems – not just for climate finance, but for all funding related to the SDGs.
Here's what civil society is asking for:
- Enhancing climate finance commitments with improved access – Developed countries should meet and exceed pledges while ensuring funds are predictable, accessible, and effectively deployed to support climate action in developing nations. FfD4 should work towards establishing a common definition of climate finance and advocate for open data sources and platforms to enhance transparency in delivery.
- Strengthening MDBs for climate action and resilience – FfD4 must champion the G20 IEG's MDB reform agenda, compelling MDBs to adopt a triple mandate—eradicating poverty, boosting prosperity, and addressing global public goods—and to triple sustainable lending by 2030. To achieve this, FfD4 should advocate for a new funding mechanism that mobilizes private sector capital alongside streamlined operational procedures and enhanced risk management frameworks, ensuring MDBs become more efficient and responsive for the most vulnerable countries. Critically, FfD4 must also insist on the creation of an independent monitoring body to guarantee the thorough implementation of these reforms.
- Advancing tax and debt reforms for financial stability— The UN Framework Convention on International Tax Cooperation should be a priority to prevent tax base erosion, illicit financial flows, and corporate profit shifting. A debt resolution mechanism must be created to prevent debt crises in climate-vulnerable nations, including provisions for fair debt restructuring and cancellation and should ensure that climate finance does not add to financial burdens.
- Ensuring effective governance of climate finance and financial innovations – FfD4 should establish clear global oversight and accountability mechanisms, with fair consideration of Global South perspectives, to promote blended finance, prevent misuse of private investments, and ensure that emerging financial tools—such as carbon markets, green bonds, and digital finance—align with sustainable development goals and benefit all nations equitably.
How can young people engage with climate finance processes and FfD4?
Global engagement
Participate in international processes: Join platforms like the Civil Society FfD Mechanism and youth delegations during events such as FfD4 and suggest and demand reforms.
Join the Engine Room: Meet young people that are getting organized from a local and global level to push for change on financing for the future.
Stay updated: Follow developments and resources on the FfD4 website.
Local and national action
Engage locally: Connect with local civil society organizations and NGOs that focus on climate finance advocacy. Use public data and reports to track your government's climate finance commitments and budget allocations.
Hold policymakers accountable: Participate in town halls and advisory panels, or join petitions and media campaigns to demand stronger action.
Support community initiatives: Get involved in local projects that promote sustainable investments and green developments.
“[Young people are already going] beyond simply saying, "you need to include me", to asserting "I'm going to be included because I know and understand the issues, and I'm committed from the perspective of the younger generation.”
Conclusion
The current system of climate finance falls short, leaving vulnerable communities without the resources they need to adapt and thrive.
Climate finance is not just a matter of policy – it's about justice. It is a moral imperative to reverse historical and intergenerational inequality. The future of billions depends on fulfilling promises and ensuring that climate action is genuinely global.
The FfD4 outcome, COP29 outcomes and the refinement of the 'Baku to Belém Roadmap to $1.3 Trillion' offer windows of opportunity to sustain the momentum and scale up ambition and action at COP30.
The international community must persevere and act decisively to ensure that climate finance reaches those who need it most and in forms that do not exacerbate existing economic burdens. The most affected countries cannot wait – climate finance must be accessible, reliable, and equitable, before they run out of time.
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