Developing countries contribute the least to climate change but are most vulnerable to its impacts. Most of these countries are not resourced or prepared for these climate impacts and will continue to suffer loss and damage, with costs estimated at $447 to $894 billion in 2030 just in developing countries. In addition, they also often lack the resources needed to invest in and gain the benefits of a low-carbon, greener economy. Developed countries must increase public climate finance to help developing countries overcome these inequities.
In 2022, about $116 billion of climate finance to developing countries was deployed, with about $22 billion coming from private sources and $92 billion coming from public sources. The remaining $2 billion came from export credits.
For the first time, the total $116 billion is above the original $100 billion annual target agreed to at COP15 in 2009, but only begins to make up for the shortfall created by developed countries’ late achievement of the target.
A new climate finance goal has been agreed upon at COP29 in 2024 for developed countries to deliver at least $300 billion annually and move toward $1.3 trillion by 2035. Despite tripling the goal, the amount does not meet the needs and priorities of developing countries. Negotiations for “loss and damage” funding for residual damages — the economic costs that cannot be prevented through adaptation – are ongoing, with initial funding for the Fund for Responding to Loss and Damage far too low compared to the scale of climate-related disasters.
While the specific distribution of investment between public and private resources is not consistently articulated by developed countries, greater private climate investment for developing countries is essential to scaling and sustaining adequate climate finance capital flows.
Public and private financial institutions should work together to ensure that climate investments in developing economies are facilitated by the most appropriate and impactful sources of capital. Public climate finance, for example, is suited to support investments that are riskier and provide public economic benefits, while private finance can bring speed and scale to climate investments that provide predictable economic returns. For reference, of the $22 billion in private climate finance deployed in developing countries in 2022, about 16% for adaptation and 84% for mitigation and cross-cutting purposes. The share dedicated to adaptation has grown from 4% in 2016 to 16% in 2022, peaking at 25% in 2020.
Developed countries urgently need to find more effective ways to unlock public and private capital — both to support their existing climate finance commitments and to meet the ongoing needs of developing countries.