Climate Finance Report 2025

Chapter 2 | STRATEGIC FRAMEWORK & COMMITMENT

unpredictable rainfall and more frequent natural disasters. SIDS face growing threats from sea level rise and coastal erosion, which damage critical infrastructure, reduce fresh- water availability and put entire communities at risk of dis- placement. At the same time, LDCs — many of which de- pend heavily on climate-sensitive sectors like agriculture — can see hard-won development gains reversed by extreme droughts, floods and the spread of climate-related diseases. These overlapping vulnerabilities create an urgent need for international support in both adaptation and mitiga- tion efforts, highlighting the importance of accessible and effective climate finance to strengthen resilience and protect long-term development progress.

growing commitments current financing remains inadequate, particularly for adaptation efforts in vulnerable regions.

At the 2024 World Bank Spring Meetings experts estimated that climate finance needs already stand at US$8 trillion per year, rising to US$10 trillion annually beyond 2030. This surge reflects not only the increasing urgency of emission reductions but also the growing need for adaptation and resilience as climate disasters become more frequent and severe. Floods, droughts, hurricanes and heatwaves are already causing significant economic losses and humanita rian crises, reinforcing the need for urgent action. Recognizing this persistent shortfall the international com- munity has taken steps to scale up climate finance. At COP29 in 2024 countries agreed on the New Collective Quantified Goal on Climate Finance, committing developed nations to mobilize US$300 billion per year by 2035 for develop- ing countries. 3 This represents a threefold increase over the previous US$100 billion annual goal set in 2009, signaling a higher level of ambition. However, this amount still covers only a fraction of the US$2.4 trillion annual financing needed for EMDEs and is far below the estimated US$8–10 trillion required globally per year. Bridging the climate finance gap will require significantly greater private sector mobilization, stronger international collaboration and innovative financing mechanisms to drive investments at scale.

Global Climate Finance Needs

Global climate finance has grown significantly in recent years, yet it remains far below what is needed. According to the Climate Policy Initiative (CPI), annual climate finance levels nearly doubled from US$653 billion in 2019–2020 to an average of US$1.3 trillion in 2021–2022. While this growth is encouraging, funding must increase fivefold to align with the 1.5°C target. IPCC estimates that global climate finance needs range from US$5 trillion to US$12 trillion per year through 2050, with emerging markets and developing economies (EMDEs), excluding China, requiring US$2.4 trillion annually by 2030 for climate and nature-related investments. Despite