Policy Context

Addressing climate change is a fundamental priority for UK development policy: The November 2023 White Paper on International Development identifies three core goals for UK development policy: eradicating poverty, combating climate change, and addressing biodiversity. The White Paper focuses on mobilizing more public and private climate finance, supporting ambitious international agreements, including on adaptation and biodiversity, helping countries transition to clean and affordable technology, and helping farmers to secure livelihoods through sustainable and resilient agriculture and food systems.

The UK has committed to providing GBP11.6 billion ( US$13.9 billion) in the form of international climate finance between FYs 2021/2022 and 2025/2026. As part of this commitment, it has set itself the target of tripling its adaptation funding to GBP1.5 ( US$1.9 billion) billion in 2025, maintaining a balance between adaptation and mitigation and ensuring at least GBP3 billion ( US$3.7 billion) of ICF is spent on protecting and restoring nature, including GBP1.5 billion ( US$1.9 billion) for forests.

In March 2023, the UK released its first-ever International Climate Finance Strategy for guiding its International Climate Finance investments: It identifies four key priority areas for investment:

• Supporting clean energy;
• Nature, climate, and people;
• Adaptation and resilience; and
• Sustainable cities and infrastructure

The strategy also commits to strengthening the gender-responsiveness and inclusivity of UK climate finance for both adaptation and mitigation, including by increasing the proportion of climate finance that has gender equality as a principal or significant objective as defined by the OECD DAC Gender Equality policy marker.

The UK published its 2030 Strategic Framework for International Climate and Nature Action in 2023, which set out a whole-of-government plan for global action: The framework identified six global challenges that need to be met and outlines 137 specific actions that the UK will undertake to address them. Adaptation is a prominent focus, with actions encompassing investments, advocacy, and partnerships. In the framework, the UK commits to driving all countries to double adaptation funding by 2025, working through coalitions and within international for to establish a new global adaptation target and supporting the establishment of a loss and damage fund, among other initiatives.

ODA Spending

How much ODA does the UK allocate to climate projects?

In 2022, the UK allocated US$2 billion in ODA commitments tagged as being principally or significantly related to climate change adaptation and/or mitigation, making it the 7^th-largest OECD DAC donor to the issue, in absolute terms. This is a large jump from the UK's 2021 ranking of 13^th, likely due in part to the changed ICF calculation methodology as well as a climate reporting issue .

The UK was the 9^th-largest donor to climate ODA in relative terms, increasing from 20^th in 2021. This is also likely due in part to new methodology and the climate reporting issue.

How is the UK's climate ODA changing?

In 2022, 40% of the UK’s bilateral allocable ODA was spent on projects with a principal climate change component, well above the DAC average of 9%.

The UK government announced GBP1.6 billion (US$1.9 billion) in climate commitments at COP28 in December 2023, of which GBP888 million ( US$1.1 billion) was considered new additional climate funding. The announcements included up to GBP60 million ( US$72 million) of funding for loss & damage, up to GBP500 million ( US$599 million) for the Investment in Forests and Sustainable Land Use Program, and GBP316 million ( US$378 million) for energy innovation projects, including GBP185 million ( US$221 million) via the UK’s Ayrton Fund for a planned UK-led Climate Innovation Pull Facility, which will use market incentives to create demand for innovations in developing countries on green energy.

At COP29 in 2024, the UK committed to a new initiative supporting forest tenure rights for indigenous and local communities across the Amazon Basin. GBP100 million of funding will be given for BII's new Mobilisation Facility, which will drive up to GBP500 million (US$647 million) of private capital into investments that support other countries in their transition towards net-zero. The UK also announced a guarantee of US$280 million to the new IFCAP initiative, which the UK is a founding partner together with the ADB, and other financing partners. The UK’s guarantee contribution will unlock US$1.2 billion of additional climate finance, at no upfront cost to the UK.

How does the UK allocate climate ODA?

Bilateral climate-related ODA

13% of the UK’s bilateral allocable ODA was screened against the Rio markers as targeting climate change. This is below the DAC average (24%) and far from the government’s target of aligning all ODA with the Paris Agreement.

In 2022, US$738 million of the UK’s climate-related ODA targeted both climate mitigation and climate adaptation, with mitigation as a priority.

Bilateral climate adaptation-related ODA

Between 2017 and 2021, the UK's bilateral ODA to climate adaptation decreased by 81%. The substantial decrease in funding was mainly caused by the cut in the ODA budget in 2021 to 0.5% of GNI from 0.7% in previous years, as well as the repurposing of unspent international climate finance for support to Ukraine. The peak in 2021 was a result of large commitments across multiple regions and sectors, and in line with the UK government's commitment to doubling UK international climate finance in that year.

Adaptation-related ODA in 2021 to environmental protection primarily targeted environmental research and biodiversity. Multi-sector funding predominantly supported research and scientific institutions. Within the agriculture sector, priority was given to rural development and agricultural research. Funding for agriculture decreased significantly from US$285 million in 2019 to US$196 million in 2022.

Multilateral Spending and Commitments

The UK contributes some of its climate financing through multilaterals. Not all these funds are considered ODA. In October 2023, the UK announced its single biggest climate change funding commitment, pledging GBP1.6 billion ( US$2 billion) to the GCF. The pledge is part of the UK commitment at COP27 to triple funding for climate adaptation.

Funding Outlook

What is the current government's outlook on climate ODA?

The UK government in late 2023 made public for the first time its ICF spending and projected forecasts. Prior to this, there has been no regular annual public reporting of how much the UK had spent on ICF. The UK noted that it has spent US$2 billion in FY2021/22, falling to US$1.9 billion in FY2022/23. ICF is then forecast to rise in FY2023/24 to between US$1.9 – 2.5 billion and to rise again in FY2024/25 to US$3 – 3.4 billion and in FY2025/26 to US$4.1 – 4.7 billion.

These projections by the UK government take account of recent changes made by the UK to the way it accounts for ICF. The changes, announced in October 2023, enable the UK to now count:

• 30% of all humanitarian spending to LDCs as ICF: About 10% of total humanitarian ODA was spent in LDCs;
• The actual amount BII invests in climate: Under the old methodology the UK assumed 30% of BII went to climate, but the UK government noted the belief that the figure is much higher, hence the move to actual count the exact amount; and
• The amount of UK funding to MDBs spent on climate: Under the old methodology, only bilateral spending was counted.

A rapid review of the UK’s international climate finance commitments by the ICAI, the UK’s international assistance watchdog, found that 55% of the UK’s US$13.9 billion ICF commitment will not be disbursed until 2025/26, the last years of the pledge. The review also found that US$2.1 billion of existing funding was recounted as ICF spending, due to the change in counting methodology.

Due to the delay in disbursements and changes to the counting of ICF, ICAI estimated that around 28% of UK ODA will be counted as ICF in 2024. This is far below estimates made in 2023 prior to the changes in the way ICF is counted were introduced, which suggested as much as 83% of the UK ODA budget would be ICF – causing concern that ICF investments displace other UK development priorities.

Key Bodies