Context

Despite broad recognition of the existential threat posed by climate change, the global community has been slow to move to curb its progression. Intensifying climate change has led to ever-worsening damage to ecosystems, livelihoods, and global health security, with the world's most vulnerable among the hardest hit. The global community has an important role to play in supporting these communities as they are forced to adapt to the dangerous realities of our changing climate.

Donor funding for climate change adaptation and mitigation is an essential complement to increase the capacity and investments of LMICs to respond to the climate crisis. In 2022, OECD DAC countries delivered US$54.6 billion in climate finance, lower than the US$100 billion annual climate finance goal originally pledged in 2015.

At COP29 in autumn 2024, the parties adopted the NCQG to replace the US$100 billion goal, agreeing to provide US$300 billion annually to 'developing countries' to support their obligations under the Paris Agreement and respond to their needs in the face of rising temperatures.

Read more on the fulfillment of climate finance commitments with the Climate Finance Commitment Tracker.

Funding Trends

How is ODA to climate projects evolving?

After years of incremental increases in bilateral allocable climate-related ODA, 2021 has seen a significant decrease in funding – both when looking at absolute numbers and also when looking at the share of total bilateral allocable ODA that donors are committing to climate change adaptation and mitigation. In 2021, funding stood at US$34.5 billion – a 16% decrease compared to US$41.3 billion in 2020. This includes funding for projects with climate both as a principal and significant objective.

US$22.9 billion went to adaptation-related projects, while US$17.7 billion went to mitigation-related projects. Of these, US$6.1 billion went to projects related to both adaptation and mitigation. In general, US$13.7 billion (11%) went to projects with climate as a principal objective, while US$20.9 billion (17%) of projects had climate as a significant objective.

Top Donors & Sectors

Who are the top donors to climate issues?

In 2022, the largest donors of climate-related ODA (including both principal and significant funding) were Japan, Germany, and the EUI. Collectively, commitments from these three donors account for 58% of total bilateral climate change adaptation and mitigation funding from all DAC countries. This is a decrease from 71% in 2021, indicating that sources of climate finance may be diversifying.

Donors’ prioritization of climate-related projects varies widely, as indicated by relative funding of climate projects compared to total bilateral ODA. The DAC average is 24%.

Japan remains the largest DAC donor in absolute and relative terms for climate-related ODA, with 77% of its total bilateral allocable ODA in support of climate projects. An important consideration, however, is that Japan provides 71% of its ODA as loans.

Japan is followed by Germany in absolute terms, however, Germany is only the sixth-largest donor in relative terms. The third best performing DAC donor in relative terms is France, with 59% of its bilateral allocable in support of climate change in 2022.

What are the top climate ODA sectors?

46% of donor countries' climate-related commitments in 2022 are focused on projects in three sectors: infrastructure, agriculture, and energy. The high funding for infrastructure is strongly influenced by Japan as a donor country. It provides the majority of its climate funding to infrastructure and accounts for 69% of the total funding from all DAC donor countries in this sector.

Adaptation

The Paris Agreement recognizes that adaptation is an integral part of the global response to climate change, but despite the increase in global financing for adaptation, it remains far below the levels required. The Global Center for Adaptation found that global adaptation finance decreased from 7% in 2019–2020 to 5% of total climate finance in 2021–2022. In absolute terms, annual adaptation finance in 2021–2022 totaled US$63 billion, increasing by 28% from the previous period. Climate mitigation finance, in contrast, saw much faster levels of growth. The vast majority of adaptation funding came from public actors and was invested domestically, especially in Asia.

In 2021, HICs made the commitment to help vulnerable countries adapt to climate change by agreeing to double their assistance to adaptation to reach US$40 billion by 2025. Without a much greater focus and funding for climate adaptation in LMICs, the expected increase in natural disasters and humanitarian crises is likely to roll back progress in key development sectors.

Bilateral donor funding makes up an important part of the funding for adaptation for LMICs. The advantage of directly channeled funding is that it more often takes the form of grants, lessening the debt burdens of LMICs. It can also better support current adaptation programming which is typically not yet well-suited to debt financing, with most projects estimated to not yet providing a clear financial return on investment.

The framework for the GGA, introduced alongside the Paris Agreement, was finally agreed upon at COP28, after many years of slow progress. The framework features 11 adaptation targets that will be operationalized at COP30 in Brazil in 2025, including targets on themes such as water, biodiversity, food, and health.

What are the key debates and topics surrounding climate adaptation?

Reform of the international financial architecture, including fulfilling past financial commitments, optimizing existing financing mechanisms, and mobilizing new sources of innovative financing, is seen by many low- and middle-income countries as going hand-in-hand with better climate action and more climate financing.

Increased engagement of the private sector in climate finance presents a unique opportunity to drive investment, foster innovation, and build thriving markets in clean energy, sustainable transport, green infrastructure, and climate-resilient agriculture. However, private climate finance investments have been slow to materialize. Climate advocates have called for the implementation of policies making climate investments more attractive, and for public institutions, development banks, and climate funds to de-risk private investments by taking on early-stage risks, funding infrastructure, and supporting climate projects.

In 2024, climate finance took center stage at COP29 with parties adopting the NCQG, agreeing to provide US$300 billion annually to 'developing countries' to support their obligations under the Paris Agreement and respond to their needs in the face of rising temperatures. The NCQG replaces the US$100 billion goal, dating back to COP15 in 2009, when developed countries agreed to provide this amount annually to developing countries by 2020. The Paris Agreement reiterated the goal and paved the way for a new goal to be established before 2025, resulting in the NCQG.

While the NCQG marks a key step in global climate ambition, it fell far short of the US$1.3 trillion annual figure sought by many emerging economies. The final negotiations were marred by the uncertainty posed by the re-election of Donald Trump, and the potential consequences of the US exiting the Paris Agreement, casting doubts on overall flows of climate finance.

Unless otherwise indicated, all data in this section is based on commitments. For more information, see our Donor Tracker Codebook.