New Vectors in the Development of the Global Climate Finance Landscape

This article was prepared by Inga Kononovich, Researcher in Climate Change Policy at the ICLRC, for the Climate Bulletin (Issue 44) (in Russian).

The Climate Bulletin is a collection of analytical articles on sustainable development. It is prepared by the team of Gazprombank’s Center for the Implementation of Sustainable Development Principles with contributions from authors of the International and Comparative Law Research Center and invited experts.

The new review of the climate finance architecture outlines key findings on its structure, volumes, and the agenda's development over the next few years. Despite climate finance surpassing $2 trillion in 2024, growth rates are nevertheless decelerating. Furthermore, sectors requiring a significant increase in climate investments remain chronically underfunded due to the lack of transparent evaluation approaches and incentives for private capital. The report highlights the growing role of developing countries, which are expected to define the climate finance agenda in the coming years. A key challenge remains the critical deficit of climate finance for adaptation, which requires international and public institutions to shift their approaches to financial resource allocation toward risk mitigation mechanisms.

In June 2026, the eighth Global Landscape of Climate Finance report was published, prepared by the Climate Policy Initiative (CPI).¹ As a leading international think tank, CPI has served since 2011 as a key data provider on climate finance for the United Nations Framework Convention on Climate Change (UNFCCC).² The new report identifies the main trends in the climate finance agenda in 2024, with particular attention to developing countries.

In a broad context, CPI³ defines climate finance as capital flows that contribute to climate change mitigation and/or adaptation.

Unlike in previous years’ reviews, CPI has altered its approach to assessing financial flows. The changes affected the accounting of dual-benefit finance projects;⁴ reshaping the methodology for evaluating South-South flows; as well as expanding the data perimeter by including contributions from national and international development banks such as the BRICS New Development Bank and the Asian Infrastructure Investment Bank (AIIB).⁵ Furthermore, the tracking of operations in the international capital market in the report is now carried out based on actual expenditures. A major innovation in 2026 was CPI’s first attempt to digitize ‘invisible’ climate capital — expenditures by individuals and households on adaptation, including drainage systems, rainwater harvesting, and local fire protection. However, due to the lack of unified approaches to evaluating such financial flows, the final figures are presented in a wide range from $17 billion to $78 billion in 2024.

Development of the Climate Finance Agenda in 2024

Climate finance growth is slowing down. Although annual climate finance flows reached the $2 trillion mark in 2024, the growth of funding for adaptation and mitigation projects has, on average, slowed down. According to the CPI report, climate finance growth was just 6% in 2024 compared to the 2019–2023 dynamics, where the average annual flows increase varied in the range of approximately 15–30%. According to CPI projections, the downward trend will intensify in 2025, and growth rates could drop to 2–3%. This is primarily due to the reduction of climate finance from international sources and lower contributions from developed countries.

The climate finance agenda continues to expand into developing country markets. Historically, capital has been concentrated in developed economies and China. Since 2019, these countries have consistently accounted for about 80% of global climate finance flows. However, in recent years, growth dynamics have shifted toward new regions. South Asia (led by India and Pakistan) and Sub-Saharan Africa have demonstrated investment growth rates in climate projects of around 20% since 2019.

Investments in climate projects come predominantly from domestic sources, while the share of international grant financing continues to decline. This is particularly sensitive for the least developed countries, which already face a high debt burden. In this context, national climate-related financial regulations play a major role. Despite a significant increase in such measures,⁶ the regulatory landscape remains uneven, and measures are predominantly voluntary, especially in developing countries.

Climate finance flows continue to be distributed extremely unevenly between adaptation and mitigation projects. In 2024, mitigation projects accounted for the largest share of climate finance ($1.9 trillion or 95% of the total volume). Despite significant institutional progress on adaptation within the UNFCCC in recent years,⁷ adaptation projects remain chronically underfunded. The core problems are the lack of commercial interest from the private sector and the poor traceability of private financial flows to such projects.

Sectoral imbalances in capital distribution are exacerbated by regulatory fragmentation across financial markets. According to the OECD data, about 20% of the world’s active green taxonomies have not yet formally integrated adaptation goals, remaining focused exclusively on climate change mitigation.⁸

Sectoral Landscape of Climate Finance

Global climate finance flows across economic sectors show a profound mismatch between mitigation-focused technologies and adaptation measures for vulnerable industries. Sectors of the economy such as agriculture and forestry remain chronically underfunded due to the lack of incentives from both national and international institutions.

In terms of financing mitigation projects, priority is given to the three most commercially attractive sectors: energy systems (48%), transport (25%), and buildings and infrastructure (18%). Conversely, sectors such as agriculture, forestry, and other land use (AFOLU), which offer high mitigation potential⁹ (primarily for methane),¹⁰ remain structurally underfinanced, with funding for these industries actually declining. According to the CPI report, the real investment needs of AFOLU are 153 times higher than current flows. For comparison, this investment gap is 31-fold for industry, four-fold for transport, 3.7-fold for infrastructure, and 2.5-fold for energy.

Unlike mitigation projects, the adaptation segment is dominated by international and public sources of finance.¹¹ However, current funding levels remain far too low to support adaptation efforts on a global scale.¹² This requires more active involvement of the private sector, particularly in developing countries. Currently, real adaptation needs exceed actual flows by more than 40 times, while the volume of international public financing for the least developed countries (LDCs) decreased by nearly 25% in 2024. In the sectoral structure of adaptation, about 82% of funds are consolidated in the water supply and sanitation sector, while the remaining 18% goes to cross-sectoral investments (including policy development and disaster risk reduction). Capital flows to the AFOLU sector for adaptation decreased by $1.7 billion, amounting to a modest $5.5 billion in 2024. Key barriers for private investors remain the localized nature of adaptation measures, the lack of standardized tools for natural capital monetization and assessing avoided damage, and weak regulatory incentives for disclosing non-financial information in many jurisdictions.

The Role of Developing Countries in the Climate Finance Architecture

Financing for developing countries (EMDEs)¹³ is key to combating the global climate crisis, accelerating economic transformation, and unlocking opportunities for green growth. The 157 EMDE countries represent nearly 90% of the world’s population and 40% of the global economy. Most of these economies are undergoing a phase of accelerated urbanization and industrialization, which sharply increases their energy consumption while simultaneously heightening their vulnerability to the devastating physical impacts of climate change.

Developing countries are systematically taking the lead in shaping climate finance regulation. According to OECD data, major developing countries in the Asia-Pacific region and Africa lead the way in adopting financial sector climate regulation measures, primarily transparency measures,¹⁴ which make up to 78% of their national regulatory framework. Over the period from 2023 to 2025, developing countries drove an explosive two-fold increase in the number of sustainable taxonomies worldwide.

In recent years, the most sustained increase in climate capital inflows has been recorded precisely in EMDE markets. According to the CPI report, investment growth rates in EMDEs (+10%) sharply outpaced those of developed countries (+1%) in 2024. China continues to lead the EMDE group (63% of total climate finance or $737 billion in 2024). However, the real drivers of growth in 2024 were other groups of developing countries, which showed an explosive average annual growth rate of 25% (totaling around $390 billion in 2024). The main drivers were India and Pakistan.

An important positive trend has been the strengthening of internal cooperation among developing countries without the participation of the Global North. South-South financing has demonstrated steady growth for the third consecutive year, reaching $27 billion in 2024. The main recipient of these funds was Latin America, while the fastest-growing region was Sub-Saharan Africa (+40%). Characteristically, private capital within South-South cooperation is highly specialized, with up to 91% of all investments focused on commercially mature and profitable projects in solar and wind generation.

However, against the backdrop of success for large developing economies, investments in the least developed countries (LDCs) plummeted by 21% (to $36 billion in 2024). The adaptation sector — critically important for LDCs — suffered the most, experiencing a record 35% drop (or ~$8.4 billion in 2024). The situation is further aggravated by the critical vulnerability of these countries' financing architecture, which relies on international public sources for 68% of its total funding. At the same time, the volume of non-repayable grants for LDCs is shrinking for the second consecutive year (14% reduction in 2024). The only financial instrument that showed growth in the poorest nations was commercial debt (+15% in 2024). However, replacing grants with commercial loans only exacerbates the debt burden of vulnerable nations, slows down the progress of projects (which are already often characterized by low returns in adaptation initiatives), and subsequently leads to substantial economic losses for these countries.¹⁵

Conclusions and Recommendations

Based on the analysis of the climate finance landscape, the CPI Global Landscape report proposes a system of recommendations structured around several key areas.

A special emphasis is placed on developing national capital markets in EMDEs and fostering South-South capital flows. CPI emphasizes the need to fundamentally reorient the mandate of international institutions, moving away from the practice of direct lending toward assisting developing countries in designing sovereign financial infrastructure, creating local markets for green instruments, and establishing national guarantee systems.

Given the focused involvement of private capital predominantly in commercially viable mitigation projects, the report's authors recommend that multilateral development banks actively mobilize commercial players in complex infrastructure programs in emerging markets by scaling up risk-sharing instruments. Such instruments include providing subsidized grants, taking on first-loss equity, and issuing risk guarantees. A common thread running through the entire array of recommendations is the need to prioritize financing for adaptation and resilience. It is these sectors that are characterized by low market attractiveness and require systemic public and international capital support, the localization of practices, and consideration of national specifics. For sectors with the deepest investment gaps (AFOLU), it is recommended to develop flexible, specialized sectoral models, including mechanisms for results-based finance.