Stockholm (NordSIP) – Global climate finance finally hit the $2 trillion mark in 2024, according to analysis by independent non-profit Climate Policy Initiative (CPI). The organisation’s annual Global Landscape of Climate Finance (GLCF) reports aim to provide a clear picture of climate finance flows from the broadest range of public and private instruments and sources.
The overall growth in global climate finance over the 6-year period to the end of 2023 presents a promising picture but more needs to be done to be in line with Paris Agreement pathways. Although there was levelling off during the COVID-19 pandemic the compound annual growth rate for the period was 19%. Nevertheless, significantly more investment will be needed to close this climate finance gap ahead of the interim 2030 milestone.
Global climate finance 2018-2023 (USD billion nominal)
An average minimum annual investment of $6 trillion is needed from 2024 to 2030 to avoid the worst impacts of climate change, and well upwards of $7 trillion thereafter. The GLCF data shows that if the post-COVID-19 growth rate is maintained annual flows of $6 trillion could be achieved as early as 2028. These forward projections cover a wide range of potential global needs, with more than $11 trillion required by 2050 at the upper end of estimates.
Global tracked climate finance and estimated annual climate investment needs through 2050
Much of the recent growth in climate related finance has been linked to investments in heating, ventilation, and air conditioning by European households as well as financial institutions and companies in Latin America and the Caribbean, the Middle East, North America, and Central Asia and Eastern Europe. Meanwhile, budget constraint led to an 8% decrease in climate spending by the public sector.
Developing economies are a priority
According to the CPI, the key focus area for future climate finance growth is in emerging markets and developing economies (EMDEs). With the exception of China, these countries will need annual spending of at least $2.4 trillion over the short term. EMDE nations are often most vulnerable to the effects of climate change and have fewer resources available for mitigation and adaptation. The New Collective Quantified Goal on Climate Finance (NCQG) established at COP29 included $300 billion for developing countries, which despite being triple the previously agreed amount was considered by many to be insufficient. There is concern that recent cuts in international development assistance such as those announced by the US and UK may jeopardise the flows that are urgently needed.
In 2023 – the last full year in the GLCF report – mitigation financing of $1.7 trillion outpaced adaptation financing of just $65 billion. The mitigation flows were dominated by private sector investments in energy systems, transport electrification, and energy efficiency in the building sector.
According to the CPI, clean energy investment has become a significant driver of gross domestic product (BDP) in many countries. Clean energy technology contributed 10% to China’s economy in 2024. The CPI concludes that the necessary funds are globally available but must be properly directed towards activities that underpin long-term climate goals. The double effect of redirecting funds that currently support high carbon activities towards climate mitigation is especially beneficial.
The CPI will update the GLCF report later this year once the analysis of 2024 flows has been completed.
