Research group Climate Policy Initiative (CPI) recently released its Global Landscape of Climate Finance 2025 report, offering a comprehensive overview of capital flows for climate action across sectors, regions and financial actors.
Global climate finance reached an all-time high of $1.9 trillion in 2023, representing a 15 per cent increase from 2022. But there are persistent financial gaps and systemic risks that could stall progress, the report highlighted. It captured both pre- and post-pandemic trends and outlines projected financing needs across sectors and geographies in the coming years.
Between 2018 and 2023, climate finance grew at a compound annual growth rate (CAGR) of 19 per cent, with a notable acceleration post-Covid-19. From 2021 to 2023, annual investments grew by a CAGR of 26 per cent — a marked improvement from 8 per cent during 2018–2020, reflecting a renewed sense of urgency and better tracking systems.
Despite this momentum, the global financial system remains misaligned with the pace and scale required to effectively tackle climate change. The report estimated a need for $6.3 trillion annually in climate finance from 2024 to 2030 to avoid the worst impacts of climate change.
If finance continues growing at its average rate of 19 per cent annually since 2018, total flows could reach nearly $6 trillion by 2030, which is still short of the target.
Among its key findings, the report underlined that mitigation finance continues to dominate global climate spending. In 2023, $1.78 trillion, or nearly 94 per cent of all tracked climate finance, was allocated to mitigation, with over 75 per cent going towards energy systems and transport. Solar photovoltaics, wind power and electric vehicles (EV) drove much of this growth. Energy remained the largest contributor, attracting $831 billion in 2023.
Notably, investment in buildings and infrastructure grew by 40 per cent between 2018 and 2023, while the agriculture, forestry and other land use (AFOLU) and waste sectors also saw rapid growth. AFOLU finance rose 286 per cent since 2018 and finance for waste doubled between 2022 and 2023.
Adaptation finance, however, remains a major concern. In 2023, only $65 billion was tracked for adaptation efforts; the figure is likely underestimated due to data gaps and inconsistent tracking methodologies.
Much of this investment went towards water and wastewater systems, AFOLU and disaster risk management. This falls well short of the $222 billion needed annually by 2030 for emerging markets and developing economies (EMDE) alone.
Finance aimed at both mitigation and adaptation — so-called dual-benefit finance — has seen substantial growth. Such finance tripled between 2018 and 2023, reaching $58 billion in 2023, CPI found. Of this, 74 per cent went towards AFOLU, water and wastewater management and cross-sectoral initiatives.
Climate finance is also becoming increasingly concentrated, the report found. In 2023, 79 per cent of global flows were directed to just three regions: East Asia and the Pacific (mainly China), Western Europe and North America. In these regions, 89 per cent of climate finance originated from domestic sources.
By contrast, in EMDEs such as sub-Saharan Africa, only 23 per cent of climate finance was domestically sourced, underlining the need for stronger domestic policy frameworks and institutional capacity to mobilise local finance and reduce dependence on international funds.
One of the most notable developments in 2023 was the surge in private finance, which crossed the $1 trillion threshold for the first time. Households emerged as the largest private contributors, particularly through investments in EVs, rooftop solar and other energy-efficient technologies, spurred in part by rising energy costs in Europe.
In contrast, public climate finance fell by 8 per cent between 2022 and 2023, driven by post-pandemic budget constraints in countries such as the United States and Germany, where national climate budgets were reduced.
Over 90 per cent of global climate finance in 2023 came in the form of market-rate debt or equity, according to CPI. Concessional finance such as grants dropped to just 7 per cent of total flows. EMDEs, especially least developed countries (LDC), remain highly dependent on concessional finance to de-risk projects, underlining the need for more catalytic capital to crowd in private and domestic funding at scale.
International public finance to EMDEs has doubled since 2018, reaching $196 billion in 2023. However, disparities persist, particularly for LDCs, which continue to rely heavily on grants and concessional instruments. Of the climate finance going to EMDEs, 78 per cent came from public sources, with the remainder from the private sector.
The report identified a series of steps for scaling up climate finance in EMDEs, including:
Developing a pipeline of bankable projects
Using concessional capital to de-risk investments
Mobilising catalytic instruments such as guarantees and blended finance
Strengthening carbon markets and pricing mechanisms
It concluded that scaling climate finance is essential to securing a low-carbon, resilient future and that the long-term benefits far outweigh the costs. Coordinated action, innovative financial instruments and greater accountability through mechanisms like the Baku-to-Belém roadmap and the upcoming 30th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP30) summit in Belém, Brazil will determine whether the world meets its climate goals.