Foreword
At the request of developed countries, the OECD has, since 2015, assessed progress towards the goal for developed countries to provide and mobilise USD 100 billion of climate finance annually for climate action in developing countries under the UN Framework Convention on Climate Change.
As our sixth assessment, the figures for 2021 presented in this report total USD 89.6 billion – a substantive increase in levels of climate finance provided and mobilised compared to 2020. This shows a positive trend, representing close to an 8% increase over 2020, which is significantly higher than the 2.1% average annual growth observed from 2018 to 2020. But we are not there yet.
One year after the 2020 initial target year, developed countries remain just over USD 10 billion short of the goal to mobilise USD 100 billion a year. In 2021, ahead of COP26 in Glasgow, many climate finance providers made scaled-up pledges. The OECD analysed these pledges, and, on that basis, produced forward-looking scenarios for 2021-25 that indicated the goal would likely be met as of 2023 (OECD, 2021[1]). The USD 89.6 billion total for 2021 is slightly above the upper end of the pre-Glasgow scenarios (estimated at USD 88 billion). Based on preliminary and as yet unverified data, the goal looks likely to have already been met as of 2022.
By 2025, developing countries are estimated to need around USD 1 trillion annually for climate investments, rising to roughly USD 2.4 trillion each year between 2026 and 2030. To close this investment and financing gap, they will need to harness a range of financial sources across public, private, domestic, and international finance. Although public finance can only contribute a share of these extensive needs, increased involvement of international providers is key.
The OECD analysis of climate finance provided and mobilised by developed countries highlights two components that remain stubbornly low. First, adaptation finance, essential for enhancing climate resilience, remains low in both absolute and relative terms, despite being a paramount concern and priority area for numerous developing countries. Second, international public climate finance is not effective enough in tapping into private capital and commercial finance, and in mobilising them for climate action in developing countries. There is a pressing need to significantly scale up both.
Providers of international public climate finance have themselves recognised these two issues as priorities. Developed countries referred to them explicitly in their 2021 Climate Finance Delivery Plan and 2022 Progress Report. Ahead of the Summit for a New Global Financing Pact in June 2023, several leaders underscored the importance of scaling up private capital flows to achieve development and climate goals. The 2021 Glasgow Climate Pact urges developed countries to at least double adaptation finance for developing country Parties from 2019 levels by 2025. The 2021 OECD Development Assistance Committee (DAC) Climate Declaration also includes commitments from DAC members to strengthen their support for climate change adaptation and resilience in developing countries.
In addition to helping improve transparency by providing updated aggregate trends, we provide actions and recommendations for bilateral and multilateral providers of climate finance, drawing on insights from two supplementary OECD reports this year: on scaling up private climate finance mobilisation and on adaptation finance.
