The OECD’s latest report on Climate Finance Provided and Mobilised by Developed Countries (covering 2013-2024) confirms a significant shift in how climate finance for Global South countries is being delivered. While the US$ 100 billion climate finance goal was exceeded for the third consecutive year, this is not being driven by increases in bilateral public funding, but by a growing reliance on private finance mobilisation and multilateral development banks (MDBs). Meanwhile, adaptation finance continues to lag behind despite growing needs in many vulnerable countries.

This shift raises important questions about the future of climate finance under the  New Collective Quantified Goal (NCQG), which commits developed countries to lead the way in mobilising at least US$ 300 billion annually by 2035. As climate finance increasingly flows through private actors and MDBs, and is heavily reliant on debt-creating instruments, the question is how much of this finance is reaching and serving the countries and communities that need it most and who defines and controls it?

Loans continue to dominate public climate finance - meaning more debt

Developed countries provided and mobilised USD $132.8 billion in both public and private climate finance in 2023 and $ 136.7 billion in 2024, surpassing their goal. 

However, the composition of this growth is particularly significant. The OECD report highlights how climate finance is increasingly being channeled through MDBs and relying on private sector mobilisation at a time when development assistance and public climate budgets in many developed countries are under pressure. These shifts are often being pursued without sufficient scrutiny of their effectiveness, accessibility for vulnerable countries, or implications for worsening debt vulnerabilities across the Global South.

The report highlights the extent to which climate finance remains dominated by debt-creating instruments. Loans accounted for 73 per cent of public climate finance in 2023, and 67 per cent in 2024. However, these numbers understate the role of debt because mobilised private finance is also largely loan-based. 

Most notably, 90 per cent of multilateral climate finance was provided as loans, and only around one-quarter of these loans were concessional. These findings illustrate why growing dependence on mobilised private and MDB finance will only exacerbate an increasingly complex debt situation in many developing countries.   

Even among the most vulnerable countries, loans remain dominant. More than half of climate finance provided to Least Developed Countries (LDCs) was loan-based, raising concerns about debt sustainability and the appropriateness of debt-creating instruments for countries already facing fiscal distress.

The report also highlights emerging approaches such as debt-for-nature swaps as a way to redirect debt repayments towards conservation and climate adaptation. However, evidence regarding the scale, efficiency, and long-term developmental benefits of these mechanisms remains mixed, and such initiatives risk diverting attention away from systemic and long-term solutions.

Adaptation finance continues to lag behind

Adaptation finance reached $33.6 billion in 2023 and $ 34.7 billion in 2024, remaining well below what many developing countries argue is needed. To meet the commitment made at COP26 to double adaptation finance from 2019 levels by 2025, adaptation finance would need to have increased by roughly 18 per cent in 2025.

The OECD’s recommendations for addressing this shortfall largely align with the “private sector first” approach. The report emphasises scaling up mobilised private finance and alternative sources, alongside efforts to strengthen enabling environments and institutional capacities in developing countries. This type of framing places disproportionate responsibility on developing countries to attract finance while avoiding more difficult questions about the adequacy, accessibility, and concessionality of climate finance flows from developed countries.

Methodological choices remain politically sensitive

The report’s methodological section also illustrates why OECD climate finance reporting remains politically contentious within the UNFCCC. One notable example is the report’s use of the OECD Development Assistance Committee (DAC) List of Official Development Assistance (ODA) Recipients to determine which countries qualify as developing countries. This results in the exclusion of several Small Island Developing States (SIDS), despite their extreme climate vulnerability. 

In the absence of a universally agreed definition and accounting methodology for climate finance, the OECD report reflects a largely donor-driven perspective. For example, it includes climate-related export credits as climate finance, despite evidence that they primarily benefit the private sector in developed countries, while increasing indebtedness in the Global South. The report also counts loans at face value, overlooking the repayment burden ultimately borne by recipient countries, and does not assess important dimensions such as the gender responsiveness of climate finance.

Looking ahead under the NCQG, debates on climate finance will increasingly focus not only on how much finance is being counted, but also on who defines climate finance, and on qualitative issues like the balance between public and private sources. For climate finance to genuinely respond to the needs and priorities of developing countries without worsening debt burdens, developed countries will need to reverse course and increase the provision of climate finance that is public, and grant-based.