In 2009, developed countries agreed to mobilise US$ 100 billion per year by 2020. This deadline was then extended to 2025, with a view to setting a new global climate finance goal by 2025. At the time, developed countries hailed this as a seminal commitment that would ensure that developing countries in the global south were also able to tackle climate change. However, this goal has never been achieved and isn’t predicted to be met until 2023. The global climate finance gap is further highlighted by the disproportionate impacts felt by global south countries, which have contributed the least to climate change and have the fewest resources to address climate impacts.

This July, the Organisation for Economic Co-operation and Development (OECD) published Aggregate Trends of Climate Finance Provided and Mobilised by Developed Countries in 2013-2020. A regular contribution from the OECD to the climate finance debate, this year’s report was published early to feed-into a UNFCCC progress report on climate finance. But what does it highlight?

In 2020, a total of US$ 83.3 billion in climate finance was provided and mobilised (private finance) by developed countries. Of this, US$ 68.3 billion was provided in bilateral public climate finance and multilateral public climate finance attributable to developed countries, an increase of US$ 4.9 billion, or 8 per cent, from 2019*. In sum, the ongoing inability to meet the yearly US$ 100 billion goal has resulted in US$ 381.6 billion or 48 per cent* in bilateral and multilateral public climate finance attributable to developed countries not being provided between 2013 and 2020. The magnitude and duration of the global climate finance gap are clear, and are greatly impacting global south countries’ ability to carry-out climate action measures. Furthermore, research from CARE Denmark shows that between 2011 and 2018, only 6 per cent of climate finance provided by rich countries was new and additional to Official Development Assistance (ODA). So not only is the global climate finance target being missed, there is an element of double counting between global financing commitments.

Climate finance provided and mobilised in 2013-2020 (US$ billion)

Public climate finance used to mobilise private climate finance decreased to US$ 13.1 billion between 2019 and 2020. Given that private finance carries considerable risks, including the risk of increased national debt; this finance stream must be monitored closely to ensure that it does not exacerbate socio-economic inequalities, between and within countries.

After a slight decline in 2019, the use of debt-generating instruments increased in 2020. An extra US$ 3.7 billion, or 8 per cent* more climate finance was contributed in the form of debt generating instruments, compared to 2019. In total, concessional and non-concessional loans and equity made up 73 per cent, or US$ 50.2 billion, in 2020. In contrast, grants only accounted for US$ 17.9 billion (26 per cent) of bilateral and multilateral public climate finance attributable to developed countries in 2020. This is only a slight increase of US$ 1.2 billion from 2019 (7 per cent)*.

Instrument split of public climate finance in 2016-2020 (US$ billion)

The repayment of loans imposes an unjust burden on developing countries that creates inequalities between countries. Consequently, it isn’t conducive to enabling economic, sustainable development in developing countries. Yet, it is too early to know the extent of debt accrued by loans and other debt-creating climate finance for 2020.

Worryingly, climate finance for small, vulnerable and low-income countries remains low. Small Island Developing States (SIDs) received just 2 per cent of total climate finance between 2016 and 2020. Similarly, for the same period, Least Developed Countries (LDCs) received just 17 per cent of total climate finance provided and mobilised; and Low-Income Countries (LICs) received 8 per cent. On the whole, lower-middle-income countries received 43 per cent. All of which goes against the grain of the Paris climate Agreement which states that LDCs and SIDs have specific capacity constraints and thus have a special need for public climate finance.

Climate finance provided and mobilised in SIDS, LDCs and fragile states in 2016-2020 (annual average)

The balance between mitigation and adaptation is still far off, but heading in the right direction. In 2020, mitigation finance decreased by 5 per cent to US$ 48.6 billion in 2020 and mainly went to the energy and transport sectors. At the same time only US$ 28.6 billion went to adaptation. While this is an increase of US$ 8.3 billion or 41 per cent it is still a far cry from the US$ 50 billion needed for an equal 50/50 balance of the US$ 100 billion goal. The Paris climate Agreement calls for a balance between mitigation and adaptation finance flows, and this is yet to be achieved.

Climate theme and sectoral split of climate finance provided and mobilised in 2016-2020

If climate finance contributors are to meet the COP26 request for developed countries to “doubl[e] adaptation finance with the aim of achieving a balance between mitigation and adaptation” they will need to significantly step-up their efforts. Based on the 2020 figure for adaptation finance, a doubling would achieve US$ 57.2 billion* and mark a new, but severely delayed amount for adaptation finance.

No information on the gender-responsiveness of climate is provided. Whilst developed countries are required to provide information on their projected levels of gender responsive climate finance in their biennial reports to the UNFCCC, this data is conspicuously absent. Eurodad understands that not enough developed countries submitted sufficient data on the gender-responsiveness of their climate finance for the OECD to be able to aggregate this data. So for another year, developed countries overlooked the importance of reporting on the gender-responsiveness of climate finance. Just as climate change deepens the impacts of inequality and discrimination against women and gender minorities, climate finance also impacts different members of society in different ways. Moving forward it is crucial for climate finance contributors to report on this data to ensure that all members of society benefit from the economic effects of climate action.

Of note, earlier this year the OECD published data on the gender-responsiveness of climate-related Official Development Assistance (ODA). The data shows that “climate ODA that is dedicated to gender equality as the “principal” objective is nearly nonexistent: In 2018-2019, this figure stood at US$ 778 million – a little over 0.04 per cent of all climate-related ODA”. Overall climate ODA that integrated gender equality amounted to US$ 18.9 billion. So there is a long way to go to ensure that both climate finance and climate-related ODA are gender-responsive.

Trends in amounts of ODA for gender equality and climate change

The main takeaways from this report are that there is a clear quantitative and qualitative climate finance gap. Unfortunately, this year’s figures tell a familiar story of excessive loans, no balance between adaptation and mitigation finance, and socio-economic data e.g. on the gender-responsiveness of climate finance, that is still not being adequately tracked or reported by countries.

The next steps from the OECD are to publish a more detailed update in September 2022, that will look at the distribution and concentration of climate finance, and outline lessons learned on the impact and effectiveness of climate finance. Both of the July and September OECD reports should be a wake-up call to developed countries ahead of the finalisation of the Climate Finance Delivery Plan 2.0 (CFDP) before COP27 in November.

Rich countries should assess these figures from the OECD and publish a CFDP 2.0 that clearly shows what they will do to limit indebtedness from climate finance, improve their monitoring and reporting, particularly on gender, and agree a roadmap to achieve the US$ 100 billion goal. Doing so will build trust and inspire confidence in the current process to set a new global post-2025 climate finance goal (NCQG). Eurodad has published recommendations on the new goal which can be found here.

*Eurodad calculations made using OECD data in the Aggregate Trends of Climate Finance Provided and Mobilised by Developed Countries in 2013-2020. Percentages were either rounded up or down.