Global Landscape of Climate Finance 2025 Report
The Climate Policy Initiative (CPI) released its Global Landscape of Climate Finance 2025 report. It reveals that climate finance reached a record $1.9 trillion in 2023. This marks a 15 per cent rise from the previous year. Despite this growth, gaps and risks threaten climate progress. The report analyses trends from 2018 to 2023 and projects future financing needs to meet climate goals.
Growth and Scale of Climate Finance
Between 2018 and 2023, climate finance grew at a compound annual growth rate (CAGR) of 19 per cent. Post-pandemic investment accelerated sharply, with a 26 per cent CAGR from 2021 to 2023. This contrasts with an 8 per cent growth rate from 2018 to 2020. Despite progress, the current pace remains insufficient. An estimated $6.3 trillion annually is needed from 2024 to 2030 to avoid severe climate impacts. If growth continues at 19 per cent, climate finance could reach nearly $6 trillion by 2030, still short of the target.
Mitigation Finance Dominates, Adaptation Lags
Mitigation finance accounted for 94 per cent of global climate spending in 2023, amounting to $1.78 trillion. Over 75 per cent of this went to energy systems and transport. Solar power, wind energy and electric vehicles were key drivers. The energy sector attracted $831 billion alone. Investment in buildings and infrastructure rose by 40 per cent since 2018. Agriculture, forestry and other land use (AFOLU) finance surged 286 per cent, while waste sector funding doubled between 2022 and 2023. Adaptation finance, however, remains low at $65 billion in 2023, far below the $222 billion needed annually for emerging and developing economies by 2030.
Dual-Benefit Finance and Regional Concentration
Finance serving both mitigation and adaptation purposes tripled between 2018 and 2023, reaching $58 billion. Most of this was directed to AFOLU, water management and cross-sector projects. Climate finance flows are heavily concentrated, with 79 per cent directed to East Asia and the Pacific, Western Europe and North America. In these regions, 89 per cent of finance comes from domestic sources. Emerging markets and developing economies (EMDEs) rely more on international funds, with only 23 per cent of climate finance domestically sourced in sub-Saharan Africa.
Private Finance Growth and Public Finance Decline
Private climate finance surpassed $1 trillion in 2023 for the first time. Households contributed through investments in electric vehicles, rooftop solar and energy efficiency, especially in Europe. Meanwhile, public climate finance fell by 8 per cent from 2022 to 2023 due to budget constraints in countries like the US and Germany. Over 90 per cent of climate finance came as market-rate debt or equity, while concessional finance such as grants dropped to 7 per cent.
Challenges for Emerging Economies and Scaling Finance
EMDEs and least developed countries (LDCs) remain dependent on concessional finance to reduce project risks. International public finance to EMDEs doubled since 2018, reaching $196 billion in 2023. Yet, LDCs still rely heavily on grants. To scale climate finance, the report recommends building bankable projects, using concessional capital to de-risk investments, mobilising catalytic instruments like guarantees, and strengthening carbon markets. Coordinated global action and innovative finance tools are vital to meet climate targets.
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