Digest #5: COP Special – Promises, Priorities, and the Price of Climate Change
As negotiators meet in Baku over the next fortnight, we’re focusing this week’s edition on the complexities of global climate finance. From the underfunding of adaptation in vulnerable nations to the shifting dynamics of Chinese energy financing and the untapped potential of remittances, we look at the financial challenges and opportunities shaping climate action.
Interested in tailored insights on the latest analysis in your sector? Get in touch with OTT’s Research Support Service team: Edris Nikjooy .
As countries gather to talk about climate financing targets, ONE.org’s piece exposes the glaring gap between pledges and reality, highlighting how wealthy nations talk big but channel six times more funding into domestic fossil fuel subsidies than international climate finance. It lays bare the numbers—Italy spending 36 times more on fossil fuels than climate aid, the UK nine times—while calling out the hypocrisy behind unmet commitments to vulnerable nations.
It also flags how $88 billion of the $116 billion in climate finance reported for 2022 was likely overstated, raising serious questions about transparency and accountability.
This report highlights the shortcomings of multilateral development banks (MDBs) in addressing climate adaptation, with only 37% of their 2022 climate finance in low- and middle-income countries allocated to adaptation, while the remaining 63% went to mitigation. Globally, the picture is worse—only 5–10% of total climate finance addresses adaptation, falling far short of the Paris Agreement’s goal of parity between adaptation and mitigation.
While mitigation tackles emissions, adaptation is crucial for helping vulnerable nations manage immediate climate impacts and build resilience. Offering valuable data, this report reinforces the findings of last week’s UN Adaptation Financing Gap report, which revealed that less than 5% of adaptation funding needs are being met.
Also weighing in on the adaptation-mitigation split, Ken Opalo bluntly highlights the absurdity of imposing decarbonisation plans on low-income nations like São Tomé and Principe, while neglecting their immediate need for energy access to fuel growth. His argument cuts to the core: the hypocrisy of high-income countries’ energy transition narratives wastes precious time that could be used to invest in growth and adaptation, addressing the realities of climate impacts where they are felt most urgently. The focus must be on efficient, impactful investments in adaptation and growth where they’re needed most.
Recommended by LinkedIn
New data shows China’s global energy financing has seen a dramatic shift, with a clear pivot from large-scale fossil fuel projects towards smaller, renewable energy initiatives, particularly in Africa. Historically dominated by oil and gas (50% of its portfolio), Chinese finance in 2023 exclusively funded three renewable energy projects, totalling $502 million, marking the third consecutive year without overseas fossil fuel investments—a move aligned with its 2021 coal funding suspension pledge.
Domestically, China maintains significant fossil fuel investments while also spearheading global clean energy development, set to invest a staggering $675 billion in clean energy in 2024, the largest worldwide. This dual strategy underscores its growing role in international climate governance and its intentions to invest in a green energy transition abroad.
As leaders convene in Baku to debate the next global climate financing target, this brief should shift attention to a vital yet underutilised funding source: remittances. In 2022, remittance flows to Africa reached nearly $100 billion, surpassing both official development assistance (ODA) and foreign direct investment (FDI), offering a more stable and consistent financial lifeline for millions. Despite their significance, the average cost of sending remittances to Africa remains the highest in the world at 9%, and their potential is often overlooked by policymakers.
The G20 TF-CLIMA report, led by Mariana Mazzucato and Vera Songwe , urges member nations to step up with bold economic strategies that combine climate action with sustainable growth, highlighting their responsibility as contributors to 80% of global GHG emissions. It emphasises the adoption of ambitious green industrial strategies, using Nationally Determined Contributions (NDCs) to steer country-level transition plans, and stresses the role of central banks and regulators in aligning financial systems with climate goals through tools like ISSB standards to boost transparency and consistent risk assessment.
The report puts forward a framework for green growth that pairs innovative industrial strategies with green finance, all supported by global governance structures designed to prioritise equity and inclusivity. All eyes on Rio next week.
What else should we have picked? Comment below with your favourite articles this month.