16/11/2023 - Climate finance provided and mobilised by developed countries for climate action in developing countries reached USD 89.6 billion in 2021, according to the OECD’s sixth assessment of 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.

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. However, one year after the 2020 target, developed countries remain just over USD 10 billion short of the goal to mobilise USD 100 billion a year.

Two years ago, ahead of COP26 in Glasgow, the OECD released forward-looking scenarios of climate finance for the period 2021-2025, which indicated the goal is likely to be reached as of 2023. The USD 89.6 billion total for 2021 is slightly higher than the upper end scenario that was estimated for this year. On the basis of preliminary and as yet unverified data available to the OECD to date, the goal looks likely to have already been met as of 2022.

“The overall upward trend is positive and shows that countries are continuing to increase action to scale up and mobilise climate finance. The increase needed to reach the USD 100 billion goal that was set for 2020 has not yet been achieved, but preliminary data available to the OECD indicates that countries look likely to have met that objective ahead of 2023,” OECD Secretary-General Mathias Cormann said. “Of course, developing countries urgently require these significant investments so climate finance providers need to continue to ramp up their efforts in line with their stated commitments.”

Over 2016-2021, the share of climate finance targeting lower middle-income countries (LMICs) and upper middle-income countries (UMICs) remained stable, whereas the share targeting low-income countries (LICs) increased from 4% in 2016 to 10% in 2021. The share of climate finance targeting small island developing countries (SIDS) progressively increased from 2% in 2016 to 4% in 2021, and the share targeting least developed countries (LDCs) progressively increased from 12% in 2016 to 25% in 2020, dropping to 20% in 2021. These trends may indicate an increasing recognition by international climate finance providers of the growing needs and opportunities for climate action in poorer and more vulnerable regions.

Public climate finance (bilateral and multilateral) almost doubled over the 2013-2021 period, from USD 38 billion to USD 73.1 billion., accounting for the vast majority of the total USD 89.6 billion in 2021. Within that amount, multilateral public climate finance grew the most, more than doubling since 2013 and overtaking bilateral public climate finance from 2019. Volumes of officially supported climate-related export credits increased by 28% over 2013-2021 but remain small and relatively volatile year-on-year. Mobilised private climate finance, for which comparable data are only available from 2016, amounted to USD 14.4 billion in 2021, thereby returning to its 2019 level after a dip in 2020. This component, however, displays an overall stagnating trend since 2017.

Two components of climate finance remain stubbornly low. First, mobilised private climate finance, for which comparable data are only available from 2016, amounted to USD 14.4 billion in 2021, or 16% of the total. Second, following significant growth reported in 2020, adaptation finance dropped by USD 4 billion (-14%) in 2021, resulting in a decrease in its share of total climate finance from 34% to 27%. At the same time, cross-cutting finance, which addresses both adaptation and mitigation activities, increased from USD 6 billion in 2020 to USD 11.2 billion in 2021. As a result, in 2021, mitigation continued to represent the majority (60%) of total climate finance provided and mobilised, adaptation 27% and cross-cutting 13%.

“There is a pressing need for international providers to significantly scale up their efforts in two key areas: adaptation finance and the mobilisation of private finance. Adaptation finance is essential to building resilience and private finance from a range of commercial actors in developed and developing countries is critical to closing the financing gap for investments in climate action, notably in clean energy systems, agriculture, forestry, land-use, adaptation, and resilience,” OECD Secretary-General Mathias Cormann said. “Our two supplementary technical reports provide actions and recommendations for international providers to help achieve the necessary increase in finance for adaptation, and to realise the considerable scope to improve the effectiveness of public climate finance in mobilising private finance.”

Detailed analyses of challenges and opportunities for scaling up finance for adaptation and the mobilisation of private finance are presented in two supplementary OECD reports also released today:
• Scaling up adaptation finance in developing countries
• Scaling up the mobilisation of private finance for climate action in developing countries

 

Figure - Climate finance provided and mobilised in 2013-2021 (USD billion)

 

 Source: OECD, 2023. Climate Finance Provided and Mobilised by Developed Countries in 2013-2021: Aggregate trends and opportunities for scaling up adaptation and mobilised private finance, OECD Publishing

 

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