Climate finance target missed despite growth, finds new report

Climate finance provided and mobilised by developed countries for climate action in developing countries reached USD 83.3 billion in 2020, according to new OECD analysis.

This is a further 4% increase from 2019 and followed a 1% increase from 2018 to 2019. However, it still falls short of the goal for developed countries to provide and mobilise USD 100 billion a year for developing countries by 2020. The increase in 2020 climate finance was primarily driven by a rise in public flows.

This year’s Aggregate Trends of Climate Finance Report is being released earlier than in previous years in order to contribute to the UNFCCC Standing Committee on Finance Report, being prepared for COP27, on progress towards achieving the goal.

Mathias Cormann, OECD Secretary-General said, “We know that more needs to be done. Climate finance grew between 2019 and 2020, but as we had expected, remained short of the increase needed to reach the USD 100 billion goal by 2020,”

Over the 2013-2020 period, public climate finance accounted for most of the total, increasing from USD 38 billion in 2013 to USD 68.3 billion in 2020. Within that overall amount, multilateral flows grew by 138% over 2013-20, while bilateral flows grew by 40%. The share of climate-related export credits in the total remains small.

The majority of climate finance in 2020 was directed at climate change mitigation efforts, but finance provided for adaptation action continued to grow, accounting for a third of the total. Mitigation finance was mainly focused on energy and transport activities, while adaptation finance focused on activities in water supply and sanitation; and agriculture, forestry and fishing.

As was the case in previous years, in 2020 public climate finance mainly took the form of loans, accounting for 71% of the total, which was up 8% in volume terms from 2019. The volume of public climate finance provided as grants also grew in absolute terms accounting for 26% of the total.

Developing countries in Asia have been the main beneficiary of climate finance over 2016-20 with 42% of the total on average, followed by Africa (26%) and the Americas (17%).

The goal for developed countries to provide and mobilise USD 100 billion of climate finance annually for climate action in developing countries was due to have been met in 2020 and to be sustained through to 2025. OECD scenarios released in October 2021 showed that, if all commitments put forward by bilateral and multilateral providers up to that point are delivered, the USD 100 billion level would be met in 2023 and be exceeded in the period to 2025.

The OECD will continue to analyse climate finance developments over the next few months, with the outcomes to be released in September.

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