The Basics: How money runs the climate crisis

In our previous posts, we discussed the incredible surge in climate finance, driven by both public and private sectors.

The numbers are staggering - global climate finance reached nearly $1.3 trillion in 2021/2022 (source CPI), with green bonds surpassing the $1 trillion milestone and private sector capital contributing almost half of the total flows. These financial movements are reshaping the way markets operate, especially in renewable energy, low-carbon transport, and mitigation projects.

📊However, we also saw that although both the public and the private are stepping into this area, there is still a need for funding in order to meet climate goals.

At this point it might be worth to also make a difference between adaptation and mitigation finance, as these types of projects are the ultimate recipients of the funding.

1. Adaptation finance focuses on funding projects that help communities and ecosystems adapt to the unavoidable impacts of climate change, such as building climate-resilient infrastructure and improving water management systems.

2. Mitigation finance, on the other hand, is aimed at reducing or preventing greenhouse gas emissions, typically through investments in renewable energy, energy efficiency, and low-carbon technologies.

💡Adaptation Finance data

Adaptation finance continues to lag far behind mitigation efforts, yet the need is immense, particularly for developing nations that face the worst impacts of climate change.

Data shows that while adaptation finance reached $63 billion in 2021/2022—a 29% increase from previous years—this is still just a fraction of the estimated $212 billion per year required by 2030 for developing countries alone.

1. 💼 98% of adaptation finance comes from public actors, leaving the private sector vastly underrepresented.

2. 🚰 The energy sector received nearly half of all adaptation finance, with large-scale infrastructure projects driving the numbers.

3. 🌍 Africa alone requires $52 billion annually by 2030 to meet its adaptation goals, but current flows fall far short.

This growing gap in adaptation finance, especially in vulnerable regions like Sub-Saharan Africa, underscores the critical need for public-private collaboration. Investments in adaptation, such as water infrastructure and climate-resilient agriculture, have the potential to not only protect vulnerable populations but also offer 2-10x returns through reduced risks and productivity gains.

💡 Mitigation Finance data

Mitigation remains the dominant focus of climate finance, with 91% of total flows directed toward efforts to reduce greenhouse gas emissions.

Latest data notes that in 2021/2022, mitigation finance reached nearly $1.2 trillion annually, primarily driven by investments in renewable energy and low-carbon transport.

🔋 Energy systems received $515 billion, accounting for 44% of all mitigation finance, with solar PV and onshore wind dominating the space.
🚗 Low-carbon transport hit an all-time high of $334 billion, driven largely by the surge in electric vehicle (EV) sales, which doubled from 2020.

But as the picture below illustrates, the capital needs are not only insufficient, but also poorly allocated to the appropriate projects.

The data also reveals a growing interest in emerging technologies such as battery storage and hydrogen, although these remain underfunded relative to their potential. With additional investment and policy support, these technologies could play a critical role in the energy transition.

🌍 The Geography data

One of the most striking revelations from the report is how unevenly climate finance is distributed globally. Nearly 90% of climate finance is concentrated in just a handful of regions—China, the United States, Europe, Brazil, Japan, and India—while low-income, climate-vulnerable countries continue to receive minimal support.
🌍The amount of tracked climate finance that went to or within industrialized nations was about 44%.
Just USD 23 billion, or less than 2% of all climate money, went to the 10 nations most impacted by climate change between 2000 and 2019.

Despite not having traditionally produced considerable emissions, EMDEs and LDCs are disproportionately susceptible to the effects of climate change and deal with significant financial obstacles as a result. These nations' complex development issues are linked to the urgency of tackling climate change, and their capacity to finance a clean transition is further limited by their high levels of current debt.

This stark disparity not only highlights the need for increased international cooperation but also presents an opportunity for private investors to focus on emerging markets. Investments in climate-resilient infrastructure, renewable energy, and sustainable agriculture in these regions can yield substantial returns while contributing to global climate goals.

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