International climate finance

The climate crisis is a global phenomenon. We need to cut emissions all over the world – lowering them in the EU alone is not enough. As such, the EU is proud to partner with developing economies to provide them with the support they need to mitigate and adapt to climate change.

Making finance flows consistent with climate goals

Under the Paris Agreement, countries around the world committed to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.

This commitment serves as a key driver for mobilising finance, supporting the urgent economic transformation needed to achieve the Paris Agreement objectives while pursuing sustainable development.

In the European Union, the EU’s Sustainable Finance Framework supports the alignment of finance flows with the ambitious climate policies of the European Green Deal and the objectives set by the European Climate Law. The EU is also ensuring that a significant part of the EU budget contributes to climate action. This 2024 report by the European Commission provides an overview of the policies and measures already in place in the EU. It highlights the challenges and opportunities faced by EU governments, businesses and financial institutions, while reflecting on how this effort could be further strengthened, both in the EU and globally.

EU contribution to international climate finance

The EU, its Member States and the European Investment Bank are together the world’s biggest contributor of public climate finance to developing economies. In 2024, they contributed €31.7 billion in climate finance from public sources and mobilised an additional amount of €11.0 billion of private finance.  Half of the public climate funding for developing countries has been directed to climate adaptation of to cross-cutting action (generating dual climate change mitigation and adaptation benefits).

The European Commission contributed €4.6 billion in public climate finance from the EU budget to developing economies in 2024. from the EU budget to developing economies in 2023, with over 50% allocated to fund climate adaptation. The European Investment Bank (EIB) provided €2.4 billion, while mobilising additional €5.4 billion from private sources to assist developing countries’ climate action in 2024.

Support to climate action is also part of the EU’s cooperation with countries outside the EU and its official development assistance. For example:

• In the 2021-2027 period, the EU’s external budget – used for partnerships with countries outside the EU – is set to be allocated to climate related projects through the Neighbourhood, Development and International Cooperation Instrument (NDICI) - Global Europe. This represents approximately €27.8 billion of international public climate finance.
• Climate action is addressed as part of the support provided by the EU as the world’s top donor of official development assistance – a total of €95.9 billion in 2023.

The EU also engages with its international partners to help scale up sustainable finance. For example:

• In 2019, the EU launched, together with Canada, Chile, China, India, Kenya and Morocco, the International Platform on Sustainable Finance (IPSF) to scale up the mobilisation of private capital for environmentally sustainable investment. The platform’s 20 members currently represent 58% of greenhouse gas emissions, 51% of population, and 54% of GDP globally.
• In 2022, the European Commission set up a High-Level Expert Group on scaling up sustainable finance in low- and middle-income countries. In April 2024, the group prepared a report to provide recommendations on this topic to the Commission.

The USD 100 billion goal

At COP15 in 2009, developed countries agreed to mobilise USD 100 billion per year by 2020 for climate action in developing countries. In 2015, under the Paris Agreement, Parties agreed to extend this goal out to 2025 and to set a new finance goal for after 2025.

The EU remains committed to working with developed countries to mobilise USD 100 billion per year until 2025 to help developing economies in their fight against climate change. 

The EU is calling for existing and potential contributors, in line with their respective capabilities and responsibilities, to also finance climate action in developing economies.

According to a report published in May 2024 by the Organisation for Economic Co-operation and Development (OECD), developed countries provided and mobilised USD 115.9 billion in climate finance for developing economies in 2022. This was the first time the goal was reached – two years ahead of schedule – and a significant milestone.

New Collective Quantified Goal (NCQG)

In 2024, the New Collective Quantified Goal on Climate Finance (NCQG) was established at COP29 in Baku as a successor to the USD 100 billion per year goal. 

The new collective goal is to mobilise at least USD 300 billion per year by 2035 to support climate action in developing countries. 

Developed countries will take the lead, while other countries are encouraged to contribute on a voluntary basis. 

The financing can come from a wide variety of sources: public finance and private finance mobilised by international public finance or public support; bilateral and multilateral, including alternative sources such as voluntary carbon markets, philanthropy, guarantees, revenues from internationally agreed levies or taxes, thematic debt instruments, or special drawing rights.

All multilateral development bank (MDB) climate finance to developing countries will be counted towards the goal, including the contribution attributable to developed countries.

The NCQG decision urges all actors to work together to help scale up financing for developing countries from all public and private sources to at least USD 1.3 trillion per year by 2035.

The EU welcomes the transformative decision on the NCQG. This decision emphasises the leading role of the developed countries and multilateral development banks in mobilising finance, recognises the contributions of other countries and actors, and identifies the needed reforms to enhance accessibility and effectiveness.

Leveraging investment for climate action outside the EU

Beyond existing funds and efforts to mobilise climate finance, developing economies need additional public and private investment to transition to a low-carbon economy and achieve sustainable economic growth. In that respect, identifying and employ financial resources in the range of trillions to address dire climate impacts will require an all-in approach from the private sector, and an increase at scale in domestic resources, both public and private.

To that end, international climate finance should be used as a lever to incentivise climate-resilient and low-carbon investment, complementing domestic resources in developing economies.

The EU's approach is twofold:

• Provide grant funding directly to the poorest and most vulnerable countries
• Use grant funding to leverage private investment by combining grants with loans and equities from public and private sources, including bilateral and multilateral development banks

For example, the EU and its Member States have established blending facilities that combine grant funding with loans, covering different regions.

The European Fund for Sustainable Development Plus (EFSD+) is part of the EU’s investment framework for countries outside the EU. It is included in the EU’s long-term budget programme for external action (Global Europe – NDICI).

The EFSD+ raises financial resources for sustainable and inclusive development from the private sector. It supports investment in partner countries to promote job creation, strengthen public and private infrastructure, promote renewable energy and sustainable agriculture, and support the digital economy. 

The EFSD+ includes:

• Grants provided through ‘blending’ (a mix of EU grants with public and commercial debt and/or equity);
• Technical assistance to help partner countries improve the quality of their projects and implement reforms;
• Guarantees to European and non-European Financial Institutions as well as local private sector.

The External Action Guarantee has a capacity of €39.8 billion to cover for EFSD+ operations 2021-2027. Together with the private sector and thanks to the leverage effect, it has a potential of mobilising more than half a trillion euros in investment for the same period.

EU contribution to global climate funds

Several international climate funds have been set up to channel financial resources to developing countries to support climate action.

The Fund for responding to Loss and Damage, established in 2022, supports particularly vulnerable developing countries in responding to loss and damage from the impacts of climate change. The EU and its Member States led the initial capitalisation of the fund by contributing more than €400 million, making up over two thirds of the initial funding pledges.

In 2025, the fund’s Board established the Barbados Implementation Modalities, a USD 250 million package of interventions for 2025–2026. It supports bottom-up, country-led and country-owned approaches, including through effective involvement of local people and communities in climate-vulnerable situations. The fund will allocate minimum of 50% to Small Island Developing States (SIDS) and Least Developed Countries (LDCs) in this early phase. 

The Green Climate Fund, established in 2010, supports developing economies in reducing their greenhouse gas emissions and adapting to the effects of climate change.

 By 31 May 2024, EU Member States had given almost USD 8.95 billion.

The Adaptation Fund supports developing countries in adapting to climate change. It is largely financed by voluntary pledges from some EU Member States and regions, which collectively account for around 95% of the fund. The European Commission pledged support for the Adaptation Fund worth €100 million at COP26 in 2021, and to date, EUR 50 million has already been delivered.

Transparency of international climate finance

The European Commission and many Member States actively contribute to initiatives improving reporting methodologies and data availability on financial support to developing countries.

Such initiatives include the OECD Development Assistance Committee, OECD Research Collaborative on Tracking Finance for Climate Action, the GEF Capacity Building Initiative for Transparency (CBIT), and International Aid Transparency Initiative.

The current EU reporting framework on climate finance is governed by the EU Governance Regulation adopted in 2018.

It requires Member States to submit annual reports on financial support, capacity building and technology transfer activities provided to developing countries.

Finance is also included in the EU’s annual climate action progress reports.

Under the international reporting framework, the Parties to the UN climate convention (UNFCCC) report their financial support to developing countries every 2 years.

In 2024, the reporting started to apply the new modalities agreed at COP24 in Katowice in 2018, which establish the  Enhanced Transparency Framework under the Paris Agreement.

The EU submitted its eighth national communication and fifth biennial report in December 2022, including information on financial resources and transfer of technology.

In December 2024, the EU submitted its first Biennial Transparency Report under the Paris Agreement.

Documents

Click on the + signs for more information.