Interactive: Mapping the Flow of Climate Finance in 2021
Climate finance refers to local, national, or transnational financing—drawn from public, private, and alternative sources—that seeks to support mitigation and adaptation actions to address climate change. In 2009, at the UN Climate Change Conference in Copenhagen (COP15), developed countries committed to jointly mobilise $100 billion by 2020 and then each year through to 2025. This pledge, which was formalised the following year at COP16 in Cancun, aimed to help vulnerable countries mitigate and adapt to the impacts of climate change. The money largely comes from the country’s foreign aid budgets, which finance climate-related development projects and a smaller proportion is also raised by the private sector. The charts below (inspired by Carbonbrief) will provide an overview of how climate finance flows from donor countries to recipient nations, shedding light on the various instruments, channels, and the significance of the process.
Country-Country Finance
The chart presents an overview of the climate finance landscape in 2021, focusing on the contributions made by OECD countries and the allocation of funds to recipient nations. According to the data, Japan emerged as the leading contributor to climate finance among OECD countries in 2021. Germany and France followed closely behind, securing the second and third positions, respectively, in terms of their climate finance provisions. On the receiving end, India stood out as the primary beneficiary of climate finance in 2021, attracting the largest share of funds from OECD countries. Bangladesh and Indonesia also received significant amounts of climate finance, ranking as the second and third largest recipients.
Channel of Delivery
The chart provides a detailed breakdown of the various channels through which climate finance was distributed in 2021. It reveals that the majority of climate finance was provided through direct transfers to recipient governments, highlighting the importance of bilateral agreements and country-to-country support in the climate finance landscape. Notably, France emerges as the largest contributor to the Green Climate Fund.
Type of Climate Finance Flows
The diagram provides a breakdown of the types of climate finance flows, categorised according to the definitions set by the Organisation for Economic Co-operation and Development (OECD). These categories include grants, debt instruments (comprising loans and reimbursable grants), equity, and debt relief.
The chart reveals significant variations in the composition of climate finance provided by different countries. For instance, Japan and France stand out for delivering the bulk of their climate finance in the form of debt instruments. This approach involves providing loans and reimbursable grants to recipient countries, which can help finance climate projects but also create a future obligation for repayment.
On the other hand, Germany distinguishes itself by primarily offering climate finance in the form of grants. Grants represent a more concessional form of financing, as they do not require repayment and can be particularly beneficial for supporting climate action in countries with limited financial resources.
In 2021, the overall composition of climate finance saw a notable shift towards more grant-based and concessional financing. Approximately 36.92% of the total climate finance was provided through debt instruments, marking a decrease from 42% in 2016. This change suggests a growing recognition among donor countries of the importance of providing more favourable financing terms to support climate action in developing nations.
Breakdown of OECD Climate-Related Projects by Objective: Principal vs. Significant
The last diagram shows the breakdown of projects labelled in the OECD data as having either a ‘principal’ or ‘significant’ climate component. The majority of projects are classified as having a ‘significant’ climate-related objective, meaning that while climate change is an important consideration, it is not the primary driving force behind these projects. In contrast, a smaller proportion of projects are categorised as having a ‘principal’ objective, indicating that they are directly focused on either mitigating climate change or adapting to its impacts. Oxfam's climate finance report highlights a significant issue in the way developed countries report their climate finance contributions. When a development project has multiple objectives, including climate action, the amount of funding counted as climate finance is determined solely by the developed countries themselves. This has “led to the use of disparate and in many instances questionable methods”, Oxfam adds.
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