What does the data say about climate development funding?

This year has seen a number of catastrophes that highlight the inadequate actions on climate change — from the devastating floods in Pakistan to the historic drought in the Horn of Africa. There are a lot of expectations and hopes as world leaders gather in Egypt for the 27th United Nations Climate Change Conference, or COP 27 — U.N.’s annual event on climate change goals. In this article, we looked into the available data to map out where climate-related development funding is going and who’s making the biggest contribution. The challenge in tracking climate data Climate funding remains difficult to track, with a number of methodologies available and different sources suggesting disparate figures. A widely used method is the Organisation for Economic Co-operation and Development’s Development Assistance Committee’s Rio Marker, which tracks bilateral and nonbank multilateral finance flows targeting two climate change objectives: adaptation and mitigation. It measures climate-related development finance, which differs from the much broader climate finance that also includes multilateral, private, and export credit flows. In this analysis, we mainly used OECD’s 2020 official development assistance, or ODA, data — its most recent final data — as a primary source. It is important to note that OECD published different data sets for donors’ climate objectives, activities, and recipients — each one with a different total climate-related ODA. We used whichever provides the most complete information for a specific category — such as priority objectives and top recipient countries — although the top countries and donors remain consistent across the data sets. What does the data say about climate objectives? Data on recipients and executing agencies put the total climate-related ODA at $52.9 billion, while data on donors’ climate objectives put it at $45.6 billion. The difference is likely due to double counting of some figures that fall under multiple objectives, although the latter is the closest to the $44 billion mentioned in OECD’s climate-related ODA report. The reported climate-related funding in 2019 amounted to $34.4 billion. The increase in 2020 is driven by Japan, which almost doubled its commitment. Both datasets used the Rio Marker, which differentiates climate activities into two: Those with climate as the primary objective are marked as “principal,” while those with other primary objectives but which have activities that still support climate goals are marked as “significant.” The sum of the two is used by OECD to report annual climate-related development funding. In terms of target, activities are categorized under climate change adaptation, mitigation, or both. Overall, $16.7 billion, or 32%, of climate-related ODA went to principal projects, while $28.9 billion, or 55%, went to significant projects. Meanwhile, $18.7 billion, or 41.1%, went to adaptation; almost $16 billion, or 35%, to mitigation; and $10.9 billion, or 23.9%, to activities with both adaptation and mitigation goals. A different report from OECD put adaptation at 39% of the total, mitigation at 37%, and the remaining 24% to activities with both adaptation and mitigation as objectives. Despite the difference, both sources placed adaptation as the priority, consistent with OECD’s report stating that this is the first time that adaptation takes over mitigation. Where is the money coming from? The same top donors in 2019 made the list in 2020, with their total contribution still accounting for the majority of funding. Overall, Japan, Germany, the EU institutions, France, and the United Kingdom contributed $37.5 billion to climate goals. The United States, the largest ODA provider in 2020, ranked seventh, with only $1.7 billion — or just 4.7% of its total development assistance. 1. Japan Total climate-related funding in 2020: $15 billion Top recipients: India, Bangladesh, Philippines, Myanmar, and Indonesia Primary agencies investing in climate: Japan International Cooperation Agency and Ministry of Foreign Affairs Japan accounted for a third of the total climate-related ODA. Up 96.3% from the previous year, the increase, worth $7.4 billion, is even bigger than France’s contribution. Of this, $3.6 billion went to India. Although its contribution is huge, only $1.9 billion went directly to climate projects. The biggest portion, worth $13.1 billion, was marked as significant contribution — with $6.7 billion coming from transport projects. 2. Germany Total climate-related funding in 2020: $8.3 billion Top recipients: India, China, Peru, South of Sahara, and Indonesia Primary agencies investing in climate: German Federal Ministry of Economic Cooperation and Development and KfW Entwicklungsbank Germany went a notch down from the previous ranking, with $8.3 billion — 7.2% less than in 2019. Of this amount, $3.7 billion was funding with climate as the principal objective while $4.7 billion was significant. Energy is the primary focus, which received $1.7 billion. Environmental protection followed, with $1.2 billion, then water and sanitation, with $1.1 billion. India is also the biggest recipient of German climate-related ODA, with $942.1 million. 3. France Total climate-related funding in 2020: $7.5 billion Top recipients: Brazil, Indonesia, Morocco, Mauritius, and South America Primary agencies investing in climate: Agence Française de Développement and Proparco France remains a significant donor in the climate change sphere, with $7.5 billion — up 19.3% from the previous year. Of this amount, $5.2 billion is principal contribution, making the country the biggest donor directly investing in climate projects. The largest portion of its funding came for banking and finance, with $1.1 billion — $963.4 million of which is principal. Brazil is France’s top recipient, with $687.4 million. 4. EU institutions Total climate-related funding in 2020: $4.6 billion Top recipients: Europe, Asia, Mozambique, Vietnam, and Serbia Primary agencies investing in climate: European Commission and European Development Fund EU Institutions ranked next, with $4.6 billion — 20.9% less than in 2019. Of this amount, $1.7 billion is principal funding while $2.9 billion is significant. The lion’s share went to regional projects, with Europe receiving $906.7 million. Among the countries, Mozambique was the top recipient, with $236.5 million. By sector, agriculture, forestry, and fishing ranked first, with $957.1 million. Contributions from the European Investment Bank — EU’s leading institution on climate finance — are excluded from total climate development funding. 5. United Kingdom Total climate-related funding in 2020: $2 billion Top recipients: Ethiopia, Somalia, Pakistan, Colombia, and Africa Primary agencies investing in climate: Foreign, Commonwealth & Development Office and Department of Energy & Climate Change The U.K. also made a sizable contribution, worth $2 billion. However, this is 33% down from the previous year. Of this, $1.7 billion was significant funding. Only $336.8 million went to principal funding — less than the contribution of eight other donors. Ethiopia is U.K.’s top recipient, with $128.1 million. Similar to France, banking and finance is the top sector contributing to climate goals, with $738.7 million. Where is the money going? Overall, South and Central Asia accounted for the biggest portion of climate-related funding, with $11.6 billion, or 22% of the total. South Sahara ranked next, with $8.3 billion, then Far East Asia, with $6.1 billion. Another $7.7 billion went to multicountry projects, while $7.2 billion went to multilateral institutions. Overall, 41% of the funding went to Asia, while 25% went to Africa. Among the countries, India is the top recipient, with $5.1 billion. Bangladesh followed, with $3.4 billion, the Philippines, with $2.2 billion, then Myanmar, with $2 billion. Kenya is the most funded African country, with $923.3 million. What the top projects suggest about the state of climate development funding Although a distinction is made between principal and significant climate objectives, a closer look at the biggest projects reveals how inflated climate-related ODA might be. It also shows how hard it is to quantify the true value of significant climate objectives. For instance, seven of the biggest activities tagged as climate-related are primarily transport projects. This includes $1.2 billion for the construction of a dedicated freight corridor in India, $1.1 billion for a bridge and coastal road in the Philippines, and $794.4 million for a railway bridge in Bangladesh. Although these projects will surely promote efficient transport systems, measuring their impact against climate change mitigation or adaptation targets is rather challenging, if not misleading. Only two among the top 10 biggest projects are obviously climate-related: an $868.6 million core contribution to the Green Climate Fund and $507.7 million for a sewage development project in Jakarta, Indonesia. Try out Devex Pro Funding today with a free 5-day trial, and explore funding opportunities from over 850 sources in addition to our analysis and news content.