Voluntary climate finance between developing countries tripled between 2013 and 2023, reveals a new working paper from the World Resources Institute (WRI).
Climate finance is funding to support developing countries to deal with climate change. It can be for mitigation projects which cut greenhouse gases from the air, for example by building wind a wind farm. Or it can be for adaptation projects which adjust life and nature to deal with the effects of climate change, such as by building sea walls.
Climate finance sits at the heart of international climate cooperation, and is a frequent source of conflict with it. Disputes centre on who should deliver finance, how and for what: public or private, grants or loans, mitigation or adaptation.
Under the 2015 Paris climate agreement, developed countries are obliged to provide climate finance to developing ones in recognition of their historical contributions to global warming. The Paris Agreement also “encourages” developing nations to contribute financial support on a voluntary basis.
The WRI paper finds that in 2013-2023 such voluntary finance from 14 major countries exceeded USD 102 billion, peaking at over USD 17 billion in 2023 after a sharp and consistent increase from 2020. For comparison, traditional climate finance from developed nations reached USD 132.8 billion in 2023.
The 14 countries fall outside Annex II, which contains those developed countries obligated to contribute to climate finance under the Paris Agreement. Annex II countries were members of the Organisation for Economic Co-operation and Development (OECD) in 1992 when the UN climate convention was signed. Since then, some countries, like China, have become upper-middle income, while others such as South Korea are advanced economies – though Annex II remains unchanged.
Excluding China, developing economies will require an estimated USD 3.2 trillion annually by 2035 to meet their climate goals and adapt to the changing climate. But traditional channels have been coming under increasing pressure since 2024 when the US under Donald Trump abandoned the Paris Agreement and its climate finance obligations. European countries have been slashing their official development assistance budgets. The UK has announced an effective halving of its climate finance commitments. And the World Bank has scrapped its internal climate finance target.
The year 2024 also saw a new global climate finance goal agreed at the COP29 climate summit in Baku, targeting USD 300 billion per year by 2035. While the goal calls on developed countries to “lead the way” in meeting this tripled target, it reiterates the importance of Global South nations making voluntary contributions, known as South-South cooperation.
“There is a huge funding need from emerging markets and developing economies for the climate transition,” Zhou Lihuan, an associate at WRI’s Sustainable Finance Center and one of the authors of the working paper, tells Dialogue Earth. “The traditional contributor countries’ climate finance cannot meet all those needs… Those from non-Annex II countries are quite important.”
Harjeet Singh, founding director of the Satat Sampada Climate Foundation, says the growth in non-Annex II countries’ climate finance “is a powerfully positive sign.”
“But it must be interpreted through the lens of South-South solidarity, not a shifting of legal burdens,” he adds. “What the WRI report illuminates is that emerging economies are stepping up as active solution-providers, despite facing massive domestic climate vulnerabilities and severe capital constraints of their own.”
Top financiers
By far the largest non-Annex II country financier is China, which provided and mobilised USD 44.8 billion between 2013 and 2023, the report finds.
Following behind China are South Korea and India, who provided and mobilised USD 13.9 billion and USD 8.3 billion respectively.
Brazil, Saudi Arabia, Argentina and Russia come next, all providing between USD 5 billion and nearly USD 7 billion. Of these, Saudi Arabia’s climate finance has been quickly and steadily growing, rising from seventh-largest provider among the 14 assessed countries to third between 2019 and 2023.
While most of these countries do not officially report or disclose their climate finance contribution, WRI’s paper uses multiple sources to identify “climate-related finance” based on its intended purposes. These are consistent with the UN climate convention’s definitions of climate finance and the OECD’s framework for tracking climate finance from developed countries.
Behind the numbers
Interestingly, when excluding China, the climate finance provided by these non-traditional contributors skews towards projects designed to adapt to climate change impacts.
The paper finds that the 13 other non-Annex II countries studied allocated about 53% of their bilateral public finance, export credits and mobilised private finance to adaptation and crosscutting projects since 2020. This contrasts sharply with traditional financiers. In 2016-21, just 25% of climate finance from developed countries went to adaptation projects, according to the OECD.
China does not fit this pattern, however. Of its climate finance provisions, nearly 93% address mitigation, says WRI’s Zhou. This is because its climate finance is dominated by infrastructure projects, which tend to focus on mitigation rather than adaptation, Zhou explains.
He cautions, however, that the paper’s reliance on external rather than government databases may mean its data misses some small-scale adaptation projects.
The paper breaks down non-Annex II climate finance flows into multilateral finance, bilateral public finance and export credits, and mobilised private finance. Collectively, contributions to multilateral institutions make up the biggest proportion, growing from USD 1.4 billion to USD 13.4 billion between 2013 and 2023.
The establishment of new multilateral banks led by emerging economies has added extra impetus to this climate finance route over the last decade, Zhou tells Dialogue Earth. He mentions the Asian Infrastructure Investment Bank, established in 2016 and led by China, and the New Development Bank, established by the BRICS countries in 2015, in particular.
Where non-Annex II climate finance closely resembles traditional climate finance, however, is its neglect of low-income countries, which are often the most vulnerable to climate change. Excluding contributions to multilateral finance, only 8% of the climate finance from the 14 countries analysed in the paper went to low-income nations. This closely mirrors (9%) contributions from Annex II countries. Additionally, of that 8%, around half has gone to just one country, Ethiopia, driven by large-scale infrastructure projects financed by Chinese banks.
“[This] proves that market-driven and infrastructure-heavy finance models are leaving the most climate-vulnerable, least-developed countries behind,” says Singh, who thinks that better mechanisms need to be created to ensure finance reaches the frontlines of the climate crisis.
Climate finance and national priorities
The paper notes that climate finance from non-traditional contributors tends to emerge from broader foreign policy rather than standalone development bodies.
“[They] do not typically have dedicated foreign aid offices to give out foreign aid. Typically they’re more like embedded within existing ministries, like the ministry of foreign affairs for example,” says Zhou.
Such countries also have large climate finance needs of their own.
Institutional and policy arrangements can vary greatly across countries. South Korea, for example, has clearly integrated climate considerations into the official development assistance (ODA) it provides bilaterally, said Taewook Huh, climate finance specialist at the Institute for Energy Economics and Financial Analysis.
In 2021, the country adopted its Green New Deal for ODA Promotion Strategy. The aim was to increase the share of green ODA to 28.1% – the average for the world’s traditional ODA providers – by 2025, from a pre-2020 baseline of 19.6%, Huh says. These goals were far exceeded, with 63% of bilateral ODA focused on climate by 2024, according to the OECD.
South Korea tends to deliver climate finance frequently and through smaller-scale projects, Huh says, via its international cooperation agencies and banks.
China’s, meanwhile, is fragmented across multiple ministries, shaped by various incentivising documents and can be erratic, given its focus on project finance.
India similarly has no standalone climate aid agency, Singh tells Dialogue Earth. Rather, international public finance is coordinated through the Ministry of External Affairs.
“India’s approach reflects a highly pragmatic model tailored to South-South cooperation, where climate outcomes are integrated directly into development partnerships,” he says. “[It is] demand-driven, reciprocal, and closely aligned with regional infrastructure demands and technology transfers.”
This raises questions of transparency and how the world should best understand the contributions of these climate financiers. Because it is voluntary and not mandated under the UN climate convention, such finance also does not have formalised reporting and disclosure requirements.
Future directions
There is no doubt that financial contributions from non-Annex II countries will be vital to meeting global climate finance needs. What direction they take from here is uncertain, however. Shaping elements include non-traditional contributors’ actions to coordinate their climate finance, and recipient countries’ domestic policies which could improve investment environments.
It will also be shaped by multilateral negotiations and meetings – not only negotiations under the UN climate convention, but also in fora such as BRICS, and regional and international fora for coordination among export credit agencies, WRI’s South-South finance director, Liu Shuang, tells Dialogue Earth. The role of private actors from non-Annex II countries will also be critical as the world stretches to reach the USD 1.3 trillion target, she adds.
Asked if he expects non-Annex II climate finance to continue its expansion, Harjeet Singh summarises: “Yes, but its growth trajectory will look vastly different from Western ODA models.”
The challenge, then, is in tracking, assessing and better coordinating these important voluntary climate finance contributions.
