Wealthy countries to deliver most climate change support through loans, not grants

A new report from the world’s richest countries celebrating contributions to climate finance has been criticised by Practical Action’s experts. 

Climate finance is money intended to support measures which reduce greenhouse gas emissions and fund adaptation actions that will help people vulnerable to the impact of climate change adapt their work and their lives.

According to the report, developed countries provided and mobilised a total of $132.8bn in 2023 and $136.7bn in 2024, ‘exceeding’ the US$100bn climate finance goal.

Those numbers have taken place against the backdrop of steep cuts in development aid globally, since 2024 and the new report shows climate finance delivered in the form of loans, constitutes more than two thirds of climate finance to developing countries as of 2024.

More loans place a greater burden on weak economies and fails to meet funding needs for much-needed climate adaptation plans.

Dr Demet Intepe, climate adaptation expert at Practical Action said: “The OECD report buries the real story behind a flashy headline.

“That headline should read: “Vast Majority of Climate Finance to Come from Loans, not Grants.”

“The report’s celebratory tone doesn’t match the reality we see on the ground. At Practical Action, our colleagues work every day with communities across Africa, Asia, and Latin America who are living with the impact of climate change they did nothing to cause. Farmers struggle with increasingly unpredictable rainfall, school children wilt in extreme heat, and families in flood-prone areas can’t take measures to protect their homes and livelihoods.

“Delivering finance in the form of loans pushes developing countries further into debt at a time they need urgent support to fight the climate crisis.

“Rich countries are becoming less willing to fund climate action in poorer countries, despite their moral and legal obligations having been confirmed by the recent ruling at the International Court of Justice.

“And when funding gets cut, projects end before they should, leaving the world’s most vulnerable communities more exposed than ever.”

For more reaction from Practical Action’s partner organisations, click here.