What’s next for climate finance? From Seville to Belém

This blog was originally published by ODI Global

With the dust settling from COP29’s hard-fought negotiations on the New Collective Quantified Goal (NCQG), attention is shifting to how the climate finance goal will be met. The challenge is how to scale up financing for increasingly connected priorities in a challenging landscape of debt stress and cuts in official development assistance.

The recent Financing for Development (FfD4) conference in Seville offers important clues about how to continue the political momentum on the road to COP30 in Belém. It is the first time that the FfD process has meaningfully connected to relevant UNFCCC decisions. FfD4’s outcome document, the Seville Commitment, goes beyond the previous FfD outcome (the Addis Ababa Action Agenda) to meaningfully integrate climate finance within the broader development finance framework rather than treating it as a separate track. While the Addis Ababa Action Agenda acknowledged existing climate finance commitments (the $100 billion goal), the Seville Commitment actively calls for resources for implementation. This marks a significant evolution.

Here are the five things that FfD4 achieved for climate finance:

Calling for resources for the implementation of UNFCCC decisions

The Seville Commitment features several connections to the multilateral processes for climate, biodiversity and desertification. More specifically for climate finance, it calls for ‘the provision and mobilisation of means of implementation in line with the objectives and respective commitments under the UNFCCC and Paris Agreement’. This includes the contentious NCQG decision (see ODI’s thoughts here) and the UNFCCC-linked multilateral climate funds.

This language matters. By setting the climate finance goal within the broader financing for development framework, the Commitment signals recognition that providing and mobilising financial resources to at least $300 billion by 2035 – and the scaling up to $1.3 trillion from all sources – will be linked to the discussions on international financial architecture reform and increasing mobilisation of private finance for sustainable development.

Supporting the implementation of NDCs and NAPs

The outcome document also calls for ‘support for the implementation of nationally determined contributions and national adaptation plans.’ Countries’ updated nationally determined contributions (NDCs), or NDCs 3.0, are due this year, and are expected to be more ambitious than the previous round, as prescribed in the Paris Agreement’s ratchet mechanism. The UNFCCC’s Standing Committee on Finance has previously estimated that developing countries’ needs in NDCs amount to US$455–584 billion per year by 2030. With NDCs 3.0 rolling in, it is possible that the estimated costs will be higher. There is a well-documented gap especially for adaptation finance needs, estimated at US$187-359 each year, which informed the Doubling of Adaptation Finance pledge made at COP21 that will expire this year.

Supporting the implementation of NDCs and NAPs will require substantial finance beyond the $300 billion goal of the NCQG. To meet developing countries’ needs, there is a need for coherent financing strategies that use scarce concessional resources well but also seek to boost domestic resource mobilisation and enable climate-smart private investment.

‘Looking forward’ to the launch of the Baku to Belém Roadmap by COP30

In pursuit of the ‘scaling up’ to $1.3 trillion, the COP29 and COP30 Presidencies are developing the Baku to Belém Roadmap and report as mandated in Baku. As Brazil’s COP30 Presidency has outlined to its Circle of Finance Ministers, five priority areas will shape the report expected by COP30 in Belém: MDB reform, expanding concessional finance and climate funds, country platforms to boost domestic capacity, innovative financial instruments for private capital mobilisation and strengthening regulatory frameworks.

These areas of focus are a welcome effort to address some of the key topics that shaped the NCQG deliberations. Some of these include the role of public finance: whether it should be used to de-risk and mobilise greater private investment to steer the real economy versus providing grants and highly concessional resources for climate actions with public good characteristics or less certain, monetisable returns, e.g., for adaptation. Navigating fiscal constraints in both developed and developing countries will be critical to scaling up finance for climate.

Stressing the importance of transparency in climate finance reporting

The Seville Commitment’s emphasis on transparency in climate finance reporting echoes the transparency arrangements featured in the NCQG decision. Starting in 2028, countries will produce biennial reports on collective progress, including specific reporting on enhancing access, the regional balance of climate finance and the impacts, results and outcomes of climate finance flows. The outcome document’s recognition of the importance of transparency demonstrates sustained momentum to track not just the quantity but the quality of finance flows.

However, progress on this front will depend on what information can be collected for reporting on a wide range of sources of finance. The broad formulation of the scaling up to $1.3 trillion in the NCQG from ‘all public and private sources’ raises a relevant question of how ‘all’ private finance (mobilised, catalysed, etc.) flows might be counted. Capturing private finance flows has long been a challenge, including managing confidentiality aspects and approaches to make this information consistent (i.e. measuring the same thing), standardised (i.e. to the same unit, including time unit) and aggregated for assessment.

The road to Belém

By acknowledging wider challenges – from high costs of capital to unsustainable debt levels – the Seville Commitment reflects a growing political awareness of the structural reforms needed to respond to the climate and biodiversity emergencies. How to get to the trillions needed will require coordination at several levels.

The scale of the needs required gives us a sense of the challenge ahead, but current figures have limited practical use for supporting the mobilisation of finance at country level. Estimates must go beyond abstract investment needs and incorporate cost of capital considerations, ultimately moving towards detailed investment plans and sophisticated financing strategies to match different sources and instruments. These should be designed in ways that minimise costs and acknowledge respective constraints for both public and private actors.

How countries translate the Seville Commitment into action will vary based on national circumstances. Success requires policy frameworks that send clear, reliable signals to financial market participants – signals that promote financial resource mobilisation. Countries can design policy packages tailored to their specific needs and priorities, drawing from tools across fiscal policy, financial regulation and both monetary and non-monetary measures. By taking into account a joined-up perspective of their financing needs, national policies and sustainable development objectives, countries can reduce uncertainty for investors and strengthen efforts to attract and deploy sustainable finance.

Just four months remain until the next COP. The road to COP30 and the delivery of the ‘Baku to Belém Roadmap to 1.3T’ will depend on whether the recognition of climate in the broader development framework leads to enhanced coordination or adds another layer of complexity to an already challenging landscape.