Closing the gap in investment needed to align with the Paris Agreement will avert massive future costs and unlock economic transformation, delivering substantial long-term savings and widespread co-benefits.
A successful shift to a low-carbon, resilient, and inclusive economy hinges on the ability of Ministries of Finance to drive strategic public investment, create incentives to attract private capital, and coordinate across sectors. To avoid far greater costs down the line, they must frontload investment, ensure national budgets reflect climate priorities, and embed just transition measures into financial planning.
- The Independent High-Level Expert Group on Climate Finance (IHLEG) estimates that to deliver on the Paris Agreement, global investment requirements for climate action will need to reach US$6.3–6.7 trillion per year by 2030, rising to US$7–8.1 trillion per year by 2035. Of this, US$2.3–2.5 trillion per year by 2030 (rising to US$3.1– 3.5 trillion by 2035) is needed for emerging markets and developing economies (EMDEs) other than China. Any shortfall before 2030 will create a steeper and potentially more costly path to climate stability.
- The challenge is to foster the enabling conditions for the ramp-up of investments and mobilize affordable finance from all pools of finance. However, increasing finance alone does not guarantee effective investment. Investment strategies must be inclusive and prioritize vulnerable groups to ensure equitable access to climate finance and economic opportunities.
- The key gaps in country-level assessments of investment needs include overlooking adaptation and resilience, loss and damage, natural capital, and just transition investment needs; not planning long term and thereby neglecting the temporal dynamics and front-loaded nature of climate investments; and not matching investment needs to the right mix of finance. Additionally, many EMDEs do not have the capacity to conduct detailed climate investment assessments.
MoFs should spearhead national efforts to build technical and institutional capacity for investment planning, leveraging multilateral support and South-South cooperation where needed. Additionally, improving data collection and methodologies and fostering coordination and collaborative frameworks within government and with external partners (such as donors, regional development banks, and private-sector partners) are important for strengthening country-level climate investment estimates.
Keywords
adaptationclimate financeinvestment needsmitigationtransition
