The Climate Finance Gap: A Missed Opportunity at COP29
The COP29 summit in Baku pledged $300 billion annually in climate finance for countries hit hardest by the climate crisis by 2035—a figure falling far short of expectations. The UN estimates the actual need at around $2.4 trillion per year. Even the 70 most vulnerable countries (the V20 group) alone require $490 billion annually by the end of the decade.
A new report by the Climate Vulnerable Forum V20 and the Bridgetown Initiative identifies 10 “super levers” that could rapidly mobilize an additional $210 billion in accessible climate finance for these nations.
Debt and Financial Access: A Core Issue, Not a Side Concern
The report emphasizes that debt and financial access are not secondary concerns when designing strategies to increase external resources for climate mitigation, adaptation, and loss and damage recovery.
Currently, 25% of V20 nations face severe debt distress. The report calls for greater use of innovative financial instruments like “debt-for-nature swaps”—agreements that reduce national debt in exchange for environmental protection measures.
More accessible financing would also enhance resilience and sustainable development, helping reduce climate damage while strengthening economic stability. The ripple effects include improved institutional capacity, better allocation of climate funds, and increased access to global markets. These, in turn, would make it easier for V20 economies to diversify and reduce dependence on raw material exports.
10 Super Levers to Strengthen Climate Finance
The proposed measures create a multiplier effect and are designed to be implemented simultaneously.
1. National Climate Platforms
Supporting climate strategies led by vulnerable countries, such as Climate Prosperity Plans, to provide a clear action framework, attract financing, and reduce transaction costs.
2. Transparent, Standardized Carbon Markets
Expanding high-integrity carbon markets to generate new government revenues while aligning emissions reductions with national priorities.
3. Reallocation of Special Drawing Rights (SDRs)
Redirecting $100 billion from the International Monetary Fund’s reserves to provide concessional financing for the most vulnerable nations.
4. Solidarity Taxes on Polluting Sectors
Imposing levies on industries like aviation and maritime transport to generate $50-100 billion annually in predictable climate finance.
5. Phasing Out Harmful Subsidies
Redirecting fossil fuel subsidies toward clean energy investments and nature-based solutions.
6. Reforming Capital Banking Regulations
Adjusting financial regulations (e.g., Basel III) to lower the cost of capital for sustainable infrastructure projects in emerging markets.
7. Mandates to Mobilize Private Capital
Setting clear investment mobilization targets for multilateral development banks (MDBs) to catalyze large-scale private sector funding.
8. Local Currency Solutions
Enhancing financial instruments such as currency risk hedges and local currency bonds to reduce financing costs for vulnerable economies.
9. Affordable Sovereign Disaster Insurance
Reducing insurance premiums for V20 nations by scaling up risk funds and designing tailored financial products to accelerate post-disaster recovery.
10. Integrating Climate and Nature into Economic Systems
Embedding natural capital valuation into economic models to drive investments that protect ecosystems and strengthen climate resilience.