Climate Finance and the SDGs: Reimagining Finance Flows for Equitable Climate Action in Sub-Saharan Africa

Climate Finance in a Shifting Global Landscape

On 16 July 2025, the World Bank’s International Bank for Reconstruction and Development (IBRD) raised €3 billion through a 10-year Sustainable Development Investment Portfolio. The bond is designed to support sustainability, promote decarbonisation, and assist vulnerable countries in responding to the growing risks of climate-related disasters. This initiative complements the broader ambition outlined at COP29, where world leaders pledged $300 billion annually in developmental climate finance by 2035 among industrial and technology-leading nations (World Bank 2025, OECD 2021). Furthermore, these pledges aim to address the persistent shortfalls in climate finance, as highlighted by the OECD, with previous targets only recently surpassing the $100 billion mark, while contributions before 2021 fell significantly short (OECD 2021, OECD 2020). Furthermore, building on international frameworks such as supporting national adaptation plans (NAPs) and Nationally Determined Contribution, there is a desperate need for the scaling up of climate finance. On the international scale, this would incorporate the United Nations Framework Convention of Climate Change’s (UNFCCC) Reducing Emissions from Degradation and Deforestation (REDD) financial support programmes and national financing initiatives such as the Amazon Fund, Green Funds and different funding programs as highlighted by the OECD (OECD 2021)

These developments reflect a growing recognition of the need for sustained financial investment to address climate change and advance the Sustainable Development Goals (SDGs) amidst variating climate finance pledges and to ensure that there is sufficient and scaled up climate finance to meet these goals in alignment with the UNFCCC and UNDP human and climate development frameworks such as the standing committee on finance. However, the structure of climate finance flows remains uneven, particularly across least developed countries (LDCs), where access to funding often depends on a country’s economic profile and financial capacity. Economist Stefan Urban has argued that there is an urgent need to align climate finance with the needs of communities, rather than focusing solely on investment for economic output (Urban 2025). In this light, climate finance must be made more inclusive to promote human development, as well as support adaptation and mitigation efforts in response to increasing climate-related challenges.

This blog explores how climate finance currently flows in Sub-Saharan Africa, highlighting the challenges faced by lower-income, resource-dependent countries. It argues for a fundamental shift away from large, donor-driven funding toward more localised and regional fiscal initiatives. This reimagined approach is vital to achieving equitable climate, social, and development outcomes, especially in light of growing international efforts like the European Green Deal and the World Bank’s expanded climate action plan. Such a transition would better support both adaptation and mitigation, aligning with global commitments under the UNFCCC and COP protocols.

The Current Climate Finance Landscape in Sub-Saharan Africa

Despite the urgency of climate adaptation and mitigation in Africa, climate finance flows across the region are disproportionately directed toward a handful of larger, semi-industrialised economies and resource-rich countries, namely South Africa, Democratic Republic of the Congo and Ethiopia. These middle-income countries (with the DRC as an exception) receive a significant share of regional climate-related funding, owing to their more diversified economies, institutional capacity, and ability to participate in complex financial arrangements. 

Broadly, the key financing mechanisms adopted by these countries, to which they also have greater access, include public-private partnerships (PPPs) for large-scale infrastructure projects, blended finance mechanisms that combine concessional and private capital, and performance-linked loans tied to emissions reductions or policy reforms. In high-capacity countries like South Africa, frameworks such as the National Development Plan (NDP) 2030 and the formal adoption of Sustainable Development Goal 8 provide a strong foundation for implementing these instruments (Meattle 2023).

However, even in higher-capacity finance environments, public funding for climate and SDG-related development remains relatively low, averaging below 20%, with Development Finance Institutions (DFIs) being the most prominent contributors. While these debt-based financing instruments are effective in mobilising significant volumes of capital, they often require robust financial and regulatory systems, strong credit ratings, and well-developed project pipelines.

In contrast, lower-income, extractive economies have historically faced continued financial barriers and access to finance mechanisms. The reliance on DFIs and private finance mechanisms is much lower, with a higher reliance on government finance. Nigeria, as a case, has a high input of climate finance, with the public sector providing around 70% of total SDG and Climate investments (Orij 2025). Therefore LDCs are incentivised to using the following levers of finance, which have been championed by large-scale investment-driven economies such as China and India:

• Direct project finance, often earmarked for narrowly defined adaptation or infrastructure interventions.
• Resource or land leasing models, typically governed by external investors to cover government expenses and debt.
• Concessional loans or debt restructuring programmes, often tied to policy reform conditions.

As highlighted in the figure below, countries such as South Africa, Ethiopia, and the DRC are among the largest recipients of approved climate finance, largely due to their industrial footprint or the strategic importance of maintaining stability to ensure the supply of critical natural resources such as copper, cobalt, tantalum, and gold. This disparity becomes evident when comparing the funding received by South Africa and Ethiopia, collectively accounting for more than two times the climate investment allocated to highly vulnerable but strategically important countries like Nigeria, Angola and Kenya. Despite its susceptibility to both the adaptation and mitigation challenges posed by climate change, Nigeria continues to receive comparatively limited financial support.

A Legacy of Structural Imbalances

The disparities in access and financing instruments reflect long-standing structural imbalances in global finance. Many of the mechanisms still in use today have their roots in the development approaches promoted during the 1980s and 1990s, when the so-called Washington Consensus guided much of the financial engagement with low-income countries. Emphasis was placed on macroeconomic stability, liberalisation, and debt sustainability, often at the expense of domestic policy space.

Although the global fiscal architecture has evolved, many least developed countries (LDCs) still face conditionality, donor-driven priorities, and limited flexibility in how funds are used. These constraints create fiscal volatility, leaving countries highly vulnerable to global shocks and climate events, with minimal capacity for local or regional response.

A notable example is Zambia, which, following a decline in copper prices, the COVID-19 pandemic, and prolonged droughts, was unable to finance any meaningful adaptation or mitigation efforts and defaulted on part of its national debt in 2021 (Makhmatova 2025). Rather than supporting climate or SDG action, national resources were redirected toward fiscal restructuring. This left communities dependent on donor funding and limited domestic initiatives to address climate and development challenges, such as infrastructure upgrades and energy transitions.

Consequently, climate strategies in many LDCs are shaped by externally funded, project-based interventions, rather than long-term, country-led transition plans. This is further underscored by the fact that over 80% of climate finance originates from just nine donor countries, all based in the Global North.

Climate finance investment remains heavily centralised around government-led initiatives. According to the Climate Policy Initiative’s Global Landscape of Climate Finance 2023, over 84% of international climate finance originates from developed countries. However, much of this funding is funnelled through government channels, often with limited involvement from local communities or grassroots organisations (Buchner et al. 2023). These structures are frequently prone to poor implementation or come with conditionalities that divert resources away from critical communities and departments. This centralisation stems largely from governments serving as the primary intermediaries between donors and local stakeholders, often leaving communities marginalised and underrepresented.

In contrast, financially capable Global South countries such as China, India, and Brazil contribute relatively little to global climate finance and the Sustainable Development Goals (SDGs). Their development support is primarily channelled through discretionary loans, resource-for-infrastructure deals, and long-term leasing. These investments are typically geared toward economic growth and infrastructure development, rather than supporting decarbonisation, climate adaptation, or broader climate finance priorities.

The Case for Reimagining Climate Finance Flows

To ensure that climate finance truly supports sustainable development for all countries, especially in Sub-Saharan Africa and shifting dynamics between western based sources of funding to include finance initiatives within the Global South, a reimagining of the system is needed. This requires a shift in focus—from viewing finance as a tool for implementing external priorities, to seeing it as a lever for empowering national climate and development strategies.

A more inclusive and equitable climate finance system would focus on several key changes:

1. Tailoring Financial Instruments to Local Needs

Not all countries can access complex financing tools like PPPs or blended finance. More accessible options—such as direct budget support, simplified grants, and concessional finance with fewer conditions—should be made available to lower-capacity nations. While COP29 pledges reflect this need, substantial funding gaps persist, particularly regarding access to different funding and finance mechanisms.

2. Expanding Access Through Capacity Building

Many countries lack the institutional capacity to access climate finance. Strengthening these systems and supporting localised funds,  such as frameworks and development finance mechanisms in Ethiopia, Rwanda, South Africa, and Benin, can help bridge the gap between global finance and local implementation.

3. Prioritising Country Ownership and Co-Design

Finance should align with national strategies, NDCs, and just transition plans, with communities directly involved in planning and delivery. Shifting from donor-driven models to co-owned initiatives can promote resilience, especially when investments extend beyond single development projects to support sectors like SMMEs, agriculture, energy, and transport.

4. Introducing Regional Facilities for Low-Income Countries

Creating regional climate finance platforms for low-income and resource-dependent economies could help pool risks, enhance access to global finance mechanisms and promote localised funding mechanisms. These platforms could also serve as intermediaries for blended finance or risk-sharing instruments that individual LDCS may not be able to manage independently. Some key finance facilities of which have already been tried and tested, are the South African Green Fund, Rwandan Green Fund and Mali Climate Fund

5. Enhancing Accountability in Fund Allocation

More transparent finance flows are essential. Clear reporting on who receives funding, how it's used, and under what terms will build trust and ensure finance benefits those most in need. As Global South participation grows, this transparency must extend to emerging funders and new finance models.

Towards Equitable Climate and Development Outcomes

The commitments made at COP29 and the recent €3 billion raised by the World Bank are clear signs that climate finance is gaining momentum. But the challenge now lies in ensuring that this momentum translates into action that is inclusive, fair, and responsive to the needs of vulnerable communities and promotes both social development and economic development for the most vulnerable communities. 

Monitoring finance flows is difficult and coupled with various nuances. The wide array of finance mechanisms coupled with fiscal risks would need to be shifted away from solely fiscal sustainability but would need to include a broader assessment of finance flows, ensuring that climate finance supports the most vulnerable communities.

In Sub-Saharan Africa, this means moving beyond a narrow focus on high-capacity economies and creating space for meaningful participation from low-income, resource-dependent countries. These nations are often among the most affected by climate change, yet the least equipped to respond. Restructuring Climate finance, if designed and delivered thoughtfully, can help address these disparities and support long-term resilience and sustainable development. The shift towards a reimagined climate finance architecture is essential for achieving global climate goals and promoting human development. 

References

Buchner, Barbara et al. 2023. Global Landscape of Climate Finance 2023. Climate Policy Initiative. Accessed July 22, 2025. https://www.climatepolicyinitiative.org/publication/global-landscape-of-climate-finance-2023/

Climate Funds Update. Climate Funds Update Data Dashboard. Heinrich Böll Stiftung. Accessed July 22, 2025. https://climatefundsupdate.org/data-dashboard/#1541245664327-538690dc-b9a8. 

Makhmatova, Solikha. 2025. “Zambia’s Debt Turnaround.” ISS African Futures, January 28, 2025. Accessed July 22, 2025. https://futures.issafrica.org/blog/2025/Zambias-debt-turnaround.

Meattle, Chavi, Pedro de Aragão Fernandes, and Dharshan Wignarajah. 2023. The South African Climate Finance Landscape 2023. Technical report prepared for the Presidential Climate Commission. Climate Policy Initiative. Accessed July 22, 2025. https://www.climatepolicyinitiative.org/publication/the-south-african-climate-finance-landscape-2023/.

OECD (2020) Climate finance provided and mobilised by developed countries in 2013-2018.  Paris: OECD. https://www.oecd.org/newsroom/climate-financefor-developing-countries-rose-to-usd-78-9-billion-in-2018oecd.html

OECD (2021) Climate Finance Provided and Mobilised by Developed Countries: Aggregate trends updated with 2019 data, Climate Finance and the USD 100 Billion Goal. Paris: OECD. https://doi.org/10.1787/03590fb7-en 

Orji, Innocent. 2025. “Scaling Up Climate Finance for Sustainable Agriculture: Strategies for Adaptation and Mitigation.” Verifa Africa, accessed July 22, 2025. https://www.verivafrica.com/insights/scaling-up-climate-finance-for-sustainable-agriculture-strategies-for-adaptation-and-mitigation

Urban, Stefan. 2024 "Financing social protection: core financing options and the need to increase synergies with green, climate, humanitarian and alternative funding frameworks for a more climate resilient future." 

Watson, Charlene (ODI Global), Liane Schalatek (Heinrich Böll Stiftung), and Aurélien Evéquoz. The Global Climate Finance Architecture: Climate Finance Fundamentals 2. Climate Funds Update and Heinrich Böll Stiftung, March 2025. https://climatefundsupdate.org/publications/the-global-climate-finance-architecture/.

World Bank. 2025. “World Bank Achieves Largest Ever EUR Orderbook for EUR 3 Billion 10-Year Sustainable Development Bond.” World Bank, July 16, 2025. Accessed July 22, 2025. https://www.worldbank.org/en/news/press-release/2025/07/16/world-bank-achieves-largest-ever-eur-orderbook-for-eur-3-billion-10-year-sustainable-development-bond.