According to a new working paper by the World Resources Institute (WRI), voluntary climate finance among developing countries has tripled between 2013 and 2023.
Climate finance refers to funds aimed at supporting developing countries in combating climate change. These funds can be used for mitigation projects, such as building wind power plants, or for adaptation projects, such as constructing sea dikes, which help nature and life adapt to climate change.
Climate finance plays a central role in international climate cooperation, but it is often a source of disagreement. Debates concern who should provide the funding, how, and for what purposes: public or private funds, grants or loans, mitigation or adaptation projects.
Under the Paris Agreement of 2015, developed countries are obliged to provide financial assistance to developing countries in recognition of their historical contribution to global warming. The Paris Agreement also encourages developing nations to voluntarily provide financial support.
The WRI study showed that between 2013 and 2023, voluntary financing from 14 major countries exceeded 102 billion US dollars, peaking at over 17 billion in 2023 after steady growth since 2020. For comparison, traditional climate finance from developed nations amounted to 132.8 billion US dollars in 2023.
These 14 countries are not listed in Annex II, which includes developed countries obligated to contribute to climate finance under the Paris Agreement. Annex II countries were members of the Organisation for Economic Co-operation and Development (OECD) in 1992 when the UN Climate Convention was signed. Since then, some countries, such as China, have become middle-income countries, while others, such as South Korea, have become developed economies, although the composition of Annex II has remained unchanged.
It is estimated that by 2035, developing economies, excluding China, will require about $3.2 trillion annually to achieve climate goals and adapt to changing climate. However, traditional channels have been under increasing pressure since 2024, when the US, under Donald Trump, withdrew from the Paris Agreement and its climate finance commitments. European countries are cutting their official development assistance budgets. The UK announced an effective reduction in its climate finance commitments, and the World Bank canceled its internal climate finance target.
At the COP29 summit in Baku in 2024, a new global goal for climate finance was agreed upon: $300 billion per year by 2035. Although this goal calls on developed countries to 'lead by example' in achieving this threefold target, it also emphasizes the importance of voluntary contributions from Global South countries, known as South-South cooperation.
Joe Lihuan, a researcher at WRI's Centre for Sustainable Finance and one of the authors of the working paper, notes: 'There is a huge need for financing from emerging markets and developing economies for the climate transition.' He adds that 'traditional donor country climate finance cannot meet all these needs... Countries outside Annex II are very important.'
Hardjit Singh, founder of the Satat Sampada Climate Fund, believes that the growth of climate finance from non-Annex II countries 'is a strongly positive sign.' Nevertheless, he insists that this should be viewed through the lens of South-South solidarity, not as shifting legal obligations. According to him, the WRI report shows that developing economies are becoming active providers of solutions despite serious internal climate vulnerabilities and their own capital constraints.
The report found that China is the largest donor from non-Annex II countries, having provided and mobilized $44.8 billion between 2013 and 2023. This is followed by South Korea and India, which provided and mobilized $13.9 billion and $8.3 billion, respectively. Brazil, Saudi Arabia, Argentina, and Russia rank next, providing between $5 billion and nearly $7 billion. Notably, Saudi Arabia's climate finance is growing rapidly and steadily, rising from seventh place among the 14 assessed countries to third between 2019 and 2023.
Most of these countries do not officially publish their climate finance contributions, but the WRI paper uses multiple sources to determine 'climate-related finance' based on its intended purposes. These definitions align with the definitions of climate finance of the UN Convention and the OECD framework for tracking climate finance from developed countries.
Interestingly, when China is excluded, the climate finance provided by these non-traditional donors is more directed towards projects related to adapting to the effects of climate change. The study found that 13 other non-Annex II countries directed about 53% of their bilateral public finance, export credits, and mobilized private finance towards adaptation and cross-sectoral projects since 2020. This sharply contrasts with traditional donors: between 2016 and 2021, only 25% of climate finance from developed countries was directed towards adaptation, according to OECD data.
However, China does not fit this model. According to Joe, almost 93% of its climate finance is directed towards mitigation. This is because its financing is mainly focused on infrastructure projects, which tend to focus on mitigation rather than adaptation. Nevertheless, he warns that reliance on external, rather than governmental, databases may lead to some small-scale adaptation projects not being accounted for.
The paper breaks down the flows of climate finance from non-Annex II countries into multilateral finance, bilateral public finance, export credits, and mobilized private finance. In total, contributions to multilateral institutions account for the largest share, increasing from $1.4 billion to $13.4 billion between 2013 and 2023. Joe points out that the creation of new multilateral banks led by developing economies has given this channel of climate finance an additional boost over the last decade, specifically mentioning the Asian Infrastructure Investment Bank, established in 2016 and led by China, and the New Development Bank, founded by BRICS countries in 2015.
Nevertheless, the similarity between climate finance from non-Annex II countries and traditional climate finance lies in the neglect of low-income countries, which are often the most vulnerable to climate change. Excluding multilateral finance contributions, only 8% of climate finance from the 14 analyzed countries was directed to low-income countries. This is very similar to the 9% of contributions from Annex II countries. Furthermore, about half of this 8% was directed to only one country—Ethiopia—due to large-scale infrastructure projects financed by Chinese banks.
Singh argues: 'This proves that market-oriented and infrastructure-heavy financing models leave behind the most climate-vulnerable, least developed countries.' He believes that better mechanisms must be created to ensure funding reaches the forefront of the climate crisis.
The paper notes that climate finance from non-traditional donors generally arises from broader foreign policy, rather than from specific environmental structures. Joe says: 'They usually do not have specialized foreign aid offices for providing foreign assistance. They are usually integrated into existing ministries, such as the Ministry of Foreign Affairs.'
Such countries also have their own large needs for climate finance. Taewook Ha, a climate finance specialist at the Institute of Energy Economics and Financial Analysis, notes that South Korea has clearly integrated climate considerations into the Official Development Assistance (ODA) it provides bilaterally. In 2021, the country adopted its 'Green New Deal' strategy to promote ODA. The goal was to increase the share of green ODA to 28.1%—the average for traditional ODA donors globally—by 2025, compared to the baseline before 2020 of 19.6%. These targets were significantly exceeded: by 2024, 63% of bilateral ODA was focused on climate, according to the OECD. Ha notes that South Korea often provides climate finance through small projects via its international cooperation agencies and banks.
China, however, is fragmented across multiple ministries, shaped by various incentive documents, and can be inconsistent due to its focus on project financing. Singh reports that India also lacks a separate climate assistance agency. Instead, international public finance is coordinated through the Ministry of Foreign Affairs. He says that 'India's approach reflects a highly pragmatic model adapted for South-South cooperation, where climate outcomes are directly integrated into development partnerships.' He adds that this approach is 'demand-driven, reciprocal, and closely linked to regional infrastructure and technology transfer needs.'
This raises questions about transparency and how the world should better understand the contribution of these climate donors. Since such financing is voluntary and not mandated by the UN Climate Convention, it also lacks formalized reporting and disclosure requirements.
There is no doubt that the financial contribution of non-Annex II countries will be vital in meeting global needs for climate finance. However, the direction they will take remains uncertain. Shaping factors include the actions of non-traditional donors in coordinating their climate finance, as well as the domestic policies of recipient countries, which can improve the investment environment. Liu Shuang, Director of South-South Finance at WRI, says that it will also depend on multilateral negotiations and meetings—not only within the UNFCCC but also at forums like BRICS, as well as in regional and international platforms for coordinating export credit agencies.
She also adds that the role of private actors from non-Annex II countries will be crucial as the world strives to reach the $1.3 trillion goal. Hardjit Singh summarizes, answering the question of whether he expects the expansion of climate finance from non-Annex II countries to continue: 'Yes, but the trajectory of its growth will look completely different from Western ODA models.'
Thus, the task is to track, evaluate, and better coordinate these important voluntary contributions to climate finance.
The current geopolitical crisis is exacerbating South Africa's existing economic difficulties, which stem from the country's dependence on an energy system vulnerable to global shocks and supply chain disruptions triggered by conflicts such as the war between the US, Israel, and Iran.
Against the backdrop of this conflict stands an existential and escalating climate crisis that demands not only technological innovation but also a fundamental overhaul of governance and financial architectures to advance development and growth. According to the 'Climate Finance Landscape Report, 2025' by the Presidential Climate Commission, South Africa, as the continent's most industrialized economy, attracts about 60% of its climate finance domestically, indicating a strong financial sector.
Nevertheless, the annual investment gap required to meet Nationally Determined Contributions (NDCs) and net-zero targets amounts to a substantial 203–404 billion South African Rand. Existing funding streams are heavily skewed towards energy, particularly renewable electricity, which accounts for 74.1% of tracked financing, while adaptation remains at only 11.3%. More tellingly, 78.2% of financial instruments consist of market-rate debt financing (45%) and equity capital (33.2%).
This reliance on commercial debt places the burden of transition onto balance sheets, a model ill-suited for community-level initiatives that lack collateral, credit history, or stable income sources in their early stages. Funding explicitly labeled as 'just transition' remains modest—averaging only 16.8 billion Rand annually—and primarily comes from governments and Development Finance Institutions (DFIs). The market itself does not ensure fairness.
Just transition is viewed not as a secondary issue, but as a normative foundation focusing on decent work, social inclusion, poverty eradication, and participation in decision-making. It envisions decentralized, diversely owned renewable energy systems and equitable access to resources. However, when climate finance is dominated by commercial players seeking risk-adjusted returns, the most affected communities, such as in coal regions like Mpumalanga, end up being either observers or, at best, recipients of symbolic programs.
Since the real impact of climate—rising temperatures, intensified storms, floods, and water scarcity—is ignored by aggregated financial flows, a targeted financing ecosystem that prioritizes community agency is necessary. A presentation on financing green initiatives at the community level in Africa, based on the South African experience, reveals a critical paradox: despite the growth in climate finance, it deeply diverges from the principles of just transition.
If the goal is to empower vulnerable groups—the poor, women, and youth—then the prevailing market-driven mechanisms are not merely insufficient, but structurally exclusionary. Data from South Africa demand a decisive shift in course: from debt-based, top-down investments to community-based, bottom-up resilience. The case of Mpumalanga serves as an example: as a province facing severe climate disruptions and the gradual phase-out of coal, its economic diversification should not depend on abstract market forces.
The true potential lies in creating region-specific value chains: critical mineral processing, green manufacturing, electric vehicle supply chains, green hydrogen, low-carbon fertilizers, and others. These sectors promise millions of new jobs, protection of existing ones, poverty reduction, and the prevention of thousands of premature deaths. Nevertheless, this potential will remain unrealized without a well-designed financing system that prioritizes community agency.
Socially owned renewable energy offers a compelling alternative to the current ownership structure in the energy generation sector. This requires appropriate governance structures, involvement in site selection, and crucially, a financial nexus that extends beyond traditional bankability, actively involving communities or workers in the local economy, thereby deepening economic democracy.
The central thesis of this article is that 'bankability must be redefined.' For community-led green initiatives, the project financing mechanism should not begin with commercial loans. It should start with grant funding for developing business cases, preliminary feasibility studies, comprehensive viability analysis, and preparation for bankability. Only then should concessional loans, blended finance, and finally, commercial debt be introduced.
This sequential approach to risk mitigation recognizes that community initiatives are not failed commercial ventures, but public goods with long-term social, economic, and environmental returns. Existing climate finance, obsessed with immediate risk-adjusted returns, systematically undervalues these co-benefits. Furthermore, adaptation finance—the forgotten child of climate flows—must be radically increased and redirected toward community-level actions. Adaptation is inherently local: early warning systems, drought-resistant agriculture, flood-resilient infrastructure, and water conservation cannot be designed remotely. Yet, at only 11.3% of tracked finance, adaptation remains a secondary concern, forcing communities to absorb shocks that strategic investment could mitigate.
Achieving a just transition in Africa requires more than just increasing the volume of climate finance; it demands a paradigm shift regarding who makes decisions, who benefits, and who bears the risks. The data from South Africa serve as a stark warning: commercial logic alone entrenches inequality. Policymakers, development institutions, and philanthropists must prioritize grant-based technical assistance, establish just transition conditions, and create dedicated funds for community-owned renewable energy and adaptation. Without such measures, the transition will be neither just nor sustainable. As the final slide of the presentation reminds us, community agency is not a charitable add-on, but the missing engine of transformative change. The question is no longer whether to finance green initiatives, but how to finance them justly.
