For decades, the international community has operated under the illusion that climate action and development are different pursuits, each with its own goals, institutions, and funding mechanisms. This approach has hindered progress on both agendas.
The world leaders gathered in Belém, Brazil, for the United Nations Climate Change Conference (COP30) must recognise this and begin transforming the fragmented, underperforming climate-finance system into an integrated framework that delivers on both climate and development objectives. As they embark on this process, it is worth considering the main takeaways from Policy-Driven Climate and Development Finance: Strategies for Equitable Solutions, the forthcoming volume of essays that I edited.
While making the global financial architecture more equitable and efficient is a long-term project, delegates at COP30 can take important steps forward. First, they must deliver a replicable and scalable model for climate finance that translates pledges into predictable flows, provides measurable results, and allows for country ownership. This is necessary to narrow the climate-finance gap, especially because developing countries will require between US$5.1-6.8 trillion through 2030 to meet their nationally determined contributions, while their adaptation finance needs are 10-18 times greater than international public-finance flows.
A good example of this kind of model is the Tropical Forests Forever Facility, an ambitious blended-finance mechanism designed to unlock large amounts of both public and private capital for the conservation and sustainable management of tropical forests. If this facility successfully channels annual payments to tropical forest countries, it will show how climate finance that is anchored in outcomes can preserve biodiversity, support local livelihoods, and, crucially, advance development.
COP30 must also focus on efficiency. The climate-finance system is not only underfunded but also fragmented. Developing countries are forced to navigate an ever-growing number of funds, each with its own procedures and reporting requirements. This bureaucratic thicket, coupled with co-financing conditions and weak coordination among institutions, can delay projects for years, while too much money is wasted on transaction costs.
At the heart of this inefficiency lies the cost of capital. Green investments often come with high interest rates for developing economies. According to the International Energy Agency, the cost of financing green energy in developing countries can be 2-3 times higher than in advanced economies, significantly constraining the pace of the low-carbon transition. This disparity is less about project risk and more about structural biases, such as sovereign credit ratings that underestimate resilience, volatile currencies, and persistent debt overhangs.
The G20 has recognised the problem and recently hosted a high-level dialogue with the African Union on debt sustainability, the cost of capital, and financing reforms. The group must now deliver viable solutions: more dynamic and liquid local capital markets, financial instruments that reduce currency risk, and de-risking mechanisms that attract private investors on fair terms. Multilateral development banks, for their part, should reform their mandates and risk frameworks to provide more capital, more cheaply and more quickly.
But increasing efficiency also requires injecting a new sense of urgency into the process. For communities at risk of being displaced by floods and droughts, a year-long approval cycle for climate financing can turn a disaster into a catastrophe. COP30 must push for accelerated disbursement standards, simplified access procedures, and other measures to streamline operations.
Lastly, there is the question of fairness. The majority of climate-finance flows are concentrated within the G20 and focused on mitigation. At the same time, developing countries are grappling with unsustainable debt burdens, which have narrowed their fiscal space and crowded out climate and development spending.
The 11 recommendations by the UN Secretary-General’s Expert Group on Debt offer a roadmap for addressing this silent debt crisis. The proposed reforms cover three broad areas: restructuring and modernising the multilateral financial system; providing borrowing countries with technical and capacity-building assistance; and encouraging borrowers to adopt more effective strategies for debt management. Implementing these recommendations would help low- and middle-income countries redirect resources from debt service toward investment in sustainable growth.
Instruments such as debt-for-climate and debt-for-nature swaps can complement these efforts by ensuring that financial relief is linked to climate and environmental protection and creating fiscal space for spending on development goals. A just climate transition requires concessional finance, which should be seen not as charity, but rather as a shared investment in global resilience.
Integrated finance is the only viable path forward, because a government that invests in climate action such as resilient agriculture or green transport is also advancing development goals. The global financial architecture must reflect that reality.
COP30 can bring about a move in this direction. Governments can commit to incorporating climate and development finance into their budgets. International institutions can begin to streamline rules, align metrics, and ensure transparency. And both public and private actors can expand the use of innovative tools – from voluntary carbon markets to regional project platforms – that support local transformation.
No country should have to choose between fighting poverty and fighting climate change. The shortcomings of the climate-finance architecture must be addressed. Public financial flows remain indispensable not only for equity, but also for leverage – every dollar spent effectively can mobilise many more in private capital. Whether COP30 is considered a success largely depends on its ability to maximise the impact of these flows on climate and development outcomes.
Mahmoud Mohieldin, UN Special Envoy on Financing Sustainable Development and Co-Chair of the Expert Group on Debt, is a former minister of investment of Egypt (2004-10), former senior vice president of the World Bank Group, and former executive director of the International Monetary Fund.
Copyright: Project Syndicate, 2025.
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