By Ukumbi Afrika |
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Multilateral development banks committed a record US$162.5 billion to climate finance in 2025, reinforcing support for developing economies. However, recent changes to the World Bank’s climate lending strategy have sparked debate over whether long-term financing targets can be sustained.
Multilateral development banks (MDBs) provided a record US$162.5 billion in climate finance last year, underscoring growing global efforts to support climate action and sustainable development. Yet the future pace of that funding has come under renewed scrutiny following the World Bank’s decision to move away from its formal climate financing target.
According to a report published by the European Investment Bank (EIB), nearly US$103 billion of the total climate finance was directed towards low- and middle-income countries, reflecting the increasing emphasis on helping developing economies adapt to climate change while pursuing low-carbon growth.
The record level of financing suggests that the world’s largest development banks remain broadly on course to achieve commitments made during the COP29 United Nations Climate Change Conference held in Baku in 2024.
Under those commitments, MDBs pledged to provide at least US$120 billion annually in climate finance to developing countries by 2030, alongside US$50 billion per year for higher-income economies.
“This demonstrates that multilateral development banks are delivering climate finance at scale and expanding support where it is needed most,” said Ambroise Fayolle, Vice-President of the European Investment Bank.
World Bank Policy Shift Draws Attention
Despite the encouraging figures, observers have questioned whether future targets could come under pressure after the World Bank announced last month that it would discontinue its goal of allocating 45% of its annual financing to climate-related projects.
The World Bank said the decision reflects a shift towards measuring development outcomes rather than focusing on specific lending allocation targets.
Nevertheless, the institution remains the largest contributor to climate finance among multilateral development banks.
According to the report, the World Bank accounted for almost half of the US$102.6 billion provided to developing countries in 2025 and has consistently played that role over the past five years.
The World Bank’s Climate Director, Jamie Fergusson, said the institution remains committed to supporting countries pursuing climate-smart development, emphasising that economic development and climate resilience are inseparable priorities.
Fayolle also expressed confidence that the collective financing goals remain achievable despite the policy change, pointing to the 21% increase in climate funding for developing countries recorded over the past year.
Climate Investment Continues to Expand
Climate finance provided by multilateral development banks to developing economies has more than doubled over the past five years, increasing from US$51.6 billion in 2021 to more than US$102 billion in 2025.
The latest report shows that:
• US$68 billion was allocated to climate mitigation projects, including renewable energy, clean transport and emissions reduction initiatives.
• US$35 billion supported climate adaptation programmes designed to strengthen resilience against extreme weather events, droughts, floods and other climate-related impacts—a 31% increase over the previous year.
Climate lending to high-income countries also expanded significantly, rising to almost US$60 billion, while MDBs helped mobilise an additional US$80 billion in private sector investment for climate-related projects.
Experts believe the current financing trajectory remains positive but argue that substantially higher levels of investment will ultimately be required.
Danny Scull, a climate finance specialist at think tank E3G, said achieving the US$120 billion annual target remains realistic. However, he suggested that meeting the scale of global climate financing needs may require annual MDB commitments closer to US$180 billion, supported by continued innovation and stronger backing from shareholder governments.
During COP30 in Brazil, multilateral development banks reaffirmed their commitment to expanding climate finance. Attention is now turning to COP31, scheduled to take place in Turkey later this year, where governments are expected to focus on implementing previous commitments and accelerating climate investment.
Why It Matters
Climate finance has become increasingly important for African countries seeking to expand renewable energy, strengthen climate resilience and protect vulnerable communities from the growing impacts of climate change. As the continent faces rising financing needs for infrastructure, agriculture and adaptation, multilateral development banks remain among Africa’s most significant sources of concessional funding. Sustaining and expanding this support will be critical to achieving both economic development and climate objectives across the continent.
Source: Reuters
Reporting: Marc Jones and Simon Jessop.
Editing: David Goodman, Helen Popper and Lincoln Feast.