Private funding steps up climate finance.

Original title: Who could replace US climate financing?

Decarbonization is a long game with a shifting line-up of players—and funds

By Mark Harris April 17, 2025 in Anthropocene

Lawsuits and political pressure may save a few projects here and there but the future of climate financing under the current US administration seems clear—there isn’t one. From a high water mark of over $11 billion in climate aid for developing countries last year, the US has already cancelled over $4 billion in pledges and will almost certainly renege on most of its other climate-related commitments. In the blink of an eye, the US has ceded its position as the largest global climate donor. Here, we stare into the climate financing hole and ask what’s next.

Source: Carbon Brief

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The Hole Is Dark and Deep

1. America last. The $11 billion that the US gave to climate financing last year accounted for about 8% of all international climate finance, according to this in-depth analysis by Carbon Brief. That was more than any other country, but still a lot less than its fair share calculated from its historical emissions and income level. Last year, the Center for Global Development estimated that the US should be paying between 45 and 55% of financing for climate projects and loss and damage payments. Anne Jellema, the executive director of 350.org, told The Guardian that the US move “is effectivelyabandoning millions of communities that have done nothing to cause global heating but are losing homes, livelihoods and lives because of it.”

2. Following the leader over the cliff. Right behind the US’s government were most of its big lenders. JP Morgan Chase, Morgan Stanley, Bank of America, Citigroup, Wells Fargo and Goldman Sachs have all now left the Net Zero Banking Alliance, a UN-sponsored group dedicated to keeping global warming to less than 1.5 degrees Celsius. Japanese and Canadian banks quickly followed suit. European countries have also announced cuts to their climate aid, in part in response to US calls for increased defense spending.

3. Unofficial climate aid is at risk, too. Low and middle income countries receive at least twice as much money from family and friends that have migrated to rich countries than they get from all official aid or financing. This eye-opening story from the Carnegie Endowment for International Peace unpacks the climate impact of those remittances, noting that remittances surge by a third after extreme weather events, directly increasing local resilience and adaptation to climate change. Earlier research provided good evidence that remittances also reduce deforestation and enable reforestation. With about a quarter of all global remittances originating in the US, a crackdown on economic migrants is potentially even more damaging for the climate than directly eliminating aid.

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But Is The Hole Half Empty or Half Full? 

1.  More loans in the wings. While the US decision is objectively bad for progress on climate change, it’s not quite the end of the world. The US contribution to climate financing slumped before, from 2017 to 2021, Then, other nations and particularly development banks and private finance stepped up to fill the gap, according to Carbon Brief. By 2024, banks and private finance were supplying about two thirds of all climate financing, compared to a third direct from nation states. That trend shows no sign of slowing down. At COP29 in December,development banks pledged to increase climate finance for the poorest countries by 60% over 2023 levels over the next six years, to $120 billion.

Source: Carbon Brief

2. The power of bonds. One recent financing innovation that shows no signs of slowing down is climate bonds. Like municipal or government bonds, these fixed income instruments pay a fixed return over time, but with the money raised used to finance environmental, renewable energy, or restoration projects. According to financial clearing house ICE, nearly $600 billion in green bonds were issued in 2024, the largest total ever. Around $150 billion in green bonds have been issued so far in 2025.

3. Red is the new green. With the US retreating to the shadows, other global superpowers are finding their feet. Although China has fewer funding and reporting commitments under UN plans, it has been quietly spending abroad on renewable power, water and sanitation, and disaster preparedness projects, to the tune of over $25 billion since 2016 according to state sources. The Center for Global Development last year calculated that China was already making more climate financing commitments than the US by some measures, and it will certainly be ahead of America in all areas this year.

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What To Keep An Eye On

1. Greyer loans. The US International Development Finance Corporation, which committed over $3.7 billion in climate finance in 2024 seems, to have been spared the ax so far. But it might shift from funding renewable energy in poor countries to fossil fuel projects. Ritu Bharadwaj, a climate-finance researcher, told Carbon Brief that the bank could “signal a shift away from public, needs-based funding toward finance that prioritizes US commercial and strategic interests.”

2. Fickle voters. As unpopular as some of the current US administration actions are, cutting back on climate aid might actually go down well with the electorate. New research from Germany suggests that while richer, more developed governments generally make larger pledges on climate action, citizens of those countries are the least willing to follow through on them.

3. Loans vs grants. All climate finance is not created equal. Grants of money are far better for recipients than loans, which have funneled billions of dollars in interest and other economic rewards back to wealthy nations, a Reuters investigation found last year. As wallets tighten in the likely coming recession, richer countries could look toprofit even more from climate loans and projects.