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Study reveals mislabeling of climate finance for non-climate projects

By Faridat Salifu

A recent study by Development Initiatives has uncovered a significant misallocation of climate finance. The report stated that almost 40% of bilateral aid in 2021 labeled as climate finance were directed towards projects that would have proceeded regardless of climate considerations.

High-income nations have been increasingly claiming their contributions to lower-income countries as “climate finance” for projects where addressing climate change was not the primary goal.


This trend has grown tenfold since the establishment of the $100 billion annual climate finance target in 2009. In contrast, funding for projects where climate change mitigation was the main objective has only increased by 200% during the same period.


Moreover, financing for these genuine climate-focused projects has remained relatively stagnant since 2017, while funding for non-climate projects has surged.

The study calls for substantial changes to reporting rules to ensure that climate finance is accurately tracked and genuinely directed towards combating climate change.


It highlights a disturbing trend where the rise in so-called climate finance is not matched by a corresponding increase in actual climate action, suggesting that much of the reported funding is mischaracterized.

Development Initiatives’ analysis underscores the need for a stricter definition and verification process for climate finance.


The report suggests that current reporting mechanisms allow for a broad interpretation of what constitutes climate finance, enabling countries to count regular development aid as contributions to their climate finance commitments.

The implications of this mislabeling are significant. The diversion of funds intended for climate action towards other projects undermines global efforts to address the climate crisis.

It also creates a misleading picture of progress towards the $100 billion target, which is crucial for supporting climate adaptation and mitigation in vulnerable countries.


To address these issues, the study recommends the implementation of more stringent criteria for classifying climate finance and increased transparency in reporting.

It also calls for the international community to hold donor countries accountable for their climate finance commitments and to ensure that funds are used effectively to combat climate change.

the study by Development Initiatives highlights a critical gap in the current climate finance framework and calls for urgent reforms to ensure that financial flows genuinely support climate action. Without these changes, the global community risks falling short of its climate goals and failing to support the most vulnerable nations in their fight against climate change.

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