Overview: EMDEs as a Global Engine for Climate Finance
Emerging markets and developing economies (EMDEs) have become a dominant force in global climate investment, reaching a record level of over USD 1 trillion in 2023. The latest Global Landscape of Climate Finance 2025: EMDE Spotlight from the Climate Policy Initiative (CPI) shows that domestic sources account for roughly 80% of these flows, underscoring the crucial role of national policy, households, and local capital in steering climate outcomes. While this level of investment marks a significant milestone, the report also cautions that the $1 trillion is far short of the approximately $4 trillion annual financing target needed for EMDEs by 2030. Nonetheless, the findings illuminate how coherent policy environments, coupled with strategic domestic investments, can spur economic development, job creation, and broader health and energy access gains.
Key Drivers: Domestic Policy, Households, and Private Capital
China dominates EMDE climate finance, accounting for about USD 685 billion in 2023 (64% of EMDE totals). Yet international finance—though a smaller share (under 20%)—still plays a meaningful role, totaling roughly USD 209 billion. Public institutions have traditionally been the largest source of international climate finance, but there is a clear shift as private participation grows. Importantly, private domestic capital is on the rise, with households representing the largest single contributor of climate finance across EMDEs, now equaling about 25% of total flows. This trend highlights how household spending and savings, when aligned with climate objectives, can significantly amplify investment in energy access, resilience, and urban infrastructure.
Mitigation vs. Adaptation: Where Funds Are Heading
Mitigation remains the backbone of EMDE climate finance, attracting USD 285 billion in 2023—roughly double the sum seen in 2018 and accounting for 92% of tracked mitigation flows. This emphasis reflects the costs and opportunities associated with expanding renewable energy capacity, electrification, and energy efficiency improvements. By contrast, adaptation funding rose to USD 48 billion in 2023, though it remains under the level needed to close the gap through 2030 and is uneven across regions. The imbalance points to a demand for smarter procurement, risk-sharing mechanisms, and targeted public-private partnerships that de-risk climate resilience investments in vulnerable communities and sectors.
Renewables at the Center: Energy Transition in EMDEs
Clean energy continues to drive EMDE investment, supported by falling technology costs and policy frameworks favorable to renewables, electric mobility, and energy efficiency. In 2023, renewables dominated EMDE energy finance, delivering approximately 80% of all investments in this group. Countries such as Brazil, Chile, Viet Nam, Morocco, Uzbekistan, and others are pivotal examples of what cohesive policy design can achieve—lowering costs, expanding energy access, and spurring job creation in new energy sectors. This renewables-led growth not only reduces emissions but also fosters broader development outcomes, including improved health outcomes through reduced air pollution and enhanced reliability of power supply for households and businesses alike.
Policy Implications: What Works in EMDE Climate Finance
The CPI report emphasizes that the most effective climate investments arise where policy environments are coherent and predictable. Clear national strategies, long-term commitments to decarbonization, and practical incentives for households and small businesses can unlock private finance and accelerate deployment of clean energy technologies. As donor budgets tighten, EMDEs will increasingly rely on mobilizing domestic capital—supported by targeted international collaboration—to sustain momentum. Policymakers are urged to prioritize energy access improvements, grid modernization, and affordable finance mechanisms to broaden the reach of climate investments beyond the largest urban centers.
Looking Ahead: COP30 and Beyond
With COP30 in Brazil on the horizon, the EMDE spotlight underscores a pivotal moment for global climate finance. Dr. Barbara Buchner, CPI Global Managing Director, notes that “Emerging economies are key players for global progress with an unprecedented opportunity for investment and development.” The synergy between domestic policy alignment and international support will be critical in transforming investment into durable growth, job creation, and more inclusive energy transitions across EMDEs.
Bottom Line
EMDEs are increasingly funding climate action from within, with domestic sources driving the majority of investment. While international finance remains essential, the growing role of households and private domestic capital signals a shift toward more resilient, home-grown climate strategies. Achieving the 2030 funding target will require continued policy coherence, expanded access to affordable finance, and accelerated deployment of renewables and resilient infrastructure.
