Overview: EMDEs Commit to Climate Finance at Record Levels
Emerging markets and developing economies (EMDEs) are reshaping the global climate finance map. A new report from the Climate Policy Initiative (CPI) — the Global Landscape of Climate Finance 2025: EMDE Spotlight — finds that in 2023 EMDEs surpassed USD 1 trillion in climate investment. Domestic sources accounted for about 80% of this total, underscoring a shift toward homegrown capital and policy-driven momentum that aligns environmental goals with development priorities.
While the figure still falls short of the USD 4 trillion annual investment often cited as a need through 2030, the report highlights how EMDEs are using a combination of policy coherence, household expenditure, and strategic leverage to mobilize climate finance at scale. The result is not only cleaner energy and lower emissions; it is broader economic development, job creation, expanded energy access, and improvements in health outcomes.
Key Statistics: Where the Money Comes From
The 2023 breakdown reveals China alone accounted for USD 685 billion of EMDE climate finance, roughly 64% of the region’s total. International climate finance, by contrast, represented less than 20% of EMDE flows (USD 209 billion in 2023). Public institutions remained the largest source of international finance, yet private sector participation—particularly foreign private investment—has begun to grow more rapidly. Donor budgets tightening worldwide could further elevate the importance of private capital and domestic fiscal policy reforms in sustaining momentum.
Private domestic capital is increasingly central to EMDE climate efforts, with households now representing the single largest source of private investment in climate finance across EMDEs—about 25% of total climate finance. This shift signals a broader engagement by households and financial institutions in long-term investments that align climate resilience with consumer demand and livelihoods.
Mitigation vs. Adaptation: Where Funds Are Going
Mitigation finance dominated the 2023 landscape, attracting USD 285 billion and representing 92% of all tracked flows. This mirrors a sustained push toward decarbonizing power systems, transport, and industry in fast-growing markets. Renewables, energy efficiency, and electric mobility are the primary pillars supporting this expansion, driven by falling technology costs and favorable domestic policies.
Adaptation finance, at USD 48 billion in 2023, shows growth but remains far below the levels required to meet needs through 2030. Adaptation funding is highly uneven across regions, highlighting the urgent need for targeted investments in resilience, climate-smart infrastructure, and disaster risk reduction where vulnerability is greatest.
Policy Drivers: Why EMDEs Are Accelerating Investment
The CPI report emphasizes coherent policy environments as a critical enabler of climate finance in EMDEs. Governments that align energy, fiscal, and industrial policies with climate objectives can attract private investment, mobilize household spending, and reduce perceived risk for financiers. Examples from leading EMDEs include:
- Clear renewables subsidies, tariffs, and procurement frameworks that reduce project uncertainty.
- Supportive regulation for energy efficiency, electric mobility, and grid modernization.
- Public investment in infrastructure that offsets long payback periods for climate-friendly projects.
- Strategies to expand energy access, which not only improves quality of life but also broadens the customer base for clean energy.
With COP30 on the horizon in Brazil, the role of emerging economies is likely to grow even more influential on the global climate agenda. The report frames this moment as an opportunity for domestic policy alignment and strategic international support to drive transformational change.
Implications for Policy and Investment Strategy
For policymakers, the EMDE spotlight highlights several priorities. First, sustaining and expanding domestic capital flows is essential. This includes leveraging household savings for climate-friendly projects and strengthening financial markets to channel private capital into long-duration green assets. Second, maintaining coherent policy frameworks that cross sectors—energy, transport, industry, and health—can reduce risk and encourage multi-stakeholder investment. Third, international cooperation remains valuable, but it must complement domestic reforms rather than replace them, particularly as donor funding becomes tighter.
Looking Ahead: Opportunities and Gaps
EMDEs should continue to build on the favorable tailwinds of lower technology costs and supportive policy regimes. Closing the gap in adaptation finance will require targeted funding for resilience, climate-smart infrastructure, and health-related outcomes. Additionally, improving data quality and transparency around climate finance flows will help policymakers benchmark progress and optimize strategies for mitigation and adaptation alike.
Conclusion
In 2023, EMDEs demonstrated that domestic financing and policy alignment can drive substantial climate investments that support development goals. As COP30 approaches, these economies stand at a pivotal point to accelerate green growth, create jobs, and expand access to clean energy—building a more resilient, sustainable future for billions of people.
