BAKU, Azerbaijan, June 8. Multilateral climate funds (MCFs) play a modest but vital role in international public finance, channeling highly concessional resources to support climate goals in emerging and developing economies (EMDEs), according to the International Energy Agency’s latest outlook, Trend reports.
Though their annual contributions remain relatively small—averaging $780 million between 2015 and 2024—MCFs have stood out for delivering support on more favorable terms than most other financiers.
Between 2015 and 2024, MCFs provided $7.8 billion in climate financing, nearly 70% of which qualified as official development assistance. These funds have been concentrated mainly in Asia (32%) and Africa (25%), with most investments directed toward clean power technologies and end-use efficiency projects.
However, momentum appears to be slowing. Annual financing declined by 26% between its 2021 peak and 2024, raising concerns about the long-term outlook for MCFs. The situation has been compounded by geopolitical headwinds, such as the U.S. government’s withdrawal of a $4 billion pledge to the Green Climate Fund.
In response to these challenges, MCFs are beginning to innovate. In January 2025, the Climate Investment Funds’ new Capital Markets Mechanism raised $500 million in its inaugural bond offering on the London Stock Exchange—marking the first time an MCF tapped capital markets to blend private and public finance.
Improved project approval and disbursement processes are also helping to strengthen confidence in MCFs. According to the IEA, continued progress on transparency and governance will be essential to expand their impact and unlock additional sources of funding.
