International Climate Finance

I would like to update the House on our progress towards meeting the UK’s commitment to spend £11.6 billion of International Climate Finance (ICF) between financial years 2021/22 and 2025/26.

The UK has long looked to lead on climate action. We were the first major economy to legislate for net zero and we remain committed to this goal. During our COP26 presidency we worked with all parties to deliver the Glasgow climate pact and keep 1.5 degrees within reach. In March this year, we published our 2030 strategic framework which set out how we will drive forward international action on climate and nature, working to keep 1.5 alive by halving global emissions, building resilience to current and future climate impacts and halting and reversing biodiversity loss. We also published our ICF strategy, underpinning our commitment to spending £11.6 billion ICF by March 2026.

Development and tackling climate change and nature loss are intertwined challenges. Since 2011/12, the UK has committed to spending a significant proportion of its aid budget on ICF to help developing countries address both the causes and impacts of climate change. This spending comes from four Government Departments: the Foreign, Commonwealth and Development Office, the Department for Energy Security and Net Zero, the Department for Environment, Food, and Rural Affairs, and the Department for Science, Innovation and Technology. The table below sets out total UK ICF spend by financial year since 2011/12. UK ICF spend by calendar year can be found as reported to the United Nations framework convention on climate change (UNFCCC) under the biennial reports, currently covering 2011-2020.

The £11.6 billion ICF commitment covers financial years 2021/22 to 2025/26 and represents a significant part of the UK’s contribution to the global target of providing $100 billion in climate finance annually to developing countries. The table below sets out how we expect to meet our target, showing spend in 2021/22 and 2022/23 and an expected range for UK ICF spending for 2023/24 to 2025/26 with the scale-up reflecting both the increasing importance of tackling climate change and the growth in our economy.

The UK has demonstrated a long-term commitment to the major global climate funds, including the green climate fund, the global environment facility, the climate investment funds, and the adaptation fund. Our pledges to these funds have been significant. The UK gave £1.44 billion to the green climate fund for 2020-23, making the UK the top donor to the fund and on 10 September 2023 the Prime Minister announced a further $2 billion (£1.62 billion) towards the next green climate fund replenishment—the biggest single funding commitment the UK has made to help developing countries tackle climate change. In recent years, following UK lobbying, a number of other international finance institutions have increased their commitments to financing climate action in developing countries. We will, therefore, include the climate relevant share of future UK contributions to the World Bank’s international development association fund, as well as other key development banks when we report ICF spending.

Our ICF achieves tangible, real-world benefits for the world’s poorest and most climate vulnerable. Since 2011, ICF has supported over 100 million people to adapt better to the effects of climate change and provided almost 70 million people with improved access to clean energy.

In addition, our programmes have avoided or reduced over 86 million tonnes of greenhouse gas emissions, avoided over 400,000 hectares of deforestation and mobilised £6,884 million in climate finance from the private sector¹. Our funding also supports cutting-edge research and innovation of new technologies.

We will ensure that our climate finance is balanced between funding for mitigation and adaptation. In contrast to many other donors, the UK’s international climate finance is all official development assistance, which means it is concessional finance that delivers benefits for developing countries. We have historically provided over 85% of our ICF as grants, enabling developing countries to mitigate against and adapt to the impacts of climate change without incurring further significant debt. This compares to the global average of just 26% grant finance². We will focus on grants and on efforts to improve access to climate finance, including through the NDC Partnership³ and Taskforce for Access to Climate Finance. At the same time, we recognise the need for increased private investment to deliver the scale of finance needed for the global net zero transition and for adaptation. We will ensure that we maximise the opportunities presented by increasing climate investments through British International Investment (BII) and other private finance mobilisation programmes.

The UK’s overall contribution to the global $100 billion climate finance target goes far beyond our £11.6 billion official development assistance commitment. If the UK were to include the full value of our investments delivered through British international investment, as other donors do through their own development finance institutions, this would have amounted to an additional £747 million in 2021/22 and 2022/23. Furthermore, our innovative multibillion pound guarantee facilities⁴ with the multilateral development banks will contribute $5.8 billion towards global climate finance targets. The UK also provides export finance that supports climate action in developing countries. Including these contributions, along with the private finance mobilised through our programmes, would increase the total finance that the UK provides for climate change between 2021/22 and 2025/26 to well in excess of £11.6 billion.

We will continue to provide high-quality finance to deliver the transformational results needed to support developing countries tackle the causes and devastating impacts of climate change.

¹ UK International-Climate-Finance Results 2023.pdf

² OECD (2022), aggregate trends of climate finance provided and mobilised by developed countries in 2013 to 2020

³ NDC Partnership

⁴ Room to Run Guarantee

and Indonesia Just Energy Transition Partnership Launched at G20,

and South Africa Just Energy Transition Investment Plan,

https://www.gov.uk/government/news/joint-statement-south-africa-just-energy-transition-investment-plan#:~:text=The %20UK% 20is%20providing%20%241.3,and%20the%20South%20Africa% 20Government

and Contingent Liability Notification: India Green Guarantee

https://hansard.parliament.uk/commons/2021-12-09/debates/21120969000015/ContingentLiabilityNotificationIndiaGreen Guarantee

and

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