The UN climate talks in Baku delivered a new agreement on climate finance (the New Collective Quantified Goal, or NCQG), but it falls short of what science and justice demand. The headline target — mobilizing $1.3 trillion annually by 2035, with developed countries providing $300 billion— is only a fraction of what’s needed. For context, developing countries require an estimated $5.1-6.8 trillion through 2030 alone to address the climate crisis.
Achieving these targets requires immediate action, well before 2035. With climate impacts accelerating and vulnerable nations already facing severe challenges, we need to build momentum quickly toward and beyond these goals. The Baku agreement takes important steps in recognizing critical climate finance quality issues —such as high borrowing costs and limited access— and provides a framework for addressing them. The launch of the “Baku to Belém Roadmap” needs to be a pathway for making near-term progress, particularly on reducing the cost of capital and improving access to finance.
The work didn’t end in Baku. As we look toward COP30, the international community faces a critical challenge: rapidly scaling up both the quantity and quality of climate finance to unlock urgent climate action. This will require immediate, concrete steps from developed nations, international financial institutions, and the private sector to deliver resources at the speed and scale the crisis demands. Success depends on rapidly translating these commitments into action through strengthened international cooperation and innovative financial solutions.
Why Quality Matters
As EDF argued in the lead up to COP29, the NCQG isn’t just about setting new financial targets – it’s about fundamentally reshaping how climate finance works. For the first time, we’re seeing explicit recognition that the quality of finance matters as much as the quantity. This is particularly significant given that developing countries need an estimated $5.1-6.8 trillion by 2030 to implement their climate commitments while facing rising debt levels and prohibitive borrowing costs. The fairer and more just we can make the climate finance system, the greater the positive climate impact we can generate with every dollar.
Key Quality Considerations
The Baku agreement makes important forward strides in addressing several quality issues. First, it calls for comprehensive reform of multilateral development banks (MDBs) to make them “bigger, better and more effective.” This reform agenda is essential to maximizing impact in developing countries, enabling them to address climate change and end poverty simultaneously.
Second, the NCQG emphasizes strengthening multilateral climate funds, with a concrete commitment to triple annual outflows from 2022 levels by 2030. This could significantly scale up resources through institutions like the Green Climate Fund and Adaptation Fund, which deliver urgent support to vulnerable countries.
Perhaps most significantly, the agreement tackles the fundamental issue of capital costs. Currently, developing countries often pay interest rates 2-3 times higher than developed nations for similar climate projects, making their clean energy transitions unnecessarily expensive. The NCQG calls for “significantly reducing the cost of capital” by 2030 through innovative financial instruments such as first-loss guarantees, local currency financing, and foreign exchange risk instruments.
The Cost of Capital Challenge
The cost of capital issue is particularly relevant as we strive to achieve the 2030 Sustainable Development Goals (SDGs), where high borrowing costs continue to impede climate investments. For example, the real cost of capital for energy projects in African countries is two to three times higher than in advanced economies and China, according to the International Energy Agency. This disparity makes renewable energy projects more expensive than fossil fuel alternatives despite the continent’s abundant renewable resources. The upcoming G20 forum with South Africa presents a crucial opportunity to advance solutions that level this playing field in dealing with credit rating, risk assessment, and equitable finance.
The Baku to Belém Roadmap: Charting the Path to $1.3 Trillion
To achieve the ambitious $1.3 trillion target, the agreement launches the “Baku to Belém Roadmap,” which explores various solutions to reduce financing costs and increase investment flows. Key elements could include reforming credit rating methodologies to better reflect climate risks and supporting local currency financing to reduce foreign exchange risks, among other actionable solutions within reach.
The roadmap also emphasizes the need to improve the mobilization ratio of private finance. Currently, multilateral development banks (MDBs) only leverage about $0.60 in private capital for every $1 of public financing —far below the sort of rations needed to meet climate finance goals aligned with the $1.3 trillion target.
Next Steps
Success will require coordinated action across multiple fronts. Development banks must accelerate their reform efforts, while wealthier countries need to fulfil their commitments to increase grant-based resources, particularly for adaptation and addressing loss and damage in vulnerable countries. The private sector must also step up, working with public institutions to develop new financial instruments that unlock investment at scale.
The NCQG agreement marks a significant evolution in climate finance, moving beyond numerical targets to address the fundamental challenges of access, effectiveness, and impact. While much work remains to translate these commitments into action, the framework established in Baku provides a solid foundation for mobilizing the resources needed to tackle the climate crisis while supporting sustainable development in vulnerable nations.
The real test will be implementation, particularly through the Baku to Belém Roadmap process. Success will require sustained political will, innovative financial solutions, and unprecedented cooperation between public and private actors. But if we can get it right, we will be far better positioned to meet the enormous climate finance challenges ahead.