As a result of political and regulatory upheaval, notably in the EU and the US, it has been an uncertain 2025 for climate finance so far. Ahead of London Climate Action Week, our experts chart the progress of the $300 billion climate finance pledge made at COP29 and what the mutual, non-negotiable goal is for all key actors up to COP30 and beyond.
The theme for this year’s London Climate Action Week is ‘building climate ambition on the road to COP30 by shaping the cooperation, politics, diplomacy and finance needed to deliver 1.5C aligned outcome’.
Climate finance is central to this and despite the current turbulent political and regulatory landscape, international commitments must stay on track.
One of the key outcomes of COP29 in November 2024 was the agreement by developed countries of a new climate finance goal, the ‘new collective quantified goal' (NCQG), which pledged to increase climate finance flows to $300 billion annually by 2035.
Despite being three times the last NCQG of $100 billion agreed at COP15 in Copenhagen in 2009 and extended at COP21 in Paris in 2015, $300 billion is just over 10% of the $2.7 trillion of climate financing that developing countries (excluding China) need annually by 2030.1
A lukewarm reception from markets and recipient countries reflects the reality that global climate ambition, and associated financing commitments, are out of step with the scale of the crisis. We are doing the bare minimum when the situation demands far more.
What has happened since COP29?
The first half of 2025 has been uncertain for financial markets globally, to which climate finance is not immune. Shaped by significant political and regulatory upheaval, most notably in the United States and the European Union, these developments have introduced new uncertainties into a market already struggling with the challenge of aligning capital flows with climate goals.
In the United States, the new administration’s early actions signalled a sharp departure from previous climate finance commitments. One of its first moves was to revoke the international climate finance plan, which had previously committed $11 billion annually — 8% of global climate finance in 2024. This was followed by a halt in foreign aid, including nearly all climate-related funding through USAID, which had accounted for another $3 billion directed to climate action in 2023. The administration also withdrew $4 billion in funding from the UN Green Climate Fund.2 In total, these reversals amount to at least $18 billion in lost climate finance, roughly 6% of the new global $300 billion annual target, highlighting the sizeable influence US policy has on global climate finance flows.
Meanwhile, the EU introduced its Omnibus Package at the start of the year3, which included revisions aimed at simplifying sustainability regulations such as the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and also included a draft Taxonomy Delegated Act.
These changes intended to streamline sustainability reporting and reduce compliance burdens have been met with mixed reactions from corporates and financial institutions. Will it dilute climate transparency, or will the shift to voluntary disclosures be a pragmatic step that could foster more meaningful transparency? Will the reduced scope and delayed reporting timelines lead to a rollback in corporate sustainability ambitions and deprive investors of the information needed to allocate capital for climate finance effectively? A joint statement from ShareAction opposing the Omnibus Package supports the narrative that simplification is needed but calls to maintain integrity of frameworks.4
Ultimately, the success of the Omnibus Package, and its impact on climate finance flows, will depend on how companies and financial institutions respond and navigate a market increasingly wary of greenwashing. In a financial environment where transparency and credibility are key, perceptions of diluted or weakened sustainability disclosures can deter climate finance investors, whereas continued rigour in reporting would allow companies to stand out as more credible investment options. This could be a key motivator for companies to maintain robust sustainability disclosures and transparency, even amid evolving, and potentially diluted, regulatory requirements.
These regulatory shifts, emanating from major financial centres in the US and EU, have also had a significant impact on global financial alliances. The Net Zero Banking Alliance (NZBA) experienced a wave of departures, with US banks exiting in response to domestic political instability and pressure to align with the new administration’s policy ambitions. Elsewhere, European institutions like Triodos leaving in protest of the alliance’s weakened climate targets highlight how increased polarisation in the climate and sustainable finance space affects the viability of industry initiatives.5 The NZBA’s move from a 1.5C alignment to a more flexible 'well below 2C' goal reflects the broader trend of softening ambition in the face of political and regulatory headwinds.
Similarly, the Net Zero Asset Managers Initiative (NZAM) paused its operations in January following the high-profile exit of BlackRock and political scrutiny from the US House Judiciary Committee.6 The initiative cited the need to reassess its role in the evolving global context.7 It remains to be seen whether ambitions will continue or silently drop off in the absence of NZAM, whose activities remain suspended as of May 2025. The reality is that even before the pause, NZAM’s members were already falling short of their climate goals.
Beyond these global initiatives, individual financial institutions have also begun to scale back their climate commitments. HSBC delayed its 2030 Net Zero8 target to 2050, while RBC dropped its $500 billion sustainable finance goal citing regulatory changes around greenwashing in Canada.9 Like the rationale behind the EU Omnibus, compromising on targets and commitments poses the challenge of balancing what is realistic and feasible, while still maintaining the level of ambition and impact that is needed to mobilise sufficient capital for the transition to Net Zero.
Given the considerable noise and shifting priorities this year, it's fair to ask: how far have we really moved the dial on climate finance so far in 2025?
As is often the case in the sustainability space, the lack of real-time data makes it difficult to quantify the financial impact so far. However, by drawing on historical figures and some mid-year indicators, we can make a few high-level assumptions about our trajectory towards the NCQG’s ambition of $300 billion by 2035.
Based on the OECD’s most recent comprehensive data, developed countries contributed $116 billion in climate finance to developing nations in 2022.10 If we assume a simple linear path to the $300 billion target, we will need to reach around $160 billion in 2025.
The World Bank has indicated it is on track to meet its FY2025 goal of allocating 45% of its total lending, an estimated at $117.5 billion, to climate finance.11 That translates to approximately $52.9 billion — almost a third of the $160 billion needed for this year to be on track for the NCQG. Historically the largest source of climate financing and backed by commitments for the future, we can safely assume that multilateral funding will continue be a significant and dependable contributor to the overall goal, even as debates among its larger shareholders continue.
On the flip side, political shifts have also fuelled the wider macro headwinds. As discussed earlier, the new U.S. administration’s rollback of up to $18 billion in international climate finance commitments, and the administration’s rhetoric on climate, continues to create uncertainty and has significantly reduce the overall pool of available financing as private capital retrenches in the face of ever shifting policy messages.
This analysis and broad assumptions are primarily based on the World Bank and the U.S. administration — two major sources of climate financing with outsized influence on achieving the NCQG. This highlights the concentration risk associated with heavy reliance on a few actors, making the system more vulnerable to political and institutional shifts acting within their own timeframes.
So, where does that leave us?
The picture is mixed. There’s clear progress from institutional actors but it’s being offset by political reversals. This suggests we’re moving in the right direction, but nowhere near fast enough.
Resources like the ‘Raising Ambition and Accelerating Delivery of Climate Finance’ from the Independent High-Level Expert Group on Climate Finance12 offer a clearer roadmap for what scaling climate finance should look like through to 2035 and why we need to push harder now.
A call to action
Inaction is not an option in a world where climate change is already reshaping economies, ecosystems, and everyday life. The idea that fiduciary duty can be fulfilled without accounting for climate risk is a false claim. Climate risk is credit risk, it is liquidity risk, and it is market risk. It is a critical driver of financial risk and must be assessed with a long-term, integrated understanding of how environmental and financial systems intersect.
Our conversations with financial institutions and clients across sectors highlight a shared commitment to the same goal: aligning capital with climate outcomes. Whether policy and regulations are abundant or absent – the climate science remains the same.
All key actors, financial institutions, corporates and public entities alike must recognise that there is a mutual, non-negotiable goal: to act decisively, ambitiously, and collectively. We must not allow the shockwaves of short-term changes in legislation and foreign policy to paralyse long-term progress; instead, we must ride the momentum forward and push climate finance flows faster and further than ever.
Because the cost of delay is not just financial — it is existential.
Join the Carbon Trust at London Climate Action Week
On 24 June at 12:00 GMT, Pietro Rocco will be at Reset Connect, the largest flagship event of London Climate Action Week, joining a panel about 'Renewable investments: How wind, solar and heat networks are shaping the future of sustainable energy'.
Register and find out moreGet in touch to see how we can support in accessing sustainable finance for your business, or how best to identify and mobilise capital for climate finance.
2 Analysis: Nearly a tenth of global climate finance threatened by Trump aid cuts - Carbon Brief
3 EU introduced its Omnibus Package - the Carbon Trust
4 Investor joint statement on European Commission’s ‘omnibus legislation’ | Policy engagement - PRI
5 Triodos Bank leaves NZBA - Triodos
6 Judiciary Committee Probes 60+ Companies over ESG Ties - House Judiciary Committee Republicans
7 Update from the Net Zero Asset Managers initiative – The Net Zero Asset Managers initiative
8 HSBC delays net-zero emissions target by 20 years - Reuters
9 RBC Drops $500 Billion Sustainable Finance Target - ESG Today
10 Climate Finance and the USD 100 billion goal - OECD
11 Financial Summary - World Bank Group
12 Raising ambition and accelerating delivery of climate finance - IHLEG
