Climate finance not reaching the local level
IIED research reveals that current reporting processes are woefully inadequate for tracking the amount of international climate funds reaching communities made vulnerable by climate change.
Birere, Uganda: local people discuss a community action plan to improve crop yields under a changing climate (Photo: John Wasige, CDKN via Flickr, CC BY 2.0)
Since 2021 more than 130 governments and institutions have endorsed the locally led adaptation principles, indicating support for climate action that includes local perspectives and is informed by locally-led decision making.
But the question is, how much committed climate funding enables that to happen?
Investigating what the answer might be was the focus of research from IIED and the answer is difficult to know.
Key findings
- Local impact or involvement were mentioned in transactions representing less than a third (29%) of total funding. A slight upward trend was observed from 26.1% in 2016 to 33.7% in 2023
- Just 0.17% mentioned the terms “locally led” or “community led” across eight years. Even in the most recent year, 2023, only 0.39% of all climate finance mentioned these terms despite growing endorsement of the principles for locally led adaptation
- Local people were mentioned in 25.5% of adaptation-specific funding in 2016, rising to 39.2% in 2023; for funding focused on cutting emissions the figures were 24.9% and 29.4%. Disturbingly, nearly 85% of “local” emission-cutting finance in 2023 came as loans rather than grants, the highest proportion in the period studied
- Only 0.7% of funding mentioned “Indigenous” or its French or Spanish equivalents
First, it was important to differentiate between funding for locally-led climate action and locally-implemented climate action. The former gives decision-making power to the community in question; the latter involves communities as beneficiaries but does not necessarily allow decisions to be driven by the priorities of local people and organisations. In fact, often the programme has been designed by people outside the community and reflects their priorities.
Then, even though in 2024 the international community agreed on a collective, quantified goal for climate finance (NCQG), there was still a question of whether there were clear, consistent sets of data to measure and track payments.
The NCQG calls for developed countries to take the lead on achieving the financing goal of US$300 billion annually for climate action in developing countries by 2035. While the UNFCCC won’t begin to report on progress against this until 2028, researchers wanted to start monitoring the difference between funding for locally-led and locally-implemented climate action.
They discovered that the existing reporting methods make it difficult for that analysis to be done. The Organisation for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC) manages a database of transactions that donor member countries make when transferring funds as official development assistance.
The IIED research team used keyword searches of project titles and descriptions for 140,000 individual transactions between 2016 and 2023 tagged as climate finance in the OECD DAC database.
Keyword searches are the only practicable way to sift this data, but this does not provide insights into how a given tranche of funding was really spent.
The alternative would have been to identify every individual project, review its documentation, then develop and apply subjective criteria for determining how much of its spending could be called locally led, or locally implemented. However, many of these documents aren’t public and donors either can’t or won’t make them available for analysis. Those that are accessible frequently lack the necessary detail.
Therefore, the only available indicator of “localness” is whether the word “local” or similar terms appear in database entries. Inevitably, figures produced in this way risk significantly overestimating the extent to which climate action is genuinely including the people on the ground who know their areas best.
Even using proxy indicators that were bound to result in overcounting, and using the broadest possible search, researchers were appalled that the final figure was so low.
A particularly shocking finding is that only 0.7% of all reported climate finance made any mention of ‘Indigenous’ or its French or Spanish alternatives. Considering that Indigenous Peoples manage over a quarter of the world’s land surface, this seems an astonishingly low figure
What should happen next?
Locally-led approaches to climate action should be a key part of the world’s response to climate change as they ensure the communities affected by impacts are developing and implementing the solutions. Top-down investments often fail to adequately respond to local contexts because they are developed without substantive community engagement. This reduces impact and sustainability.
An inability to monitor exactly how much committed finance is getting to the local level for locally-led and locally-implemented projects will promote a lack of accountability, and a weakening of the commitment to reach the New Collective Quantified Goal on Climate Finance. What is actually ‘local’ will not be clear and could lead to national or even regional level funding being included in the count.
Having done this exercise, IIED researchers arrived at a series of clear recommendations. Above all, they urged an overhaul of reporting systems to streamline climate finance tracking and make it properly transparent.
Previous research
The latest study in November 2025 followed previous research showing less than 10% of funding committed under international climate funds was directed at the local level.
However, in line with the latest research that found a lack of transparency and differing approaches and reporting requirements make it extremely difficult to accurately track climate finance flows beyond the national level, the analysis in 2017 was based on only the 7% of climate finance that was transparent enough to be tracked.
Researchers found 93% per cent of climate finance was not sufficiently transparent to be tracked to its end use, and then IIED director Andrew Norton called for changes in how climate finance is allocated.
He said: "Substantial reform needs to be made to how development banks and UN agencies distribute this crucial money. To be effective in helping poor communities build resilience and tackle the effects of climate change, many more climate funds need to reach the local level."
