Finance for nature and climate: shared learning on common challenges
As we enter the second week of COP16, the UN biodiversity negotiations, the two-week countdown to COP29, the UN climate negotiations, begins. At this critical juncture between the two summits, Nicola Sorsby and Pia Treichel reflect on some common challenges in funding for both nature and climate, and explain why it is crucial that funding can truly be accessed by those who need it most.



The finance and biodiversity pavilion at COP16 in Cali, Colombia (Photo: Nicola Sorsby, IIED)
Finance is a major issue this year for both nature and climate. At the UN biodiversity conference (COP16), efforts are ramping up to plug the biodiversity financing gap (valued at US$700 billion per year) to ensure enough money is available to protect and restore nature by 2030.
At the UN climate change conference (COP29) in a fortnight’s time, all eyes will be on the agreement of a New Collective Quantified Goal, the target for how much climate finance developed countries will make available to developing countries to tackle climate change.
The causes and impacts of biodiversity loss and climate change are closely intertwined. It is crucial to get the flow of finance right to address these interconnected problems; funding must deliver outcomes for nature, climate and people, and progress on any one of these cannot undermine the others.
While global policy goals to increase finance for both nature and climate are needed, we must also pay attention to who has access to this finance. Funding must flow directly to those most vulnerable to these challenges, especially to Small Island Developing States (SIDS), the least developed countries (LDCs), Indigenous Peoples and local communities (IPs and LCs).
Why finance must reach the local level
SIDS and LDCs are uniquely vulnerable to climate change due to their increased exposure to both slow onset and extreme climatic events, and their constrained capacity to adapt. As a result, biodiversity in SIDS and LDCs is being threatened, but is also essential to shield against climate impacts.
Small islands are globally important hotspots (PDF) for biodiversity. Meanwhile those living in the LDCs are most affected by biodiversity loss due to their daily reliance on natural resources. And as stewards of large areas of the world’s landmass, IPs and LCs are crucial to developing and implementing solutions for both nature and climate: they possess valuable knowledge and practices to conserve biodiversity and adapt to climate impacts.
It is the world’s most vulnerable populations who endure the worst impacts of both biodiversity loss and climate change. Yet these communities also hold critical knowledge to address these crises: it is imperative that they receive the resources they need to do so.
Major nature-climate funds: learning from successes
There are multiple funding sources for climate and nature action, including several large funds established under the UN processes. Some steps have been taken to prioritise funding for those who need it most.
In 2022, the Global Environment Facility (GEF) was announced as the new host of the Global Biodiversity Framework Fund (GBF Fund), established to raise funds for global biodiversity action by 2030. The GBF Fund includes some important innovations, including an aspirational target to get 20% of funds directly to initiatives led by IPs and LCs and to channel 39% of funds to SIDS and LDCs.
The Green Climate Fund (GCF) is the largest of the multilateral climate funds. It too aims to prioritise funding for the world’s most climate-vulnerable countries, with a minimum allocation for adaptation finance.
This has worked effectively to ensure at least 50% of GCF adaptation funding goes to countries in Africa, SIDS and LDCs. The GCF’s updated strategic plan (2024-2027) also includes a target of “40-70 approved proposals for adaptation projects, including for locally led adaptation action”.
As well as the GBF Fund, the GEF also operates the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF), which focus on providing climate funding for SIDS and LDCs. And earlier this year, the Adaptation Fund (AF) announced new funding streams to increase funding for locally led adaptation (LLA), with $35 million dedicated to an aggregator programme for channelling small grants for IPs and LCs. This is a significant opportunity to increase funding flows to the local level.
Restricted access, unclear criteria
These prioritised funding streams and targets provide valuable lessons on how other funds can be structured to improve access for priority countries and populations. However, many challenges remain in ensuring this funding reaches the world’s most vulnerable communities.
Indigenous Peoples have long been calling for direct access (PDF) to nature and climate finance to ensure projects are locally owned and led and reflect local knowledge. But in practice, these multilateral funds predominantly disburse money via international intermediaries, with only 15% of GCF funding going to national level entities, and even less via the GEF climate funds (SCCF and LDCF).
Complex and rigorous funding requirements across the main nature-climate funds continue to restrict access for SIDS and LDCs – particularly for IPs and LCs, which are often represented by local organisations with limited capacity. Funding cycles are slow, while project application and reporting processes are usually required in English, a key obstacle to many organisations.
IPs and LCs have raised concerns about the unclear criteria for allocating resources within the GBF Fund. Many of these concerns reflect similar access challenges and inadequate recognition for IPs and LCs under the climate funds.
Furthermore, the GBF Fund and GCF targets for increasing funding for locally-led interventions mentioned above are optional or aspirational only. In both cases, the funds can achieve their targets without channelling any money to local communities.
Lastly, it is essential to ensure a plurality of voices in the decision-making bodies of climate and nature funds and at each stage of financial flows. IPs and LCs are still underrepresented on many funders’ boards, including at the GEF, AF and GCF: this needs to change.
Without a formal seat at the decision-making table, IPs’ and LCs’ needs and priorities will not be recognised in decisions around who gets funding and for what, which could be catastrophic for nature, climate and the people most affected.
Looking ahead
Major nature-climate funds include some key innovations that aspire to get funding to the people and places who most need it, but practical questions remain around how this will be achieved. These experiences can offer helpful comparisons to learn from what has worked and avoid replicating ineffective models that fail to get money to where it matters.
As global leaders prepare to negotiate important milestones on climate finance at COP29, we urge parties to deliver an ambitious New Collective Quantified Goal with clear mechanisms to deliver funding directly to IPs and LCs, LDCs and SIDS. At COP16, negotiators must likewise ensure not only that sufficient funding is committed, but that IPs and LCs can access this funding directly and make decisions over how funding is allocated and spent.
The international climate and nature funds have a critical role to play and can lead the way in transforming financial flows in favour of nature, climate and people.