Multilateral climate funds: three ways to step up for the world’s most vulnerable nations
Multilateral climate funds are making positive moves to improve access to adaptation finance for countries that need it most. These moves now need to be realised in practice and continue to be scaled up. Isatou Camara and Mohsen Gul identify practical ways to get the funds delivering for least developed countries and Small Island Developing States.
In Burkina Faso, the livelihoods of women farmers and their families are often dependent on what they grow and sell (Photo: CIFOR-ICRAF, via Flickr, CC BY-NC-ND 2.0)
The ‘New Collective Quantified Goal (NCQG') delivered at last year’s UN climate negotiations (COP29) set a goal of mobilising at least US$300 billion annually for developing countries by 2035.
To deliver this goal, climate financiers, including multilateral climate funds (MCFs), set up by the United Nations Framework Convention on Climate Change (UNFCCC) to serve the Paris Agreement, must gear up to meet the challenge. Among the major MCFs are the Green Climate Fund (GCF) and Adaptation Fund (AF) − we focus on these here.
While the climate funds are a very small part of the overall climate-finance landscape, they represent central players in building partnerships to deliver best practice adaptation and resilience projects, particularly through innovative, scalable and transformational interventions, in leveraging and shifting broader flows of finance and in encouraging systemic, equitable and effective change.
The funds are shaping up to deliver at scale. In June, the GCF board approved a record breaking $1.225 billion in new projects. And the volume of financing up for approval at this month’s board meeting is set to break the record again.
In June, the GCF board also approved a suite of reformed policies around accreditation to vulnerable countries, designed to speed up processes and improve transparency for national entities. This builds on changes to the readiness and preparatory support programme, approved last year, reforms of which also focused on improving country-originated investment pipelines.
The AF has also made significant moves to ease funding access, including through introducing dedicated funding windows to support locally led adaptation (LLA).
Yet much work remains to meet the volume and quality of finance, and the pace it needs to be delivered at for scale. The Adaptation Gap Report 2024 estimates an adaptation finance shortfall for developing countries of $187-359 billion per year. It is no mean feat to fill this gap.
The international climate finance architecture is not delivering for developing countries, and particularly for the poorest and most vulnerable communities in the least developed countries (LDCs) and the Small Island Developing States (SIDS). While many individual projects receiving adaptation finance have delivered tangible results, a shift in the wider landscape is needed.
Many are calling for a radical rethink of how the international community supports adaptation in the places most in need. And this isn’t just the responsibility of the UNFCCC and the MCFs – a more integrated approach is needed. Climate risks being included in the outcome (Compromiso de Sevilla) of the 4th Financing for Development Forum in July 2025 showed a step in the right direction.
Longstanding access challenges for LDCs and SIDS
The 44 LDCs and the 39 SIDS − representing around 15% of the world’s population but collectively emitting only 2% of global greenhouse gasses − are among the hardest hit by climate impacts.
Given their urgent need for more adaptation finance, and that they are disproportionately and unjustly impacted by climate change, the UNFCCC and the Paris Agreement (PDF) acknowledge the special circumstances of LDCs and SIDS, and their need for enhanced climate finance.
Following this, the GCF has set specific targets for support to vulnerable groups – at least 50% of adaptation finance is earmarked to LDCs, SIDS and African States. The AF also prioritises LDCs and SIDS, based on their climate vulnerability; around 30% of the fund portfolio (PDF) has flowed to LDCs and 16% to SIDS.
The quality of access to the funds has been an ongoing issue for these vulnerable countries. Of the GCF’s 153 accredited entities, only 18 are national entities from LDCs and 10 from SIDS. A key aspect of quality is supporting and strengthening national institutions who can deliver in-country.
The AF’s direct access modality was the first of its kind among MCFs. Accredited National Implementing Entities (NIEs) can access AF financing directly and develop their own adaptation projects while building capacity to adapt.
Of the AF’s 61 accredited entities, 12 are LDC national entities and six are SIDS. The volume of finance flowing through these national entities is notably low: only around 4% of all project finance of the AF flows through LDC national entities (IIED calculations based on AF data).
Similarly, when looking at project finance flows to the LDCs from these national entities, for example, only around 4% of total flows from the GCF go through these entities (IIED calculations based on GCF data). An evaluation finds that 62 of 77 approved projects to LDC countries are led by international entities.
Most MCF financing continues to be channelled through international intermediaries. This incurs high transaction costs and decisions on how the money is spent is made by the intermediaries. This limits opportunities for LDCs and SIDS to make their own decisions, and to build the systems and capacities that would support longer term transformative change.
The data clearly tells the story: a significant amount is not channelled to where it is needed most. The systems need to support LDCs and SIDS to overcome structural barriers and access the fund more effectively.
Getting MCF finance flowing to LDCs and SIDS: three ways forward
MCFs comprise a very small part of the overall climate finance architecture. Nonetheless, building on positive reforms already in place could be significant in improving adaptation finance flows to the LDCs and SIDS, thereby helping achieve the new climate finance goal of the Paris Agreement.
We put forward three practical recommendations:
1. Enhance direct and equitable access for national and local institutions
Why: Direct access lies at the heart of country ownership. Yet, in practice, true direct and equitable access remains the missing link in achieving transformational impact in LDCs and SIDS. Many face accreditation hurdles, complex application procedures and capacity constraints.
How:
- Simplify and scale fit-for-purpose accreditation pathways, including fast-track or project-specific mechanisms
- Expand support for locally led entities through grants, tailored technical assistance and mentoring, and
- Increase the share of funding committed through Direct Access Entities (DAEs) and enforce equity-driven allocation targets.
2. Improve readiness and pipeline development support with stronger links to funding outcomes
Why: Readiness programmes are critical for building institutional capacity and preparing quality proposals, yet LDCs and SIDS still face delays and readiness support is not commonly leading to approved funding projects.
How:
- Align readiness programming more closely with country-driven priorities and long-term planning cycles
- Allocate more readiness resources for project pipeline development, especially for small-scale, community-led proposals, and
- Track and publish data that shows the pathways from readiness finance to project proposal approvals to ensure accountability and evidence-based improvements.
3. Elevate the role of Indigenous Peoples and local communities in decision making and implementation
Why: Local actors in LDCs and SIDS often lack voice and influence in fund governance and project cycles, despite being the most affected by climate impacts.
How:
- Expand and institutionalise LLA windows with flexible funding and longer engagement timelines
- Require meaningful participation of local stakeholders – including Indigenous Peoples and local communities – in project design, governance and evaluation, and
- Support inclusive monitoring, learning and adaptation mechanisms that centre local perspectives and priorities.
If the international climate finance architecture is to deliver on its promise of fairness and responsiveness, direct access must become the norm, not the exception. It is through country-led and nationally-owned pathways that we can truly advance the principles of equity, efficiency and sustainability.
And with global public funding retreating significantly and at an alarming rate, now more than ever, MCFs need to shape up to deliver the strongest possible results for the poorest and most vulnerable communities in LDCs and SIDS.
With thanks to Sejal Patel, Clara Gallagher, Rojy Joshi and Sydney Church for contributing to the development of this insight.
