Policy Context

In March 2023, the UK released its first-ever International Climate Finance Strategy for guiding its International Climate Finance investments. It identifies four key priority areas for investment:

• Supporting clean energy;
• Nature, climate, and people;
• Adaptation and resilience; and
• Sustainable cities and infrastructure

The strategy also commits to strengthening the gender-responsiveness and inclusivity of UK climate finance for both adaptation and mitigation, including by increasing the proportion of climate finance that has gender equality as a principal or significant objective as defined by the OECD DAC Gender Equality policy marker.

The UK also published its 2030 Strategic Framework for International Climate and Nature Action in 2023, which set out a whole-of-government plan for global action. The framework identified six global challenges that need to be met and outlines 137 specific actions that the UK will undertake to address them. Adaptation is a prominent focus, with actions encompassing investments, advocacy, and partnerships. In the framework, the UK commits to driving all countries to double adaptation funding by 2025, working through coalitions and within international for to establish a new global adaptation target and supporting the establishment of a loss and damage fund, among other initiatives.

On October 17, 2023, UK Minister for Development and Africa Andrew Mitchell, confirmed to Parliament that the government will be changing the way it counts ICF, with the new methodology showing that the UK is on track to meeting its 2021-2025 climate target of US$US$13.9 billion:

• For the 10% allocation of humanitarian spending LDCs, the UK will assume 30% of this was spent on ICF without making a precise calculation. This is in line with practice in other major countries delivering assistance;
• The UK will no longer assume only 30% of BII funds go to ICF, noting that the true amount is likely much higher; and
• The UK will for the first time count UK MDB spending on climate.

Carbon Brief calculated that the new methodology adds GBP450 million (US$539 million) in ICF between FY2021/22 and FY22/23. Previously, ICF was reported to have fallen significantly more in FY2021/22 and FY2022/23. Concerns were raised by civil servants over the summer that the UK was off track from meeting the target, but the new methodology enables the UK to more easily reach the target by counting a greater amount of spending as ICF. Mitchell defended the government against criticisms that the changes to the methodology were creative accounting, noting that the changes were in line with OECD rules and would more accurately reflect UK climate spending. He pointed out that the UK would not be counting climate related loans to LICs, as is common practice for other donors, nor would it count guarantees to MDBs as climate finance.

On February 29, 2024, ICAI, the UK’s international assistance watchdog, released its rapid review of the UK’s international climate finance commitments. The review found that 55% of the UK’s US$13.9 billion ICF commitment will not be disbursed until the last two years of the pledge. The review also found that US$2.1 billion of existing funding was recounted as ICF spending, due to the change in counting methodology. Due to the delay in disbursements and changes to the counting of ICF, estimates of the commitment's prioritization in the ODA budget have been significantly reduced from 83% reported in July 2023 to 28% in 2024, reducing potential trade-offs between climate funding and other priorities.

ODA Spending

How much ODA does the UK allocate to climate projects?

In 2022, the UK allocated US$2 billion in ODA commitments tagged as being principally or significantly related to climate change adaptation and/or mitigation, making it the 7^th-largest OECD DAC donor to the issue, in absolute terms. This is a large jump from the UK's 2021 ranking of 13^th, likely due in part to the changed ICF calculation methodology as well as a climate reporting issue .

The UK was the 9^th-largest donor to climate ODA in relative terms, increasing from 20^th in 2021. This is also likely due in part to new methodology and the climate reporting issue.

How is the UK's climate ODA changing?

In 2022, 40% of the UK’s bilateral allocable ODA was spent on projects with a principal climate change component, well above the DAC average of 9%.

FCDO's FY2022/23 report laid out anticipated climate funding numbers. Climate funding lines indicated that international climate funding would decrease by at least US$105 million in FY2023/24. However, the climate, energy, and environment thematic area showed new funding lines that were not present in FY2021/22. Funding stood at US$248 million in FY2021/22 and increased by 148% in FY2022/23 to US$593 million. It is scheduled to increase by 20% again in FY2023/24 to US$710 million and again rise by 35% to US$805 million in FY2024/25.

UK ICF spending is forecast at US$2 billion in FY2021/22, falling to US$US$1.9 billion in FY2022/23. ICF is then forecast to rise in FY2023/24 to between US$1.9 – 2.5 billion and rise again in FY2024/25 to US$3 – 3.4 billion and in FY2025/26 to US$4.1 – 4.7 billion.

How does the UK allocate climate ODA?

Bilateral climate-related ODA

13% of the UK’s bilateral allocable ODA was screened against the Rio markers as targeting climate change. This is below the DAC average (24%) and far from the government’s target of aligning all ODA with the Paris Agreement.

In 2022, US$738 million of the UK’s climate-related ODA targeted both climate mitigation and climate adaptation, with mitigation as a priority.

Bilateral climate adaptation-related ODA

Between 2017 and 2021, the UK's bilateral ODA to climate adaptation decreased by 81%. The substantial decrease in funding was mainly caused by the cut in the ODA budget in 2021 to 0.5% of GNI from 0.7% in previous years, as well as the repurposing of unspent international climate finance for support to Ukraine. The peak in 2021 was a result of large commitments across multiple regions and sectors, and in line with the UK government's commitment to doubling UK international climate finance in that year.

Adaptation-related ODA in 2021 to environmental protection primarily targeted environmental research and biodiversity. Multi-sector funding predominantly supported research and scientific institutions. Within the agriculture sector, priority was given to rural development and agricultural research. Funding for agriculture decreased significantly from US$285 million in 2019 to US$196 million in 2022.

Multilateral Spending and Commitments

The UK contributes some of its climate financing through multilaterals. Not all these funds are considered ODA.

Funding Outlook

What is the current government's outlook on climate ODA?

The UK’s COP26 presidency reinforced its commitment to climate: The UK government is committed to providing at least US$16 billion between 2021-2026 in international climate finance (all from the UK's ODA budget). This is double the UK’s previous funding. The UK government also announced at COP27 that UK adaptation financing would rise to US$1.8 billion by 2025, a three-fold increase from 2019.

Concerns surrounding the UK’s commitment to climate action: In July 2023, a leaked briefing note to Ministers suggested that the UK government has abandoned its climate finance commitment due to the commitment's outsize pressure on the UK's reduced, 0.5% ODA/GNI in 2023 and competing priorities including addressing the impacts of the Ukraine crisis. The abandonment has, however, not been confirmed by the FCDO. The new ICF methodology shows that the UK is on track to meeting its 2021-2025 climate target of US$16 billion.

Key Bodies