Explainer: Climate finance is great but how do you get it?

AI Summary

Pakistan faces immense challenges in securing adequate climate finance for recovery and adaptation following devastating floods in 2022. Despite international pledges, slow disbursement and complicated funding procedures hinder effective access to necessary resources for climate resilience.

In the summer of 2022, monsoon rains combined with glacial melt to produce one of the worst flooding disasters in Pakistan’s history. In this flood, roughly two million homes were damaged, and thirty-three million people were affected. Nearly 8m people are reportedly displaced. The World Bank’s post-disaster needs assessment estimated total damages at close to $15 billion, with reconstruction needs exceeding $16bn. At COP27, Climate Minister Sherry Rehman turned this catastrophe into a diplomatic breakthrough, helping secure global agreement on the Loss and Damage Fund. In the eyes of many who covered the summit, Pakistan became the poster child of climate justice. Three years on, the fund exists. Pakistan’s problem has not gone away. The country’s climate financing need is very large and cannot be ignored. The World Bank estimates that a comprehensive response to Pakistan’s climate and development challenges between 2023 and 2030 will cost around $348bn. Of that, $152bn is for adaptation and resilience, and $196bn is for reducing emissions across the economy. Compared with this needed amount, the country receives very little. Donors pledged more than $9bn at the Geneva conference in January 2023 to support flood recovery. But a large share of that consisted of loans and previously committed development finance rather than fresh grants, and disbursement has been slow and uneven. The newer Fund for Responding to Loss and Damage, operationalised in 2025 under a World Bank-hosted trustee arrangement, tells a similar story globally. It had attracted pledges of roughly $768m from 27 contributors as of April 2025, significant, until it is set against researchers’ estimates that low- and middle-income countries could need $290bn to $580bn annually by 2030 to cope with climate losses. For a country as exposed as Pakistan, ranked among the world’s most climate-vulnerable states despite contributing under one percent of global emissions. The money on the table remains a fraction of what is needed. It would be easy to end the analysis there: rich countries have not paid what they owe. That is true, and important. But it is not the whole picture, and focusing only on this side hides another uncomfortable truth: Pakistan has also struggled to draw down the finance that already exists. Climate finance doesn’t work like foreign aid, in which one government transfers to another government. International Climate Finance, such as the GCF, GEF, Adaptation Fund, and the Fund for Loss and Damage, has specific procedures and requirements that countries must follow to access these funds. Each fund requires an approved organisation, called an “accredited entity,” to receive and manage the funds, and this organisation must demonstrate strong financial management systems and the ability to handle the funds responsibly and transparently. In Pakistan, the Ministry of Climate Change serves as the National Designated Authority to the GCF, which reviews and approves projects, but approval does not automatically mean the funding is received. Pakistan has struggled to develop national institutions that meet the strict requirements to become accredited to receive and manage international climate finance. For example, when Punjab’s Environment Protection Agency tried to be accredited, the process needed a detailed institutional gap assessment by an international consultancy before it could even begin. The National Disaster Risk Management Fund (NDRMF) is one of the few Pakistani institutions that has built strong capacity and remains the country’s rare success story in this area. Officials and practitioners working on Pakistan’s climate finance say that slow progress is not caused only by limited donor funding. A major problem is the shortage of “bankable” project proposals. Bankable projects are those that are detailed, financially credible, properly designed, and able to meet the strict due diligence requirements of international funds. Preparing such proposals requires specialised technical skills. Many federal and provincial departments have limited in-house capacity and depend on continuous external support. The 18th Amendment further complicates the issue by transferring many environmental and climate-related responsibilities to the provinces. The provincial governments have much of the implementation authority and local knowledge, while the Ministry of Climate Change in Islamabad remains the main national body dealing with international climate funds. It also contributes to the slow pace of Pakistan’s engagement with these funds. Trust is another important issue that money alone cannot solve. Donors look not only at whether a project proposal is technically strong. They also look at whether the country has a history of using funds transparently and effectively. In Pakistan, some externally funded infrastructure projects have drawn criticism for their performance. For example, local communities blamed a World Bank-supported drainage ca