At COP29 in Baku, negotiators reached a historic but heavily debated outcome with the establishment of the Baku Finance Goal, committing governments to mobilise at least $300bn annually by 2035 for developing countries.
While significant in symbolic terms, the target was swiftly recognised as falling short of what is required to meet global mitigation and adaptation needs.
To address this, countries requested Azerbaijan and Brazil to develop the Baku-to-Belem Roadmap, a plan to scale up climate finance for the developing world to $1.3trn a year by 2035. The roadmap will aim to define the collective responsibilities of governments, multilateral institutions and the private sector in closing what has become known as the missing trillion.
The gap is substantial. According to recent analyses, global climate finance flows must reach $7.5trn annually through 2030, increasing to $8.8trn per year from 2031 to 2050 to align with the 1.5C pathway.
While public finance remains central, private capital is expected to carry the bulk of this burden.
The Independent High-Level Expert Group (IHLEG) on Climate Finance, convened at the start of COP29, outlined a pathway for mobilising $1trn in private finance for emerging markets and developing nations by the end of the decade. Their recommendations focused on reforming development banks, derisking private investment and establishing predictable concessional flows to the Global South.
Progress, however, has been limited by a combination of political divergence, slow implementation and investor uncertainty.
This uncertainty has been deepened by the political backlash against environmental, social and governance (ESG) finance in the US.
The UN-backed Net-Zero Banking Alliance (NZBA), launched in 2021 under the Glasgow Financial Alliance for Net Zero, disbanded in 2025 following the withdrawal of major US banks including JPMorgan Chase, Goldman Sachs, Wells Fargo, Citi, Bank of America and Morgan Stanley. These exits were followed by HSBC, UBS and the Bank of Montreal.
The Net Zero Asset Managers initiative (NZAM) also suspended its activities earlier this year after sustained federal pressure and BlackRock’s withdrawal.
Market behaviour has mirrored this turbulence. In the first quarter of 2025, sustainable investment funds recorded $8.6bn in net outflows, the largest on record, largely attributed to anti-ESG sentiment and policy rollbacks.
The second quarter brought modest recovery, with $4.9bn in inflows, though investor confidence remains fragile.
Sustainable investment funds
Q1 2025 saw the biggest net outflow on record.
Q2 2025 saw a modest recovery
Yet, signs of resilience persist. More than 50 jurisdictions are now developing or using sustainable finance taxonomies, and the global market for green and social bonds has grown to $6trn in 2025, underscoring that investor appetite for climate-positive assets globally remains intact, even amid political volatility.
Institutional governance frameworks are also evolving. The Task Force on Climate-related Financial Disclosures (TCFD), established in 2015 by the Financial Stability Board to improve transparency on climate-related risks, formally concluded its work in 2023. Its mandate and monitoring functions have since been taken over by the International Sustainability Standards Board (ISSB).
The ISSB now oversees global disclosure standards, embedding the TCFD recommendations into national and international reporting frameworks. More than 4,800 organisations globally have now aligned with TCFD principles.
Nevertheless, too much finance continues to support high-carbon sectors, while too little reaches the communities most exposed to climate shocks. Only 2.5% of total global climate finance currently flows to sub-Saharan Africa, despite the region’s acute vulnerability and high potential for renewable energy and adaptation projects.
Nearly 60% of low-income countries are now in debt and they collectively spend six times more repaying their debt than what the World Bank lends in a year. Correcting this inequity requires not only new pledges but structural reforms that make access to finance fairer, faster and more predictable.