Climate finance illustration./PHOTO ; AI
Fifteen years after wealthy nations pledged billions to help developing countries tackle climate change, a new report reveals that much of that promise has been hollow.
Developing nations are now paying more back to rich countries in climate finance loans than they receive in support, a reversal that lays bare the deep inequities at the heart of global climate action.
According to the newly released report by Oxfam and the CARE Climate Justice Centre, “Climate Finance Shadow Report 2025: Analysing Progress on Climate Finance under the Paris Agreement, two-thirds of climate finance to the Global South is being delivered as loans rather than grants, forcing vulnerable nations to repay seven dollars for every five received as they struggle to cope with escalating climate disasters.
“Rich countries are treating the climate crisis as a business opportunity, not a moral obligation,” said Nafkote Dabi, Oxfam’s Climate Policy Lead, referring to the report.
“They are lending money to the very people they have historically harmed, trapping vulnerable nations in a cycle of debt. This is a form of crisis profiteering.”
Debt disguised as climate aid
Rich countries claim to have mobilized $116 billion in climate finance in 2022. Still, Oxfam’s analysis finds that the true value of support is closer to $28-35 billion once loan repayments and inflated accounting are factored in, barely a third of what was pledged.
Nearly 65% of this financing came in the form of loans, many at standard or near-market interest rates, with no meaningful concessions.
As a result, climate finance, which was meant to relieve the burden of the climate crisis, is instead deepening the debt trap.
The total debt owed by developing nations now stands at $3.3 trillion, with much of it tied to climate-related borrowing.
Countries such as France, Japan, and Italy are among those most frequently issuing climate loans rather than grants.
In 2022 alone, developing nations received around $62 billion in climate loans, but are expected to repay up to $88 billion, a 42% “profit” for creditors.
The forgotten frontlines
The report finds that Least Developed Countries (LDCs) received just 19.5% of total public climate finance between 2021 and 2022, while Small Island Developing States (SIDS), some of the world’s most climate-vulnerable nations, received only 2.9%.
More than half of this money came in the form of loans they must repay.
At the same time, only 3% of climate finance specifically targeted gender equality, even though women and girls are disproportionately affected by climate-related shocks such as drought, displacement, and food insecurity.
Oxfam and CARE warn that this imbalance not only undermines the promise of the Paris Agreement but also leaves millions exposed to worsening climate impacts.
In recent years, extreme weather events have displaced millions in the Horn of Africa, battered 13 million people in the Philippines, and flooded over 600,000 people in Brazil, yet many of the affected countries continue to divert scarce resources toward repaying climate-related loans.
Cuts that deepen the crisis
The findings come amid what aid agencies describe as the sharpest cuts to foreign aid since the 1960s.
Data from the Organisation for Economic Co-operation and Development (OECD) shows a 9% drop in development assistance in 2024, with projections indicating a further 9–17% reduction in 2025.
“Rich countries are failing on climate finance, and they have nothing like a plan to live up to their commitments to increase support,” said John Norbo, Senior Climate Advisor at CARE Denmark.
“In fact, many wealthy countries are gutting aid, leaving the poorest to pay the price, sometimes with their lives.”
These cuts threaten to further weaken adaptation and resilience programmes that communities rely on to withstand climate shocks.
Oxfam notes that adaptation funding, which supports water management, drought-resistant agriculture, and disaster preparedness, accounts for only one-third of total climate finance, while the majority goes toward mitigation projects with higher financial returns.
A call for justice at COP30
As negotiations ahead of COP30 in Belém, Brazil, begin to take shape, the report urges developed countries to stop what it calls “climate crisis profiteering” and to increase the share of grants and highly concessional finance in their climate commitments.
Oxfam and CARE are calling for the following actions:
- Fulfill the full $600 billion climate finance commitment for 2020–2025 and outline a clear roadmap to scale up to $300 billion annually beyond 2025, as part of the Baku-to-Belém pathway.
- Triple adaptation finance by 2030, using the COP26 commitment to double adaptation funding by 2025 as a baseline.
- Ensure meaningful contributions to the Loss and Damage Fund, which remains severely underfunded, with less than $700 million pledged globally by the end of 2024.
- Mobilize new sources of finance by taxing the super-rich, which could raise $1.2 trillion annually in OECD countries, and by taxing fossil fuel company windfall profits, estimated at around $400 billion per year.
These measures, the report argues, would help realign climate finance with the principles of fairness and solidarity envisioned under the Paris Agreement.
Beyond numbers: rebuilding trust
Beyond the figures, the report exposes a deeper trust deficit between the Global North and South.
For many developing nations, the issue is not only about the money owed but about accountability and the spirit of partnership promised at international climate summits.
The reliance on loans and the growing role of private investors has turned climate finance into what many experts call a transactional relationship, rather than a cooperative effort to confront a shared existential threat.
Oxfam warns that without structural change, the world risks repeating the same mistakes that have long undermined global development aid in inequitable terms, opaque reporting, and the concentration of decision-making power in the hands of the wealthiest.
“The global climate finance system was meant to help vulnerable nations survive,” said Dabi.
“Instead, it is forcing them to pay for their own destruction.”
Looking ahead
The Climate Finance Shadow Report 2025 arrives at a pivotal moment, as countries prepare to update their climate finance pledges ahead of COP30.
It challenges the idea that pledges alone are progress, showing that how money is delivered and on what terms matters just as much as how much is promised.
For millions living on the frontlines of climate change, the issue is not abstract.
Every dollar repaid in debt is a dollar not spent on rebuilding after a flood, securing clean water during a drought, or protecting children from hunger.
As the report concludes, the question is no longer whether climate finance exists, but who it truly serves.
Source: Oxfam International and CARE Climate Justice Centre, Climate Finance Shadow Report 2025: Analysing Progress on Climate Finance under the Paris Agreement
