Climate development finance

Pacific Island countries are among the world’s most vulnerable to weather-related disasters and the impacts of climate change. Governments across the region face high unmet needs for climate finance, particularly for adaptation. The International Monetary Fund estimates that Papua New Guinea needs to invest 2% of GDP in adaptation-related infrastructure, while other Pacific Island countries need to invest between 6.5% and 9%.¹ Given their small economies and limited fiscal capacity, these countries rely heavily on external support to help narrow climate financing gaps.

Trends

Climate-related official development finance (ODF) to the Pacific increased from $1.3 billion in 2023 to $1.5 billion in 2024, suggesting a stabilisation in spending on climate adaptation and mitigation following the volatility of the pandemic years. The elevated levels recorded in 2021 and 2022 were driven largely by pandemic-era emergency financing, including substantial budget support loans to Papua New Guinea and Fiji that were reported as having “significant” climate objectives (Figure 1).

Looking beyond these short-term fluctuations, the longer-term trend is one of sustained growth. Climate-related ODF to the Pacific has expanded rapidly from a low base over the past decade, increasing by an average of 18% per year. Notably, even as total ODF to the Pacific declined between 2021 and 2023, the share allocated to climate objectives remained well above pre-pandemic levels. This shift is particularly evident in funding for projects with climate as a “principal” objective, which reached a record high of $461 million in 2024.

New commitments with climate-related objectives also show positive trends. In 2024, donors announced $2.8 billion in new mitigation and adaptation projects, the highest level on record for the Pacific. Much of this growth reflects a new wave of infrastructure investment incorporating climate-resilient design, including a substantial pipeline financed through the Australian Infrastructure Financing Facility for the Pacific (AIFFP).

Key partners

Consistent with its position as the Pacific’s largest aid donor, Australia is also the region’s leading source of climate-related development finance. Between 2008 and 2024, Australia disbursed $4.6 billion in climate-related ODF to the Pacific (Figure 2). Early growth in “significant” climate-tagged finance was driven largely by the inclusion of climate objectives in major budget support operations. More recently, growth has been underpinned by the expanding AIFFP project pipeline.

In 2024, Australia became the Pacific’s largest provider of “principal” climate finance for the first time. Key projects included the AIFFP loan to Solar Pacific Pristine Power for the Palau Solar Project, a solar and battery storage facility expected to supply up to 20% of Palau’s electricity. Australia also funded the Tonga Renewable Energy Stabilisation Package, which will upgrade the electricity grid and install hybrid-compatible generators to support renewable energy integration. At a smaller scale, the RENew Community Electrification program aims to expand access to solar power for the region’s rural households, schools, and health clinics.

The Asian Development Bank (ADB) is the Pacific’s second-largest source of “principal” climate finance. Fiji and Papua New Guinea have been the primary recipients, accounting for nearly 70% of this funding since 2008. The largest ADB climate-related investment since 2022 has been the Sustainable and Resilient Recovery Program in Fiji, a $159 million policy-based operation that combines fiscal reform with disaster and climate risk management.

The Pacific Aid Map’s independently compiled dataset shows that Beijing is a relatively small but active climate finance partner in the Pacific. Since the Covid pandemic, China’s climate-tagged portfolio has been split between a handful of large energy-sector projects and a broader range of smaller adaptation grants. Most spending has been concentrated in Papua New Guinea, including on the Hagen–Mendi–Tari Grid Development Project and the $56 million Ramu System Extension from Yonki to Mt Hagen. In Tonga, China provided grant finance for a $14 million Wind Power Station, completed in 2025. Alongside these larger investments, China has provided a steady stream of smaller adaptation and clean-energy grants across Fiji, Solomon Islands, the Federated States of Micronesia, Kiribati, and Vanuatu. These projects have included solar home systems, solar street lighting, water tanks, agricultural initiatives, and drought-relief desalination support in Kiribati.

Climate-focused multilaterals, notably the Green Climate Fund, Climate Investment Funds, Adaptation Fund, Global Environment Facility, and Global Green Growth Institute, play an important role in providing “principal” climate finance to Pacific Island countries. Because their mandates are focused almost exclusively on climate and environmental objectives, nearly all of their funding qualifies as climate finance. While these institutions accounted for only 14% of “principal” climate finance to the Pacific between 2008 and 2024, this represents an outsized contribution given that they collectively provided less than 1% of total ODF to the region.