Bridging the climate finance divide before COP30 in Belém
A bulldozer shovels dead fish out of a river near the port city of Volos in central Greece, in August last year, following a mass die-off that has been linked to extreme weather fluctuations stemming from climate change. [AP]
When the international community meets this week in Belem, Brazil, for COP30, one issue will define the success of the summit: whether we can finally fix the way climate finance flows – or rather, fails to flow – to the developing world.
The debate around the New Collective Quantified Goal (NCQG) on climate finance is more than a technical negotiation. It is about whether the Paris Agreement’s promise of global solidarity can survive in practice. Yet even as calls for increased funding grow louder, the structural barriers that prevent money from reaching emerging economies remain largely unaddressed.
A recent report by the International Chamber of Commerce (ICC), “Enhancing Climate Finance in Emerging Market and Developing Economies” (June 2025), reveals the scale of the imbalance. Emerging and developing economies (EMDEs) account for around 25% of global GDP but attract only 14% of total climate finance. To stay on track toward a net-zero future, these countries will need an additional US$450-550 billion every year in external funding.
This shortfall is not due to a lack of projects or ambition. It is largely the result of how the global financial system defines and regulates risk.
First, public risk-mitigation tools such as guarantees and political-risk insurance offered by multilateral development banks (MDBs) and development finance institutions (DFIs) are often ignored under current prudential rules like the Basel Framework. Because such guarantees are rarely “unconditional” or “immediately payable,” they fail to qualify for capital relief. The result: Private banks see little regulatory incentive to lend alongside public institutions.
Second, project finance – the backbone of climate and infrastructure investment – is penalized with risk weights far higher than evidence warrants. Data from rating agencies show that EMDE projects default at rates comparable to investment-grade corporates and recover strongly when they do. Yet banks are still required to hold excessive capital against these assets.
Third, the system still bundles project-level risk with sovereign risk. Even commercially robust, fully contracted renewable projects in low-rated countries carry the same penalty as the government’s sovereign debt. This systematically overprices private capital and shuts out investment exactly where it is needed most.
The ICC proposes a pragmatic two-step reform agenda. In the short term, regulators should clarify that MDB and DFI guarantees and private political-risk insurance do qualify as valid credit-risk mitigants; allow partial guarantees to count proportionally; and provide guidance that project-finance structures with secure offtake contracts, performance bonds, or escrow arrangements deserve lower risk weights.
In the longer term, the treatment of project finance and country risk must be fundamentally rethought. Risk weights should be dynamic, decreasing as projects mature and their performance becomes verifiable. Regulators should distinguish between sovereign and project-specific risk, and introduce a “supporting factor” for climate-aligned investments in EMDEs – mirroring the EU’s own green-asset framework.
Our region lies at the intersection of Europe, Africa and the Middle East – where climate vulnerability, migration pressure and financing asymmetry converge
Such reforms would not cost taxpayers a cent. They would simply align regulation with real-world risk, freeing up billions in private lending capacity.
Europe cannot afford to stand aside. As the world’s largest source of sustainable-finance standards and home to major development institutions, the EU has both the leverage and the duty to ensure its regulatory frameworks do not inadvertently reinforce global inequality.
European policymakers should use COP30 to push for coherence between the EU’s Sustainable Finance Taxonomy, the Basel III/IV implementation, and the forthcoming NCQG. A unified approach that rewards climate-aligned investment – wherever it occurs – would send a powerful signal ahead of 2030.
For Greece and the wider Mediterranean, the issue is especially acute. Our region lies at the intersection of Europe, Africa and the Middle East – where climate vulnerability, migration pressure and financing asymmetry converge. Greece has already shown leadership in ocean governance and blue-economy diplomacy; we can now help champion innovative financial partnerships linking European investors with credible, de-risked projects in neighboring regions.
Belem, surrounded by the Amazon’s vast ecosystem, is a fitting venue to redefine what “climate finance” truly means. It is not just about more pledges – it is about changing the rules that prevent capital from reaching the front lines of climate action.
As the ICC rightly concludes, “prudential regulation has become an unintended bottleneck to climate investment in developing markets.” Correcting this is both a technical necessity and a moral imperative.
If COP30 delivers not only new targets but also a credible path to unlock private finance for the Global South, it will mark a turning point in the fight for climate justice. Europe and Greece should be at the forefront of that transformation.
Dr Dionysia-Theodora Avgerinopoulou is chair of the Special Parliamentary Committee on Environmental Protection.