Ten years ago, I attended the third United Nations International Financing for Development (FfD3) Conference in Addis Ababa, Ethiopia, which took place at the midway stage of the then Millennium Development Goals (MDGs).

Ten years later, the fourth International Financing for Development (FfD4) Conference, a key global forum for Africa’s socio-economic growth, convenes in Spain mid-this year to, among other actions, align climate action and development through financing for the MDGs’ successor – the Sustainable Development Goals (SDGs).

What do “development finance” and “development finance for climate” mean? Development finance refers to financial resources used to fund cooperation activities. Development finance for climate is a subset of development finance that is reported by bilateral and multilateral donors as supporting climate action in developing countries.

What is development finance?

According to the Organisation for Economic Cooperation and Development (OECD), development finance for climate (also known as climate-related development finance), provided and mobilized for developing countries towards the $100 billion goal are closely related but distinct measures.

The $100 billion (sh129 trillion) annual finance goal runs to this year when Spain hosts FfD4. In 2010, the UN climate summit (COP16) in Buenos Aires, Argentina, recognised that developed countries committed, (in the context of meaningful mitigation actions and transparency on implementation), to a goal of jointly mobilizing $100 billion per year by 2020 to address the needs of developing countries. The goal was later extended to 2025.

Africa requires adequate and predictable means of implementation to maximise the opportunities provided by climate change. The cost of climate change solutions is estimated at $4.5 trillion by 2030, according to the African Development Bank (AfDB).

Climate finance was the hottest issue during last November’s COP29 in Baku, Azerbaijan, as developing countries took wealthy, fossil fuel-producing nations to task over their failure to fulfil long-standing climate finance pledges.

Eventually the developing and developed countries reached a compromise for $300 billion a year in climate finance after fractious talks and tough negotiations. Developing nations agreed to the deal rather than let the acrimonious talks collapse as it would have jeopardised their climate goals to leave them in a more desperate position.

They felt the amount offered was inadequate as developing countries continue to bear the burden of global warming caused by the biggest emitters from wealthy nations.

The decision indicates that such finance would come from a wide variety of sources – public, private, bilateral and multilateral, and include alternative sources of finance. At FfD3, the Addis Ababa Action Agenda provided the foundation for the 2030 Agenda that drives the SDGs, by defining its means of implementation. It introduced the concept of ‘mutual benefits’.

The integrated nature of the 2030 Agenda offers a framework to address structural vulnerabilities and ensure that investments contribute positively to multiple SDGs without undermining other targets.

It is important to explore the role FfD4 will play in the alignment of climate action and development through SDG financing. The 2030 Agenda and its 17 SDGs offer an integrated framework that addresses structural vulnerabilities, enabling investments to positively affect multiple objectives, from poverty reduction to climate action.

Integrated approach to development financing

FfD4 has a crucial role in promoting SDG alignment among all public and private providers of finance for development fostering a systematic approach to financing. The development and finance goals are mutually reinforcing when managed strategically.

This active alignment ensures that resources are used efficiently across sectors and contribute to both immediate development needs and long-term sustainability.

When this integrated approach to development financing is adopted, stakeholders can maximise the efficiency of resource allocation and address both immediate development needs and long-term sustainability goals.

Stakeholders can also ensure that climate action and development objectives work in harmony and at the same time create positive synergies across multiple SDG targets.

In partnership with the Agence Française de Développement, the European Think Tanks Group (ETTG), has prepared a policy brief on the preparations for FfD4 and how it can align climate action and development through SDG financing.

The brief examines critical financing challenges and opportunities in the African region amid growing global polarisation and faltering progress towards the SDGs. The report provides detailed insights into African financial priorities and practical recommendations for strengthening international development financing frameworks.

By promoting SDG alignment among all public and private providers of finance development, it notes, the FfD4 can foster a systematic approach to financing.

Within the framework of the FfD4, it is crucial to emphasise that the pursuit of development and climate goals is not only compatible but mutually reinforcing when enforced strategically.

In analysing key African priorities for the financing for development summit, the continent’s stakeholders underline strengthening domestic resource mobilisation through developing local capital markets, improving tax collection systems, and addressing illicit financial flows.

The ETTG brief highlights the importance of reforming the G20 Common Framework for debt treatment and addressing challenges with credit rating agencies that affect African nations’ access to financing.

Special attention is given to optimising external financial flows, including the rechanneling of special drawing rights through multilateral development banks and fostering climate finance alongside development finance.

The analysis reveals significant alignment between African financial priorities and European Union priorities, suggesting opportunities for enhanced partnership based on mutual interests and common goals.

What is climate finance? It is important to get the correction definition of climate finance within the context of development ahead of the forthcoming FfD4.

Climate finance data is used to monitor the finance provided and mobilised in support of climate change adaptation and mitigation in developing countries, notably to assess progress towards the $100 billion (now $300 billion) climate change mitigation goal.

The definition of climate finance is presented in the UN Framework Convention for Climate Change (UNFCCC) Sixth Biennial Assessment and Overview of Climate Finance Flows.

The UNFCCC states that…”Climate finance aims at reducing emissions and enhancing sinks of greenhouse gases, aims at reducing vulnerability, increasing adaptive capacity, and maintaining and mainstreaming and increasing resilience of human and ecological systems to negative impacts

“…And includes financing for actions identified in a country’s nationally determined contribution (NDC), adaptation communication, national adaptation plan, long-term low emission development strategy or other national plan for implementing and achieving the goals of the Paris Agreement and the objective of the convention.”

Climate finance components

Against these backdrop, four different climate finance components in tracking progress towards the $300 billion goal can be captured: The first two components are bilateral climate finance provided by developed countries’ institutions, notably bilateral aid agencies and development banks), and multilateral public finance provided by multilateral development banks and multilateral climate funds, attributed to developed countries.

The other two climate finance components are climate-related officially supported export credits, provided by developed countries’ official export credit agencies, and private climate finance mobilized by bilateral and multilateral public climate finance, attributed to developed countries.