Explainer: Climate finance is great but how do you get it?

Explainer: Climate finance is great but how do you obtain it?

Key points

• Farhad Ullah Published September 7, 2026 Updated September 7, 2026 05: 18pm.
• Header image: This aerial photograph taken on September 5, 2022, demonstrates flooded residential areas after heavy monsoon rains in Dera Allah Yar, Balochistan. – AFP.
• The newer Fund for Responding to Loss and Damage, operationalised in 2025 under a World Bank-hosted trustee arrangement, tells a similar story globally.
• In Pakistan, the Ministry of Climate Change serves as the National Designated Authority to the GCF.
• In the summer of 2022, monsoon rains combined with glacial melt to produce one of the worst flooding disasters in Pakistan's history.

Pakistan still isn't able to properly tap into the billions of dollars.

In the summer of 2022, monsoon rains combined with glacial melt to produce one of the worst flooding disasters in Pakistan's history. In this flood, roughly two million homes were damaged, and thirty-three million individuals were affected. Almost 8m residents are reportedly displaced. The World Bank's post-disaster needs assessment estimated total damages at close to $15 billion, with reconstruction needs exceeding $16bn. At COP27, Climate Minister Sherry Rehman turned this catastrophe into a diplomatic breakthrough, helping secure global agreement on the Loss and Damage Fund. In the eyes of plenty of who covered the summit, Pakistan became the poster child of climate justice.

Three years on, the fund exists. Pakistan's difficulty has not gone away.

Meanwhile, the country's climate financing need is particularly substantial and cannot be ignored. The World Bank estimates that a comprehensive response to Pakistan's climate and development challenges between 2023 and 2030 will cost around $348bn. Of that, $152bn is for adaptation and resilience, and $196bn is for reducing emissions throughout the economy. Compared with this needed amount, the country receives particularly little. Donors pledged more than $9bn at the Geneva conference in January 2023 to backing flood recovery. But a sizeable share of that consisted of loans and previously committed development finance rather than fresh grants, and disbursement has been slow and uneven.

Notably, the newer Fund for Responding to Loss and Damage, operationalised in 2025 under a World Bank-hosted trustee arrangement, tells a similar story globally. It had attracted pledges of roughly $768m from 27 contributors as of April 2025; significant, until it is set against researchers' estimates that low- and middle-income countries could need $290bn to $580bn annually by 2030 to cope with climate losses. For a country as exposed as Pakistan, ranked among the world's most climate-vulnerable states despite contributing under one per cent of global emissions. The funds on the table remains a fraction of what is needed.

How climate finance works.

It would be straightforward to end the analysis there: rich countries have not paid what they owe. That is true, and significant. But it is not the whole picture, and focusing only on this side hides another uncomfortable truth: Pakistan has additionally struggled to draw down the finance that already exists.

Climate finance doesn't work like foreign aid, in which one administration transfers to another administration. International Climate Finance, such as the GCF, GEF, Adaptation Fund, and the Fund for Loss and Damage, has specific procedures and requirements that countries must follow to access these funds. Each fund requires an approved organisation, called an "accredited entity, " to receive and manage the funds, and this organisation must demonstrate solid financial management systems and the ability to handle the funds responsibly and transparently.

In Pakistan, the Ministry of Climate Change serves as the National Designated Authority to the GCF. It reviews and approves projects, but approval does not automatically mean the funding is received. Pakistan has struggled to develop national institutions that meet the strict requirements to become accredited to receive and manage international climate finance. When Punjab's Environment Protection Agency tried to be accredited, the process needed a detailed institutional gap assessment by an international consultancy before it could even commence, for example. The National Disaster Risk Management Fund (NDRMF) is one of the few Pakistani institutions that has built solid capacity and remains the country's rare success story in this area.

Authorities and practitioners working on Pakistan's climate finance say that slow progress is not caused only by limited donor funding. A major difficulty is the shortage of "bankable" project proposals. Bankable projects are those that are detailed, financially credible, properly designed, and able to meet the strict due diligence requirements of international funds. Preparing such proposals requires specialised technical skills. Plenty of federal and provincial departments have limited in-house capacity and depend on continuous external backing. The 18th Amendment further complicates the matter by transferring numerous environmental and climate-related responsibilities to the provinces. While the Ministry of Climate Change in Islamabad remains the main national body dealing with international climate funds, the provincial governments have much of the implementation authority and local knowledge. It additionally contributes to the slow pace of Pakistan's engagement with these funds.

Trust is another significant problem that funds alone cannot solve. Donors look not only at whether a project proposal is technically solid. They additionally look at whether the country has a history of using funds transparently and effectively. In Pakistan, some externally funded infrastructure projects have drawn criticism for their performance. For example, local communities blamed a World Bank-supported drainage canal in Sindh for worsening flood damage in 2022; such incidents growth donor worries and create it challenging to rebuild trust rapidly. Restoring donor confidence requires more than one successful project; it needs consistent transparency, proper monitoring, and regular reporting of results over time.

Meanwhile, the solution to our climate difficulty.

Pakistan's climate challenges cannot be solved by international promises alone. A realistic understanding of the challenge requires recognising two facts: the international community has not provided all the climate finance it pledged, and Pakistan has additionally not developed robust enough institutions and systems to effectively access and employ the funding available.

Closing this second gap is more within Pakistan's control than solving the first. Pakistan needs to invest in a few solid national institutions that can meet international accreditation standards instead of depending on temporary, donor-funded assessments whenever an agency applies for funding. The NDA secretariat additionally needs enough staff and technical expertise to manage a growing project pipeline, and the country should additionally create a solid federal-provincial coordination system so provincial capacity can be turned into well-prepared, fundable projects instead of separate, fragmented requests.

Pakistan additionally needs a proper project preparation facility to turn climate priorities into robust, bankable proposals, rather than preparing each application at the last minute. Lastly, transparency and monitoring should not be seen as burdens imposed by donors; they should be treated as essential tools for building trust and securing more climate finance going forward.

Pakistan's case for climate justice is solid, and its exposure to climate disaster is not in question. But justice delayed by institutional gaps is still, in practical terms, justice denied. If Pakistan wants the next flood, the next heatwave, the next glacial outburst to be met with finance that arrives on time and at scale, the country's most urgent climate policy task may not lie in Baku, Belém, or wherever COP31 convenes next. It may lie in Islamabad, building the institutions capable of receiving what the world eventually agrees to send.

For context, the writer is a graduate student at School of Economics, QAU, and is at present pursuing an MPhil in Public Policy at the Pakistan Institute of Development Economics PIDE, Islamabad. His research focuses on disaster risk financing, climate finance, and disaster risk reduction in Pakistan. Climate finance in RoB. The climate finance boom and why Pakistan is missing out.

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Taken together, the developments around explainer: Climate finance is great but how do you get it? Point to a situation that is still moving, and the coming days should bring more clarity.