January 2026

Submission to the International Development Committee inquiry into the UK’s international climate finance

The Independent Commission for Aid Impact (ICAI) is the scrutiny body for UK development assistance. It operates independently of government, reporting to Parliament through the International Development Committee. Since 2011, ICAI has commissioned 14 climate-related reviews on UK international climate finance (ICF), in recognition of the scale of spending involved and its strategic importance to the UK’s global objectives. This evidence submission summarises ICAI’s findings from the most relevant of these reviews (see list at submission end) against relevant questions set out in the committee’s call for evidence.

Summary

ICAI identified several cross-cutting themes, including that there is good evidence of UK leadership on ICF, drawing in other donors, which is likely to increase the value for money and impact of the UK’s own contributions. However:

• Changes to accounting and reporting of the UK’s £11.6bn ICF pledge, such as the reclassification of humanitarian spend and multilateral development bank (MDB) contributions, risk undermining transparency.
• The UK’s portfolio-wide strategy and cross-departmental coordination could be strengthened.
• The UK’s approach of using multilateral channels and blended instruments to mobilise private finance is likely to be effective for mitigation programmes in middle-income countries, but is less appropriate for meeting adaptation and resilience needs in low-income countries. 

ICAI also notes that UK leadership in international institutions dealing with climate finance may be harder to sustain as donor budgets are scaled back globally.

What impacts will the reduction of official development assistance have on the UK’s ability to deliver its ICF commitments?

The UK has made three public commitments to ICF since 2011: £3.8 billion in ICF1 (2011-12 to 2015-16), £5.8 billion in ICF2 (2016-17 to 2020-21), and £11.6 billion in ICF3 (2021-22 to 2025-26). These commitments were met in ICF1 and ICF2.[1] The 2024 ICAI review of the UK’s international climate finance commitments (hereafter referred to as ‘the 2024 ICAI review’) found that the UK government was still committed to reaching the ICF3 target by the end of the 2025-26 financial year.[2] However, the spending profile was heavily backloaded to the last two years of the ICF3 period, with around 55% of the committed spending – estimated at that stage at between £3.4 billion and £3.8 billion – planned for 2024-25 and 2025-26.[3] In February 2024, there were concerns that the UK aid budget reductions – notably the 2020 reduction of the ODA budget from 0.7% to 0.5% of UK gross national income – might impact on the UK’s ability to meet its ICF pledge, given its backloaded nature.[4] Overall, however, ICAI has found that ICF has so far been relatively more protected from budget reductions than other aid sectors.[5]

What are the trade-offs associated with decisions to divert aid from ICF to other priorities, such as humanitarian crises?

The 2024 ICAI review noted that the UK government had reclassified certain programmes as ICF-eligible and created a new accounting methodology to count certain humanitarian spend as ICF, [6] for example that UK humanitarian programmes operating in the 10% of countries most vulnerable to climate change effects (according to the Notre Dame Global Adaptation Initiative Index) are attributed a fixed ICF proportion of 30%.[7] While ICAI was critical of this reclassification process, noting that it has “moved the goalposts in measuring additional climate finance to developing countries,”[8] it also acknowledged that the change had reduced the pressure to cut non-ICF spending, particularly in the humanitarian sphere. The reclassification of previously non-ICF ODA as ICF-eligible is not uncommon amongst donors, and the review found that the UK remained conservative in its approach to reporting ICF, as compared to other donors such as France, Germany, the Netherlands and Norway.[9]

How do the UK’s ICF commitments and delivery compare with other countries in a similar situation?

The UK is a significant and respected donor in the climate finance landscape. According to Carbon Brief, in 2021-2022, the UK ranked as the fifth-largest contributor to climate finance behind Japan, Germany, the US and France.[10] The 2024 ICAI review found that, while the UK’s contribution to the global $100 billion goal (now $300 billion, following agreements at COP29) is relatively small, it has played a global leadership role. The review found that the UK’s £11.6 billion ICF pledge, leadership at COP26 and commitment to the UNFCCC and ambitious domestic emissions reduction programmes together gave it a level of influence beyond the scale of its funding.[11] The UK also plays a significant role in the multilateral climate funds, as one of the top three donors to the Green Climate Fund (GCF) and the Climate Investment Funds (CIF).[12] ICAI’s 2025 review of UK aid for energy transition (‘the 2025 ICAI review’) found that the UK exercises strategic leadership across the CIF and the GCF, and is widely recognised as a consistent and influential voice in both funds.[13] While ICAI has not conducted a comprehensive benchmarking of the UK’s ICF commitments and delivery compared to other donors, evidence from various ICAI reviews suggests that the UK is a leader in this space.

How transparent is the UK government about its ICF commitments?

The UK government is increasingly transparent about its ICF commitments. Through its scrutiny, ICAI has played a role in encouraging increased transparency. For example, the 2024 ICAI review found that there was insufficient transparency about the adjustments made to the ICF accounting methodology, as detailed above.[14] As a result of the adjustments, interested observers were unable to make accurate estimates of ICF spend. In response to the review’s recommendation on transparency, the government created an ICF information booklet and updated the ICF website.[15]

What processes are in place to oversee the UK’s ICF expenditure and impact?

There is an interdepartmental ICF Management Board to oversee ICF expenditure and impact, given that programmes and portfolios span across several departments. The government reports on ICF spending through an annual report and on platforms such as DevTracker.[16] The annual report shows cumulative progress against the 15 ICF key performance indicators (KPIs). ICF is one of few cross-government ODA portfolios to report against a common set of KPIs, although these necessarily capture only a subset of UK ICF’s total impact.[17]

How are the UK’s ICF programmes selected and are they effective in meeting the long-term needs and priorities of low-income and climate-vulnerable countries?

The UK ICF portfolio is guided by its 2023 strategy, ‘Together for People and Planet’, but this lacks detailed direction and focus on specific thematic areas. For example, the 2025 ICAI review found that the UK’s energy transition portfolio was broad and diverse, creating a risk of incoherence and presenting prioritisation challenges as the UK reduces its aid budget.[18] Likewise, previous ICAI reviews on sustainable cities and the Blue Planet Fund noted the lack of a shared approach within the UK government and marine ecosystems, respectively, leading to a broad portfolio with a lack of criteria for resource allocation[19]. Although ICAI’s 2025 follow-up to the Blue Planet Fund review shows that there has been progress in these areas[20]. Several ICAI reviews have recommended the development of a strategy to guide programme selection in particular thematic areas.

The 2024 ICAI review found that the government’s approach to ICF does not sufficiently address public commitments to addressing climate change in least developed countries (LDCs) and Small Island Developing States (SIDS).[21] ICAI’s analysis found no geographic prioritisation for ICF funding. This is particularly true for funding via multilateral climate funds (MCFs) and development finance institutions (DFIs), with only 10% of energy transition finance via GCF, CIF, British International Investment (BII) and Private Infrastructure Development Group (PIDG) allocated to low-income countries.[22] This reflects a global challenge, with 70% of all global climate funding provided and mobilised by developed countries being directed to middle-income countries in 2022.[23]

Assessing how well UK support meets the needs of low-income and climate-vulnerable countries is challenging, because ICF data are not disaggregated by geography in a standardised way. The 2025 ICAI review found that government activities were not uniformly tagged by geography, with over 90% of energy transition programmes being ‘geographically unspecified’, often because they are multi-country.[24] During evidence collection for the energy transition review, ICAI heard from external stakeholders that the UK was more likely than other donors to support innovation, research and development, pilot projects, capacity building and enabling environment work in lower-income countries,[25] but this is difficult to validate from the data.

To what extent does the UK ensure that programmes are rooted in local participation, management and decision making?

ICAI has observed a growing focus on country ownership and country-led climate programming in recent years. For example, as detailed in the 2025 ICAI review, the Just Energy Transition Partnerships (JETPs) and the UK-Brazil Hubs work on a country partnership model.[26] The UK has been a pragmatic and responsive JETP partner, however progress towards the partnership’s goals has been slow. The UK has used lessons from the challenges faced by the JETPs to inform newer partnerships, such as the UK-Brazil Hubs, which adopt a more realistic design anchored in national plans.[27]

How effectively are FCDO, DESNZ, DSIT and Defra[28] coordinating their efforts to deliver the UK’s ICF commitment and maximise value for money?

The departments work under a unified ICF3 strategy to deliver the UK ICF commitments.[29] There is an interdepartmental ICF Management Board that supports coordination.[30] ICAI reviews have found some positive examples of cross-departmental coordination, but also noted persistent challenges in this area, notably around the division of labour between the two main delivery departments, FCDO and DESNZ, with blurred responsibilities and fragmented implementation. According to the energy transition review, “this has resulted in overlapping programming and weakened portfolio coherence due to limited coordination”.[31] The review found that the division of responsibilities between FCDO and DESNZ was unclear, creating institutional tension and uncertainty, particularly during periods of restructuring and disruption.[32] The 2023 ICAI review of the Blue Planet Fund found weak coordination between FCDO and Defra, and noted that this would make it more challenging in the future to demonstrate the Fund’s impact and value for money.[33] In a 2025 update on progress, the government reported that it had taken some steps to address this, including by implementing stronger cross-government oversight, coordination and monitoring of the Blue Planet Fund.[34]

ICAI has found examples of management processes at sector and programme levels designed to promote value for money decision-making. For example, the energy transition review found “good examples of programme-level learning”, notably the Ayrton Fund, which has a Joint Delivery Team of FCDO, DESNZ and DSIT providing coordination, tracking and reporting through a joint Ayrton Board, along with expert steering groups for its 12 priority challenges. However, the review found that evidence from cross-departmental programmes is often siloed, with limited use of thematic synthesis or structured learning to inform strategic decisions across the portfolio.[35] FCDO has produced a ‘best buy’ document which draws on evidence from several donors to identify value for money options in climate mitigation interventions, with the most recent version from 2019. DESNZ produced an unpublished September 2024 ICF Assessment of Mitigation Options report to inform its strategic approach to value for money of interventions to mitigate climate change. However, ICAI found that “these documents were not being systematically used and understood by staff working on the energy transition portfolio.”[36]

Is there sufficient cross-departmental monitoring and evaluation being conducted to measure programme impact on low-income and climate-vulnerable countries?

Monitoring and evaluation (M&E) of the portfolio has changed over time. The 2019 ICAI review of low-carbon development confirmed that the UK was viewed as a thought leader on M&E in climate finance, with an innovative set of KPIs and significant investment in M&E.[37] However, the 2023 ICAI review of UK aid to agriculture found that ODA reductions had led to reduced investment in M&E, expertise and learning, undermining the UK’s role as a thought leader on M&E.[38]

The 2025 energy transition review commended the UK’s ICF MEL system overall.[39] It noted that the UK is one of the only ICF providers to report aggregated results regularly, allowing departments to track results against a range of outcomes across programmes and over time. The 2024 ICAI review found that KPI reporting does not provide a comprehensive picture of what UK ICF is achieving and does not specifically address results from multilateral partners.[40] The ICF KPIs do measure programme impact for climate vulnerable people. The 2025 UK ICF results show that, across ICF activities, 137 million people were supported in coping with the effects of climate change, 33 million people secured improved resilience to climate change, 717,000 hectares of ecosystem loss was avoided, and over 12 million hectares of land came under sustainable management practices.[41]

How does the UK engage with multilateral banks and climate funds and how is this shaping cross-departmental ICF strategies?

The UK has a strong track record of engaging with multilateral development banks (MDBs) and MCFs in line with the ICF3 strategy. The UK plays an important funding role and is recognised as an influencer and leader on ICF within the MDBs and MCFs. The channelling of ICF through multilateral channels allows the UK to contribute to collective climate action, more easily meet its ICF commitments, and mobilise or influence additional finance at a greater scale.[42]

The energy transition review assessed that the UK’s role as a major contributor to the MCFs is central to its energy transition objectives.[43] The GCF and the CIF follow a country-led approach to support countries in transitioning their energy systems, allowing for greater country ownership. ICAI found that working with these MCFs allowed for the mobilisation of additional climate finance and enabled transformational, system-level change in developing countries. The CIF and GCF portfolios are managed collaboratively by FCDO and DESNZ, and both departments provide strategic leadership and technical expertise to support the funds’ aims.

What lessons should the UK government learn from the delivery of ICF between 2021-22 and 2025-26, including the effectiveness of multi-year commitments?

ICAI has undertaken 14 climate-related reviews since 2011. Of the nine reviews scored, all have received green‑amber scores, and the UK government has fully accepted 47 of ICAI’s 64 climate-related recommendations. ICF is one of the higher performing areas that ICAI has reviewed in the UK aid programme.

The 2025 energy transition review highlights the UK’s influential role in the world’s leading MCFs – the GCF and the CIF – both through its financial contributions and technical engagement as a shareholder.[44] The 2019 ICAI review and subsequent reports note that UK ICF has supported portfolios in the areas of clean energy, energy transition, nature-based solutions and sustainable urban investments, and has helped mobilise additional public and private finance via DFIs and blended finance arrangements.[45] ICAI has also recognised the UK’s early work on ICF KPIs and central monitoring, evaluation and learning arrangements, which have been used to strengthen results management across the UK ICF portfolio and in turn influenced the MCFs, notably the CIFs and then the GCF, in strengthening their results management systems.[46]

Overall, ICAI reviews looking at ICF delivery between 2021-22 and 2025-26, advised a post-March 2026 approach built on a clearer long-term strategy (recommendation 1 in the 2025 review and recommendation 2 in the 2024 review of sustainable cities); more balanced allocations, especially for adaptation and vulnerable countries (recommendation 4 in the 2024 review), and a continued commitment to climate finance amidst short-term domestic fiscal and political volatility (recommendation 1 in the 2024 review).[47]

Is the UK using the right and most effective financial instruments to deliver ICF?

ICAI has drawn consistent conclusions about which instruments tend to be most appropriate for adaptation and for mitigation in different contexts, in line with the international consensus.

For adaptation, particularly in LDCs, SIDS and highly vulnerable communities, grants and highly concessional public finance remain the preferred instruments, given limited debt‑carrying capacity, weak revenue generation and high vulnerability. The 2024 ICAI review underlined that an increasing share of UK climate finance is being channelled as loans through MDBs and noted that this is not well suited to the needs of the poorest and most climate‑vulnerable countries.[48]

For mitigation and large-scale energy transition, especially in middle-income countries, concessional loans, equity, guarantees, blended finance and green or sustainability-linked bonds are generally more effective. This is because they can leverage substantial additional public and private finance for revenue generating investments, such as utility scale renewables, transmission networks and urban infrastructure.[49] The energy transition review found that BII and PIDG have successfully mobilised large volumes of private capital for mitigation projects, mainly via equity, debt, guarantees, and risk-sharing instruments; while grant-funded technical assistance plays a complementary role by enabling policy reforms, early‑stage project preparation and higher‑risk innovation or demonstration projects.[50]

MCFs, such as the GCF and the CIF, and DFIs, including the World Bank’s International Development Association (IDA) and the MDBs, give the UK access to different types of instruments, risk appetites and country reach, which are structurally complementary. The 2024 ICAI review found that around 30% of the £11.6 billion ICF pledge is planned as core multilateral funding, with a further 22% in the form of bilateral funds channelled through multilateral organisations. The portfolio therefore already relies heavily on these institutions as delivery channels.[51] Within that multilateral mix, ICAI notes that grant windows and highly concessional terms offered by MCFs and IDA are particularly important for adaptation, resilience and higher‑risk or early‑stage interventions in LDCs, SIDS and fragile states, where debt sustainability is a concern and revenue streams are weak. These channels allow the UK to provide climate grants, technical assistance and results‑based finance at scale in countries that could not safely take on more borrowing for climate action.[52]

What opportunities and risks do alternative funding instruments, such as private or blended finance, pose for the UK’s ICF?

The 2025 ICAI review found that the UK’s energy transition portfolio mobilised around £5.2 billion of finance in the period from 2021-22 to 2023-24, including through BII and PIDG. [53] The UK has supported the MDBs and MCFs to mobilise greater volumes of private finance for energy transition by using their capital base, credit ratings and risk-sharing instruments.

However, as noted in the 2025 ICAI review and by other organisations,[54] private finance is far more difficult to mobilise in low-income countries, where projects are often seen as riskier, smaller and more complex.[55] Therefore, private investment flows disproportionately to middle-income countries. The UK does try to mitigate inequalities in private finance access by improving the enabling environment through, for example, the Climate Compatible Growth Programme and the GCF Readiness Programme.[56]

Is the UK’s use of loans, that represented more than two-thirds of the global ICF commitment in 2022, appropriate and what is its impact on low-income and climate-vulnerable countries?

The 2024 ICAI review noted the increased use of MDBs as a delivery channel for ICF, enabling substantial leverage of additional finance, with a 1:4 proportion between donor grant investments and on-lending of World Bank IDA concessional finance.[57] The 2025 energy transition review noted that while middle-income countries can absorb loans and loan guarantees, low-income and climate-vulnerable countries remain dependent on concessional finance and grants. This reflects a broader global challenge where 70% of all climate finance was channelled towards middle-income countries in 2022.[58]

How can the UK utilise innovative mechanisms, such as debt relief, as alternative routes to fulfilling its ICF commitments?

ICAI has not looked in detail at novel mechanisms such as debt for climate swaps and blue bonds, but has engaged with BII and PIDG who are providing other novel financing mechanisms under UK ICF. For their energy transition projects, for example, BII leverages finance by anchoring equity and debt investments that pull in institutional co-investors to commercialise and scale up projects in emerging markets.[59] One promising example is BII’s establishment of a £100 million Mobilisation Facility to increase the flow of private capital into emerging economies considered risky by other investors. PIDG also mobilises private capital by derisking early-stage and frontier infrastructure through facilities like InfraCo and GuarantCo.[60]

How should the UK’s ICF be spread between mitigation, adaptation and loss and damage spend to respond to climate change most efficiently?

Article 9 of the Paris Agreement states that countries should aim for a balance of mitigation and adaptation finance, but without specifying exactly how ‘balance’ should be interpreted.[61] Adaptation made up only 28% of global climate finance,[62] and the gap is widening, with adaptation finance needs sitting at 12-14 times current flows.[63] At COP30 in November 2025, the Mutirão Decision called for the tripling of adaptation finance by 2035.[64]

ICAI reviews have found that ‘balance’ between mitigation and adaptation is appropriately treated as a strategic objective to be managed at the portfolio level, rather than a rigid 50/50 split. The 2024 ICAI review notes that the UK pledged to triple adaptation finance to £1.5 billion by 2025 and to “retain a good balance between spending on adaptation and mitigation”, but finds that the proportion of adaptation finance dropped below 40% in 2023. This falls below the informal benchmark prescribed for members of the Champions Group, of which the UK is part (this group aims to increase the total level of adaptation finance, particularly for LDCs and SIDS).[65] The UK has committed £60 million to loss and damage.[66]

Most relevant ICAI reviews

• Independent Commission for Aid Impact, ‘International Climate Finance: UK aid for low-carbon development’, February 2019
• Independent Commission for Aid Impact, ‘International Climate Finance: UK aid for halting deforestation and preventing irreversible biodiversity loss’, July 2021
• Independent Commission for Aid Impact, ‘UK aid’s alignment with the Paris Agreement’, October 2021
• Independent Commission for Aid Impact, ‘UK aid to agriculture in a time of climate change’, June 2023
• Independent Commission for Aid Impact, ‘Blue Planet Fund’, November 2023
• Independent Commission for Aid Impact, ‘UK aid’s international climate finance commitments’, February 2024
• Independent Commission for Aid Impact, ‘UK aid for sustainable cities’, July 2024
• Independent Commission for Aid Impact, ‘UK aid for energy transition’, November 2025