Written Evidence Submitted by Climate Action Network UK (CAN-UK)

UK International Climate Finance
International Development Committee Inquiry
19th January 2026

Executive Summary

International climate finance (ICF) is a cornerstone of the UK’s international obligations, climate leadership, and contribution to global stability. It is not discretionary aid, nor an optional expression of solidarity, but a legal, moral, and economic responsibility rooted in international law and reaffirmed by the 2025 International Court of Justice (ICJ) Advisory Opinion on states’ obligations in respect of climate change.

The UK has historically played a constructive role in international climate finance, including early leadership on adaptation, nature, and the provision of grant-based finance. However, this leadership has been significantly weakened in recent years by reductions in Official Development Assistance (ODA) by successive governments, increasing reliance on loans and non-grant instruments, and accounting changes that undermine the integrity and impact of ICF.

This submission makes five central arguments:

1. Reductions in ODA fundamentally undermine the UK’s ability to deliver its ICF commitments, because UK ICF was originally justified as “new and additional” precisely because it was funded from growth in a 0.7% GNI ODA budget. That condition no longer exists.
2. The UK has a legal obligation to provide climate finance at a scale aligned with global need, and this obligation is increasing, not diminishing. As ODA shrinks and climate change intensifies, the only viable response is to raise new and additional public finance for climate action.
3. Grant-based public finance must be the backbone of UK ICF, particularly for adaptation and loss and damage. The growing reliance on loans, equities, guarantees, and blended finance is inappropriate for climate-vulnerable and debt-distressed countries, and risks deepening the global debt crisis.
4. Evidence from UK-funded programmes, demonstrates that well-designed, grant-based, locally-led ICF delivers strong value for money, and can reduce future humanitarian needs and costs.
5. The UK is not providing its fair share of international climate finance, but it could do so without diverting ODA spending by implementing fair “polluter pays” measures that enjoy strong public support across political parties and voter groups.

CAN-UK urges the Government to use ICF4 (starting April 2026) to restore the UK’s credibility, rebuild trust with Global South partners, and deliver climate finance that is fair, effective, and commensurate with the scale of the climate change emergency.

About Climate Action Network UK (CAN-UK)

CAN-UK is the UK network of international development and environment NGOs working together at the nexus of poverty, nature, and climate change for climate justice and sustainable development for all. We have 45 member organisations, and our purpose is to work collectively to limit climate change, restore nature, and make our societies more equal and just. CAN-UK is also the UK Node of CAN International, a global network of more than 1,900 civil society organisations in over 130 countries working to address the climate crisis and advance social, economic, and racial justice.[i] 

Climate finance is at the core of international climate change cooperation and climate justice, yet is the area of international action and leadership most lacking currently. CAN-UK (and previously as the Development and Environment Group DEG) and our members have engaged on policy and implementation of UK ICF since its inception.

1. What impacts will the reduction of ODA have on the UK’s ability to deliver its ICF commitments?

ICF was meant to be new and additional finance for developing countries to tackle climate change

Article 4.3 of the United Nations Framework Convention on Climate Change (UNFCCC) enshrines the obligations on developed countries to “provide new and additional financial resources” for developing countries to address climate change not of their making.

When the UK first established its ICF, it did so against the backdrop of a growing ODA budget and a UK commitment to spend 0.7% of Gross National Income on ODA, from which climate finance would be able to grow without displacing other development and humanitarian priorities. This allowed the government to claim that UK ICF was “new and additional”, rather than repurposed aid.

This approach also helped build trust with developing country partners, who have long expressed concern that climate finance would simply relabel existing aid flows rather than increasing overall support.

ODA cuts have fundamentally altered the nature of UK ICF

The decision to cut ODA - first under a Conservative government from 0.7% to 0.5% GNI, and then further to 0.3% GNI under this Labour government - has fundamentally changed this picture. UK ICF is now drawn from a shrinking aid budget, creating direct trade-offs between climate finance and other essential priorities such as:

• Humanitarian response,
• Global health and pandemic preparedness,
• Education,
• Gender equality and sexual and reproductive health and rights.

In 2025/26, UK ICF is expected to account for approximately 24–28% of total ODA, an unprecedented concentration of resources within an already diminished budget. This is not what “new and additional” was ever intended to mean.

This diversion is unacceptable and counterproductive

Diverting ODA to meet climate finance commitments is unacceptable for three reasons:

1. It undermines poverty reduction and humanitarian response, particularly at a time when global needs are rising due to conflict, climate change, and economic instability.
2. It damages trust with partner countries, who experience climate finance as coming at the expense of other vital spending.
3. It does not increase overall flows of finance, meaning the total resources available to address climate change, development, and biodiversity loss together remain far below what is required.[ii]

Climate change itself is a major driver of humanitarian need and development reversal. Weakening non-climate ODA in order to fund climate finance risks increasing future climate change vulnerability, creating a vicious cycle of crisis response rather than long-term resilience and sustainable development.

Legal obligations require climate finance to increase

The 2025 ICJ Advisory Opinion is a watershed moment for international climate governance.[iii] It clarified that:

• States have legal duties to prevent foreseeable harm caused by greenhouse gas emissions.
• Developed countries have heightened responsibilities, reflecting historical emissions and capacity.
• Financial support is a necessary component of meeting these obligations.

Crucially, the Opinion makes clear that climate finance must be provided at a scale sufficient to enable effective mitigation, adaptation, and to address loss and damage.

This creates a stark contradiction: the UK’s climate finance obligations are increasing, while the budget from which it is currently drawn is shrinking. This contradiction cannot be resolved through further reallocations within ODA.

The only viable solution: new and additional finance

If the UK is to meet its legal obligations, climate finance must be funded through new and additional sources, separate from ODA.

This is not only feasible but politically viable. As set out later in this submission, there is strong public support for raising revenues through fair “polluter pays” measures that would allow the UK to scale up climate finance without diverting aid or increasing the burden on ordinary households.

2. What lessons should the UK Government learn from the delivery of ICF between 2021–22 and 2025–26?

Predictability and multi-year commitments are essential

One of the UK’s most valuable contributions to international climate finance has been its use of five-year commitment periods, which should provide a degree of predictability for partner governments, multilateral funds, and civil society organisations.

Predictability enables:

• Long-term planning and institutional strengthening,
• Integration of climate action into national development strategies,
• Reduced transaction costs and better value for money.

However, the effectiveness of these commitments has been undermined by political uncertainty, abrupt ODA cuts, and in-year budget revisions. These have led to programme delays and closures, scaling back of ambition, and erosion of trust.

Lesson: Multi-year ICF commitments must be backed by stable, dedicated funding sources and cross-party political support, and longer-term programmes lead to the most transformational outcomes.

Grant-based finance delivers strong impact and value for money

Evidence from UK-funded programmes shows that grant-based ICF can deliver value for money and strong outcomes, particularly when aligned with national priorities and community needs.

Building Resilience and Addressing Vulnerability to Emergencies (BRAVE) Programme

The UK ICF-funded BRAVE programme rehabilitated hand pumps damaged by floods in Pakistan, rebuilding them on raised platforms which improved health and resilience to future floods. By locating the hand pumps near clusters of homes also saved women hours of daily labour, enabling other income-generating activities such as embroidery and livestock rearing. Evidence from other similar programming implemented by WaterAid Pakistan demonstrate similar positive adaptation and wider social and economic outcomes.

These programmes illustrate that low-cost interventions made possible by grant finance can enable adaptation while also supporting wider priorities such as gender equality and local economic development.

ONE WASH National Programme, Ethiopia

UK ICF provides finance to Ethiopia’s ONE WASH National Programme, a flagship government initiative to ensure universal, equitable, and sustainable access to safe water, sanitation, and hygiene (WASH) services in the face of climate change.

Interventions have contributed to communities’ resilience to climate change and lead to the following outcomes:

• Adopting Climate Resilient Water Safety Plans, managing gravity fed water systems, and strengthening rural water user associations.
• Improving soil health and groundwater recharge through reforestation of degraded watersheds led by women’s groups and youth environmental clubs that promote biodiversity awareness.
• Reducing vulnerability to climate change shocks with farmers trained in regenerative agriculture and drought tolerant seeds.
• Reducing girls’ absenteeism by 30% through solar-powered water schemes and school WASH interventions, including integrated menstrual hygiene management.
• Improving the safety and resilience of infrastructure and while protecting aquifers, wetlands, and water sources.
• Increasing adaptive safety nets with community Disaster Risk Reduction committees and revolving funds.

These examples demonstrate that adaptation-focused, grant-based ICF supports long-term resilience not just short-term recovery, representing good value for money now and reducing future costs to both partner governments and international climate finance providers.

Locally-led approaches improve outcomes

Climate finance is most effective when it is locally-led, flexible, and accessible to grassroots organisations. However, many funding mechanisms remain overly complex and risk-averse, and do not reach those who need it most. The UK’s 2025 ICF results indicate severe gaps in disaggregated data - particularly on disability, age, and geography – that makes it difficult to assess whether ICF is truly reaching the most marginalised.[iv] It is likely groups, such as persons with disabilities, have been excluded or insufficiently reached.

Lessons: The UK should fully operationalise its commitment to locally-led adaptation[v] in ICF4, work with other institutions to simplify access to climate finance for local communities and groups most impacted, and improve data collection and targeting to ensure who is reached is fully disaggregated.

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

Grant finance must be prioritised

Climate change is not a problem caused by developing countries. Asking them to take on debt to address its impacts is unjust and counterproductive - particularly in the context of a global debt crisis that is already constraining public spending on health, education, and social protection.

Grant finance is essential because:

• Adaptation and loss and damage deliver public goods, not revenue streams.
• Loans reduce fiscal space and increase debt.
• Debt burdens undermine countries’ ability to invest long-term in sustainable development and addressing climate change.

The UK once had a strong reputation for prioritising grants in its ICF. Recent shifts away from this approach risk undermining both impact and credibility.

Risks of private and blended finance

Private finance has a role, particularly in mitigation projects with clear revenue streams. However, evidence shows that a “private finance first” approach poses serious risks:

• Blended finance mobilises far less private capital than often claimed, particularly in Least Developed Countries (LDCs).
• Sovereign guarantees and contingent liabilities increase public debt.
• Profit requirements can lead to higher tariffs and exclusion of the poorest.

2019 analysis of blended finance from ODI found an average leverage ratio of just 1:0.75 public to private finance for all developing countries, falling to 1:0.37 for low-income countries (LICs)[vi] and 2024 analysis focused on energy transition from Oil Change International found just 1:0.85 for developing countries, dropping to 1:0.69 for LICs.[vii]

Conclusion: Private and blended finance should complement, not replace, public grant-based climate finance but only in contexts where this is appropriate, and should not be used for adaptation or loss and damage.

4. Is the UK’s use of loans appropriate? What about debt relief and innovative mechanisms?

The dominance of loans in global climate finance is deeply problematic and fundamentally misaligned with principles of climate justice and effectiveness.

Climate-vulnerable countries are already facing record levels of debt distress. Recent analysis shows that many LDCs and Small Island Developing States (SIDS) are paying more in debt servicing than they receive in climate finance, leaving them with shrinking fiscal space to invest in sustainable development, public services, and climate action.[viii] Requiring countries that are least responsible for climate change to take on additional debt in order to respond to its impacts is neither fair nor sustainable.

The use of loans for climate finance:

• Increases vulnerability to climate change impacts, as countries must divert scarce public resources to debt repayment rather than adaptation.
• Reduces fiscal space for essential social spending, including health, education, and social protection, undermining development outcomes.
• Shifts the burden of climate action onto those least responsible, exacerbating global inequalities and historic injustices.

Climate finance delivered as loans deepens inequality, entrenches debt dependency, and undermines democratic accountability, particularly where conditionalities or private-sector guarantees are attached.

Debt relief must be additional to, not a substitute for, climate finance

Debt relief and debt cancellation are an essential part of addressing the debt–climate crisis nexus, but they must not be treated as a replacement for climate finance, nor should they be counted as climate finance.

Debt cancellation:

• Addresses the legacy of unsustainable and often unjust debt burdens.
• Creates fiscal space that enables countries to invest in climate action and development.
• Is a matter of economic justice and global financial reform.

As such, debt cancellation should be pursued alongside the provision of new and additional, grant-based climate finance, not instead of it. Counting debt cancellation as climate finance would risk double counting, inflate climate finance providers contributions on paper, and further undermine trust between developed and developing countries.

Debt swaps are not a panacea

Debt-for-climate or debt-for-nature swaps are often presented as solutions to the debt, climate, and biodiversity crises. However, evidence shows that in practice they:

• Cancel only small amounts of debt, often insufficient to meaningfully reduce debt distress.
• Involve high transaction and administrative costs, reducing net benefits for partner countries.
• Risk imposing new forms of conditionality, undermining national ownership, democratic decision-making, and citizen participation.

Debt swaps can also legitimise illegitimate debt and divert attention away from the need for systemic debt cancellation and reform of the global financial architecture.[ix]

A just and effective approach

A just and effective UK approach must therefore:

• Prioritise grant-based climate finance, particularly for adaptation and loss and damage.
• Support meaningful debt cancellation and restructuring, especially for climate-vulnerable and low-income countries.
• Ensure debt cancellation is additional to climate finance and not counted towards ICF.

Only by combining grant-based climate finance with genuine debt cancellation can the UK help create the fiscal space and stability needed for climate-vulnerable countries to pursue long-term, sustainable, and equitable development pathways.

5. How should UK ICF be split between mitigation, adaptation and loss and damage?

Adaptation remains chronically underfunded

Despite international commitments to balance mitigation and adaptation finance, adaptation continues to receive a minority share of global climate finance.

The UK has historically been a leader on adaptation finance, including securing the COP26 commitment to double adaptation finance by 2025 and providing a balance between adaptation and mitigation finance in UK ICF. This leadership must not waver.

Loss and damage must be additional

Loss and damage finance is now unavoidable due to decades of delay and insufficient action on mitigation and adaptation. It must be:

• Grant-based.
• Additional to mitigation and adaptation finance.
• Delivered through means that reach communities most impacted.

Diverting adaptation finance to cover loss and damage would increase future vulnerability and costs.

Raising the finance: fair share and polluter pays

The UK’s current ICF commitment (£11.6bn over five years) falls far short of its fair share, given its historical responsibility and economic capacity (see Annex 1)

As the fifth largest historical emitter and sixth largest economy, the UK must do more. This is entirely feasible:

• Polling consistently shows strong public support for taxing fossil fuel profits, extreme wealth, and high-emitting luxury activities.[x]
• Analysis by Oxfam and Christian Aid shows £23–37bn per year could be raised through reasonable measures.[xi]

These revenues could fund a scaled-up ICF commitment without diverting ODA and also raise public finance for domestic climate action.

Recommendations

CAN-UK recommends that the UK Government:

1. Provide climate finance new and additional to ODA.
2. Announce an ambitious ICF4 commitment, aligned with the UK’s fair share.
3. Raise new finance through fair polluter pays measures.
4. Prioritise grant-based finance, particularly for adaptation and loss and damage.
5. Maintain a balanced allocation between mitigation and adaptation, with additional finance to address loss and damage.
6. Address the debt–climate nexus, including meaningful debt cancellation.
7. Increase funding through UN climate funds that have balanced governance.
8. Restore long-term certainty and rebuild trust with Global South partners.

Annex 1: UK ICF and a fair shares approach[xii]

ODI analysis calculates the UK’s fair share of international climate finance to be 5.80%, based on historical responsibility for climate change, ability to pay, and population.[xiii] In this section we provide some illustrative figures using this metric to frame decisions on ICF4. We recognise that there are different metrics available to assess fair shares, as well as methodological limitations of applying this metric to different types of global targets, but offer these figures as illustrative examples and ballpark reference points for ICF4 decision-making.

By applying the ODI metric to the global climate finance goal of USD 100 billion annually from 2020, the UK’s fair share would be USD 5.80 billion a year, which at current exchange rates convert to approximately £4.68 billion annually and £23.4 billion over the five years of UK ICF3. Yet ICF3 is around half this, at £11.6 billion.

Looking ahead to the New Collective Quantified Goal (NCQG) of at least USD 300 billion a year by 2035 agreed in November 2024 at COP29, on a straight-line trajectory from OECD reported figures of international climate finance of USD 115.9 billion in 2022[xiv], to USD 300 billion by 2035, the UK’s fair share would be at least USD 58.29 billion / £47 billion for ICF4 (to 2030) and USD 87 billion / £70.16 billion for ICF5 (to 2035).

However, the NCQG outcome was declared a staggering betrayal of the world’s most vulnerable by LDCs[xv], civil society[xvi], and those seeking equitable progress on addressing the climate emergency, with actual needs of developing countries estimated to be between USD 1 trillion to USD 10 trillion a year. The figure of USD 1.3 trillion a year was recognised in the NCQG text as a closer reflection of the actual needs, on which basis the UK’s fair share would be at least USD 76.44 billion / £61.61 billion per year, at least £308.05bn over the five years of ICF4.

These indicative figures illustrate clearly that UK climate finance currently falls far short of the UK’s fair share of climate finance needs in developing countries. This means that the greatest burden and costs of climate change are unfairly being borne by communities and households least responsible, most marginalised, and least able to afford it. As the sixth largest economy and the fifth largest historical emitter, the UK can and must do more.

Table 1: Illustrative framing figures to inform UK ICF4

Endnotes and references