By Paula Brufman
Introduction
As the world moves closer to the 2030 milestone, the gap between climate ambition and tangible implementation is becoming increasingly difficult to ignore. Nowhere is this challenge more evident than in emerging markets and developing economies. These countries are expected to play a critical role in the global response to climate change, yet they face significant barriers in turning their nationally determined contributions (NDCs) into real, measurable outcomes. While the volume of climate finance has risen in recent years, this remains far below what is required to meet the full scope of climate goals.
The shortfall is especially concerning in the rapidly growing African continent where more than 1.3 billion people will lose an average of 2 to 5 % of their annual gross domestic product (GDP), highlighting the disproportionate burden faced by the continent, according to a report produced by the World Meteorological Organisation. In a similar vein, the Inter-American Development Bank (IDB) has projected that without climate action, countries of Latin America and the Caribbean could lose up to 3.6 % of GDP yearly by the end of the century under high-emission scenarios.
Despite growing awareness and increased financial flows, the landscape for climate finance in developing countries remains fundamentally imbalanced. Many of these nations are underfunded and overexposed, facing the dual burden of climate vulnerability and insufficient fiscal capacity. At the core of this challenge is a reliance on international support to bring NDCs to life.
Current estimates indicate that the cost of implementing NDCs in emerging markets and developing economies amounts to roughly USD 400 billion each year. What is striking, however, is the breakdown of how this amount is expected to be financed. Only a small portion, approximately 13 %, is considered “unconditional,” meaning it can be sourced domestically through public budgets and financial systems. The remaining 87 % is categorised as “conditional,” meaning it is dependent on international support through grants, concessional loans, technical assistance, and other external sources.
This imbalance reflects deeper structural issues in the global climate finance system. Many developing countries possess strong political commitment and growing technical capacity to engage in mitigation and adaptation. However, they frequently lack the fiscal space, creditworthiness, and institutional infrastructure needed to fully fund and deliver their climate agendas. Without sufficient international finance, many national climate pledges will remain unrealised. The widespread reliance on conditional NDC targets is, therefore, not just a reflection of budgetary constraints,it is a signal of the broader inequities within the international climate regime.
Unlocking Climate Financing for NDCs
One of the core obstacles to unlocking climate finance at the scale required is the lack of comprehensive, consistent, and standardised costing of NDCs. More than 25 percent of developing countries have not quantified their climate finance needs at all within their NDCs. Among those that have, the methodologies used vary significantly. Some countries base their cost estimates on detailed lists of adaptation and mitigation projects, while others rely on broader, partial sectoral assessments. There is no universally accepted framework for estimating financial needs, nor is there a mandated structure for reporting those needs within the NDCs. Additionally, few NDCs disaggregate funding needs at the sector or regional level, making it difficult for donors, development banks, and the private sector to align support with the most pressing priorities.
This lack of granularity reduces the effectiveness of NDCs as investment roadmaps. Without clear cost breakdowns and standardised estimates, external financiers face significant uncertainty. This, in turn, dampens the appetite for collaboration, slows the mobilisation of finance, and weakens overall accountability.
To address these challenges, a fundamental shift in approach is needed: moving beyond measuring how much finance is available and toward transforming financial systems to align with national climate objectives. This is the basis of what is increasingly referred to as NDC-aligned finance. The idea is that climate goals must be woven into the fabric of national financial systems, influencing budget allocations, investment strategies, regulatory decisions, and financial risk assessments.
For public finance to effectively contribute to NDC implementation, finance ministries must be equipped with tools such as climate budget tagging, emissions-based investment prioritisation, and climate-informed public expenditure reviews. At the same time, national development banks and multilateral financial institutions should align their portfolios with country-specific NDC targets, using screening tools and policy alignment frameworks to ensure coherence.
Private sector engagement is equally critical. Governments can encourage private investment by improving transparency, establishing clear policy frameworks, and developing national taxonomies to guide sustainable finance.
To make this transformation possible, several reforms are urgently required. First, technical guidance from the United Nations Framework Convention on Climate Change (UNFCCC) could help establish a standardised approach for countries to estimate and report their climate finance needs. This includes defining conditional and unconditional contributions with clarity and offering harmonised methodologies for sectoral and cross-sectoral costing. Such standardisation would improve comparability and transparency across NDCs and serve as a foundation for more coordinated international support.
Second, partnerships between governments and the private sector should be more systematically embedded into the NDC design and revision processes. Institutionalising these collaborations would help countries identify blended finance opportunities, foster innovation, and attract long-term investments that align with national climate priorities. Public-private dialogue platforms can also clarify roles, build investor confidence, and strengthen the enabling environment for private capital mobilisation.
Third, capacity-building efforts must be significantly expanded. Many emerging and developing countries lack the technical and institutional resources to model long-term climate finance needs, construct sectoral investment plans, or navigate complex application processes for climate funds. This is where institutions like the Green Climate Fund (GCF), Adaptation Fund (AF), and Global Environment Facility (GEF) play a pivotal role. These multilateral entities not only provide direct financial support for mitigation and adaptation efforts but also offer capacity-building, readiness grants, and policy support.
Finally, robust and transparent progress tracking mechanisms are essential to monitor both the mobilisation and disbursement of climate finance and the actual implementation of NDCs on the ground. Countries should be supported in establishing climate budget tracking systems and results-based monitoring frameworks that link financial inputs to emissions reductions and resilience outcomes. Climate funds and development partners can assist by harmonising reporting requirements and offering technical assistance to build country-level systems that enable accountability, comparability, and data-driven decision-making.
Conclusion
Ultimately, the future of NDCs, and the credibility of the global climate effort, depends on the ability of countries to move from ambition to action. E Co’s vast experience in policy development and climate financing has provided us with the realisation that climate finance must become more than a promise; it must be responsive, inclusive, and grounded in national realities.
As countries prepare to submit the next round of NDCs in 2025, the stakes are high. Governments must not only raise their ambition but also demonstrate that they have credible strategies to finance it. The alignment of finance and policy, of planning and execution, will determine whether we collectively rise to meet the challenge or fall short of the sustainable transformation the planet so urgently needs.
