This chapter examines the scale of funding and need, analysing trends in international humanitarian assistance in the second year of the Covid-19 pandemic and the wider context of total development funding. It explores the sufficiency of funding compared with identified need, how much funding is being targeted towards gender-related responses and the intersection between humanitarian and climate finance.

In 2021, total international humanitarian assistance increased by 2.5% (US$0.8 billion) to US$31.3 billion. Between 2018 and 2021, total assistance has plateaued, with marginal growth of just 2.6% over this four-year period, despite needs continuing to rise. This compares with annual growth of more than 10% between 2012 and 2018.

As the number of countries experiencing protracted crisis has grown, these countries have received a growing share of official development assistance, from 9.4% in 2012 to around 14% in the five years to 2021. However, as humanitarian need continues to grow, governments are faced with increasingly difficult choices related to their wider aid budgets. These challenges have been exacerbated in 2022 by the conflict in Ukraine, with clear risks including: de-prioritisation of humanitarian spending in other crisis contexts; development funding drawn to in-country refugee expenditure; and reduced overall aid budgets as demand for other expenditure, including military assistance, grows.

A total of US$38.4 billion was requested through UN-coordinated appeals in 2021. This was 2.3% (US$895 million) lower than in 2020 but still US$7.9 billion more than in 2019. Funding was requested for 48 UN-coordinated appeals, compared with 55 in 2020 and 36 in 2019.

The gap between needs and requirements narrowed slightly but remained large. In 2021, 56% of identified funding requirements were covered, up from 51% in 2020. This represents the second-highest shortfall ever in the volume of funding provided: US$16.9 billion, less than 2020’s US$19.1 billion. The overall pattern of funding to individual clusters has remained largely unchanged over the past four years, despite some year-on-year fluctuation. Food security has consistently received the largest volume of funding: US$6.0 billion in 2021, almost four times the next-largest cluster.

Funding specifically targeted to gender grew from US$268 million in 2018 to US$587 million in 2021. In 2021, total reported gender-relevant funding accounted for 3.4% of total international humanitarian assistance.

As the number of climate-driven and climate-related disasters continues to rise, climate finance could present one option for alleviating pressure on humanitarian systems. Climate finance is heavily focused on anticipatory action, and a small proportion of climate finance goes to countries already at risk of multiple crises in fragile and conflict-affected states. The 34 countries experiencing protracted crisis in 2020 received a total US$1.6 billion in adaptation funding, less than 3% (2.8%) of their total bilateral official development assistance funding (US$56.8 billion), and 27% (US$6.0 billion) of climate-relevant official development assistance for adaptation. Only 12% (US$1.3 billion) of disbursed funding from multilateral climate funds (US$10.7 billion) goes to fragile and conflict-affected states. No clear financing mechanism yet exists to diminish the climate losses and damages communities face, with these costs borne by local actors or the humanitarian system.

Total international humanitarian assistance, from public and private donors, grew slightly in 2021. However, the increase in the volume of assistance provided over the past four years has been marginal, following the period of sustained and rapid growth in assistance before 2018.

• In 2021, total international humanitarian assistance from governments and EU institutions and estimated contributions from private donors was US$31.3 billion, an increase of US$0.8 billion (a 2.5% rise) from 2020.
• Between 2018 and 2021, total international humanitarian assistance has plateaued, with marginal growth of just 2.6% over this four-year period. From 2012 to 2018, total assistance grew each year by an average of more than 10%, rising to US$14.2 billion and almost doubling over that period (86% increase).

The proportion of total international humanitarian assistance provided by government and EU institutions has remained relatively stable. Estimates for the volume of assistance from private donors in 2021 suggest a similar amount to 2020, as previous growth levels off.

• In 2021, funding from governments and EU institutions accounted for 79% of total international humanitarian assistance. This is consistent with the pattern over the past five years: assistance from public donors accounted between 78% and 81% of total contributions.
• In 2021, funding from governments and EU institutions rose by US$0.9 billion, from US$24.0 billion in 2020 to US$24.9 billion. This represents growth of 3.6% and follows two years of consecutive falls in funding from governments and EU institutions.
• Estimates for 2021 indicate that funding from private donors fell very slightly from the highest recorded volume in 2020 of US$6.5 billion to US$6.4 billion.

As humanitarian need continues to grow (see 'Volumes of assistance compared with appeal requirements'), and in the context of slowing economic growth in many donor countries and the same small group of countries sustaining the donor base (see ‘International humanitarian assistance: largest donors’, Chapter 3), those governments providing significant volumes of official development assistance (ODA) are faced with increasingly difficult choices. In 2022, the conflict in Ukraine has exacerbated these challenges for many donor governments, particularly those receiving large numbers of refugees (see ‘International humanitarian assistance: largest donors’, Chapter 3).

► Read more from DI on how donors work at the nexus, seeking to make humanitarian and development responses more coherent in crisis settings.

There are clear risks of development funding to developing countries being diverted to support humanitarian response in Ukraine, and in-country refugee expenditure, including in countries experiencing crisis where such funding is critical to long-term recovery. Humanitarian spending may be de-prioritised in other crisis contexts, and total ODA expenditure may decrease with growth in other demands, including for military assistance.

ODA has increased over the past decade, with a greater proportion provided to countries experiencing protracted crisis, as the number of these countries has grown rapidly. Total ODA from members of the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development grew by just over a third in the past decade, with volumes levelling off in recent years following years of more rapid growth.

• Between 2012 and 2021, net disbursements of total ODA from DAC donors increased from US$123 billion to US$168 billion (an increase of 36%).
• Total ODA from DAC members grew by 3.3% (US$5.3 billion) between 2020 and 2021, an increase driven primarily by DAC members’ continued support for Covid-19 activities in 2021, largely in the form of vaccine donations. Excluding the cost of vaccines, ODA grew by only 0.6% in real terms from 2020 to 2021^[1].
• The possibility of reporting surplus vaccines from domestic supplies of DAC members as ODA when provided to ODA-eligible countries has created additional pressures on ODA budgets. DAC members reported US$2.2 billion of surplus vaccines as ODA in 2021, amounting to 1.3% of total ODA that year; 81% of this was reported by only six donors (Germany, France, Spain, Italy, Japan and the UK), ranging between 0.9% and 7.6% of the respective donors’ ODA budgets. Coupled with expected increases in costs of in-country refugee hosting (see ‘International humanitarian assistance: largest donors’, Chapter 3), this risks a reduction in the volume of ODA to humanitarian crisis countries and least developed countries.

While ODA has grown over the past decade, the volume allocated to humanitarian assistance has increased at a faster rate.

• The proportion of total humanitarian assistance^[2] provided by DAC members from within total ODA has increased from 9% in 2012 to 14% in 2021. Most of this increase occurred between 2012 and 2014 (9% to 13%), with levels remaining close to 14% in the five years to 2021.

UN humanitarian appeals seek to provide a coordinated, strategic approach to the provision of international assistance to a humanitarian crisis. Over the past decade, the number of UN-coordinated appeals has grown rapidly, with these appeals now capturing the majority of funding requirements identified by humanitarian agencies.

The systemic global shock of the Covid-19 pandemic drove an unprecedented rise in funding requirements within UN-coordinated humanitarian appeals in 2020, when the number of appeals rose to the highest ever: 55 (including country and global response plans, flash appeals and refugee response plans). However, only 51% of those funding requirements were fulfilled, with the highest-ever shortfall in funding of US$19.1 billion. In 2021, needs reduced very slightly and funding increased marginally, but the overall pattern of severe underfunding remained unchanged.

• A total of US$38.4 billion was requested through UN-coordinated appeals in 2021.
• This funding was to meet needs identified in 48 UN-coordinated appeals: 7 fewer than the 55 in 2020, when several were launched in response to the Covid-19 pandemic. The Global Humanitarian Response Plan to Covid-19, in place in 2020, was discontinued in 2021. There was only one country appeal specifically for needs related to Covid-19, in Nepal. Needs relating to Covid-19 were not disaggregated within appeals but addressed through other clusters.^[3]
• Despite the slight decrease in the number of appeals in 2021, the number remains a third higher than the 36 coordinated appeals operating in 2019.
• In 2021, there were 4 countries (El Salvador, Guatemala, Honduras and Madagascar) with UN-coordinated appeals that did not have appeals in 2020, while 15 countries with appeals in 2020 (the majority specifically to respond to Covid-19) did not have appeals in 2021.
• Most countries with UN appeals are experiencing protracted or recurrent crises. In 2021, 36 of 67 countries had had UN-coordinated appeals for five or more consecutive years.

Appeal requirements

In 2020, the onset of the Covid-19 pandemic drove a rapid increase in total funding requirements for UN-coordinated appeals. Total appeal requirements in 2021 remained historically high, only slightly below the total amount requested in 2020.

• Funding requested through UN appeals reduced by 2.3% (US$895 million) in 2021, the first decrease since 2015.
• With Covid-19 continuing to exacerbate need and complicate response, unresolved protracted crisis in many countries and worsening large-scale crises, for instance in Afghanistan and Ethiopia, total funding requirements were still over a quarter (26%) greater in 2021 than in 2019, and nearly four times (265%) higher than a decade ago in 2012.
• Looking forwards, at the time of writing, appeal requirements for 2022 were over US$47 billion, driven in part by the conflict in Ukraine, indicating that the slight reduction evident in 2021 may be reversed.
• The scale of requirements to respond to crises in Syria and Yemen continued to dwarf other appeals. In 2021, the Syrian Refugee Regional Response Plan (3RP) (requirements of US$5.6 billion), Syria Humanitarian Response Plan (HRP) (US$4.2 billion) and the Yemen HRP (US$3.9 billion), had collective funding requirements of US$13.7 billion, accounting for over a third (36%) of total appeal requirements.
• This represents a settled pattern, with the Yemen and Syria crises having the highest level of funding requests and accounting on average for 41% of total appeal requirements since 2015.
• With the Taliban take-over of Afghanistan, funding requirements grew with the launch of a Flash Appeal in addition to the pre-existing HRP, increasing total requirements in 2021 to US$15 billion, from US$1.1 billion in 2020.
• Appeal requirements for countries experiencing protracted crisis, with five or more years of consecutive appeals, decreased on average by 15%.

Funding commitments to appeals

Funding committed towards UN-coordinated appeals grew slightly in 2021. Combined with the marginal fall in appeal requirements, the gap between funding and need narrowed slightly. However, the shortfall in funding, both by volume and as a proportion of total requirements, remained at levels not seen before 2020.

• Funding towards UN appeal requirements grew for the sixth consecutive year, rising to US$21.4 billion in 2021, an increase of US$1.3 billion from 2020.
• With this rise in funding, the volume of funding requirements unmet in 2021 reduced slightly to US$16.9 billion, from US$19.1 billion in 2020. Before 2020, the largest shortfall in funding was of US$11.2 billion in 2018.
• The gap between needs and requirements narrowed slightly but remained historically large. In 2021, 56% of identified funding requirements were covered. This compares to an average, in the decade up to 2020, of 60%.

As in previous years, the proportion of funding requirements met varied significantly between individual appeals. Chronic underfunding, where appeals received less than a quarter of their requested assistance, affected fewer contexts in 2021 than 2020.

• In 2021, almost half of appeals received less than half of their requested funding (23 of 48 appeals). And coverage varied greatly, with the difference between the best-funded appeal, the Afghanistan Flash Appeal (187% funded), and the worst, the Nepal Response Plan (7%), particularly stark.
• Of total appeals, 11 (23%) received more than 75% of their requirements, while 6 (13%) were funded at less than 25% (Nepal, Myanmar, Zimbabwe, Kenya, South Sudan Regional RRP, Democratic Republic of the Congo Regional RRP), many fewer than the 15 funded at this level in 2020.
• The appeals that received the highest amount of funding were for the Yemen HRP (US$2.4 billion, 62% of total requirements), the Syria HRP (US$2.0 billion, 47%) and the Syria Regional Refugee and Resilience Plan (US$1.9 billion, 32%).

Funding inside and outside appeals

Over the past decade, the proportion of total humanitarian assistance captured within UN-coordinated appeals has increased. However, a significant volume of finance continues to be provided outside these appeals, not least in countries with humanitarian need but no UN appeal.

• In 2021, more than two thirds (71%) of all country-allocable international humanitarian assistance was provided within UN-coordinated appeals. This represents a notable increase from the 42% provided in 2012, with the proportion of funding within appeals appearing relatively stable at close to 70% in four of the five years between 2017 and 2021.
• The largest 10 recipients of international humanitarian assistance in 2021 had more than four fifths (82%) of funding captured within UN appeals. Funding outside appeals in the largest crises flowed predominantly to Red Cross Red Crescent organisations, as well as to UN agencies, non-government organisations and some private sector companies.
• In 2021, the proportion channelled within UN appeals to smaller recipients of international humanitarian assistance was significantly lower, at 55%, than that to the largest recipients.
• In relative terms, the volume of funding going to individual countries without a UN-coordinated appeal was small. In 2021, the largest volume of funding to a country without a UN appeal was to India, which saw a rapid rise in international humanitarian assistance, increasing 818% to US$172 million.
• Only three other countries without UN-coordinated appeals received more than US$20 million: Bosnia and Herzegovina (US$100 million, a 313% increase from 2020), Iran (US$78.0 million, a 24% decrease) and Thailand (US$50.3 million, a 24% increase).

Red Cross Red Crescent appeals

The International Red Cross and Red Crescent Movement sets out its requirements separately from UN-coordinated appeals. In 2021, the International Federation of Red Cross and Red Crescent Societies (IFRC) appeal requirements decreased by a quarter, while the funding shortfall continued to increase. This contrasts with the International Committee of the Red Cross (ICRC), which had record high coverage of its appeal requirements in 2021.

IFRC emergency appeals relate mostly to disasters associated with natural hazards.

• In 2021, IFRC appeal requirements shrank to US$762 million, a record decrease of 25% from 2020 (US$1.0 billion).
• Due to lower funding requirements, funding to the IFRC dropped by 32%: from US$584 million in 2020 to US$396 million in 2021.
• Despite the decrease in appeal requirements, the coverage of IFRC appeals decreased to a record low of 52% (from 58% in 2020), well below the average coverage of 72% from 2017 to 2020.

ICRC appeals respond mainly to conflict-related situations.

• The ICRC received US$1.9 billion in 2021 (up 4% from 2020), continuing the pattern of sustained growth over the five years from 2017 to 2021, which have seen funding rise by 13%.
• ICRC was able to cover 94% of its US$2.0 billion appeal requirements. Since 2017, coverage has averaged 92%.

Humanitarian programming provides assistance to meet a wide, and increasing, range of needs of people experiencing acute and protracted crisis. UN coordination of humanitarian response has been organised around a system of clusters – groups of organisations collectively targeting specific areas of humanitarian need – since 2005. This approach seeks to ensure needs-driven coordination of responses in the main areas of humanitarian response, promoting leadership and accountability, enabling effective prioritisation and helping to define roles and responsibilities. Clusters identify the total number of people in need within a crisis context. In formulating HRPs, each cluster determines how many of these people they will seek to provide humanitarian assistance to. This informs the total amount of funding required (see ‘Volumes of assistance compared with appeal requirements’).

Due to limited resources, across all clusters only a proportion of the identified people in need are targeted within an appeal. The proportion chosen to be targeted varies greatly between clusters.

• In 2021, the food security cluster targeted the largest number of people (see Figure 1.3), seeking to reach 113.1 million out of 158.3 million people identified as requiring food-security assistance. This represented the highest proportion (71%) targeted, of the total identified as in need, of any cluster.
• The early recovery cluster sought to target the least number of people, just 5.5 million out of 28.7 million, seeking to provide assistance to just 19% of those identified as being in need of early recovery support in 2021.

Funding requirements are set against the number of people in need within each cluster that are selected to be targeted, of which typically a sizable proportion, in excess of a third, is not provided. Over the past decade, shifts in funding to individual clusters are evident, in terms of both the size of requirements and volume of funding committed. However, the overall picture of scale and targeting to areas of humanitarian response has changed relatively little. The food security sector received by far the largest volume of funding in 2021, as it has consistently for the last decade.

• In 2021, the food security sector accounted for just under half of all requirements within UN-coordinated appeals, requesting US$11.1 billion. Towards these requirements, it received US$6.0 billion, almost four times as much as the next-largest sector, nutrition, which received US$1.7 billion.
• Food security has received the largest volume of funding of any cluster every year for the past decade, typically having close to the average level of funding requirements met across all clusters, in each year.
• Reporting on requirements for food security indicate a sharp rise in 2021 from 2020 levels. This was partly driven by increases to food security needs in large response plans for Syria and Ethiopia. However, the increase is likely to appear more pronounced as data on sector requirements for Yemen, which had the largest requirements within the cluster in 2021, was not broken down by cluster in 2020.

Early recovery was the worst-funded sector, both by volume and in terms of proportion of funding requirements met.

• The early recovery cluster – which seeks to support sustainable recovery from crises, strengthen resilience and lay the foundations for longer-term development – received the smallest volume of funding and had the lowest level of requirements met in 2021.
• Despite increased focus on the importance of transitioning from humanitarian assistance to longer-term development, evident in the higher profile in recent years of discussions on the humanitarian­–development–peacebuilding nexus, underfunding to the early recovery cluster has in fact worsened. The proportion of funding requirements met has fallen from a high of 40% in 2015 (still far below the average across all clusters) to just 17% in 2021.

Across other clusters, other notable shifts are evident in health, nutrition and education.

• Requirements for the health sector grew sharply to US$2.4 billion in 2020, a 62% increase. Funding also increased markedly, but at a slower rate (33%), resulting in the lowest level of requirements met in the past decade (37%). In 2020, there was also a specific Covid-19 cluster, affecting where health-related requirements and funding were recorded.
• The nutrition sector has seen the most marked improvements in the extent to which funding requirements have been met. With the exception of 2020, the proportion of funding requirements met for nutrition has increased every year since 2014, rising from 20% in 2014 to 67% in 2021.
• The education sector has seen underfunding worsen over the past four years. The proportion of funding requirements met has fallen year-on-year from a peak in 2018 of 51%, to 25% in 2021.

The peak of ‘multi-sector’ funding and requirements seemingly evident in 2020 is mostly attributable to cluster reporting within the Yemen HRP. Extremely limited cluster requirement and funding information for 2020 was reported. All funding to the Yemen HRP in 2020 was reported as either ‘Covid’ or ‘non-Covid’, with the large volumes of ‘non-Covid’ funding captured in this analysis under ‘multi-sector’. As the HRP with the largest requirements and volumes of funding in that year, this significantly impacts what is seen within those two sectors. With detailed Yemen cluster funding absent in reporting in 2020, and then re-appearing in 2021, the changes evident over this period across clusters appear more pronounced than they actually were.

Gender-related needs are considered to have grown rapidly, with the Covid-19 pandemic reported to have reversed previous gains in gender equality and the empowerment of women and girls.^[4] There have been a number of commitments in recent years to channel more funding for gender-related humanitarian responses.^[5] However, beyond reporting on funding and requirements on gender-based violence (GBV) within the protection cluster, there is no easily accessible reporting from which to estimate volumes of funding and therefore the extent to which commitments are being fulfilled.

► Read more from DI about:

• how the global response to GBV can be strengthened by the humanitarian-development-peace nexus.
• the impact of Covid-19 on international funding for gender-related humanitarian programming.

Analysing data from the Financial Tracking Service of the UN Office for the Coordination of Humanitarian Affairs using a key-word search methodology, it is possible to estimate volumes for gender-specific funding (which has a key focus on addressing gender-related needs and advancing gender equality) and gender-mainstreamed funding (which seeks to implement funding in a way that considers gender-related needs). For more detail, see our online ‘Methodology and definitions’ (Chapter 5) and Chapter 3, ‘Largest donors of gender-relevant humanitarian funding’).^[6]

Reported gender-specific funding, which includes funding targeting GBV, more than doubled between 2018 and 2021.

• Total gender-specific funding grew from US$268 million in 2018 to US$587 million in 2021.
• Assistance targeting GBV accounted for a growing proportion of this funding, increasing from US$67 million (25%) to US$224 million (38%).

Figures for gender-mainstreamed funding, where an element of an identified programme addresses gender-related needs, show that assistance has grown significantly.

• Total gender-mainstreamed funding more than doubled between 2018 and 2021, rising from US$167 million to US$466 million.

Total gender-relevant funding, combining gender-specific and gender-mainstreamed assistance, had grown to over US$1 billion by 2021. However, despite this growth, it still represents a very small proportion of total international humanitarian assistance.

• In 2021, total reported gender-relevant funding accounted for just 3.4% of total international humanitarian assistance.
• Gender-specific funding, for programmes with a primary focus on gender-related humanitarian needs, made up just 1.9% of total assistance.

While many recent reports have highlighted the insufficiency of funding for gender-related needs, there is presently no certain way to identify the volumes of funding required for all areas of humanitarian programming relating to gender equality and the empowerment of women and girls. Funding requirements for GBV are, however, the exception. Reporting on GBV requirements indicates that underfunding has worsened, as increases in need have outpaced rises in funding.

• In 2021, just 29% of GBV funding requirements were met, the lowest proportion reported over the previous four years, and down from 32% in 2020.
• While funding for GBV increased almost fourfold over the four-year period to 2021, funding requirements increased more than fivefold, from US$146 million in 2018 to US$747 million in 2021.

Improvements in reporting and the collation of data on gender-related funding are needed. Analysis of funding and requirements for all areas of humanitarian response related to gender equality and the empowerment of women and girls is currently challenging. Over the period covered by this analysis, the increased profile of gender in humanitarian response, particularly efforts to promote improved responses to GBV, are likely to have driven improvements in reporting, which may partly account for the identified rises in funding. Moreover, current gender markers on the Creditor Reporting System of the Organisation for Economic Co-operation and Development DAC and the Financial Tracking Service of the UN Office for the Coordination of Humanitarian Affairs are not consistent and do not currently allow for the accurate tracking and detailed analysis of funding flows.^[7] And, the nature of programming, especially where a programme may contain elements focusing on gender within a wider approach, or where core funding may support gender-mainstreamed programmes, make tracking flows inherently complex.

Climate-related and climate-driven crises are increasingly intersecting with, and compounding, existing vulnerabilities in countries already experiencing crisis, particularly in those states with the lowest levels of resilience. In 2021, half of the 306 million people in need of humanitarian assistance lived in areas facing high levels of vulnerability to the impacts of climate change (see ‘Humanitarian need and intersecting dimensions of risk’, Chapter 1).

As climate change exacerbates existing crises and drives new ones, already stretched humanitarian resources will become increasingly insufficient. UN humanitarian appeals requirements linked to extreme weather in 2020 were eight times higher than they were 20 years ago, and experienced significant levels of underfunding.^[8] To address this growing funding gap and alleviate the effects of protracted crises, we need better understanding of: the mechanisms and objectives of climate finance, how it intersects with other finance, and how it alleviates the severity of a crisis.

What is climate finance?

‘Climate finance’ is a broad term that encompasses a range of different financing structures and instruments, some of which are tracked and mobilised through the UN Framework Convention on Climate Change (UNFCCC).^[9] It includes a mix of local, national and international resources, including ODA and non-ODA funding, that come from public and private sources. Most climate finance that is tracked is invested domestically.^[10] Most international climate finance is provided in the form of loans from public finance, which therefore carry risks of debt for the recipients. Countries experiencing multiple, protracted crises are often ineligible for lending.^[11]

Climate finance supports a range of initiatives. Most global climate finance is targeted to alleviate the severity of climate change through emissions-reduction activities (‘mitigation’ finance) and promoting the transition to less carbon-intensive economies. The remaining finance is used to help communities adapt to the impacts of climate change (to reduce disaster risk and communities’ vulnerability to environmental changes driven by climate change).^[12] Unlike humanitarian financing, climate finance is not targeted at disaster response, but rather disaster prevention, seeking behavioural change from individuals, communities, corporations and governments.

Following international recognition of the need for support for climate action in developing countries, an international climate finance target was agreed at the 2009 conference of the UNFCCC. Developed countries – in accordance with the principle of common but differentiated responsibilities and respective capabilities – committed themselves to a goal of jointly mobilising US$100 billion a year by 2020 to address the mitigation and adaptation needs of developing countries. This focused particularly on those most likely to be vulnerable to climate change – the least developed countries and small island developing states. This goal was not met and has been extended to 2025.^[13]

The UNFCCC also recognises the importance of ‘averting, minimising and addressing’ the worst effects of climate change through an additional type of financing called ‘loss and damage’ (L&D). The UNFCCC considers ‘averting and minimising’ to be covered by mitigation and adaptation funding, but there is currently no finance to address losses and damages. Civil society is currently advocating for L&D finance to compensate vulnerable communities experiencing losses and damages related to extreme weather events and slow-onset climate-related disasters (see Box 2.1, ‘Loss and Damage’).^[14]

Climate-relevant finance to vulnerable countries

Climate adaptation funding, disaster risk reduction and insurance are particularly critical to building the resilience of people and places by managing risk and adapting to change. Where people are experiencing protracted crises, these tools reduce vulnerability to the impacts of climate change, and so reduce the risks of climate change events driving or exacerbating crises. While similar in principle, they differ by implementation, emerge from different global processes, are managed by different actors and governed by different reporting processes.^[15]

A significant amount of international bilateral climate finance from government donors to development and crisis contexts is taken from ODA budgets, and ODA remains an important mechanism for climate funding going to developing countries, despite being severely underfunded overall.^[16] Climate finance provided as grant ODA has particular potential to support efforts in countries at risk of multiple and protracted crises by supporting key sectors, building institutional capacity to deal with climate-related risks and leveraging other forms of finance. This finance is also potentially a key resource in the prevention of, and response to, humanitarian crises, including to climate-related disasters.

Importantly, there is a clearly defined expectation that tracked ODA climate finance should be additional to other, pre-existing ODA commitments, including humanitarian assistance.^[17] At present, existing aid classification indicators are insufficient to distinguish whether this activity is truly additional.^[18] Nevertheless, looking at bilateral climate-relevant ODA provides a useful way to track how much climate finance is flowing to developing countries and crisis contexts, and how this money is spent. The amount of funding allocated to humanitarian crises tagged with climate relevance is small.

• In 2020, 8.9% of all bilateral ODA (US$10.8 billion)^[19] was disbursed to programmes and interventions with climate-related objectives, according to projects tagged with the Rio marker system. Of this amount, 45.1% (US$4.9 billion) was for mitigation activities, 37.1% (US$4.0 billion) for adaptation activities, and 17.8% (US$1.9 billion) for activities with dual mitigation/adaptation objectives.

While all climate finance should be additional, some adaptation funding is reported as both humanitarian and climate adaptation.

• Of the US$6 billion of ODA with the purpose of adaptation (including dual mitigation/adaptation objectives), US$270 million (4.5%) was spent on humanitarian interventions. This volume was equal to 1.7% of total humanitarian ODA, or 0.2% of total ODA that year, and represents the volume of all projects for humanitarian purpose and tagged as relevant for adaptation. In addition, humanitarian assistance is also spent responding to the impacts of climate change, including extreme weather events, but reporting does not allow for this funding to be disaggregated from wider response.
• Most of the US$270 million of ODA for the purpose of adaptation also spent on humanitarian interventions was spent on emergency response activities like emergency food assistance. A further 15.5% (US$47 million) was spent on disaster prevention and preparedness, which is directly related to climate adaptation objectives.

Countries experiencing protracted crisis are among the most vulnerable and least able to adapt to the impacts of climate change. International funding support is critical to enabling them to manage and adapt to the impacts of climate change, and to limit climate change driving and exacerbating crisis. These countries receive a small proportion of their total ODA for climate adaptation and a relatively small share of total ODA for climate adaptation.

• The 34 countries^[20] experiencing protracted crisis in 2020 received a total US$1.6 billion in adaptation funding, less than 3% (2.8%) of their total ODA funding (US$56.8 billion) and 27% (US$6.0 billion) of climate-relevant ODA for adaptation purposes.
• The top 20 recipients of ODA for adaptation purposes received US$2.4 billion in 2020 (41% of total adaptation funding). Among this group of 20 countries, the 10^[21] experiencing protracted crisis received US$977 million (16.4% of total adaptation funding).

Further to bilateral climate-relevant ODA, climate finance is allocated via multilateral climate funds. Climate Funds Update data gives an initial picture of broader climate finance flows via the major UNFCCC climate funds.^[22] This data highlights the inadequate volumes of climate finance going to help vulnerable communities adapt in the face of climate change.

• Most climate finance dispersed by major climate funds is spent on mitigation activities, with only 28% (US$2.9 billion) of the US$10.7 billion dispersed funding being spent on adaptation purposes.
• Only 12% (US$1.3 billion) of disbursed funding (US$11 billion) goes to fragile and conflict-affected states (FCASs), despite these states being most in need of international support to respond to climate change.
• While FCASs do receive a higher proportion of their total funding for adaptation purposes (46%, US$600 million), this represents only 5.6% of total funding dispersed. FCASs receive a smaller amount of funding (36%, US$ 471 million) for mitigation, which covers infrastructure investments and deforestation activities related to emissions reduction.
• Over one third (38%) of the approved funding from multilateral climate funds is in the form of concessional loans. FCASs, however, receive most of their finance from multilateral climate funds (90%) in the form of grants.

The data on bilateral ODA for climate adaptation purposes and on multilateral climate funding in FCASs suggests that there is insufficient climate funding directed toward and successfully addressing sudden and slow-onset humanitarian disasters that result from climate change, especially in the most vulnerable places. This leaves local actors and the humanitarian sector to bear the costs of responding to climate-related disasters.^[23]

Further, mechanisms like disaster risk reduction, adaptation finance and insurance may become less effective as the number of disasters increases and when the dimensions of risk multiply.^[24] Communities experiencing multiple dimensions of risk are less likely to receive adaptation funding, and more likely to experience the accumulated risks of protracted crises (see ‘Humanitarian need and intersecting dimensions of risk’, Chapter 1; and ‘Development financing for disaster risk reduction’, Chapter 3).^[25]