Tackling climate change requires finance, and the continuity of that finance. Developing countries in particular are highly critical of the high investment costs required for emission reductions and of the cost of accessing capital, which is far more expensive for them than for developed countries.
That is why, as COP31 approaches, the question of the conditions under which the money will be provided is gaining increasing importance alongside the scale of the finance itself. Demands such as low-interest loans, grants, a more active role for multilateral development banks and lower costs of capital are coming increasingly to the fore. Indeed, in a recent statement, Minister of Environment, Urbanisation and Climate Change Murat Kurum, who holds the COP31 Presidency, emphasised giving a stronger voice to the demands of developing countries and stated that climate finance would be the summit's priority. Kurum said that developing countries need around $1 trillion in finance to achieve their climate targets, and that the time has come to move from decision-making to implementation.
It is precisely at this point that the debate on climate change mitigation finance in particular is intensifying. This finance essentially focuses on activities that reduce greenhouse gas emissions, prevent emissions from arising or remove greenhouse gases from the atmosphere — in other words, activities aimed at slowing climate change. The largest share of mitigation finance goes to the energy transition through renewable energy investment. Energy efficiency, the integration of renewables into the system, the electrification of transport, agriculture, forestry and land use, waste management and the circular economy, and the decarbonisation of industry, heavy industry above all, are the other main areas to which mitigation finance is directed.
Mitigation Finance Passes $2 Trillion
The most recent data on mitigation finance appear in the Global Landscape of Climate Finance 2026, a report by the Climate Policy Initiative, an international organisation that produces analysis on climate policy and finance. According to the report, global climate finance exceeded $2 trillion for the first time in 2024, and a figure of $2.1 trillion is estimated for 2025. Although mitigation still makes up the bulk of climate finance, the report shows that current growth still falls far short of what is needed to align with the goals of the Paris Agreement. It therefore specifically underlines the need for more private capital, capital market instruments, public guarantees, blended finance and development bank support.
The report shows that mitigation finance accounts for around 90% of total climate finance, while adaptation finance remains at a much lower level of only around $64 billion. Around half of mitigation finance goes to clean energy investment. Domestic private sector actors provide around 60% of total mitigation finance, and around 70% of the net growth since 2019 has come from the private sector. Whereas public finance once mostly served to trigger private investment, the main investment in the transition now comes from the private sector. The report also notes that households are beginning to become a supporting element in mitigation finance. From rooftop solar systems to energy-efficient buildings, households invested around $332 billion in low-carbon solutions in 2024.
While developing economies in particular continue to suffer above all from political uncertainty, a lack of project preparation capacity and high costs of capital, the report also places particular emphasis on the need to scale up enabling elements such as first-loss capital, credit enhancement instruments and a range of guarantee mechanisms.
The Driver of the Transition is Changing
All these requirements are expected to leave their mark on the discussions at COP31 as well. We can therefore say that in developing economies such as Türkiye, the private sector and finance will become more decisive in the coming years, in renewable energy investment and grid modernisation above all, as well as in industrial transformation and carbon alignment in export sectors.
It is a fact that the trillion-dollar investments required for the climate transition in developing countries cannot be met by public resources alone. Bringing private capital into the system is essential. But for this to happen, strong public policies, de-risking mechanisms, reliable data infrastructure and strategically deployed concessional finance — in other words, blended finance — are needed. Such an approach is of course an important tool that can bridge public and private capital, but its success also depends on a properly designed ecosystem.
Whereas the private sector was once seen more as a supporting actor in the implementation of climate policies, today it is becoming the main provider of finance and the driver of the transition, particularly in energy transition and clean technology investment. Commercial banks, insurance companies and companies' own capital investments are now far more prominent in this regard. A company investing in a renewable energy plant and a bank lending to a solar project are realities we now encounter far more often.
We can say that one of the private sector's most important roles in mitigation finance in the coming period will be developing technology. Technological transformation and innovation are of enormous importance, particularly in industrial transformation. Within the private sector, banks and investors are also now seen as going beyond merely providing finance to become actors that determine the direction the economy will take. Through the sectors it lends to, the companies it invests in and the risks it prices, the financial sector is gaining the capacity to accelerate the transition even further. In addition, treating climate risk as financial risk will become another growing role for the private financial sector. The financial risk that any company's current carbon intensity will create in the future will always be borne in mind, and carbon markets will gain even greater importance.
What Financial Architecture is Needed to Attract the Private Sector?
On the other hand, the private sector continues to face many problems in relation to mitigation finance in developing and least developed countries. Political uncertainty, high interest rates and exchange rates are seen as areas of risk for the private sector. At the same time, these countries need a great deal of capital for the entire transition, energy infrastructure above all.
It is therefore very important to roll out and implement a climate finance strategy in which public finance reduces risk, development banks facilitate the transition, and the private sector extends that transition to more people, a wider area and greater volume. For this reason, at the centre of the mitigation finance debate at COP31 will most likely be not only the question "how much money is there?" but also "through what financial architecture can we channel private capital to developing countries?" How will the hundreds of billions of dollars needed for the energy transition in developing countries be divided between public resources and private capital, and through what mechanisms will the private sector be drawn into this transition? Recalling Murat Kurum's emphasis on finance ahead of the summit, we can say that in this debate Türkiye will stand much closer to the line of developing countries calling for more resources and more favourable financing terms. We can even hope that, with this line's louder voice, the call for more finance for adaptation as much as for mitigation may also grow stronger.
Date: 16 July 2026
