Combating climate change requires finance and continuity in that financing. Developing countries in particular are deeply concerned about the high investment costs required for emissions reductions and the fact that their cost of accessing capital is far higher than that of developed countries.
As COP31 approaches, the conditions under which finance is provided are therefore becoming as important as its scale. Calls for low-interest loans, grants, a more active role for multilateral development banks and lower capital costs are moving further to the fore.
In a recent statement, COP31 President and Minister of Environment, Urbanisation and Climate Change Murat Kurum stressed the need to voice the demands of developing countries more strongly and said that climate finance would be the summit's priority. Kurum said that developing countries need approximately USD 1 trillion in finance to achieve their climate targets and that the time has come to move from decisions to implementation.
This is precisely why the debate on climate-change mitigation finance is intensifying. Mitigation finance primarily supports activities that reduce greenhouse gas emissions, prevent emissions from arising or remove greenhouse gases from the atmosphere - in other words, activities intended to slow climate change. Energy transition and renewable-energy investment account for the largest share.
Other principal areas include energy efficiency, integrating renewable energy into the system, electrifying transport, agriculture, forestry and land use, waste management and the circular economy, and industrial decarbonisation, particularly in heavy industry.
Mitigation Finance Exceeds USD 2 Trillion
The latest data on mitigation finance appear in the Climate Policy Initiative's Global Landscape of Climate Finance 2026. According to the report, global climate finance exceeded USD 2 trillion for the first time in 2024 and is estimated to have reached USD 2.1 trillion in 2025.
Although mitigation still accounts for the main body of climate finance, the report shows that current growth remains far too limited to align with the goals of the Paris Agreement. It therefore emphasises the need for more private capital, capital-markets instruments, public guarantees, blended finance and support from development banks.
Mitigation finance accounts for approximately 90% of total climate finance, while adaptation finance remains much lower at only around USD 64 billion. Approximately half of mitigation finance goes to clean-energy investments. Domestic private-sector actors provide around 60% of total mitigation finance and have accounted for approximately 70% of net growth since 2019.
Where public finance once served mainly to catalyse private investment, the private sector now provides the principal investments driving the transition. The report also highlights the growing contribution of households. From rooftop solar systems to energy-efficient buildings, households invested approximately USD 332 billion in low-carbon solutions in 2024.
Emerging economies in particular continue to face political uncertainty, limited project-preparation capacity and high capital costs. The report consequently emphasises the need to expand enabling instruments such as first-loss capital, credit-enhancement tools and guarantee mechanisms.
The Driver of the Transition Is Changing
These requirements are expected to shape the COP31 debate. In emerging economies such as Türkiye, the private sector and finance are therefore likely to play an increasingly decisive role in renewable-energy investment and grid modernisation, industrial transformation and carbon-adjustment measures in export sectors.
The trillions of dollars required for the climate transition in developing countries cannot be provided through public resources alone. Private capital must be brought into the system. That requires strong public policy, risk-mitigation mechanisms, reliable data infrastructure and strategically deployed concessional finance - in other words, blended finance.
Such an approach can provide an important bridge between public and private capital, but its success depends on a well-designed ecosystem.
The private sector was once seen mainly as a supporting actor in the implementation of climate policy. Today, especially in energy transition and clean-technology investment, it is becoming the principal source of finance and a primary driver of the transition. Commercial banks, insurance companies and companies' own capital expenditure are assuming a far more prominent role.
Companies investing in renewable-energy plants and banks lending to solar projects are now an increasingly common reality.
Technology development is likely to become one of the private sector's most important roles in mitigation finance. Technological transformation and innovation are particularly important in industrial transition. Banks and investors are also moving beyond their role as providers of finance and are increasingly seen as actors that help determine the direction of the economy.
Through the sectors to which they lend, the companies in which they invest and the risks they price, financial institutions can accelerate the transition. The private financial sector will also increasingly be expected to treat climate risk as financial risk. The future financial risk created by a company's current carbon intensity will remain under close scrutiny, and carbon markets will become more important.
What Financial Architecture Will Attract the Private Sector?
Significant obstacles continue to stand between private investors and mitigation finance in developing and least-developed countries. Political uncertainty, high interest rates and foreign-exchange volatility are seen as major risks. At the same time, these countries require very large amounts of capital for the entire transition, particularly for energy infrastructure.
It is therefore essential to put into wider practice a climate-finance strategy in which public finance reduces risk, development banks facilitate the transition and the private sector expands its reach and scale.
The discussion on mitigation finance at COP31 is therefore likely to focus not only on "how much money is available?", but also on "what financial architecture can direct private capital towards developing countries?"
How will the hundreds of billions of dollars required for developing countries' energy transitions be divided between public resources and private capital, and through which mechanisms will the private sector be brought into the transition? Given Murat Kurum's emphasis on finance ahead of the summit, Türkiye is likely to stand close to developing countries' call for greater resources and more favourable financing conditions.
We can also hope that, with this position voiced more strongly, calls for greater adaptation finance will grow alongside mitigation finance.
Date: 16 July 2026
