International climate and biodiversity funding: does allocation follow need in Global South countries?

Tackling the interconnected climate and biodiversity crises requires major flows of financial resources directed to areas of greatest need. Funding is required not only to mitigate climate change but also to adapt to it while stemming biodiversity decline. Acute need, scarce financial resources, and legacies of injustice in countries of the Global South mean international funding must be a key source of support for climate adaptation and biodiversity conservation. Yet knowledge of international funding for these two objectives remains fragmented, with little systematic analysis across them over time. We address this gap by analyzing international development funding for climate adaptation and biodiversity investments over the past decade from both traditional grants and financial return-based instruments, an increasingly prominent approach. Using two-stage Cragg regression models, we first assess whether funding is prioritized to countries with the greatest need and then compare funder use of grant versus return-based instruments. Funding need is defined based on theoretically informed indicators and analyzed using publicly available datasets. We find that funders using grants are more likely to provide funding to countries more vulnerable to climate change and where biodiversity is under greater threat. By contrast, we find opposite or non-significant relationships for return-based funding, indicating that such instruments often do not flow to where they are needed most. Our joint assessment of the increasingly blurred climate and biodiversity finance landscapes advances scholarship by bringing these two domains together within the same analytical framework to provide new insights on international development finance allocation. Our results highlight the importance of harnessing synergies between climate adaptation and biodiversity to enhance co-benefits. Study results also underscore the continued value of grant funding, especially for countries with the greatest funding need where return-based investments are less likely, and the need to explore ways return-based instruments might succeed in high-need countries.