Empowering Communities Through Climate Finance: Tackling Inequalities for True Climate Justice

In the past decade, major climate finance initiatives like the Adaptation Fund, Green Climate Fund, and others have funneled over $25 billion to help developing countries address climate change. This seems promising, but a closer look reveals a troubling reality. Much of this money gets tangled in bureaucratic layers, hefty administrative fees, and large international firms, leaving local communities—the ones truly impacted—struggling for support.

Take the Adaptation Fund as an example. In April 2025, it approved $137 million for 16 projects, totaling nearly $1.4 billion allocated globally. Although the fund recently increased its spending limit for countries, most financial support still flows through major international organizations like UNDP and UNEP. Around 30% of the Adaptation Fund has gone to just UNDP, showing how power remains concentrated in a few large hands.

The Green Climate Fund tells a similar story. By October 2023, it had approved about $13.5 billion for 243 projects. Surprisingly, over 80% of this funding went through big players like the World Bank and UNDP, with these institutions receiving billions. This highlights a significant imbalance—a handful of organizations hold most resources while smaller, local entities struggle to be seen.

Official reports claim only 8-10% of funds go toward administrative costs, but this figure can be misleading. Hidden under other budget categories are actual expenses that often exceed those percentages. Towards the end of funding cycles, large organizations sometimes splurge on luxury workshops and retreats, draining resources that could support adaptation projects in local communities. Such practices undermine trust and call for immediate reform.

Decision-making in climate finance often favors established entities, known as ‘reputation comfort.’ Institutions like the World Bank get funding more easily, while innovative local NGOs face skepticism. This ‘old-boys network’ keeps money concentrated among a few well-known organizations, leaving many smaller groups sidelined. For instance, by 2023, only a few major institutions managed a large portion of climate funds, reinforcing these structural inequalities.

Technical review processes sometimes add to this bias by prioritizing proposals that contain quantitative economic analyses, typically prepared by large consulting firms. Meanwhile, community-driven solutions focused on local knowledge often get dismissed as “less rigorous.” For example, large solar projects might attract attention over programs addressing critical community resilience issues, sidelining grassroots work.

Addressing these inefficiencies is crucial. The ongoing climate justice case at the International Court of Justice (ICJ), led by small island nations, aims to address both accountability for emissions and the inequalities within climate finance. This historic initiative could expose many hidden injustices in how funds are distributed.

To truly achieve climate justice, we need a transformation in how climate finance operates. This includes simplifying processes, reducing red tape, and ensuring clear accountability. Targets like directing at least 25% of climate funding to local entities by 2030 could significantly empower community-led initiatives.

Moreover, dedicated funding for marginalized populations—including Indigenous peoples, the elderly, and many others—needs to be established. These groups often face unique climate challenges but remain systematically excluded from resources. Prioritizing local leadership and accessible funding will make all the difference for communities facing the brunt of climate impacts.

In short, reform isn’t just necessary; it’s overdue. By focusing on who truly benefits from climate finance, we can ensure that funds serve those most affected by climate change, rather than getting lost in bureaucratic layers.

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Environment blog, Hari Krishna Nibanupudi blog, The eco diplomat: Bridging nature and policy blog