The Impact of COVID-19 on Climate Finance and Green Development

This policy brief by the South African Institute of International Affairs examines the impact of the COVID-19 pandemic on green finance and development, contrasting the robust recovery packages in the global North with the funding gaps and systemic challenges in the global South. It highlights the risk that urgent health-sector spending may undermine environmental sustainability and advocates for institutional reforms, increased South-South cooperation, and coordinated global efforts to bridge the climate finance gap.

• There is a significant preexisting gap between the financial resources available for green development and the estimated costs required for a low-carbon transition. While climate finance flows reached $612 billion in 2017, they declined by 11% to approximately $546 billion in 2018, falling far short of the IPCC's estimate of $1.6 trillion to $3.8 trillion needed annually between 2016 and 2050.
• Developed markets, particularly in Europe, the US, and Japan, have more mature green finance ecosystems characterized by the use of Environmental, Social, and Governance (ESG) criteria and a multistakeholder approach involving banks and public-private partnerships. For instance, sustainable investments in Europe reached approximately $31 trillion by 2018, and US-domiciled assets using sustainable strategies grew to $12 trillion by the start of 2018.
• The European Union and its member states integrated substantial green recovery measures into their COVID-19 stimulus packages. The EU's initial EUR 750 billion proposal allocated 25% to climate-friendly measures, while a subsequent $2.1 trillion budget committed 30% of total expenditure to climate concerns. France also allocated a third of its EUR 100 billion stimulus package to green measures.
• In contrast to the EU, most developing countries did not explicitly allocate specific budgets for green development within their COVID-19 recovery packages. For example, Kenya's KSH 54 billion relief package did not specify a reserved amount for green development. Consequently, green finance in the global South remains heavily dependent on external North-South flows, such as the African Development Bank's $10 billion COVID-19 Response Facility.
• Developing countries, particularly in sub-Saharan Africa, face severe infrastructure financing deficits and limited capacity for climate observation. The World Bank reports that only 10 of 54 African countries provide adequate meteorological services, and fewer than 300 weather stations meet World Meteorological Organization standards, which restricts the ability to analyze climate information and implement adaptive policies.
• Emerging Market Economies (EMEs) such as Brazil, Chile, Colombia, Mexico, and Peru have established green growth frameworks since 2011 but struggle with implementation due to governance issues, inadequate human and financial capacity, and a lack of accountability mechanisms. In Brazil, while a green recovery could potentially create 2 million jobs and increase GDP by $535 billion by 2030, these gains are hampered by limited implementation capacity.

APA

South African Institute of International Affairs (2021). The Impact of COVID-19 on Climate Finance and Green Development. https://saiia.org.za/research/the-impact-of-covid-19-on-climate-finance-and-green-development/

Chicago

South African Institute of International Affairs. The Impact of COVID-19 on Climate Finance and Green Development. 2021. https://saiia.org.za/research/the-impact-of-covid-19-on-climate-finance-and-green-development/.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=The Impact of COVID-19 on Climate Finance and Green Development |date=19 May 2021 |url=https://saiia.org.za/research/the-impact-of-covid-19-on-climate-finance-and-green-development/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2021impact, author = {{South African Institute of International Affairs}}, title = {{The Impact of COVID-19 on Climate Finance and Green Development}}, institution = {South African Institute of International Affairs}, year = {2021}, month = may, url = {https://saiia.org.za/research/the-impact-of-covid-19-on-climate-finance-and-green-development/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }