Six good reasons for more international climate finance

Why climate finance should be part of the new German government’s priorities. Photo: shutterstock

International climate finance is not an act of charity – it is a strategic necessity. In a world of geopolitical upheaval, international climate finance serves as a strategic instrument for stable partnerships and secures jobs and economic stability in Germany. Through it, Germany and the European Union (EU) benefit from resilient supply chains and new markets while strengthening trust and cooperation with important partner countries. International climate finance is also a question of global solidarity and justice, and the budgetary resources required for this must therefore be mobilized in a socially just manner.

Germanwatch has recently published a discussion paper (in German) that outlines six arguments explaining why a new German government must provide more international climate finance. The following is an overview of the main points.

1. More security and stability through climate finance

International climate finance is a crucial factor for security and economic stability – both globally and in Germany. According to the World Economic Forum’s “Global Risk Report 2025,” the five biggest global risks of the next ten years are related to the climate crisis. A lack of investment in climate change mitigation and adaptation not only exacerbates environmental problems but also deepens social inequalities and geopolitical tensions. Germany and the EU must increasingly view international climate finance as a security policy instrument to contain future crises.

The climate crisis acts as a threat multiplier, worsening existing stressors such as poverty, hunger and migration while increasing the risk of conflict and destabilization. International climate finance can counteract this through preventive measures, such as ensuring access to water and food. It also helps reduce global emissions, preventing critical tipping points in the climate system from being exceeded – consequences that could trigger uncontrollable chain reactions. For instance, the Atlantic meridional overturning circulation, crucial for Europe’s climate, could collapse and cause drastic weather changes. To minimize these risks, increased international investment in climate protection and adaptation measures in the Global South is essential.

2. Climate finance as a basis for stable international partnerships and multilateralism

International climate finance is a strategic tool for building new partnerships. In a world of geopolitical upheaval, stable relationships with other countries are more important than ever. Bilateral partnerships based on climate finance can provide access to stable trade relations, raw materials, and new markets. Through climate finance, Germany can build trust with geopolitically important countries such as India, Brazil, South Africa, Indonesia, and the group of least developed countries while deepening existing relationships. In times of uncertain US policy, it is crucial not to leave a geopolitical vacuum for China, Russia, or the Gulf states to fill. Especially now – when countries are increasingly turning away from China after a phase of China euphoria – this presents an opportunity for Germany and the EU. Those who invest in climate partnerships today strengthen their foreign policy influence in the long term.

International climate finance also strengthens multilateralism. While some states rely on power politics rather than international cooperation, Germany must actively defend multilateralism. Climate finance is key: it creates alliances in international negotiations and organizations, promotes global stability, and supports the UN Sustainable Development Goals. As an export-oriented economy, Germany benefits from a rules-based world order – strong climate finance is therefore not only sound climate policy, but also an investment in security and prosperity.

3. Living up to historical responsibility and taking legal obligations seriously

Germany has built its prosperity largely through fossil fuel use and – as the sixth-largest historical emitter – bears particular responsibility for the climate crisis. While poorer countries in the Global South have contributed least to global warming, they are most affected by its impacts. Solidarity does not end at national borders – climate finance is a question of global justice and historical responsibility. The polluter-pays principle enshrined in the Framework Convention on Climate Change and the Paris Climate Agreement obliges Germany to act under international law. Compliance with these commitments forms the basis for functioning multilateralism and strengthens Germany’s credibility as a reliable partner.

While Germany has long exceeded its fair CO₂ budget, it expects poorer countries to operate in a climate-friendly manner despite facing high borrowing costs and debt burdens that often prevent necessary investments in renewable energy sources. Climate finance helps these countries overcome such hurdles while fostering sustainable economic development.

4. Economic benefits for Germany and the EU through international climate finance

International climate finance not only brings stability but also economic opportunities. As one of the largest exporting nations, Germany depends on functioning global supply chains. The climate crisis jeopardizes this through extreme weather events, as demonstrated by the 2023 drought at the Panama Canal and the resulting delivery delays. Climate finance helps to make logistics and production chains more resilient, particularly through investments in measures to adapt to the impacts of the climate crisis. This prevents interruption of production caused by climate change impacts due to supply chain problems at large companies, such as those in the automotive industry, thereby securing jobs and economic stability.

In addition, international climate finance dampens price fluctuations, opens up future markets and secures jobs. Extreme weather events drive up prices for foodstuffs such as coffee, chocolate and olive oil. Rising food prices exacerbate inflation, promote social tensions and strengthen populist movements. Investments in climate-resilient agriculture and water management can mitigate these risks and contribute to economic stability. International climate finance also strengthens Germany’s economy by opening up new markets for climate-friendly technologies. Investments in renewable energy, sustainable infrastructure and climate change adaptation create stable economic partnerships with the Global South. A study by the Kreditanstalt für Wiederaufbau (KfW) shows that every euro invested in development cooperation projects increases German exports and secures jobs in industry and the service sector. Through international climate finance, Germany can directly combine economic opportunities with global responsibility.

5. Climate financing is working – already today

International climate finance is already playing a crucial role in protecting particularly vulnerable countries from the impacts of the climate crisis. Countries such as Bangladesh or Small Island Developing States (SIDS) are particularly exposed to extreme weather events such as storms, heat waves and floods, but often do not have the financial means to adapt sufficiently. Between 2009 and 2019, climate-related extreme weather events caused an average of $143 billion in annual damages. Adequate climate finance not only alleviates human suffering, but also reduces financial losses and has a stabilizing effect in the long term.

The climate crisis is one of the main causes of the current and future need for humanitarian aid. International climate finance can therefore help to reduce humanitarian crises and the aid needed for them. Investments in climate adaptation such as early warning systems or resilient infrastructure have already shown that they save lives. For example, Bangladesh was able to drastically reduce the number of cyclone fatalities through targeted measures: while a cyclone claimed 500,000 lives in 1970, a similarly strong storm in 2007 resulted in only around 4,000 deaths. A World Bank study shows that every dollar invested in climate change mitigation and adaptation saves four dollars in future damage.

6. Budgetary resources for international climate finance can be mobilized in a socially just manner

International climate finance must not be at the expense of low-income population groups in Germany: The poor must not be played off against those who are even poorer elsewhere. The money is available – priorities just need to be set correctly and in a socially just manner. Billions flow into subsidies for fossil fuels or are not even collected due to a far too low taxation of the super-rich.

By reducing environmentally harmful subsidies and reallocating budget funds sensibly, money for international climate finance can be mobilized in a socially just way. The reduction of climate-damaging subsidies alone could free up over 24 billion euros annually – funds that could instead be used for international climate finance and socially just climate protection. The reform of Germany’s company car privilege alone could bring in up to six billion euros. In addition, new, effective and socially just sources of financing can mobilize additional resources for climate finance. Climate-friendly taxes – such as closing tax loopholes for private jets and first-class flights – could provide billions annually for climate finance. There is also scope at the EU level, for example through higher taxation of marine diesel and kerosene. Fossil fuel companies, which have made billions in profits through climate-damaging business models, must also make their fair contribution and share in the costs of international climate finance.

Germany must advocate internationally for fair funding sources to hold major polluters accountable. A global tax on oil and gas companies or a levy on extreme wealth as well as air and shipping traffic could mobilize hundreds of billions of dollars worldwide for climate protection and adaptation measures – ideas that are already being discussed in multilateral forums.

Conclusion: International climate finance is an investment in the future

International climate finance is not charity, but a strategic investment in security, economic stability and global justice. Germany has an opportunity to act as a leading player in international climate policy while simultaneously strengthening its own economic interests. A forward-looking new German government must set the right course – toward a stable, secure and sustainable global system.

Julia Grimm and Lisa Schultheiss, Germanwatch