FfD4: A Turning Point for Climate Finance – What the Conference in Sevilla Must Deliver for Global Climate Justice

The Fourth United Nations (UN) Conference on Financing for Development (FfD4), taking place from 30 June to 3 July 2025 in Sevilla, Spain, is about to start – and the stakes are high for strengthening the global financial architecture to deliver on climate justice and the Sustainable Development Goals (SDG).

1. A Crucial Moment for Climate Finance

The world is approaching a crossroads. Climate disasters are escalating, costs for adaptation and loss and damage are rising, and yet promised flows of climate finance remain inadequate. As the international community prepares for FfD4 in Sevilla, the need for concrete progress on climate finance has never been more urgent.

The outcome of FfD4 will pave the way from Sevilla to Belém and beyond, where countries will need to find ways to increase public climate finance in times of falling budgets earmarked to development and climate. While the New Collective Quantitative Goal (NCQG) was formally agreed upon at COP29 last year, its ambition and effectiveness will hinge on whether the broader financial architecture can channel sufficient, equitable, and needs-based finance to the countries that need it most.

2. Why FfD4 Matters for Climate Finance

The FfD process is the only multilateral forum that links all aspects of financial policymaking – debt, taxation, trade, development assistance, and systemic reform – under the overarching umbrella of sustainable development. This way, the process underpins an integrated approach to climate and development objectives, With climate targets agreed at COP, FfD4 offers a unique space to address how these are to be financed, particularly in countries with constrained fiscal space.

The outcome document, agreed by consensus ahead of the conference, includes references to climate across its core sections, even as these sections have been weakened by Global North countries in the last weeks before the outcome document was finalised. The remaining references, however, create openings to make climate finance more just, accountable, and effective. But the language remains vague in key areas and lacks the specificity and commitment needed to address the scale of the climate crisis.

3. What the Outcome Document Says on Climate Finance (and What It Does Not)

Debt and Climate Justice

The outcome document recognizes the need to strengthen the debt sustainability of climate-vulnerable countries and mentions tools like debt-for-climate and debt-for-nature swaps. However, it stops short of acknowledging that the current international debt system is ill-equipped to respond to the growing frequency of climate-induced shocks.

In recent years, several countries in the Global South have found themselves unable to rebuild after devastating storms, droughts, or floods – not because of a lack of will but because their national budgets are tied up in external debt service. These situations illustrate the urgent need for climate-resilient debt mechanisms, including instruments that allow automatic payment suspension following climate disasters, and a multilateral debt resolution mechanism, housed at the UN, that incorporates climate vulnerability. These recommendations have also been featured in the recently released Jubilee report, co-authored by the economists and Nobel laureates Joseph Stiglitz and Martín Guzmán. Follow through on tackling debt will be crucial for a successful implementation of FfD4.

Domestic Resource Mobilization

Meaningful progress on domestic resource mobilization (DRM) at FfD4 demands addressing the deep inequalities built into the global tax system. Many Global South countries—particularly in Africa—are systematically disadvantaged by rules shaped primarily within OECD forums that lack transparency, inclusiveness, and fairness. Strengthening DRM is vital, offering these nations a sustainable, sovereign alternative to costly, volatile external borrowing and dwindling foreign aid. The UN Framework Convention on International Tax Cooperation presents a crucial chance to level the playing field, ensuring tax policies truly reflect the needs and capacities of the Global South. FfD4 must decisively endorse the UN as the fair, inclusive, and effective hub for global tax reform – one that aligns tax priorities with the goals of the 2030 Agenda for Sustainable Development.

Yet, with the convention process not expected to conclude before 2027, urgent interim action is imperative. FfD4 should commit to solidarity levies on heavily polluting, undertaxed sectors like aviation, fossil fuels, and finance – building on the shipping industry‘s example, where companies advocated for an ambitious levy and countries under the International Maritime Organization (IMO) agreed to an underlying mechanism at their recent meeting in April. The momentum sparked by last year’s G20 push to tax billionaires must also be sustained. Those with the greatest means and climate impact must shoulder their fair share now to finance a just and sustainable future. These levies exemplify the four Rs of effective taxation: generating revenue, promoting redistribution, correcting market failures through repricing, and ensuring fair representation. Without bold steps today, climate-resilient development will remain out of reach. Levies and taxation following the polluter pays principle provide a fair and equitable solution for much needed grant financing for adaptation and loss & damage.

International Development Cooperation: Climate and Private Finance

The International Development Cooperation section of the outcome document includes important affirmations of the need to scale up public, concessional climate finance, especially for adaptation and loss and damage. This is a vital signal at a time when countries most affected by climate change continue to receive only a fraction of the finance they require as well as of the climate finance in circulation globally.

At the same time, the outcome document places strong emphasis on mobilizing private finance and promoting blended finance approaches. While private investment has a role to play, particularly in mitigation and infrastructure, it often fails to reach sectors such as adaptation or social protection. FfD4 must clarify that public finance is the foundation of climate justice. Private finance can complement but must never substitute public commitments, and its use must be transparent, accountable, and aligned with national priorities of developing countries. Only this way can the public good of mitigating and adapting to climate change be realized in a sustainable manner.

Systemic Issues: Special Drawing Rights and Financial Architecture Reform

The systemic issues chapter of the outcome document references important global reform debates, including better use of Special Drawing Rights (SDRs) – a reserve asset used by the International Monetary Fund (IMF) and the reform of credit rating methodologies. These are critical levers in enabling countries to finance their climate and development goals without deepening their debt burdens.

There is currently no multilateral strategy for channeling SDRs toward climate-resilient investment in a coordinated and effective way. The potential to reallocate unused SDRs, particularly through multilateral development banks (MDBs), remains largely untapped. Meanwhile, outdated credit rating practices continue to penalize countries with down ratings for investments into climate resilience that carry long-term benefits but may not show immediate returns. FfD4 must go further in recognizing these structural imbalances. Re-channeling SDRs toward development and climate goals through MDBs, coupled with efforts to ensure transparent and fair credit ratings, are key to unlocking large-scale climate finance.

4. From Sevilla to Belém: What Germany Must Do

As one of the largest donors and a leading voice in international development cooperation, Germany bears responsibility for the success of FfD4. The German government has played an important role in shaping key reform processes at international financial institutions. This must now be matched with action at UN level. Germany should work with ambitious partners from both the Global South and Global North to raise the level of ambition on climate finance during the implementation of FfD4. Specifically, Germany should:

• Strengthen public, grant-based climate finance as the backbone of the NCQG, and thus reaffirm its commitment to delivering at least €6 billion annually in international climate finance, as agreed in its 2021 pledge.
• Support provisions for climate-resilient debt instruments and the development of a multilateral debt workout mechanism.
• Endorse the UN tax convention as the central forum for fair global tax governance, champion solidarity levies on polluting sectors, and advance the momentum to implement a robust tax on ultra-high-net-worth individuals.
• Promote stronger safeguards and accountability frameworks for private climate finance
• Advance proposals for the fair rechanneling of SDRs through MDBs and for the reform of credit rating agencies to better reflect climate risk and investments in resilience.

FfD4 is more than a development conference. It is a political litmus test for multilateralism and global climate solidarity. If the international community is serious about implementing the NCQG, building resilience, and closing the adaptation finance gap, it must use FfD4 to address the structural drivers of climate injustice. Germany has the diplomatic weight, the resources, and the responsibility to help turn this conference into a moment of renewal. Not just for climate finance, but for the legitimacy of the international financial system as a whole.

Christian Gröber and Nouhaila Zaki / Germanwatch
Sabine Minninger / Brot für die Welt