Climate Action: Rethinking finance, technology, and policy for a sustainable future

A key challenge is defining what exactly constitutes climate finance.

By Dr Ajay Mathur and Karan Mangotra

Against the 1.5°C target set under the Paris Agreement, current trajectories project a 2.4°C increase, and the global climate agenda is at a crossroads. The US withdrawal from the Paris Agreement will deepen funding gaps for developing nations already struggling with climate impacts and strain global cooperation. Concurrently, India, with a recent reduction in tariffs on solar cells and modules and increased support for domestic production outlined in its Union Budget 2025-2026, is positioning itself as a leader in the clean transition.

This divergence calls for rethinking climate finance, technology, and policy coordination to close action gaps. The challenge ahead is about ensuring that mission-critical solutions scale at the pace and scale needed to address the crisis, only if it is powered by the lifeblood of climate finance.

What does climate finance really mean?

A key challenge is defining what exactly constitutes climate finance—a debate that remains deeply polarised, adding to the complexities that stand in the way of achieving the Paris climate goals.

Developed nations favour broad climate finance definitions, including private investments and loans, while developing countries emphasise high-quality public finance, mainly grants. They argue that reliance on loans—often tied to market conditions and repayment obligations—raises concerns about perpetuating debt cycles. Grants acknowledge the historical emissions of wealthier nations, ensuring support reaches those most vulnerable—without strings attached.

COP29’s New Collective Quantified Goal (NCQG) sets a $300 billion target by 2035, far short of the $1.3 trillion needed annually for adaptation and mitigation in developing economies. Ambiguity also covers mechanisms of finance delivery. What proportion will come from public versus private sources? How will funds be distributed among mitigation, adaptation, and loss and damage?

Empowering communities to be climate resilient

The risk of uneven implementation leaves the most vulnerable communities at the mercy of fragmented and unpredictable funding flows. Resolving these concerns is essential to rebuilding trust, cooperation, and alignment with the Paris Agreement’s vision of climate justice.

As the 1.5°C pathway fails, adaptation becomes crucial. COP29 emphasised National Adaptation Plans (NAPs), which provide essential financial and technical support, capacity-building, and technology transfer. These plans integrate energy security strategies into comprehensive climate adaptation efforts, addressing human and environmental vulnerabilities effectively. COP29 also strengthened the foundations of carbon markets, concluding a decade-long negotiation process towards a more structured and equitable approach to carbon trading.

Differentiated solar roadmaps can open new energy transition pathways

The emerging geopolitical landscape of climate action reveals that there can be no one-size-fits-all when it comes to the financial, technological, and policy-oriented levers of implementation. Nations will do what they have to, guided by the unique needs of their citizens, businesses, governments, and economies.

As highlighted in ISA’s recent report, Unleashing the Role of Solar in Advancing Economic, Social, and Environmental Equity, solar power offers tailored solutions for diverse economic contexts—through tailored energy transition roadmaps for four archetypes: high-income countries (HICs), emerging economies (EEs), low-income countries (LICs), and small island developing states (SIDS).

Our analysis shows that over 70% of NDCs target renewable energy. Solar, as the most promising clean technology, fuels growth and clean transitions simultaneously. Solar’s versatility allows it to be deployed across diverse applications—rooftops, water bodies, forest areas, and even integrated into buildings—at scales ranging from small home systems to expansive solar parks. Reflecting this adaptability, the International Solar Alliance’s SHINE (Solar Harvest Increase in Non-Carbon Energy) scenario projects a 20-fold increase in solar penetration by 2050, aligned with the commitments outlined in the already submitted Nationally Determined Contributions (NDCs). Additionally, it provides greater socioeconomic benefits such as a 58% increase in employment opportunities, with ~4 million additional jobs for women.

Scaling solar requires cost reduction, infrastructure expansion, and financial mobilisation. Understanding and addressing the archetypes' unique imperatives is key to unlocking renewable energy's transformative potential. Tailored approaches that align with the specific needs and capabilities of each group can ensure equitable progress, driving global energy transitions that leave no nation behind.

Private capital also must be mobilised, and governments should shift from being primary funders to ‘catalytic funders’, facilitating and incentivising private investment into clean energy transitions.

A symphony for a sustainable future

Orchestration is the need of the hour; a symphony-like approach will provide a compelling framework for action. Climate solutions need the coordinated effort of diverse actors—governments as conductors, with technology providers, DFIs, MDBs, and grassroots organisations performing seamlessly. Together, these players must harmonise financial, technological, and policy innovations to create a cohesive and impactful response.

Collaboration, equitable resource allocation, and solar innovation can turn the tide. When every instrument plays its role, the result is a symphony—a sustainable future for all.

(Dr Ajay Mathur, Director General, International Solar Alliance and Karan Mangotra, Partnership and Strategy Specialist, International Solar Alliance.)

Views are personal, and do not represent the stand of this publication.