Does climate finance achieve its goals in developing countries? An econometric assessment of mitigation and adaptation outcomes

Despite the increasing mobilization of climate finance under international frameworks, its effectiveness in achieving tangible mitigation and adaptation outcomes in developing countries remains empirically underexamined. This study evaluates the effectiveness of climate finance in developing countries by examining its impact on both greenhouse gas (GHG) emissions mitigation and climate adaptation outcomes. Using panel data from 30 developing countries over the period 2010–2021 and applying fixed-effects econometric models, the analysis investigates the effects of total climate finance, as well as disaggregated mitigation and adaptation flows, on key indicators including GHG emissions, agricultural productivity, water resource efficiency, and climate-induced economic losses. The results indicate that a 1% increase in total climate finance is associated with a 0.03% reduction in GHG emissions, highlighting its role in supporting low-carbon transitions. Mitigation finance demonstrates a significant positive impact on agricultural productivity but exhibits limited influence on water resource efficiency. Conversely, adaptation finance shows a positive correlation with economic losses in the short term, potentially reflecting the reactive allocation of funds to highly vulnerable regions. These findings suggest the need for more proactive and synergistic financing strategies. Policy implications include prioritizing long-term resilience investments, enhancing the balance between mitigation and adaptation allocations, and improving evaluation frameworks to maximize the effectiveness of climate finance in achieving sustainable development goals.