Investigating the Health Benefits of Climate Finance: Evidence From Developing Countries

ABSTRACT Although climate finance has expanded considerably over the past decades as part of the global response to climate change, many developing countries continue to experience persistently high infant mortality, widespread undernourishment, low life expectancy, and rising mortality burdens. This paradox raises an important question: does climate finance merely support environmental objectives, or does it also contribute meaningfully to improving population health in developing countries? Despite growing scholarly attention to climate finance, existing studies have largely focused on environmental sustainability, carbon emissions, and economic growth, while providing limited evidence on its broader health implications. To address this gap, this study examines the effect of climate finance on health outcomes in 61 developing countries over the period 2003–2021. Specifically, the study investigates the effect of climate finance on infant mortality, prevalence of undernourishment, life expectancy, and death rates. Employing the Driscoll–Kraay estimator and the Instrumental Variable Generalized Method of Moments techniques, the findings consistently reveal that climate finance significantly reduces infant mortality, undernourishment, and death rates while improving life expectancy. These results remain robust after controlling for endogeneity, omitted‐variable bias, alternative data structures, additional covariates, and disaggregated climate‐finance measures. Further evidence shows that both adaptation and mitigation finance contribute positively to population health. The study concludes that climate finance constitutes not only an environmental instrument but also an important mechanism for improving public health and human wellbeing in developing countries.