Financial assessments to address climate change
Climate finance is essential to meeting the goals of the Paris Agreement, yet it is estimated that almost US$7.4 trillion a year is needed globally to address climate change. For a country to implement their Nationally Determined Contributions (NDCs), they need to have a complete picture of national climate finance needs. Countries must also know which options are available for them to increase finance through national and international sources, both public and private. To support countries in this endeavour, UNDP developed a methodology to assess the investment and financial flows needed to address climate change based on their national circumstances, resources and capacities.
How does the Investment and Financial Flows methodology work?
The methodology helps countries answer several key questions, including what the planned climate measures are across key sectors, who is currently investing in climate action in each sector, what shifts and required additional investment and finance is needed, and what policies and incentives can induce the necessary shifts and changes in finance.
As part of the methodology, countries begin by breaking down their key national climate plans (i.e. NDCs, NAPs, LT-LEDS) into actionable mitigation and adaptation measures.
Countries then develop two financial scenarios which consider all types of finance:
- A baseline scenario – business-as-usual conditions for climate spending; and
- A target scenario – the financial requirements of the measures needed to reach the country’s climate targets.
The methodology then provides specific guidance on 10 key sectors. Countries can use this guidance to assess the financial reallocations and additional investments they would need to implement mitigation and adaptation actions, and ultimately identify the policies and incentives necessary to bring about that change.
The methodology is flexible and can be tailored to country needs, including building on existing national processes and institutions in the context of sustainable development, taking into account further national concerns such as biodiversity conservation and land degradation.
For example, the financial assessments can be an integral part of another UNDP approach, the Integrated National Financing Frameworks, that countries utilize to implement the SDGs.
What are expected outcomes from using the methodology?
The financial assessments can support countries to move from planning to implementation in climate action by helping decision makers identify current and future climate-related investments and financial flows, as well as their timing, sources and investment entities.
Expected outcomes and uses of the methodology include:
Strengthened national budgets
- Refine national budgetary planning to be more efficient.
- Strategize the share of the national budget allocated to climate action.
Mobilized finance
- Identify investments best suited for public vs. private finance, national or international.
- Prioritized suite of policies and measures to mobilize finance across sectors.
Informed policymaking
- Develop a national strategy for mitigation and climate change risk management.
- Integrate developed sectoral norms and standards into a legislative framework.
Strong business case for climate finance made
- Pursue potential partnerships.
- Develop proposals for climate funds (i.e. Adaptation Fund, Green Climate Fund, Global Environment Facility, etc).
Improved planning tools
- Continuously track climate finance for NDC implementation.
- Identify further sectors that would benefit from the methodology to support resource mobilization.
Who is the methodology for?
The methodology is primarily a resource for governments. While the key actor for national finance planning is typically a government institution, the assessments strive to engage a broad set of contributors.
Teams carrying out financial assessments include Ministries of Planning, Finance, and Environment, and relevant sectoral Ministries, together with the private sector, academia and non-governmental organizations who can provide information and help with gathering socio-economic and financial data, scenario creation and modelling.
How to use the methodology
The methodology can be used economy-wide, offering thematic modules for key climate sectors, which can be used based on each country’s priorities. A general methodology guide (Chapters 1 and 2) is provided to steer the user through the methodology. Chapters 3-14 cover distinct thematic sectors, focusing either on adaptation or mitigation. Chapters 15-16 and annexes provide supporting material. Each chapter includes one guide that provides a narrative description of the methodology and one presentation that can be used to train national counterparts on the methodology.
Since 2008, countries have carried out around 60 assessments across the globe. See examples of completed assessments here.
The methodology’s content was updated in 2026.
If you are interested in starting a financial assessment, please reach out to susanne.olbrisch@undp.org for more information, potential support and additional resource materials.
Methodology Guidebook (by chapter)
Explore more publications
Country examples of domestic finance assessments
Countries have used the results of the assessments to implement their national climate targets and Nationally Determined Contributions.