In Depth Ethiopia’s Climate Finance Challenge: Strong Policy Ambitions, But Billions Still Missing
By Sara Solomon
March 7, 2026
As Ethiopia positions itself to host the 32nd UN Climate Change Conference (COP32) in 2027, an event expected to draw around 80,000 participants, a new financial diagnostic suggests that while the country has built an ambitious climate policy framework, the investments required to realize those ambitions remain far from sufficient.
At the Second Climate Finance Summit held on March 5, 2026, at the Sheraton Addis, experts presented a draft version of the Ethiopia Landscape of Climate Finance study prepared by the Climate Policy Initiative (CPI).
Though still pending finalization, the report offers one of the most detailed assessments yet of how climate finance flows into Ethiopia, where it is concentrated, and where critical gaps persist in financing the country’s green transition.
The summit brought together government officials, development partners, financial institutions, and sector experts. Negusu Aklilu (PhD), Chief Executive Officer of the COP32 Presidency Secretariat Office established under President-designate Gedion Timothewos (PhD), briefed participants on preparations for hosting the global climate gathering.
According to Negusu, the organizational structure for COP32 includes four task forces overseen by a national steering committee chaired by Prime Minister Abiy Ahmed (PhD), supported by 13 subcommittees.
Senior government officials lead the different tracks of the preparation.
Fitsum Assefa (PhD), minister of Planning and Development, heads the content and policy track, while Redwan Hussien, director of the National Intelligence and Security Service, oversees media and communications.
Alemtsehay Paulos, minister of Cabinet Affairs at the Prime Minister’s Office, leads logistics, infrastructure, and operations, and Ahmed Shide, minister of Finance, is responsible for resource mobilization and partner engagement.
Negusu noted that 23 federal, city, and state institutions are involved in organizing the event.
“The COP is like having a country in a city,” he said, describing the scale and complexity of hosting the conference.
Each task force has submitted a 100-day action plan, with the first quarter of implementation expected to conclude this month. Preparations must meet the standards of the United Nations Framework Convention on Climate Change (UNFCCC), he added, noting that teams are working around the clock to ensure compliance.
The secretariat is also preparing to receive a UNFCCC fact-finding mission in early July. Such missions involve technical and logistical assessments conducted by the UN climate body in potential host countries to evaluate readiness for staging the annual Conference of the Parties.
Negusu also outlined developments in communications planning. A draft communications strategy has already been prepared and validated and has been presented to the COP32 presidency. The document is expected to be made public in the coming months.
A consortium of local public relations firms is currently working with the Media and Communications task force, while international PR firms may also be engaged due to the political sensitivities surrounding the event. Ethiopia also plans to consult previous COP host countries to learn from their experiences.
“This is a great opportunity in building legacy,” Negusu said.
Beyond the logistics of hosting the summit, discussions at the event focused heavily on the financial realities of Ethiopia’s climate ambitions.
Dawit Woubeshet, a senior environmental economist at the World Bank, believes the country has made notable progress in translating climate strategies into institutional frameworks.
Ethiopia is currently transitioning to its third Nationally Determined Contribution (NDC 3.0), covering the period from 2025 to 2035. The roadmap includes a dedicated investment framework and sets a target of reducing greenhouse gas emissions by more than 70 percent by 2035.
Yet turning policy ambition into actual investment remains a major challenge. During a fireside discussion on moving from strategy to financing, Misganaw Eyasu, senior climate finance advisor at the Ministry of Planning and Development, highlighted the scale of the financing gap.
Ethiopia received only about USD 82 billion in climate finance between 2011 and 2019, which is just 1.3 percent of what is required to meet its climate goals. The Ministry has since introduced a National Carbon Market Strategy covering 2025–2035 and is currently drafting a proclamation to operationalize the system.
However, Misganaw noted that the absence of a national carbon registration platform and other technical limitations continue to hinder progress.
Speaking to The Reporter, Misganaw explained that most of the climate financing Ethiopia secured during that period came from domestic sources. He pointed to limited technical capacity within local banks to prepare proposals and negotiate climate financing agreements with international partners.
“A lack of interest from foreign financiers has also contributed to the gap,” he said, stressing the need for financial institutions to strengthen technical expertise and negotiation capacity while engaging qualified professionals in the sector.
Despite these challenges, Misganaw believes hosting COP32 could create new opportunities. Reflecting on the success of the Second African Climate Summit held in Addis Ababa in September 2025, he expressed confidence that Ethiopia can once again demonstrate its capacity to convene global leaders while attracting new climate investments.
“This would bring an opportunity to address the challenges and invite investments to the country,” he said.
Panel discussions throughout the summit further highlighted the structural issues affecting climate finance. Participants noted that the lack of a universally agreed definition of “climate finance” remains a persistent challenge in aligning policy frameworks and funding mechanisms.
Several speakers also emphasized that the sector needs tangible financial transactions rather than repeated dialogue.
Hikmet Abdella, CEO of FSD Ethiopia, echoed that sentiment.
“What we need is transactions, and not more meetings,” she told The Reporter.
Hikmet noted the absence of a nationally coordinated action plan dedicated specifically to climate finance. FSD Ethiopia is currently working to facilitate collaboration among key institutions, including the National Bank of Ethiopia, the Ministry of Planning and Development, and the Ministry of Finance, to establish a more coherent framework. She disclosed that the organization has received a request to help develop a green bond sukuk and plans to explore sustainability-linked financial instruments.
Capital market institutions are also beginning to position themselves within the emerging climate finance ecosystem.
In a panel discussion featuring Hana Tehelku, director-general of the Ethiopian Capital Market Authority, and Yodit Kassa, chief operating officer of the Ethiopian Securities Exchange (ESX), the conversation centered on how financial markets could support climate investment.
Hana said the authority is considering policy incentives such as tax incentives and credit enhancements to encourage private sector participation. Yodit added that ESX is preparing voluntary guidelines to promote sustainability-linked financial products. Both speakers emphasized that unlocking private capital will require strong regulatory frameworks and government leadership to build investor confidence.
The summit’s central focus, however, remained the findings of the draft CPI study presented by Matthew Hurworth.
The analysis examines climate finance commitments from public and private, domestic and international sources, categorizing them into mitigation efforts aimed at reducing greenhouse gas emissions, adaptation initiatives that build resilience to climate impacts, and projects that deliver both benefits.
The study reveals that climate finance flows to Ethiopia have remained largely stagnant between 2020 and 2023 despite growing climate risks. To meet the country’s climate investment requirements, current funding levels would need to increase more than fourfold.
Climate finance in Ethiopia is heavily dominated by international public funding, while private sector participation remains limited. Public actors committed about USD 2.2 billion annually in 2022–2023, representing a 23 percent increase compared to the previous period.
Most of this funding came in the form of grants (80 percent) and concessional debt (14 percent). Multilateral development finance institutions accounted for the largest share, followed by donor governments. Ethiopia’s domestic budget allocated roughly USD 274 million—about 12 percent of total public climate finance—to climate-related projects.
Adaptation activities receive the largest share of funding, accounting for about 60 percent of total climate finance, or roughly USD 1.4 billion. Yet even this level of investment covers only about a quarter of the country’s annual adaptation needs outlined in NDC 3.0.
Much of the funding is directed toward agriculture, forestry, and land use sectors, reflecting their importance to Ethiopia’s economy and their vulnerability to drought, rainfall variability, and land degradation.
Mitigation finance, meanwhile, remains significantly underfunded, according to the study.
Current investment stands at around USD 0.5 billion, less than 10 percent of the estimated USD 6.6 billion required annually. Most mitigation funding is directed toward the energy sector, particularly hydropower, though the study identifies growing opportunities for solar and wind expansion, especially through mini-grids and decentralized energy systems.
However, participants of the summit also cautioned that the findings should be interpreted within certain methodological limitations. The study measures total climate finance including committed climate finance rather than funds actually disbursed, meaning some pledged resources may not yet have reached projects on the ground. In addition, the analysis relies on financial data from roughly two years prior, which may not fully reflect the current financing environment. Recent shifts in the global development landscape, including the withdrawal or scaling back of funding from major donors such as USAID, may have significantly altered the amount stated in the study.
As Ethiopia prepares to welcome the world for COP32 in 2027, the country finds itself at a pivotal moment. Hosting the conference could elevate its global climate leadership while also serving as a catalyst to close its climate finance gap. If leveraged effectively, the event may not only showcase Ethiopia’s policy ambitions but also attract the partnerships, capital, and technical expertise needed to translate those ambitions into measurable climate action.