CLIMATE FINANCEClimate Finance in the Multipolar Era
Amid continuing conflict in the Middle East, geopolitical shifts, and policy changes in Washington, climate finance has entered a new era—one driven less by multilateral commitments and more by geopolitics, energy security and mounting climate impacts.
This piece was originally published on CCSI Investment Perspectives, a guest column by the Columbia Center on Sustainable Investment.
Amid continuing conflict in the Middle East, geopolitical shifts, and policy changes in Washington, climate finance has entered a new era—one driven less by multilateral commitments and more by geopolitics, energy security and mounting climate impacts.
New Drivers in a Fractured Order
Geopolitics has always shaped climate negotiations, but the U.S. withdrawal from the Paris Agreement, international institutions, and the Sustainable Development Goals (SDG) agenda marks a deeper shift. In Davos earlier this year, Canadian Prime Minister Mark Carney stated that we face a “rupture” in the rules-based order. The post-1945 framework on which the United Nations and the international climate finance regime rest is giving way to a more fragmented landscape.
A coherent new system seems unlikely to emerge soon. Gordon LaForge has argued that the new order will be defined by “connectivity without hegemony,” with state and non-state actors coalescing fluidly around specific issues; for collective action problems like trade, public health and climate change, “this might even prove to be an improvement.”
For climate finance, this may mean less reliance on consensus forums like the United Nations Framework Convention on Climate Change (UNFCCC) regime and more on coalitions of willing partners acting where security and economic interests align. The process may look messier but could move faster than lowest-common-denominator agreements. The First Conference on Transitioning Away from Fossil Fuels, which drew ministers from nearly 60 countries to Santa Marta, Colombia—but not China, India, Russia, Saudi Arabia or the United States—reflects both the promise and the limits of such coalitions.
Energy Security and the Rise of Electrostates
Against this backdrop, the Strait of Hormuz crisis has surfaced a new generation of energy security risks. International Energy Agency (IEA) Executive Director Fatih Birol called it “the greatest energy security threat in history,” and Goldman Sachs has outlined scenarios of prolonged disruption with significant scarring to long-run supply. Energy policy will increasingly be framed through security of supply rather than climate ambition.
Rather than viewing climate investments through emissions-reduction goals or Nationally Determined Contributions (NDCs), governments will prioritize secure access to fuels, critical minerals, suppliers, and trade routes. Emissions reductions are more likely to be co-benefits, rather than primary drivers.
