As the world inches closer to COP30 global efforts to align financial systems with climate goals took center stage at the June Climate Meetings in Bonn, Germany. The Sharm el-Sheikh Dialogue established at COP27 convened its first workshop of 2025, zeroing in on Article 2.1(c) of the Paris Agreement, which urges nations to make finance flows consistent with low-emission, climate-resilient development. The discussions offered a sharp focus on three intertwined issues: financial sector capacity-building, equitable transition planning, and pathways to meet the New Collective Quantified Goal (NCQG) on climate finance.
Held from June 16 to 26, the Dialogue drew participation from global experts, central banks, multilateral agencies, and policymakers from both developed and developing countries. A key theme emerged early on climate finance must not only grow in scale but also evolve in equity and structure. With $300 billion per year set as the climate finance target for developing nations by 2035 under the NCQG, the challenge lies in transforming global finance systems to deliver those funds effectively and fairly.
In the first session on capacity building, the Bundesbank Germany’s central bank presented sobering estimates: if current policies persist, climate-related physical risks could slash global GDP by 15 percent by 2050. However, transitioning to net-zero could limit the damage to 8 percent. Meanwhile, representatives from Brazil’s flood-hit Rio Grande do Sul painted a grim picture of real-world vulnerabilities, revealing that only four out of the 95 percent flood-affected municipalities had adaptation plans in place.
The workshop also highlighted new tools to fill institutional gaps. The Global Capacity Building Coalition showcased its GCBC Accelerator an open-access digital platform designed to support financial institutions, especially in the Global South, in navigating the complexities of climate finance. Participants also explored parametric insurance as a fast-acting financial shield against disasters. However, concerns were raised over its applicability across diverse risks and its cost-prohibitive nature in vulnerable regions.
The Dialogue second session delved into national-level transition planning. Brazil highlighted its electric bus programme and green investment platform aimed at attracting international capital for local decarbonisation. South Africa, through its Development Bank, outlined plans to mobilise blended finance for renewable energy, water reuse, and adaptation stressing the need for international development banks to step in and lower the cost of green capital.
Yet, transition narratives were not without critique. Community voices from the Gulf South in the United States cautioned against the use of natural gas as a so-called transition fuel, pointing to the creation of “sacrifice zones” plagued by health hazards and environmental injustice. Investors’ demands for local climate risk disclosures raised fresh concerns particularly that credit downgrades could further squeeze developing countries trying to secure funds for green infrastructure.
The final session of the Dialogue tackled one of the thorniest challenges aligning finance flows with the $300 billion NCQG. Economist Ulrich Volz called for phasing out fossil fuel subsidies, which totaled $900 billion last year, and redirecting them toward clean energy.
The Asian Development Bank shared examples of creating enabling environments through national platforms that translate climate policies into investable projects. UN Climate Change High-Level Champions pressed for stronger integration of climate risks into private investment decisions, while the UN Industrial Development Organization urged a shift from fragmented funding to full-fledged national transition pipelines.
As co-chairs prepare to present the outcomes at COP30 in Belém, Brazil, later this year, the Dialogue has made one thing clear capacity building and financial system reform are not just technical processes, but political ones. Frictions continue between market-based approaches and equity-led frameworks, especially as developing countries invoke the principle of Common But Differentiated Responsibilities. The success of Article 2.1(c) will hinge on whether global finance can serve not just markets, but people and whether climate justice is truly embedded in the world’s economic transformation.
The road to Belém now carries the weight of expectations that the Dialogue will translate talk into transformative commitments. As global temperatures climb and climate disasters escalate, the clock is ticking for financial systems to shift from risk enablers to resilience builders.