The Climate Finance Boomerang: Uncovering the Backflow of Climate Finance from the Global South to the Global North

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Climate finance boomerang: When money meant to tackle the climate crisis flows backwards

Billions of dollars intended to help developing countries confront climate change are flowing back to lenders through loan repayments. New CARE research warns that, within a decade, annual repayments could exceed new climate lending, raising urgent questions about who really benefits from international climate finance.

Climate finance is supposed to help countries protect their people, economies and livelihoods from a crisis they did little to cause. But a growing share of that support comes with a repayment bill.

A new report by CARE Denmark and the Climate Justice Center – The Climate Finance Boomerang: Uncovering the Backflow of Climate Finance from the Global South to the Global North – reveals the scale of this financial backflow and its implications for countries already grappling with climate disasters, mounting debt and limited resources.

The findings are significant. In 2024 alone, an estimated USD 20.1 billion in climate loan repayments fell due, almost three times the USD 6.9 billion estimated for 2020. Meanwhile, 67% of public climate finance was provided as loans in 2024, rather than grants.

And the situation could worsen. If climate lending continues at its 2024 level and loan terms remain unchanged, annual repayments could exceed new climate lending by 2036. Within a decade, more money could be due back to lenders each year than is provided through new climate loans.

The hidden cost of climate finance

Drawing on more than 18,000 public climate loan records reported between 2011 and 2024, the research estimates that loans worth USD 489 billion will generate USD 663 billion in lifetime repayments, including approximately USD 174 billion in interest and calculable fees.

These figures expose a dimension of international climate finance largely missing from official reporting. While governments announce billions in commitments, the money flowing back to lenders through repayments remains largely invisible in the headline figures.

This matters politically. Without accounting for repayments, international reporting risks presenting a misleading picture of the support available to countries on the frontlines of the climate crisis, while obscuring the financial burden that accompanies it.

The report builds on CARE and Oxfam’s 2025 research, which highlighted how climate loans can leave developing countries repaying substantially more than they originally borrowed. The new analysis goes further, tracing repayment obligations over time and revealing how they could eventually overtake new lending.

Climate adaptation cannot depend on debt

Loans can be appropriate for investments that generate revenue. But much of what developing countries urgently need involves protecting lives rather than generating financial returns.

A flood barrier does not turn a profit. Securing drinking water during droughts or helping farmers protect their harvests may prevent devastating losses, but these investments do not necessarily generate the income needed to repay a loan.

For countries already struggling with debt, repayment obligations can further constrain public budgets, leaving fewer resources for essential services, climate resilience and disaster preparedness. Women and girls, who often face disproportionate impacts from climate shocks, risk bearing an additional burden when support falls short.

Grants, not repayment bills

As governments negotiate climate finance at the Conference of the Parties (COP), the findings raise a fundamental question: should climate finance be judged by how much wealthy countries announce, or by how much support actually reaches developing countries and remains available to communities?

CARE is calling for a decisive shift towards grant-based public climate finance, particularly for adaptation and loss and damage. It also urges governments and financial institutions to disclose loan terms, interest and repayments, and to prevent climate finance from worsening debt crises, including through debt relief where necessary.

Climate finance must help vulnerable communities and countries on the frontline of the climate crisis build resilience, not leave them with decades of repayment bills.

The repayment figures are modelled obligations, not verified cash repayments. The 2036 finding is an illustrative scenario based on unchanged lending levels and terms, rather than a forecast.