As one of the lead authors and a member of the Forum’s Global Future Council on the Future of Resilient Financial Systems, I worked with colleagues from across sectors to set out practical ways to close the investment gap holding back climate progress in developing economies
The scale of the challenge is clear. Emerging and developing countries face an annual shortfall of up to $2.4 trillion to finance their transition to net zero. These are the nations most vulnerable to climate impacts and often least able to afford the high cost of capital. Yet, without their participation, a global transition is simply not possible.
Since the report's release, global attention has shifted. Trade tensions and the prospect of a new global recession now dominate headlines. Meanwhile, the United States has stepped back from previously agreed-upon climate targets and international commitments. It’s the kind of abrupt policy change more often associated with developing economies – chaotic, unpredictable, and difficult for investors to navigate.
Yet the picture isn’t all bleak. The United States still benefits from strong institutions, particularly monetary policy and financial oversight, providing long-term economic stability. And globally, there are signs of meaningful progress.
The European Union, the United Kingdom and others remain committed to aligning financial systems with climate goals. There is growing momentum to link different kinds of carbon markets. Compliance carbon markets – where governments set legal limits on emissions and companies must trade allowances to stay within them – can be deployed to enable the voluntary retirement of allowances as an alternative to voluntary carbon markets, where companies buy credits to offset emissions outside any regulatory obligation. International cooperation is also strengthening through Article 6 of the Paris Agreement. This part of the agreement allows countries to trade emissions reductions with each other, helping to lower the global cost of meeting climate targets.
I’ll explore these issues further at London Climate Action Week this June, where I’m chairing a panel on Global Carbon Trading: Overcoming Barriers and Seizing Opportunities (24 June 2025). We’ll discuss how carbon markets can unlock investment, support fairer outcomes, and play a more strategic role in the global economy.
The climate crisis hasn’t paused, nor should we halt our efforts to address it meaningfully. Well-designed carbon markets can be powerful tools for change. But to succeed, they must be built on transparency, integrity and international cooperation.
Gbenga Ibikunle is our Professor and Chair of Finance.