Financing a sustainable future: the effectiveness of climate finance across the primary, energy, and water sectors

Yuzhu Fang, Chi-Chuan Lee and Xinghao Li ()
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Yuzhu Fang: Southwestern University of Finance and Economics
Chi-Chuan Lee: Southwestern University of Finance and Economics
Xinghao Li: Big Data Laboratory on Financial Security and Behavior, SWUFE (Laboratory of Philosophy and Social Sciences, Ministry of Education)

Palgrave Communications, 2025, vol. 12, issue 1, 1-16

Abstract: Abstract Climate change has a profound impact on socio-economic systems, and climate finance stands as one essential tool for combating and alleviating its disastrous effects. This research draws on an OECD project database, identifies 98 countries, and conducts empirical analysis on the deployment of climate finance across the primary, energy, and water sectors over the period 2010–2021. It further delves into climate finance efficacy across different sectors within country groups characterized by distinct features. The findings reveal that, first, climate finance is able to raise the power output of the recipient nations. Second, in the agriculture-based primary industry, adapting climate finance notably boosts the value added. Third, climate finance applied to the water sector does not significantly affect any increase in freshwater withdrawals. Lastly, heterogeneity analysis demonstrates that income and resource endowments significantly influence the effectiveness of climate finance across various sectors. Based on the findings, this paper offers relevant policy recommendations.

Date: 2025
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DOI: 10.1057/s41599-025-04939-0

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