Per-capita climate-labelled debt now stands at $23.12, with South Asia facing the highest average burden at nearly $29.87 per person, while East Asia and the Pacific follow with $23.58 and Sub-Saharan Africa with $21.61
Representational Image: Exploring Economics
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Representational Image: Exploring Economics
A surge in loan-based climate finance is driving dozens of vulnerable nations deeper into a worsening debt trap, according to the Climate Debt Risk Index 2025 (CDRI’25) released in Belém yesterday (15 November) following a press briefing.
The assessment, produced by Change Initiative in partnership with Young Power in Social Action (YPSA), shows that many of the world’s most climate-exposed countries now repay far more to creditors than they receive for climate action, eroding their fiscal resilience just as global warming accelerates.
The report evaluates 55 climate-vulnerable economies and finds 13 already classified as “very high risk” and another 34 as “high risk”.
Only two countries fall into the “low risk” bracket. Across the Sahel, coastal West Africa, the Pacific Islands and parts of South Asia, the burden of debt is rising rapidly as climate impacts intensify and loans increasingly dominate the funding landscape.
The analysis reveals that in 2023, the 55 countries together paid $47.17 billion in debt servicing while receiving only $33.74 billion for climate response. Per-capita climate-labelled debt now stands at $23.12, with South Asia facing the highest average burden at nearly $29.87 per person. East Asia and the Pacific follow with $23.58 and Sub-Saharan Africa with $21.61.
Guests take the stage at the launch event of the Climate Debt Risk Index 2025 in Belém, where researchers and global advocates warned that vulnerable countries are paying more in debt than they receive for climate protection. Photo: Rezaul Haque Heron
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Guests take the stage at the launch event of the Climate Debt Risk Index 2025 in Belém, where researchers and global advocates warned that vulnerable countries are paying more in debt than they receive for climate protection. Photo: Rezaul Haque Heron
The authors argue that these imbalances illustrate a growing injustice: countries with the least responsibility for emissions are financing their own climate survival through debt.
“This shows that climate hardship is financing banks, not protecting people,” said M Zakir Hossain Khan, chief executive of Change Initiative and lead author of the index. “Where needs are sharpest, climate money still arrives late and it arrives as loans. That combination weakens fiscal space and delays vital protection of people and nature.”
CDRI’25 draws on a wide range of indicators, including climate exposure, debt sustainability, finance structure, credit ratings, poverty, income levels and natural-resource governance. The index integrates these factors into a 0–100 score and includes projections for 2028 and 2031, revealing that countries such as Bangladesh, Djibouti, Liberia and Uganda could slip into “very high risk” within the decade if climate finance continues to be dominated by loans rather than grants or swaps.
The report shows that vulnerabilities are intensifying quickly. Djibouti and Guinea have moved from “high” to “very high” risk, while Timor-Leste has risen from “moderate” to “high.” Large loan-grant gaps persist in South Asia, where Bangladesh holds one of the most imbalanced portfolios with a loan-to-grant ratio of 2.70, contrasting sharply with Nepal’s far lower ratio.
Pacific Island countries remain heavily reliant on grant-financed programmes but the timing and scale of these grants are inconsistent, causing frequent project delays. In conflict-affected regions such as Yemen, disbursement rates remain among the world’s lowest despite extreme climate vulnerability.
The report highlights that nearly one-third of global climate finance now flows into large-scale energy projects, many of them funded through loans. This leaves crucial adaptation sectors including health, food security, water systems, and disaster preparedness critically underfunded. Health receives less than one percent of climate finance, population-related programmes even less and disaster-prevention efforts barely exceed one percent.
According to the authors, this imbalance reveals that global climate finance continues to “chase bankable assets rather than safeguard lives,” leaving millions in frontline communities exposed to storms, heatwaves, hunger and displacement. Small Island Developing States, in particular, carry climate-related debt loads that consume significant portions of their national income. For low-emitting countries such as Niger, Rwanda and Bangladesh, debt per tonne of emissions remains among the highest in the world, highlighting the inequity embedded in today’s climate finance system.
“Frontline youth are asking a simple question: why are we borrowing to survive a crisis we didn’t cause?” said Samira Basher Roza, research analyst at Change Initiative. She argued that grant-first climate finance, faster delivery and structured debt solutions are essential for countries that have already exhausted their fiscal space.
The index documents widespread misclassification of climate finance over many years. Billions of dollars counted as climate support have actually funded coal plants, luxury hotels, chocolate shops, cancelled projects and even a rainforest-themed romance film.
Examples include Japan financing coal-fired plants in Bangladesh and Indonesia, the United States supporting a Marriott hotel in Haiti, Italy backing chocolate shops across Asia and the European Bank for Reconstruction and Development labelling a Moroccan coal port as climate finance. The analysis notes that the World Bank overstated up to $41 billion in untraceable climate-related spending, while France reported loans for cancelled initiatives.
‘The world is not short of money; It is short of rules’
According to the report, these distortions inflate global climate finance figures, misdirect resources and erode trust in the entire financing system at a moment when vulnerable nations urgently need reliable support.
Khan argued that the climate finance gap is the result of political choices, not economic constraints. “A modest global carbon tax and arms levy could raise up to six trillion dollars a year,” he said. “Directing even one-third of that to vulnerable countries, degraded ecosystems and collapsing biodiversity is not charity. It is a repayment of climate and ecological debt. Anything less is a deliberate choice for chaos over a just and manageable transition.”
The report outlines a three-part framework for reform. It calls on developed nations to make grants the default for adaptation and loss and damage, expand debt-for-nature swaps, offer comprehensive debt relief and establish an Earth Solidarity Fund to deliver real-time support to frontline communities.
It urges multilateral development banks, donors and climate funds to shift toward rights-based, grant-centred finance, reform their portfolios so that adaptation and loss and damage are grant-driven and link debt relief to resilience and ecological protection.
A pathway toward climate-debt freedom
For vulnerable low-income countries, the index recommends mobilising pollution taxes, carbon pricing, bio-finance, philanthropic partnerships and community-led Natural Rights Funds supported by redirected fossil-fuel subsidies, carbon taxes, Zakat and corporate social responsibility.
“Climate debt is increasing quickly in countries that have contributed the least to the crisis,” said Dr Arifur Rahman, chief executive of Young Power in Social Action (YPSA). “Every cyclone, flood and loss of land deepens an unfair burden. The world must act now to provide fair financing and protect climate-vulnerable people.”
Prof Mizan R Khan, technical lead, of the LDC Universities Consortium on Climate Change (LUCCC), said current IMF and G20 debt frameworks are failing low-income countries and argued for a Borrowers’ Club and global tax convention. He described adaptation loans to LDCs and SIDS as “a blatant travesty of climate justice.”
“For countries like Bangladesh, climate debt brings lost livelihoods, more migration and worsening poverty,” added Mohammad Shahjahan, Director of YPSA and Chair of CANSA Bangladesh. “As losses grow beyond what nations can handle, urgent global action and fair climate funding are essential to ensure a just future.”