Impact of climate vulnerability on the allocation of climate finance: global evidence

Climate finance serves as a vital mechanism for assisting developing nations in mitigating and adapting to the adverse impacts of climate change. The core tenet of climate finance is climate justice, specifically distributive justice, which stresses the fair distribution of financial resources to the most vulnerable. This issue has sparked significant interdisciplinary debate; however, a consensus on the fairness of Climate Finance allocation remains elusive. This study seeks to empirically examine the relationship between Climate Vulnerability and Climate Finance across 133 countries from 2000 to 2022, while also thoroughly investigating the moderating effects of institutional quality and conflict prevalence. The results indicate a clear alignment with climate justice principles, as nations exhibiting greater climate vulnerability receive increased climate funding, especially adaptation finance, which is more responsive to addressing vulnerability compared to mitigation finance. Nonetheless, the research reveals other dynamics- the strong institutional quality of the recipient nation has enhanced the positive impact of Climate Vulnerability on Climate Finance distribution. In contrast, conflict undermines this relationship negatively by reducing the impact of climate vulnerability on the allocation of both mitigation and adaptation climate finance. Upon further examination, the analysis reveals notable asymmetry and heterogeneity, with climate vulnerability significantly influencing climate finance allocation for Small Island Developing States and demonstrating regional disparities across Africa, Asia, the Americas, and Europe. The findings highlight the necessity for modified strategies in climate finance distribution, ensuring a balance between global equity and local circumstances. The study concludes by presenting practical implications for recipient and donor countries, highlighting the necessity of enhancing institutions, mitigating conflict, and tackling regional disparities to ensure that climate finance achieves its objectives of justice and effectiveness in combating climate change.