Since the publication of the original Coalition of Finance Ministers for Climate Action’s The Role of Ministries of Finance in Driving Climate Action: A Guide to Economic Transformation and Resilience in 2023, the economic context for climate action has become more challenging. At the same time as the consequences of climate change have become more immediate and widespread. Growth is low and uncertain across much of the world, fiscal space is tight, and inflation has narrowed policy options. Investment has remained weak in many economies since before the global financial crisis, and substantial investment is required to renew infrastructure and support structural transformation. 

These pressures are particularly acute in emerging market and developing economies, where investment needs in cities, energy systems, and human capital remain large. Climate change and nature loss compound this existing economic challenge. Their physical impacts are intensifying, with consequences for productive capacity, infrastructure, household and firm balance sheets, public revenues and expenditure, and the cost of finance.  

At the same time, the case for action on climate change has become even more compelling and increasingly rests on the opportunities it can create and the risks it can reduce. Part of the return comes from the wider effects of investment and structural change. Falling technology costs, greater energy security, productivity gains, new sources of competitiveness and employment, and stronger resilience can all generate economic, fiscal, and social benefits. 

Another part comes from reducing exposure to physical climate impacts and from avoiding damage, contingent liabilities, and emergency expenditure that would otherwise fall on economies and public balance sheets. However, these gains are neither automatic nor uniform. They depend on countries’ existing capabilities, economic structures, policy choices, and delivery capacity. The key questions are therefore where the opportunities lie in a particular economy and under what conditions they can be realized.  

Capturing these opportunities can be difficult because countries need to make long-term investment and policy choices under constrained macroeconomic and financial conditions. Public debt and debt-service burdens are high, fiscal space is limited, and governments face competing claims on budgets from development priorities and recurrent expenditure. For many emerging market and developing economies, the terms on which investment can be financed are an additional constraint. 

The challenge for governments—and one that the Guide aims to provide support on—is to manage the trade-offs across composition, timing, and financing of investment and economic adjustment while maintaining macroeconomic and fiscal sustainability. 

Ministries of Finance (MoFs) occupy a central position in navigating these choices and are essential to whole-of-government action for three reasons. First, they contribute to shaping national economic and investment strategies, including through macrofiscal frameworks, public investment appraisal, and the assessment of economy-wide trade-offs. Second, they hold or influence many of the fiscal and budgetary instruments that affect incentives, resource allocation, and adjustment across the economy. Third, they shape the financing conditions under which investment takes place, including the allocation between public and private balance sheets, debt management, publicly backed financial institutions, financial policy, and engagement with domestic and international sources of capital.  

This role is principally one of shaping the conditions under which investment and economic adjustment take place, rather than delivering the transition to a low-carbon, climate-resilient, and nature-positive economy. Line ministries, regulators, subnational governments, state-owned enterprises, financial institutions, firms, and households undertake much of the underlying investment and implementation. MoFs can influence decisions where they manage the relevant instruments, and can help make strategies credible, investments financeable, and risks visible in economic and fiscal decision-making. 

The scale of the investment involved also gives particular importance to financing. More than half of assessed climate-related investment needs are expected to be financed privately, highlighting that the question for MoFs is how policy, public finance,and risk allocation can help mobilize capital on terms consistent with fiscal sustainability, in addition to what public budgets can support. 

Using these instruments successfully will require treating climate as part of existing economic, fiscal, and financial functions rather than a separate agenda. In many countries, this will involve institutional and governance reforms to strengthen leadership, coordination, and human and analytical capability. And it will mean confronting the systemic barriers that keep many MoFs at the margins of climate policy decisions. 

This Guide is written first for all MoFs, drawing on their lessons as they mainstream climate into their core functions and capabilities. Those in the early stages of integrating climate might find it particularly helpful; those that are further along will find it useful selectively, as a reference against their own practice and a source of country experience. Throughout, the Guide offers a menu of options rather than a single prescription: what works depends on each country’s circumstances, capacity,and starting point. The Guide presents choices and trade-offs for ministries to weigh, not steps to follow in order. 

There is also value in MoFs navigating these questions together, while recognizing that the answers will differ across countries. Common challenges around investment, financing conditions, analytical tools, and the international financial architecture create scope for MoFs to learn from one another and to draw on a wider body of experience. The Coalition shows that Ministers of Finance can act together: more than 100 MoFs have signed the Helsinki Principles, recognizing that climate risk to economies is real and that their ministries manage instruments relevant to climate policy. 

Strong examples of action are given throughout this Guide, from both inside and outside the Coalition’s membership. The task now is to build on that progress. Delay raises the cost of acting later and risks foregoing the growth, competitiveness, and resilience opportunities of the transition.  

The 2023 Guide was conceived as a living document, and this update puts that intent into practice. In the three years since it was published, the context in which MoFs operate has shifted. Climate-driven disasters strain budgets with growing frequency, rising debt limits fiscal space, and MoFs face growing expectations to align spending with climate, nature, and adaptation and resilience goals. At the same time, shifting geopolitics, greater defense spending, changing trade patterns, and cost of living pressures sharpen the need for a clear economic and financial case for sustainable, resilient, and inclusive growth. This update is an effort to respond to that changed context. Following consultations with the membership, it focuses on five priorities: 

• Additional content on priority topics, in particular adaptation and resilience, nature and biodiversity, trade, industrial policy, and competitiveness. 

• An expanded focus on the how: practical, actionable guidance that takes account of MoFs capacity and political economy constraints. 

• A modular website that makes the Guide easier to navigate and use. 

• A Case Study Database, with new case studies and reflections on how others have evolved. 

• Selected updates to existing content and framing, leaving the Guide’s overall structure unchanged. 

The update is being delivered in three tranches through 2026 and 2027, so that members can engage with the material as it matures.  

Note: While the focus of the Guide is on “climate action”, it treats nature and biodiversity loss as part of the climate agenda and therefore as inseparable from both mitigation and adaptation. The Nature and Biodiversity thematic overview page further sets out this relationship. 

The Guide is split into three Parts:  

Part A, The role of Ministries of Finance in navigating the transition to a low-carbon, climate-resilient and nature-positive economy, sets out the strategic case for action. 

Part B, A Ministry of Finance Framework for Climate Action, is the practical core of the Guide. It organizes action into the three Functions of a Ministry of Finance: reforming economic strategy, reforming fiscal policy, and financing the transition; and three Capabilities: Leadership and Governance, Coordination, and human and analytical Capabilities.  

Part C, Priorities for action Ministries of Finance, draws the Guide together into an agenda for action. 

The Guide is not designed to be read cover to cover. It is a modular resource allowing readers to come to this agenda from different starting points.  

Read more about how the Guide is organized and how to use it.