How Climate Finance Units can strengthen national systems for accessing and managing funds

Amid the flurry of activity at COP26 in Glasgow, a quieter but transformative initiative was gaining ground. The NDC Partnership launched the Taskforce on Access to Climate Finance aiming to identify and implement novel approaches to improving resource access.

One of the clearest innovations to emerge: Climate Finance Units (CFUs). 

What are CFUs?

Among the Taskforce’s pioneer countries was Uganda, where a small team in the Ministry of Finance piloted a novel approach to coordinating climate finance. This team became a model for the CFU: a dedicated unit mandated to mobilize and coordinate national and international climate funding. Uganda’s CFU has already secured nearly USD 300 million, with another USD 400 million in the pipeline.

Globally, other countries are taking note. Denmark has established a Green Policy Center, while Bangladesh, Rwanda, Fiji, Mozambique, Kenya, and Belize have created their own versions of CFUs. Though names and mandates differ, the core idea remains: create a central unit to consolidate and coordinate climate finance flows at the national level.

Why now?

The urgency behind CFUs stems from a rapidly growing, fragmented, and complex climate finance landscape. Developing countries need an estimated USD 2.4 trillion annually by 2030. But existing systems for accessing international finance are slow, technocratic, and hard to navigate. Most support is project-specific and short-term, making it difficult to align with long-term national strategies. Coordination across ministries and sectors adds further complexity. Such structural barriers make accessing sufficient resources in a timely and efficient manner challenging for developing countries.

CFUs are designed to overcome some of these obstacles. By acting as a single, government-led entry point, they streamline access to funding, bridge gaps between institutions, and ensure more coherent national planning and implementation.

What do CFUs do?

CFUs are commonly tasked with unlocking international climate finance, particularly from international sources like the Green Climate Fund or multilateral development banks. They act as a liaison with funders, and appraise and endorse project proposals. But their role often goes beyond fundraising.

Increasingly, their value lies in what they do after the money arrives. CFUs help align climate finance with national development priorities, ensure funds are well-spent, and build pipelines of high-quality, investment-ready projects. They are also increasingly working across ministries to embed climate considerations into budgets, fiscal policies, and economic planning.

Importantly, CFUs create enabling environments for private sector investment by improving transparency, reducing fragmentation, and lowering barriers to entry. Beyond finance, CFUs can help mainstream climate change across sectors by, for example, integrating climate considerations into ministerial budgets. This turns climate action into a whole-of-government effort, not just the domain of a single ministry.

What makes CFUs work?

Strong CFUs tend to share several characteristics:

• A clear, empowered mandate: Backed by a legal or policy framework, this allows them to coordinate across government and engage funders effectively.
• Strategic institutional placement: CFUs are often housed in finance ministries to align closely with national budgets. In other contexts, placing them in higher-level offices or as standalone entities can improve visibility and coordination.
• Multidisciplinary teams: Effective CFUs bring together expertise in climate policy, economics, public finance, project development, and stakeholder engagement.
• Strong relationships and legitimacy: Engaging ministries, civil society, and the private sector fosters trust and whole-of-government collaboration.

What are the challenges ahead?

CFUs face notable challenges. Many operate with small teams developing their technical capacity on the fly and are still struggling to meet the complex cross-sectoral and multidisciplinary demands of climate finance. While external advisors help in closing the gap, long-term success requires investment in in-house capacity building. A narrow focus on international funding can also limit CFUs. To materialise their full potential, they must engage domestic resources and the private sector, as well as support the mainstreaming of climate finance into broader governance practices.

Political support is crucial. Without backing from senior leadership or legal mandates, CFUs risk limited influence or even dissolution. Financial sustainability is another concern: many currently rely on donor support and lack clear plans to transition to achieving self-sufficiency through national budgets. The inertia of fragmented national governance with overlapping mandates can also dilute their effectiveness.

It is crucial to understand that CFUs are not silver bullets that can address all the climate finance challenges facing a country. While they can consolidate national expertise across the diverse funding sources, they cannot resolve structural barriers to access embedded in the international climate finance architecture – many of which are shaped by developed countries. Their impact, utility, and sustainability strongly depend on the national operating context, chosen mandate, and other characteristics highlighted above. To overcome the structural barriers that inhibit access to climate finance, CFUs need to be accompanied by reforming access mechanisms and aligning flows with the actual needs of developing countries. Without this dual effort, CFUs risk being strong ideas constrained by systems with barriers.

Conclusion

As climate finance becomes more complex and high-stakes, countries need coherent systems to manage it. CFUs offer a promising solution: a dedicated unit that not only attracts funding but ensures it is used strategically and effectively.

While not a one-size-fits-all model, CFUs are gaining traction because they reflect a shared need: systems, not just funds, to make climate action work. To meaningfully translate climate ambition into tangible action in the most vulnerable countries, investing in the institutional backbone to deliver finance can be a crucial next step.

This blog is informed by Climate Analytics’ CFU Report. Read the full publication