Climate finance is an umbrella term for financial resources such as loans, grants, or domestic budget allocations for climate change mitigation, adaptation or resiliency. Finance can come from private and public sources. It can be channeled by various intermediaries such as multilateral development banks or other development agencies. Those agencies are particularly important for the transfer of public resources from developed to developing countries in light of UN Climate Convention obligations that developed countries have.

There are two main sub-categories of climate finance based on different aims. Mitigation finance is investment that aims to reduce global carbon emissions. Adaptation finance aims to respond to the consequences of climate change. Globally, there is a much greater focus on mitigation, accounting for over 90% of spending on climate. Renewable energy is an important growth area for mitigation investment and has growing policy support.

Finance can come from private and public sources, and sometimes the two can intersect to create financial solutions. It is widely recognized that public budgets will be insufficient to meet the total needs for climate finance, and that private finance will be important to close the finance gap. Many different financial models or instruments have been used for financing climate actions. For example green bonds, carbon offsetting, and payment for ecosystem services are some promoted solutions. There is considerable innovation in this area. Transfer of solutions that were not developed specifically for climate finance is also taking place, such as public–private partnerships and blended finance.

There are many challenges with climate finance. Firstly, there are difficulties with measuring and tracking financial flows. Secondly, there are also questions around equitable financial support to developing countries for cutting emissions and adapting to impacts. It is also difficult to provide suitable incentives for investments from the private sector.

Climate finance is "finance that aims at reducing emissions, and enhancing sinks of greenhouse gases and aims at reducing vulnerability of, and maintaining and increasing the resilience of, human and ecological systems to negative climate change impacts", as defined by the United Nations Framework Convention on Climate Change (UNFCCC) Standing Committee on Finance.

Under the UN Climate Convention, climate finance refers to transfers of public money from high income countries to low and middle income countries. This would be in light of their obligations to provide new and additional financial resources. The 2015 United Nations Climate Change Conference introduced a new era for climate finance, policies, and markets. The Paris Agreement, which was adopted at that conference, defined a global action plan to put the world on track to avoid dangerous climate change by limiting global warming to well below 2 °C above pre-industrial levels. The agreement covers climate change mitigation, adaptation, and finance. The financing element includes climate-specific support mechanisms and financial aid for mitigation and adaptation activities. The aims of these activities are to speed up the energy transition towards a low-carbon economy and climate-resilient growth.

At the 16th Conference of the Parties in 2010 (Cancun 2010) developed countries committed to the goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries. The decision by the 21st Conference of the Parties (Paris 2015) also included the commitment to continue their existing collective mobilization goal through 2025. In 2025, a new goal is expected to be adopted.

However, the amount of finance actually provided was estimated to be well below what had been targeted. According to OECD figures, climate finance provided and mobilized reached $83.3bn in 2020 and $89.6bn in 2021. This means that the US$100 billion per year by 2020 target has been missed.