Investigating the dynamics of climate finance disbursements: A panel data approach from 2003 to 2022

This study investigates the intricate dynamics of international multilateral climate
f
inance disbursements from 2003 to 2022 via an extensive dataset from the Climate
Funds Update (CFU). By employing panel data econometric models, including pooled
ordinary least squares (OLS), fixed effects (FE), and random effects (RE) models,
the study elucidates the impact of grants and approved funds on disbursement levels
across different income groups. The analysis reveals that while grants do not signifi
cantly influence disbursements, the approval of funds plays a critical role in enhancing
disbursement efficiency. The random effects model, validated through the Hausman
test, emerges as the optimal model for this context. The findings underscore the impor
tance of streamlined approval processes in ensuring effective climate finance dis
bursements and highlight the need for further investigation into the non-significance of
grants. The forecasting results indicate a positive trend in disbursements from 2023 to
2027, with potential fluctuations driven by external factors. This study provides valuable
insights for policymakers and stakeholders to optimize climate finance mechanisms and
improve fund utilization for sustainable development.