A key challenge lies in the gap between climate commitments as reflected by a country’s NDCs and development planning. While environment ministries typically lead the development of NDCs, successful implementation depends on coordinated action across powerful sectoral ministries — such as energy, transport, agriculture, and finance. These ministries often hold more influence and control over public investment decisions but are not consistently engaged in climate planning or delivery. Weak institutional mechanisms for cross-ministerial coordination further compound the problem, leaving NDCs siloed within environment ministries. As a result, many commitments remain aspirational rather than integrated into national development priorities and public budgets.
Critically, if a ministry such as Energy does not “own” the climate targets relevant to its sector, it will not translate them into policy frameworks, investment strategies, or project pipelines. Without this ownership, there is no credible pathway for transforming NDC ambitions into investable propositions that can attract finance. In this vacuum, climate finance tends to flow toward standalone, easier-to-fund projects — often shaped by donor priorities — rather than those rooted in national climate strategies. The result is a widening gap between climate finance flows and the delivery of NDC targets. Transparent processes, from planning and target setting to monitoring progress during implementation, can help overcome these challenges and unlock the integration required for an effective engagement of sectors thus enabling climate finance to connect to measurable impact on the ground.
This challenge is, however, compounded by the way financial institutions — whether multilateral banks, development finance institutions, or private investors — engage with climate action. Their focus is often on funding discrete, bankable projects, rather than aligning investments with the national climate priorities set out in NDCs. These institutions also tend to apply their own monitoring and evaluation (M&E) frameworks, tailored to internal accountability or impact measurement needs, with little connection to a country’s monitoring, reporting and verification (MRV) framework. A more integrated approach, with project M&E fully aligned with national MRV processes, would build national ownership, increase policy coherence, and allow tracking the collective progress toward national and global goals. By insisting that funded projects be anchored in NDCs and that monitoring projects use indicators from programmatic results frameworks, financial institutions can play a catalytic role — pushing national ministries to coordinate across sectors, strengthen alignment, and embed climate action within the core of development planning.
But the issue runs deeper. When key line ministries are not meaningfully engaged in the NDC process, they are unlikely to develop the policies, investment plans, or regulatory frameworks needed not only to translate commitments into actionable programmes, but also to reduce the risk premium. Without these sector-specific strategies, there is little for funders — whether public or private — to assess, support, or finance. Only when sectoral ministries engage, can there be credible pipelines of projects and policy reforms that can attract investment. This can create a self-reinforcing cycle: Once NDCs can attract funding because they are grounded in the operational realities of sectoral planning, sectors will be engaged because they see strong incentives to align with national climate goals.
A further challenge, however, lies in a lack of systematic evaluation of performance. While many countries have established NDC tracking systems, their use is often limited to reporting progress against indicators rather than for systematic evaluation of the implementation experience. As a result, when countries prepare new NDCs, they rarely draw on structured assessments of what worked, what didn’t, and why. This represents a critical missed opportunity for learning. Without embedding evaluation into the NDC cycle, the Paris Agreement’s ratcheting mechanism — designed to strengthen NDC ambition over time based on experience — cannot function as intended. Instead of building on past successes or course-correcting based on challenges, countries risk repeating the same implementation gaps, with limited gains in ambition or effectiveness.
