A rapid surge in loan-based climate finance is pushing many of the world’s most vulnerable countries, including Bangladesh, deeper into an escalating debt trap, according to the Climate Debt Risk Index 2025 (CDRI’25) released in Belém on Sunday.
The assessment warns that frontline nations are being forced to borrow simply to survive as climate impacts intensify.

The index, produced by Dhaka-based Change Initiative in partnership with Young Power in Social Action (YPSA), evaluates 55 climate-vulnerable economies.
It finds 13 already in “very high risk,” 34 in “high risk”, and only two in “low risk.”
Risk levels are accelerating fastest in South Asia, the Sahel, coastal West Africa, and the Pacific, where worsening climate shocks collide with loan-heavy financing models.
The financial strain is severe. In 2023, the 55 countries assessed paid $47.17 billion in debt servicing, far more than the $33.74 billion they received for climate action.
Average per-capita climate-labelled debt stands at $23.12, with South Asia carrying the highest burden at $29.87. Bangladesh sits firmly within this high-pressure cluster.
“Climate hardship is financing banks, not protecting people,” said M Zakir Hossain Khan, chief executive of Change Initiative and lead author of the study. “Where needs are sharpest, climate money still arrives late, and it arrives as loans. That combination weakens fiscal space and delays vital protection of people and nature.”
The index draws on climate exposure, credit ratings, income, debt sustainability, finance structure, and natural-resource governance to produce a 0-100 risk score with projections for 2028 and 2031.
Bangladesh is among the countries likely to enter the “very high risk” category this decade unless the global system shifts toward grants, debt relief, and swaps.
Bangladesh also has one of the most imbalanced climate finance portfolios in the world: its loan-to-grant ratio is 2.70, dramatically higher than Nepal’s 0.10.
Researchers caution that this debt dependence is constraining the country’s ability to scale up adaptation as cyclones, river erosion, salinity, and extreme heat worsen.
Other countries are deteriorating rapidly as well: Djibouti and Guinea have moved from “high” to “very high” risk, while Timor-Leste has jumped from “moderate” to “high.”
Adaptation sectors critically underfunded
Nearly 32% of global climate finance continues to flow into large-scale energy projects, many financed through loans, while survival-focused sectors receive a fraction of what is needed. Health gets less than 1%, population-related programmes even less, and disaster prevention only about 1%.
For Bangladesh, which urgently needs investment in flood control, cyclone protection, climate-resilient agriculture, and coastal infrastructure, the imbalance is particularly alarming. Low-emitting countries such as Niger, Rwanda, and Bangladesh also face some of the highest climate debt per tonne of carbon emitted, underscoring deep inequities in the system.
“Why are we borrowing to survive a crisis we didn’t cause?” asked Samira Basher Roza, research analyst at Change Initiative.
She said grant-first climate finance and faster disbursement are essential for countries like Bangladesh that have already exhausted significant fiscal space due to recurring climate disasters.
Mislabelled climate finance eroding trust
CDRI’25 outlines how billions in global climate finance have been misclassified over the years, diverted into coal plants, hotels, chocolate shops, and even cancelled projects rather than genuine climate action.
The report cites multiple cases: Japan counted coal plants in Bangladesh and Indonesia as climate investments; the United States listed a Marriott hotel in Haiti; Italy labelled chocolate shops across Asia; the European Bank for Reconstruction and Development tagged a Moroccan coal port; and France reported loans for projects that never materialised.
The World Bank overstated up to $41 billion in untraceable climate spending.
Researchers warn that this pattern of inflated reporting undermines trust at a time when countries like Bangladesh urgently need predictable and timely support.
‘A political choice, not economic limitation’
Khan argued that the global climate finance gap reflects political unwillingness rather than financial constraints.
“A modest global carbon tax and arms levy could raise six trillion dollars a year,” he said. “Directing even a third of that to vulnerable countries and degraded ecosystems is not charity, it is repayment of climate and ecological debt.”
Call for urgent action
The report urges sweeping reforms to ensure climate finance reaches the people who need it most.
It calls on developed countries to make grants, not loans, the default for adaptation and for loss and damage financing.
Countries already drowning in debt, it says, should not be pushed further under in the name of climate action.
The authors also push for expanded debt-for-nature swaps, comprehensive debt relief, and the creation of a global Earth Solidarity Fund to deliver fast, reliable support to frontline communities during climate disasters.
Beyond governments, the report urges multilateral development banks to overhaul their financing models, shifting from loan-heavy portfolios to rights-based, grant-centred systems that link debt relief with resilience, environmental protection, and long-term climate security.
For Bangladesh and other LDCs, the index recommends mobilising pollution taxes, carbon pricing, philanthropic partnerships, and community-led Natural Rights Funds.
“Climate debt is increasing quickly in countries that contributed the least,” said Dr Arifur Rahman, chief executive of YPSA. “The world must act now to ensure fair financing and protect vulnerable communities.”
“For Bangladesh, rising climate debt means lost livelihoods, displacement and worsening poverty,” added Mohammad Shahjahan, director of YPSA and chair of CANSA Bangladesh. “We need urgent global action and just financing to protect our future.”