Climate finance as a catalyst for peace

Debates on the role of climate finance in conflict-affected regions increasingly emphasize its potential to link climate adaptation with national stability. Using OECD-DAC dataset and UCDP conflict records, we construct a panel of 85 developing countries from 2000 to 2023 and employ a two-stage least squares (2SLS) strategy. Results indicate that greater volumes of climate finance significantly reduce conflict incidence in recipient countries, with particularly pronounced effects on resource-related, small-scale, and intra-state conflicts. Investments in social infrastructure and services yield the strongest conflict-mitigating impact. This relationship appears to be driven by two primary mechanisms involving the alleviation of water scarcity and the reduction of fossil fuel dependence. These findings highlight the role of climate finance not only in adaptation to climate change but also in promoting stability, with direct relevance for international assistance and climate policy.