How AI can help close the finance gap between climate ambition and action

Communities around the world are grappling with the realities of climate change, from floods displacing families to droughts threatening food security and rising seas reshaping coastlines.

These realities show that climate ambition has never been higher, yet the gap between commitments and implementation persists. Governments, businesses and financial institutions are pledging larger sums, but much of this capital still struggles to reach bankable, measurable projects that can transform economies and protect lives.

Global climate finance reached a record $2 trillion in 2024, which is more than double the levels seen six years ago. Yet this still falls far short of the trillions needed each year to keep the world on a 1.5°C-consistent pathway.

Adaptation and nature-positive investments in emerging and developing economies remain underfunded, even as climate risks intensify. The gap is not only about the quantity of capital but also about how effectively it is deployed.

Responsible artificial intelligence (AI), if governed well and applied with precision, can help close this gap by turning fragmented information into investable opportunities, and accelerate real-world outcomes while reinforcing trust and transparency.

This matters because when capital is mobilized it can mean safer homes, secure food supplies and resilient communities in regions most vulnerable to climate shocks.

Closing the finance gap requires more than pledges; it demands that commitments translate into execution. A central constraint is data fragmentation with key sustainability commitments that are often scattered across different formats, updated at different times and varying in detail.

This fragmentation creates friction for financial institutions, delaying the path from commitment to execution, and ultimately slowing the flow of finance to where it is most needed.

AI changes this dynamic. When trained on credible, comparable data and paired with strong governance and human expertise, it can turn fragmented information into actionable insights, helping institutions uncover opportunities and focus efforts where environmental and social impact will be most meaningful. For families living in flood-prone areas or farmers facing drought, faster financing decisions can mean the difference between recovery and ruin.

One of the most critical areas where this potential comes to life is the energy transition. Financing must reach across oil and gas decarbonization, renewables, nuclear, hydrogen and emerging technologies.

AI can pre-screen company plans to identify credible pathways, optimize smart grids, forecast renewable output and simulate infrastructure resilience through digital twins (a virtual representation of a physical asset, system, or process). Mapping out where high-integrity, high-impact opportunities are emerging enables us to direct financial and intellectual capital toward areas of greatest systemic relevance.

FAB is putting this principle into practice through its AI-powered Sustainable Finance Market Pulse platform, which transforms unstructured information into qualified sustainable finance leads that are organized by sector, geography and priority with enhanced speed and clarity.

This capability underpins FAB’s commitment to mobilize AED500 billion ($135 billion) in sustainable and transition finance by 2030, while elevating strategic dialogue with clients and counterparties. This is not just about numbers, it is about enabling projects such as renewable energy that power schools, hospitals and homes – improving quality of life for millions.

The value of AI extends across other environmental, social and governance (ESG) priorities. Clients face growing physical risks, such as flooding in the UAE, alongside evolving climate regulations. AI can map site-level risks using satellite and sensor data, track disclosure requirements, and align financing with national climate targets.

Nature-positive investments and water resilience are vital yet underfunded. AI can identify biodiversity dependencies, model water stress and verify impact for investor confidence. FAB leads in this space through early Taskforce on Nature-related Financial Disclosures (TNFD) reporting, high transparency standards and pioneering instruments such as the region’s first blue bond by a financial institution and the first low-carbon energy bond issued globally by a financial institution.

These innovations channel capital to nature, circularity and water resilience projects aligned with UAE priorities and global frameworks. They help ensure clean water for households and protect ecosystems that sustain livelihoods for rural communities.

The green transition must also be fair and inclusive. AI can help identify underserved segments, structure financing for small and medium-enterprises (SMEs) and youth programmes, and track social outcomes alongside environmental metrics. When SMEs and youth programmes thrive, they create jobs and opportunities that strengthen social fabric and reduce inequality.

As AI becomes more deeply embedded in financial decision‑making, strong governance is essential to maintain trust and avoid harmful consequences. Without proper oversight, AI can widen information gaps, reinforce systemic biases or amplify sustainability claims that lack real impact.

At the same time, digital capabilities vary widely across regions and closing that gap is vital. Responsible AI should foster inclusivity, ensuring emerging economies have the tools and infrastructure to meaningfully participate in the climate finance ecosystem.

While strong governance and inclusivity are necessary, systemic challenges demand systemic solutions and leading institutions are already demonstrating what this looks like.

FAB’s sustained commitment to mobilize capital and its AI Innovation Hub with Microsoft to drive responsible innovation in financial services, and the European Investment Bank’s global standards on climate-risk transparency and sustained investment into renewable energy and climate adaptation are just two examples. Meanwhile, Cisco’s AI + Climate Innovation Lab combines blended finance with technology to support on-the-ground climate solutions in areas such as regenerative agriculture and wildfire resilience.

These efforts demonstrate how technology, capital and policy can work together to scale solutions and show collaboration is key to protecting families from climate disasters, strengthening food systems and creating sustainable jobs worldwide.

Global climate finance has reached record levels, but the gap between needs and flows remains substantial. To unlock AI’s potential in climate finance, three priorities stand out for leaders in finance and policy.

The future of climate finance will be measured not by capital committed, but by capital deployed, and the real-world transformations it enables. AI, governed responsibly and applied strategically, can help transform climate finance from a story of under‑delivery into one of scaled, inclusive impact.

By turning noise into insight and pledges into projects, AI can support a global transition where capital flows more quickly and fairly to the solutions that will define a climate‑resilient future.