Climate finance has become a fundamental pillar of global efforts to address climate change by supporting mitigation, adaptation, resilience-building, and sustainable development. Since the adoption of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, the global climate finance architecture has evolved through successive international agreements, including the Kyoto Protocol, the Paris Agreement, the Glasgow Climate Pact, and the establishment of the Loss and Damage Fund. Despite these developments, significant disparities persist in the mobilisation, allocation, accessibility, and effectiveness of climate finance, particularly in developing and climate-vulnerable regions such as South Asia. The region faces increasing climate-related risks, including floods, cyclones, droughts, and glacier retreat, sea-level rise, and biodiversity loss, while facing substantial financial constraints in implementing climate mitigation and adaptation measures. This review paper examines the evolution, current landscape, major challenges, future prospects, and policy implications of climate finance in South Asia. Adopting a systematic narrative review approach, the study synthesises evidence from peer-reviewed journal articles, books, institutional reports, policy documents, and publications from international organisations, including the UNFCCC, IPCC, ADB, World Bank, OECD, CPI, GCF, and UNEP. The review analyses the principal sources, financial instruments, sectoral priorities, country-specific patterns, governance mechanisms, and institutional arrangements shaping climate finance across South Asia.

The findings indicate that although climate finance to South Asia has increased over the past decade, available financial resources remain well below the region’s investment requirements. Major challenges include inadequate funding, unequal distribution across countries and sectors, complex access procedures, weak institutional capacity, governance deficiencies, limited private-sector participation, debt sustainability concerns, and fragmented monitoring and reporting systems. The effectiveness of climate finance will depend on stronger international cooperation, enhanced domestic resource mobilisation, institutional reforms, improved governance, integration of climate finance into national development planning, and expanded regional collaboration. The paper concludes with policy recommendations to strengthen the mobilisation, allocation, governance, and utilisation of climate finance. By integrating global developments with regional perspectives, this review contributes to the growing climate finance literature and provides a useful reference for researchers, policymakers, development partners, and financial institutions working towards climate-resilient and sustainable development in South Asia.