Rising Public Climate Finance Flows Only Tell Part of the Story

Just in time for the international climate community coming together from December 2-15 for this year’s international climate summit, the COP24 in Katowice, Poland, two complementary sets of climate finance data and reports, one by the UNFCCC’s Standing Committee on Finance (SCF), the other by the Organisation for Economic Co-operation and Development (OECD), have been released covering the years 2015-2017. Both draw an – albeit admittedly incomplete and fragmentary – picture of climate finance flows over the last few years. They are bound to be read and dissected in multiple ways, giving evidence to some that climate finance flows are increasing and on track to reach the USD 100 billion per year by 2020 goal, to others evidence that the delivery of climate finance from developed countries to developing countries still falls woefully short of what was promised, let alone what is needed. And they will surely influence how finance will be discussed at COP24, where, as seems habitual by now, the issue will be one key deciding factor for negotiation success.

Both the SCF’s Biennial Assessment and Overview of Climate Finance Flows (BA) covering 2015-2016 and the OECD Report on public climate finance flows from developed to developing countries 2013-2017 outline that public finance flows have risen – the good news. According to the BA, public climate finance flows from developed to developing countries amounted to USD 55.7 billion in 2016, and thus increased by 30 percent over 2014 levels. Some 60 percent of this funding flowed through bilateral and regional channels, another 35 percent through multilateral development banks. Multilateral climate funds made up only 4.3 percent of these flows in 2015-2016, but have risen since, owing largely to the ramped up operations of the Green Climate Fund, which in 2018 alone approved projects and programs worth USD 2.1 billion, but only started funding in 2015. The OECD report details a steady rise of public climate finance from developed to developing countries from USD 39.5 billion in 2013 to a total of USD 56.7 billion in 2017 – an increase of 44 percent since 2013.  

However, these numbers tell only part of the story. By design, both reports leave out other climate finance relevant issues needed to complete the picture of public climate finance flows. While both reports include some information on the quality of public climate finance provided, such as how much of it is delivered in grants versus loans, they are largely silent on a whole set of qualitative and normative questions and issues that should provide the framework for how public climate finance is mobilized, governed and disbursed. These include questions such as the additionality or predictability of climate finance. Or issues of adequacy of climate finance provision: Should adaptation finance be delivered to some of the poorest developing countries or Small Island Developing States in the form of loans? Or is it legitimate to include flows from export credit agencies (where the purpose is clearly to generate income in the developed countries providing the finance) as public climate finance delivered, as the OECD report does? And how to account for and report on the gender-responsiveness of climate finance and ensure that public climate finance flows deliver equitable benefits to both men and women in a way that contributes to more gender equality?

Some answers and recommendations to this set of interwoven questions are delivered by an information brief on the Normative Framework of Public Climate Finance that ODI and the Heinrich Böll Stiftung North America have released as part of an annual update of their Climate Finance Fundamentals (CFF) briefing series on the eve of COP 24.  Two additional briefings, one exploring more in-depth the gender dimensions of climate finance (CFF10) and one giving an update on the operations of the Green Climate Fund and its climate finance delivery (CFF11) are also available in English, French and Spanish as PDFs here:

• CFF 1 on a Normative Framework for Public Climate Finance
• CFF 10 on Gender and Climate Change
• CFF 11 on the Green Climate Fund (GCF)   

It is laudable that this year’s BA includes some references to the intended gender impact of investments and how this correlates to tracking public climate finance. In contrast, the OECD report does not.  The need to improve tracking and reporting on the gender-related aspects of climate finance, including impact measuring and mainstreaming – one relevant recommendation from the BA –  is thus self-evident to correct a chronic shortcoming in detailing the quality of public climate finance. This is despite the fact that the gender dimension of climate change has for years been addressed as a standing item under the UNFCCC and some major advances in including gender considerations have been made since COP16 was held in Cancun in 2010, which had declared that gender equality and the effective participation of women are important for all aspects of climate change. 

The Paris Agreement also anchored gender equality and the empowerment of women as a core principle in its pre-amble. Yet, while mandating gender-responsive adaptation and capacity-building efforts – and thereby confirming the dominant narrative of women as climate change victims – the Paris Agreement failed to integrate gender-specific language in its mitigation, technology or finance articles. At COP24, gender and women’s rights groups and human rights advocates will therefore double up on their efforts to bring at least some gender and human rights language into the operational guidelines of the Paris Rulebook. In Katowice, COP24 under the standing agenda item on ‘gender and climate change’ will also consider progress on some first actions under the two-year Gender Action Plan for the UNFCCC, which was approved last year in Bonn.  An important focus of this GAP is intended to be on means of implementation, especially technology development and transfer as well as finance.

The two operating entities under the UNFCCC Financial Mechanism, the Global Environment Facility (GEF) and the Green Climate Fund (GCF) – which will also serve in the same function for the Paris Agreement – both have dedicated gender policies and separate gender action plans, but further improvements are needed.  The GEF, which has had a gender mainstreaming policy since 2011, only last year in November approved a new policy on gender equality in response to an evaluation of GEF gender mainstreaming efforts by its own accountability body. The body found that only 5 percent of a sample of 70 projects under its climate finance focal area were successfully integrating gender, while almost half of projects analyzed were judged to be largely gender-blind. The GCF started out as the first multilateral climate fund to integrate a gender dimension from the outset by anchoring gender mandates in key operational policies governing accreditation of implementation partners, the investment criteria and its results management framework. But progress has stalled. The GCF’s own gender policy and action plan was approved as an interim policy in 2015 with a mandated review, but the GCF Board in 2018 was unable to agree on a forward looking new gender equality policy and action plan. 

In 2018 the GCF has marched forward in approving another 42 project and program proposals worth USD 2.1 billion in GCF funding, including 19 proposals worth USD 1 billion at its last Board meeting in October in Bahrain. Its portfolio of approved projects is now 93 projects worth USD 4.6 million. The surge in approvals came despite various set-backs in efforts to improve core policies and guidelines. These would provide more clarity to the ever-growing family of GCF implementing partners on the criteria under which financial resources would be provided and seeking to increase the overall quality and impact of projects and programs. With the growing capacity of the GCF to program more funding faster, the GCF’s resources collected under its initial resource mobilization (IRM) period have dwindled, further depleted by the non-payment of the remaining USD 2 billion in the promised USD 3 billion contribution of the United States and hit by significant currency fluctuations.  With USD 5.5 billion now committed by the fund out of, by some accounts, a new total of only USD 7.1 billion from the original IRM, the GCF at its last Board meeting in Bahrain in October formally triggered the first replenishment process.  It is to be completed by October 2019.

Until then, the GCF will have to carefully manage its commitment authority of just USD 1.3 – 1.4 billion to be programmed over three Board meetings in 2019. Not surprisingly, while not formally up for discussion at COP24, the issue of GCF replenishment, its scale, length of the replenishment period and policies for contributions is bound to play a role in negotiations on climate finance in Katowice. The negotiation tracks on climate finance will center around efforts to agree on reporting guidelines for ex-ante and ex-poste public climate finance provisions. It is not just more climate finance that will be asked for. Negotiators acknowledge, even though they might not agree on the details, that we need to understand the quality of public climate finance flows. This includes their predictability, additionality, impact and ultimately what can or should be counted to get a fuller picture and tell the real public climate finance story.