The International Institute for Sustainable Development (IISD) provides the April update on global developments in climate finance.
April 2016 Climate Finance Update: Key Meetings Mobilize Action, Adaptation Put under the Spotlight
In the Paris Agreement, agreed upon by 195 UN Member States in December 2015, countries agreed to make “finance flows consistent with a pathway towards low greenhouse gas (GHG) emissions and climate-resilient development.” Developing countries will receive financial resources for both mitigation and adaptation actions, while developed countries are expected to continue to lead in mobilizing climate finance from a variety of sources, with public funds playing a significant role in reaching the previously agreed US$100 billion annual target by 2020. Monthly IIDS RS Climate Finance Updates aim to help track multilateral financing to support the finance goal agreed under the UNFCCC, which will in turn contribute to the implementation of Sustainable Development Goal (SDG) 13 (Take urgent action to combat climate change and its impacts).
Private Banks Pledge US$7 billion, World Bank Launches Action Plans
In April 2016, a major meeting of relevance for climate finance took place: the 2016 World Bank Group – International Monetary Fund (IMF) Spring Meetings in Washington D.C., US. In parallel, finance ministers of the Group of Twenty (G20) and the Vulnerable Twenty Group (V20) met. While the G20 called for scaling up climate finance, the V20 stressed the need for a financial system consistent with the 1.5°C limit.
Prompted by these meetings, the month of April saw some major announcements on climate finance, as well as the launch of strategic plans by the World Bank Group.
Eight private banks and investors pledged US$7 billion in support of an initiative by the Bank of America to stimulate US$10 billion in investments for clean energy and sustainable development. The World Bank Group launched its Climate Change Action Plan, aimed at supporting countries in delivering on their nationally determined contributions (NDCs, in other words countries’ national climate plans) under the UNFCCC, and sets targets for 2020 in areas with high impact.
The World Bank Group also launched its ‘Forest Action Plan FY16-20’ that seeks to integrate the sustainable management of forests more fully into the Bank’s development priorities and streamline interventions across the World Bank Group and forest-related funds. Also, the International Finance Corporation (IFC), part of the World Bank Group, released its Climate Implementation Plan, which aims to, inter alia: scale up climate investments to 28% of IFC’s annual financings by 2020; catalyze US$13 billion in private sector capital annually by 2020 to climate sectors; and account for climate risk (both physical and carbon asset-related) in IFC’s investment selection.
Other climate finance-related meetings in April included the 12th meeting of the UNFCCC Standing Committee on Finance (SCF), which assists the Conference of the Parties (COP) in exercising its functions in relation to the Convention’s Financial Mechanism. The meeting considered, inter alia, long-term finance, different policy approaches to financing for forests, and the 2016 biennial assessment and overview of climate finance flows.
Momentum Builds on Carbon Pricing, Attention to Climate Risk
In a joint vision statement issued on the eve of the Paris Agreement signing ceremony by the Carbon Pricing Panel, six Heads of State and Government, two city and state leaders, and the Heads of the World Bank Group, the IMF and the Organisation for Economic Co-operation and Development (OECD) urge the international community to enhance cooperation on, broaden and deepen carbon pricing.
The World Bank’s Partnership for Market Readiness (PMR) held its Partnership Assembly in Lima, Peru. Also, the World Bank announced that Thailand will receive policy support from the PMR for the development of market-based instruments for emissions reductions.
On climate risk disclosure, the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TFCD), which is working at the request of the G20 to develop “voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders,” presented its ‘Phase I Report’ to the FSB. The report sets out the scope and high-level objectives of the TFCD’s proposed work and a set of principles of disclosure to guide the Task Force’s work in Phase II. The European Investment Bank’s (EIB) Climate Awareness Bonds (CAB) April Newsletter highlighted how green bonds “can constitute a hedge against carbon exposure, as issuers are typically well advanced in anticipating business risks associated with climate change. EIB also priced a new ten-year US$1.5 billion CAB benchmark.
Funds Focus on Access and Readiness
The Green Climate Fund (GCF) organized a “readiness week” for its 13 accredited direct access entities and National Designated Authorities and Focal Points from 25 countries at its headquarters in Songdo, the Republic of Korea. The event was aimed at facilitating knowledge sharing for developing country-driven projects and programmes for low-carbon and climate-resilient development.
The Adaptation Fund held its second climate finance readiness webinar, aimed at the Fund’s 23 National Implementing Entities and focusing on “managing knowledge throughout the accreditation, project development, implementation and evaluation processes.”
The African Guarantee Fund (AGF) Board of Directors agreed on the establishment of a green guarantee facility (GGF) to support African small and medium-sized enterprises (SMEs) investing in green growth and climate resilient development, supported by €7.6 from the Nordic Development Fund (NDF).
Climate Planning Advances on Country and City-level
The African Development Bank (AfDB) Board of Directors approved Ethiopia’s Country Strategy Paper for 2016-2020, which is tied to Ethiopia’s second Growth and Transformation Plan that aims to achieve a climate resilient, green economic transformation by, inter alia, “fostering a stable macro-economic framework and climate resilient green economy.”
The City of Gaziantep, Turkey, launched a climate change action plan, which received support from the European Bank for Reconstruction and Development (EBRD) and will aim to reduce greenhouse gas (GHG) emissions through renewable energy, energy efficiency and measures in the transport and agriculture sectors. [EBRD Press Release] A brief by the World Bank summarizes the scope and aims of the Global Platform for Sustainable Cities (GPSC), launched in March 2016, that will “provide cities with holistic support from the planning and design phase through to implementation and management” through a multi-agency approach.
Thailand Launches Ozone, Climate-friendly Air Conditioning Technology
A Thailand manufacturer launched a technology for air conditioners that does not deplete the ozone layer, is more energy-efficient and reduces GHG emissions in residential air conditioners “by one-third.” Thailand is the second-largest producer of air conditioners and foam in the world, manufacturing 12 million air conditioners annually. The project, which targeted reductions of hydrochlorofluorocarbon (HCFC) gases in manufacturing processes, received support from the Multilateral Fund for Implementation of the Montreal Protocol.
Adaptation in the Spotlight: Several Countries Receive Disaster Relief, Support for Resilience
April brought much news on adaptation finance. A number of African and Asian countries affected by natural disasters received support from multilateral development banks (MDBs). Several disaster risk management, resilience and adaptation projects and initiatives supported by MDBs were also launched and reported on.
The AfDB announced a US$549 million relief package for 14 countries affected by drought in Eastern and Southern Africa. According to AfDB, “in recent years, droughts and floods have been occurring with increased severity, frequency and variability in many parts of the [region].”
The World Bank approved a US$200 million loan for Morocco’s ‘Integrated Disaster Risk Management and Resilience Program-for-Results’ that aims to improve the institutional framework and strengthen financial resilience to natural disasters of targeted populations. The World Bank and France will support countries in West Africa to strengthen the resilience of their coastal areas to climate change and to identify investment opportunities for the development of their ‘blue’ economies.
The Africa Climate Resilient Infrastructure Summit, organized by the African Union Commission (AUC), the UN Economic Commission for Africa (UNECA) and the World Bank in Addis Ababa, Ethiopia, featured a panel discussion on the Africa Climate Resilient Infrastructure Facility (ACRIF), originally launched at the UN Paris Climate Change Conference in December 2015, which will “will assist governments, planners and developers in Africa to integrate climate change in project planning and design, thereby attracting climate finance from the Green Climate Funds and other sources.”
The Mountain Partnership reported on a climate change adaptation project that will implement research-based interventions to support the food security and reduce the vulnerability of smallholder farmers in Ethiopia, Kenya and Tanzania, which is supported by Finland.
The AfDB published three short briefs highlighting adaptation success stories in: community-based adaptation in the agriculture sector in Malawi; climate resilience with health and job benefits in the water sector in Cameroon; and community empowerment in the agriculture sector in Burundi.
The Asian Development Bank (ADB) will provide a US$200,000 grant to the Marshall Islands to help the country tackle the effects of a severe drought, which has persisted since January 2016. The ADB, as part of a UN-led emergency response, will also provide a US$2 million grant to Mongolia to support herders affected by a protracted climate disaster characterized by an unusually dry summer followed by a heavy winter snow and cold temperatures. The ADB further approved a US$10 million grant from the Japan Fund for Poverty Reduction for the reconstruction of villages in Myanmar following a cyclone. The Myanmar project will include the construction of roads using a “build-back-better” approach for improved climate and disaster resilience.
The Russian Federation announced a US$10 million contribution to UNDP programmes focusing on “mitigating the negative effects of climate change” and supporting the achievement of SDGs in “countries in Europe, the [Commonwealth of Independent States] and beyond.”
In its ‘2016 Annual Evaluation Review,’ the Independent Evaluation at ADB finds that “widening income inequality, slower growth, and climate change are reshaping Asia’s economic landscape.” It warns that “development gains can be worn away by the rising frequency and ferocity of natural disasters, and the degradation of the environment,” and calls for countries to “vigorously promote social inclusion and environmental sustainability.”
Latin America and the Caribbean
In South America, the Inter-American Development Bank (IDB) will provide a US$100 million loan to support Bolivia’s efforts to strengthen national capacity to manage natural disaster risks.
The Adaptation Fund published an ‘Adaptation Story’ brief that highlights the goals, co-benefits and progress of a US$10 million project in Uruguay, launched in 2012, that is building climate resilience of the country’s vulnerable smallholders.
MDBs Report on Climate Finance Activities
In April, two MDBs reported on their activities in 2015. The ADB’s 2015 Annual Report highlights the need to scale up financing in order to support the SDGs and the goal to keep global warming below 2°C above pre-industrial levels. IDB’s Sustainability Report 2015 states that, last year, the Bank committed US$3.8 billion for projects targeting “climate change adaptation and mitigation, renewable energy and environmental sustainability.”
The NDF, in its Annual Report 2015, draws attention to the Fund’s “efforts to strengthen its innovative and catalytic role as a climate finance institution,” which have received recognition by the UNFCCC.
Information resources published in April 2016 included: a booklet on the Global Environment Facility’s (GEF) climate change activities, which notes that approximately two-thirds of overall GEF financing can be considered climate-related; a factsheet explaining the IMF’s policy and advisory work on climate change, and highlighting carbon taxes and energy pricing as effective instruments for achieving the required “radical transformation of the global energy system over coming decades”; and an EIB video that presents “A Beginner’s Guide to Innovative Climate Financing,” which stresses the need to provide increased information to potential investors.