The International Institute for Sustainable Development (IISD) provides the May update on global developments in climate finance.
June 2016 Climate Finance Update: Funds Meet, Non-state Actor Engagement Accelerates
This issue of the Climate Finance Update features recent global and regional news on climate finance activities by a variety of intergovernmental actors. Several climate funds met in June to make decisions on strategy and funding. A number of disaster recovery and resilience projects received funding in Asia and Africa. The World Bank highlighted developments in carbon pricing, and some concrete measures were taken to increase the engagement of non-state actors in climate financing.
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).
Key Climate Funds Meet on Governance
In June, several climate funds held meetings, discussing matters of governance and making funding decisions. The 50th meeting of the Global Environment Facility (GEF) Council took place in Washington, D.C., US, from 7-9 June, establishing a new trust fund for the Capacity-building Initiative for Transparency (CBIT) created by the Paris Agreement, and approving ten climate change projects. Following the meeting, the 20th meeting of the Council for the Least Developed Countries Fund and Special Climate Change Fund (LDCF/SCCF) took place on 9 June, at the same location.
The Climate Investment Funds (CIF), managed by five multilateral development banks (MDBs), held their governing body meetings from 12-17 June in Oaxaca, Mexico, discussing, inter alia, the Funds’ strategic directions and shedding light on experiences of countries participating in the CIF Forest Investment Program (FIP). Another meeting to focus on forests, specifically REDD+, was that of the World Bank’s Forest Carbon Partnership Facility (FCPF), which convened from 20-22 June in Paris, France.
At the end of the month, from 28-30 June, the Board of the Green Climate Fund (GCF) met in Songdo, Republic of Korea, to approve funding for nine projects, totaling US$257 million, of which seven focus on adaptation.
Attention Turns to Private Sector, Civil Society
After the recognition by the Paris Agreement’s accompanying decision of the role and efforts of non-party stakeholders in addressing and responding to climate change, recent months have seen these actors come into the limelight.
The 2016 Business and Climate Summit, which took place from 28-29 June in London, UK, focused on the role of businesses in transitioning into the net-zero carbon economy.
The CIF meetings resulted in a call for the CIF to “develop options for a financing vehicle to attract private capital investors for renewable energy and clean technology projects in developing economies.” According to some estimates, a total of US$90 trillion in investments in sustainable infrastructure will be required over the next 15 years. CIF Manager Mafalda Duarte explained that scaling up investments will be particularly important in areas that “have lacked funding or for technologies on the threshold of becoming economically viable.”
In Cambodia, a US$1.4 million scheme, funded by the CIF Pilot Program for Climate Resilience (PPCR), will support 19 civil society organizations (CSOs) in mainstreaming climate resilience into their operations, including through community-based disaster risk reduction (DRR) projects. According to the Asian Development Bank (ADB), which is helping administer the project, “strong community involvement in drawing up climate change adaptation strategies improves their uptake and sustainability as it gives communities a strong sense of ownership.”
The 2016 Climate Business Forum of the International Finance Corporation (IFC), which took place from 14-15 June in Bogotá, Colombia, focused on private sector opportunities in, and innovative approaches to, climate-smart projects in the Latin America and the Caribbean. Addressing the Forum, ICF’s Director for Climate Change Christian Grossmann stated that the Paris Agreement and its long-term temperature goals had paved the “path for the active engagement of the private sector,” noting that “a growing number of companies realize that creating a low-carbon business strategy can also be beneficial for their bottom-line.” A paper launched during the event, titled ‘Climate-Smart Investment Potential in Latin America: A Trillion Dollar Opportunity,’ estimates that investment opportunities in renewable energy and energy efficiency in Brazil alone total US$182 billion through 2030.
The ADB has released a publication that presents an overview of the Bank’s experience in building a CIF private sector portfolio. The publication shows how “funding has been able to encourage greater private sector investment in climate-relevant sectors by using innovative financial instruments to address risks.” The ADB also published a report presenting the CIF development initiatives it administers, totalling US$1.5 billion, which include: 22 investment plans in 18 developing countries; regional programmes under the Clean Technology Fund Dedicated Private Sector Program; and private sector adaptation projects in Cambodia.
World Bank Continues to Highlight Carbon Pricing, Markets
In June, the World Bank reported on various developments in the area of carbon pricing, which it strongly advocates for. It highlighted how Royal DSM, a Dutch nutritional ingredient company, has put an ‘internal price’ on carbon of €50/tonne, aimed at “future proofing the business by changing the mindset when reviewing large investment decisions.”
According to an executive briefing by the World Bank and the International Monetary Fund (IMF)-led Carbon Pricing Leadership Coalition, “the key challenge to acceptance of carbon pricing is the fear of reduced economic competitiveness, but evidence to date shows little impact.” The paper suggests that political engagement and targeted policies can address related concerns.
A study by the World Bank assesses the impacts of meeting China’s target of reducing the country’s carbon dioxide (CO2) intensity of the gross domestic product (GDP) by 60-65% in 2030 compared to 2005 levels through carbon pricing. It finds that “carbon pricing that starts at a lower rate and gradually rises until it achieves the intensity target would be more efficient than a carbon price that remains constant over time.”
Carbon market stakeholders from China, Japan and the Republic of Korea met during the Carbon Expo event to discuss ways to reduce the costs of emission reductions through regional cooperation, with an eye on a possible ‘North East Asia Carbon Market.’
Also, the World Bank’s Partnership for Market Readiness (PMR) launched its China Carbon Market Monitor for the first quarter of 2016, which highlights, inter alia, that “China will follow a principle of ‘unification with flexibility’ in linking the national market to its pilot markets, to ease the transition, which is expected to take place in early 2017.”
Disaster Recovery, Climate Resilience Receive a Major Boost in Asia
The month of June saw major announcements in funding for climate change planning in Africa, and disaster relief and resilience in Asia, with Viet Nam in particular receiving important financing for its national climate change adaptation and mitigation efforts.
Following its governance meetings, the CIF endorsed three countries’ investment plans: Côte d’Ivoire’s US$24 million forest plan, focusing on restoring the country’s forest cover; Mozambique’s US$24 million forest plan, focusing on REDD+; and Cambodia’s US$30 million renewable energy plan, comprising a solar energy development programme for both small- and utility-scale renewables. In addition, CIF granted the Gambia US$1.5 million for the preparation of a national Strategic Program for Climate Resilience.
In the area of climate-resilient infrastructure and planning, three projects in Africa will receive a total technical assistance grant of US$347,000 from the Africa Climate Change Fund (ACCF), aimed at knowledge and capacity building, and facilitating partnerships for their climate-proofing. The projects involve Benin, Togo, Zambia, Zimbabwe, the Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC).
Also, four adaptation projects in South Africa will receive US$2.44 million through the Adaptation Fund’s Community Adaptation Small Grants Facility to support climate change responses that are identified and implemented by affected local communities. The projects focus on: adapting villages to increasing temperatures and water scarcity; livestock adaptation; sustainable land and water use in agriculture; and access to financial services.
Asia and the Pacific
In Fiji, the ADB approved a US$50 million emergency assistance loan to finance disaster recovery reconstruction, including building schools and housing, in the aftermath of Tropical Cyclone Winston, which struck the country in February 2016. In Sri Lanka, following Tropical Storm Roanu on 15 May, the ADB will provide a US$2 million grant from the Bank’s Asia Pacific Disaster Response Fund, which will be used for the purchase of emergency relief materials and supplies and help restore community services affected by flooding and landslides in the Western parts of the country.
In Vanuatu, reconstruction efforts after Tropical Cyclone Pam, which struck the islands in March 2015, will continue supported by a total of US$50 million (US$25 million credit and US$25 million grant), which will be used towards repairs and climate-resilient upgrades of key infrastructure across the country.
In the area of resilience support, the World Bank approved a US$310 million credit for the Mekong Delta Integrated Climate Resilience and Sustainable Livelihoods Project, which will support the development of enhanced tools for climate-smart planning and climate-resilient land and water management practices in selected provinces of the Mekong Delta in Viet Nam. The project is expected to enhance the climate resilience and sustainable livelihoods of 1.2 million people.
The World Bank also approved a US$90 million credit for Viet Nam for the strengthening of the country’s climate change and green growth agenda. The credit is the first in a series of three that Viet Nam is expected to receive under its national Support Program to Respond to Climate Change, and it will be used towards coastal zone planning and management, green public investments and water efficiency improvements, among others.
In India, resilience to climate change in the water-stressed Vennar Sub-basin of the Cauvery Delta in Tamil Nadu will be improved with the help of a US$100 million loan from the ADB that will target strengthening a key irrigation system and improving water management.
In the Philippines, a team of experts is working to review and revise the country’s national building code with the aim of mainstreaming of DRR measures into the code. The project is supported by a grant from the Japan-World Bank Program for Mainstreaming Disaster Risk Management in Developing Countries.
Latin America and the Caribbean
In Jamaica, a project aimed at enabling investments in efficient water technologies and practices in newly-built housing through promoting related business opportunities and entrepreneurship will receive a US$5.75 million loan from the CIF Pilot Program for Climate Resilience (PPCR) and US$1.1 million in financing for technical assistance from the Inter-American Development Bank (IDB) and Nordic Development Fund (NDF).
A study by the World Bank on Mexico found that disaster funds can have a significant positive impact on local economic activity and reconstruction. The paper concludes that “access to disaster funding boosts local economic activity between two and four percent in the year following the disaster,” and “that the positive impact of disaster funds on local economic recovery can persist for as long as a year and a half after the disaster.”
Côte d’Ivoire, Latin America and Caribbean Region Receive Readiness Support
The ACCF approved a US$430,000 grant to Côte d’Ivoire for enhancing the country’s capacity to attract international climate finance. The funding will be used to develop and structure two projects that will be submitted to the GCF and Adaptation Fund.
Also in June, the Adaptation Fund and the Central American Bank for Economic Integration (CABEI) co-hosted a regional climate finance readiness workshop in Tegucigalpa, Honduras, aimed at stakeholders from Latin America and the Caribbean. Over the coming months, the Adaptation Fund will host readiness workshops in Washington D.C., US (13-15 July), Madhya Pradesh, India (23-25 August), and Casablanca, Morocco (6-8 September).
Institutional Developments: GCF Gains New Partners, Funds Report on Activities
In June, two accredited entities formalized their relationship with the GCF by signing an Accreditation Master Agreement (AMA). The World Meteorological Organization (WMO) became the first UN agency to sign the AMA, whereas Acumen Fund, Inc., a not-for-profit global investment fund, became the first private sector accredited entity to do so. Already in 2015, the GCF approved Acumen’s first project proposal, aimed at supporting off-grid solar energy access in East Africa.
The GCF published a booklet titled the ‘Green Climate Fund Insight,’ which provides an introduction to the Fund. The GCF also launched, on its website, the ‘GCF Spotlight’ series, in which National Designated Authorities share insights on national climate action and building partnerships. The first Spotlights include interviews of representatives of the Gambia, Antigua and Barbuda, the Cook Islands and Barbados.
The NDF’s newsletter ‘Climate in Focus,’ launched in June, describes how the Fund supports climate change projects in Africa, Asia and Latin America.
The ACCF released its annual report for 2015, which highlights, inter alia, that the ACCF approved grants totaling US$2.53 million for five African Countries to advance and scale-up climate finance readiness, and one multi-country grant that will create climate change profiles for 54 African countries. It explains that, in late 2015, Italy made a commitment of €4.7 million to the ACCF, doubling the size of the German-supported fund to €9.4 million.
The UN Environment Programme Finance Initiative’s (UNEP FI) Portfolio Decarbonization Coalition announced it will be awarding a €12,500 grant for research projects with potential applications in the field of investment management under the title ‘Aligning Investment Portfolios with a Low Carbon Economy.’ The deadline for applications is 31 August 2016.