The International Institute for Sustainable Development (IISD) provides the July update on global developments in climate finance.
July 2016 Climate Finance Update: Meetings Call for Access, Mobilization, Scaling Up
During the month of July, a number of high-level meetings highlighted the need for enhanced focus on climate finance. Resilience and disaster recovery projects in Asia and Africa received new financing. Climate funds launched calls for readiness and private sector support projects, and a number of entities reported on lessons learned from climate finance in agriculture, forests, gender mainstreaming and regional resilience investment planning.
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).
High-level Meetings Call for Access, Scaling Up Climate Finance
Climate finance-relevant ministerial and high-level meetings in the month of July included the seventh Petersberg Climate Dialogue (4-5 July), the High-level Political Forum on Sustainable Development (HLPF, 11-20 July), the Food and Agriculture Organization of the UN (FAO) Committee on Forestry (COFO) meeting (18-22 July) and the Group of 20 (G20) Finance Ministers and Central Bank Governors’ meeting (23-24 July).
The Petersberg meeting, focused on the theme of ‘Making the Paris Agreement a Reality,’ heard calls for expedited work on the rulebook of the Paris Agreement on finance, and the need to create a “simplified and accessible mechanism for climate finance.”
The HLPF, held under the banner of ‘ensuring that no one is left behind,’ included a moderated dialogue on challenges in mobilizing means of implementation (MOI) at the national level, and a ministerial session on unlocking MOI for SDGs and creating an enabling environment. At a side event on integrating climate change and sustainable development planning, civil society representatives stressed, inter alia, the need for long-term sectoral strategies for enabling developing countries to identify their capacity and financing needs.
The meeting of the COFO, held during the World Forest Week, saw a high-level dialogue on forests and climate change, which explored institutional frameworks, funding and partnerships to strengthen the implementation of climate actions in the land-use sectors, with a particular focus on developing countries.
The third meeting in 2016 of the G20 finance ministers and central bank governors marked the first time that green finance featured on the agenda. The meeting communiqué recognizes scaling up of green finance as a necessary condition for supporting environmentally sustainable growth.
Also, the leaders of the Smaller Island States (SIS) of the Pacific Islands Forum adopted a strategy for the Cook Islands, Kiribati, Nauru, Niue, Palau, the Marshall Islands and Tuvalu to highlight these countries’ common vulnerabilities in five areas, vis-à-vis the broader regional policy agenda. In the area of climate change, the strategy, inter alia, describes strengthening access to, and delivery on, climate finance as the “single most important priority for the SIS,” stressing the need for “collective, coordinated and targeted approach… to identify options.”
The Low Emission Development Strategies (LEDS) Partnership reported on the Asia LEDS Forum 2016 and the Asia LEDS regional workshop, held from 27-29 June in Hanoi, Viet Nam, which focused on the themes of ‘mobilizing finance for priority actions’ and ‘mechanisms that catalyze finance for grid-connected clean energy in Asia.’ The events sought to support the region’s countries in mobilizing finance for the implementation of LEDS, in line with their nationally determined contributions (NDCs), including by developing recommendations for governments and the Asia LEDS Partnership.
Green Bonds in Spotlight
The UNFCCC wrote on green bonds, an instrument first launched in 2008 by the World Bank to finance projects with environmental gains, noting that “analysts predict strong future growth fueled by demand, environment-friendly projects and the adoption of the Paris Climate Change Agreement” despite “question marks and problems to solve,” such as misuse of proceedings. Experts suggest green bonds can also serve as a tool to implement the Paris Agreement. The UNFCCC article, however, explains that, while green bond sales are expected to grow from US$42 billion in 2015 to more than US$50 billion in 2016, these levels represented only 0.06% of the global bond market in 2015.
In July, the government of the state of Victoria, Australia, launched an AUD300 million green bond to finance a number of existing and new low-carbon projects.
Private Sector Lends Support to Carbon Pricing, Rating Agency Incorporates Climate Risk
In Canada, close to 20 companies representing, among others, the forest, retail and aviation sectors, joined the World Bank’s Carbon Pricing Leadership Coalition (CPLC), a multi-stakeholder initiative to identify and address challenges to the use of carbon pricing. [World Bank Press Release]
The bond credit rating agency Moody’s Investor Service announced it will use countries’ national climate plans, specifically the intended nationally determined contributions (INDCs) submitted in support of the Paris Agreement, in its analysis of the credit implications of carbon transition risk. The agency will use four categories in its carbon transition risk assessments: uncertainty regarding the pace and detail of emissions policies; direct financial effects due to higher research and development (R&D) costs, and capital expenditure and operating costs; changes in demand; and technology developments and disruptions.
Resilience and Disaster Risk Recovery Projects Receive Financing in Africa, Asia
During the month of July, climate resilience projects focusing on both the rural and urban environments received funding in Niger, Uganda, Viet Nam and China, in addition to disaster risk training and recovery efforts in the Northeast Asia region and Myanmar.
The Adaptation Fund approved two climate resilience projects, in Niger and Uganda. In Niger, a US$9.9 million project will introduce modern irrigation techniques to support the resilience of agriculture to climate change and, consequently, food security in the country. In Uganda, US$7.8 million in funding will be targeted at enhancing community resilience through catchment-based integrated water management.
Asia and the Pacific
Viet Nam and the World Bank signed agreements for loans and credits, totaling US$560 million, aimed at supporting urban development, climate resilience and sustainable livelihoods in the Mekong Delta. Under the two projects receiving the financing, measures will be taken to reduce flood risk, enhance city authorities’ disaster risk management capacity, and improve farmers’ land and water management practices through climate-smart planning and improved climate resilience. The IISD RS reported on one of the projects, the Mekong Delta Integrated Climate Resilience and Sustainable Livelihoods Project, in June 2016.
In China, a US$317.5 million sustainable urbanization project with climate change mitigation and resilience benefits will receive US$150 million in financing from the World Bank. The project will target cities and towns surrounding the fast-growing Ningbo Municipality area by regenerating urban zones, improving public transport services, supporting non-motorized transportation and taking measures to reduce flood risks, among other things.
The Republic of Korea will support education and training for disaster risk reduction (DRR) through a five-year US$10 million agreement with the UN Office for Disaster Risk Reduction (UNISDR). The funding, targeted at the UNISDR Office in Northeast Asia and the Global Education and Training Institute, will support the training of local and national leaders in furthering the understanding of how the Sendai Framework for Disaster Risk Reduction can be implemented at different levels.
In Myanmar, the World Bank approved US$200 million in financing for the country’s Flood and Landslide Emergency Recovery Project, which will include building climate-resilient road infrastructure and supporting livelihoods and recovery of the agriculture sector in the aftermath of flood and landslides that hit parts of the country in 2015.
Lessons from Climate-smart Land Management, Climate-resilient Investment Planning, REDD+, Gender Mainstreaming Explored
The World Bank reported on results of its Sustainable Land Management Project II in Ethiopia: by supporting climate-smart practices, since 2008, the project has benefited more than 700,000 people through increased crop yields and income, and issuance of land holding certificates. In China, another World Bank-supported project focusing on sustainable and climate-smart agriculture is benefiting 380,000 rural households through improved irrigation infrastructure and financial support and training for local water user associations. [World Bank Press Release on Ethiopia]
A short brief published by the Cooperation in International Waters in Africa (CIWA), a partnership between the World Bank and the Governments of Denmark, the EU, Norway, Sweden, the Netherlands and the UK, lays out the results of a project led by the Niger Basin Authority, with support from CIWA, to develop a climate resilience investment plan consisting of 246 resilience-building investments valued at US$3.1 billion. The next steps will include the development of a monitoring and evaluation methodology for the plan.
The Center for International Forestry Research (CIFOR) reported on a study that examines four bilateral REDD+ agreements Norway has entered, in the frame of results-based aid (RBA), drawing lessons for the design and implementation of future REDD+ mechanisms.
The Asian Development Bank (ADB) launched a study that evaluates the Bank’s experience in mainstreaming gender equality in climate change in projects funded by the Climate Investment Funds (CIF), focusing on four areas: mitigation; adaptation; co-benefits; and standard design elements. Among the study’s main recommendations are to increase and expand projects that place greater emphasis to mitigation or adaptation and gender equity their design elements.
Also in July, the UN Environment Programme (UNEP) Inquiry into the Design of a Sustainable Financial System launched a report that highlights experiences by 13 developing countries with green finance.
Support for Readiness: Adaptation Fund Calls for Applications
Climate funds’ efforts to support to climate finance readiness continued in July. The Adaptation Fund launched a call for proposals for four small grants under its Climate Finance Readiness Programme. The grants are aimed at supporting the capacity the Fund’s national implementing entities (NIEs) to access, receive and manage adaptation finance. The deadline for submitting applications is 31 August 2016.
The Green Climate Fund (GCF) announced its invitation to countries to submit concept notes for participation in the pilot phase for additional modalities to enhance direct access, which will allocate a total of US$200 million for around 10 pilot projects. The deadline for the second batch of submissions is 31 January 2017.
In July, the Adaptation Fund also organized its annual Global Climate Finance Readiness Seminar, in Washington D.C., US, from 13-15 July. The seminar, which brought together the Fund’s accredited entities partner organizations and other stakeholders, included presentations on funded projects, readiness support, and the Fund’s accreditation and project review processes.
Furthermore, the Government of Uzbekistan launched a national readiness project funded by the German-supported GCF Readiness Programme. The project, which aims to enable direct access to the GCF and is implemented jointly by the UNEP, the UN Development Programme (UNDP) and the World Resources Institute (WRI), will include activities to create an enabling environment for private sector engagement in climate action and to strengthen national capacity to design bankable project proposals. A total of nine countries are receiving technical assistance under the GCF Readiness Programme.
Institutional Developments: GCF Seeks Inputs on Funding Modalities, Adaptation Fund Welcomes New NIE
Under its recently-established pilot programme to support micro-, small- and medium-sized enterprises (MSMEs), the GCF announced a request for proposals (RfP) from qualified financial institutions on projects and programmes that support MSMEs and fit within national climate priorities and the eight GCF strategic impact areas. The first issuance under this pilot programme will total US$100 million. The deadline for applications is 30 August 2016.
The Adaptation Fund approved the accreditation of the Cook Islands’ Ministry of Finance and Economic Management as the Fund’s 24th NIE.