Latest update on climate finance

The International Institute for Sustainable Development (IISD) provides the August update on global developments in climate finance.

 

August 2016 Climate Finance Update: Readiness, Simplified Access to Finance in the Spotlight; Caribbean Disaster Resilience and Relief Gets Support

During the month of August, the focus of multilateral climate financing activities turned to the South, with a number of high-level meetings and technical workshops focusing on access, readiness and the special circumstances of vulnerable developing countries. The Green Climate Fund (GCF) signed its first disbursement agreement and the Adaptation Fund reported a record level of requested support.

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).

Meetings in the South Call for Simplified Access to Finance, Support to Vulnerable

While the Northern Hemisphere saw a quiet month, multilateral meetings in the South drew attention to the challenges and needs of vulnerable developing countries.

In Suva, Fiji, the foreign ministers of the Pacific Islands Forum convened for their first standing meeting, aimed at helping shape the regional political agenda in line with the objectives of the Framework for Pacific Regionalism. At the core of the discussions were the issues of regional cooperation around disaster risk management, responding to the adverse effects of climate change and simplified access to climate finance.

The Climate Vulnerable Forum (CVF) organized a week of leadership events in the Philippines, which marked the start of the CVF presidency by Ethiopia and the inauguration of the Philippines-based CVF South-South Centre of excellence for climate information and services. Incoming CVF Chair Shiferaw Teklemariam Menbacho, Ethiopia’s Minister of Environment, Forestry and Climate Change, outlined as one of the presidency’s priorities “mobiliz[ing] all kinds of support to the most vulnerable countries, including enhanced capacity building assistance to better access climate finance.”

Workshops, Information Resources on Access and Readiness

Developing country readiness and access to climate finance was also the focus of workshops organized by climate funds, while two non-governmental organizations (NGOs) published on experiences and lessons on ‘what makes a good project proposal’ and ‘how developing countries can access climate finance.’

The GCF organized its second regional meeting for the Pacific region, hosted at the Pacific Islands Forum Secretariat headquarters in Suva, Fiji. The event attracted 170 participants representing Pacific Island States, GCF Accredited Entities, development partners, civil society and the private sector. Participants, including ministers, shared experiences in access to GCF funding and discussed areas for improvement in this regard. The meeting included a two-day technical workshop, which focused on developing ideas and concepts into ready proposals, and resulted in a ‘Pacific GCF roadmap’ containing potential proposals for preparation for consideration by the GCF Board.

A climate finance readiness workshop organized by the Adaptation Fund in Mumbai, India, attracted participants from more than 30 countries. The workshop was specifically aimed at increasing the number of the Fund’s National Implementing Entities (NIEs) on the ground, in order to expand the Fund’s reach to the region’s climate-vulnerable communities.

In an interview by the Climate and Development Knowledge Network (CKDN), Mikko Ollikainen, Adaptation Fund Secretariat, shares his views on the characteristics of, and requirements for, a good project proposal, including “respond[ing] to the needs of the recipient and include[ing] needs and priorities of the country and specific stakeholders the project is targeting.”

An article by the World Resources Institute (WRI) summarizes the findings of a meeting between a Senegalese non-governmental organization (NGO) and the Kenyan environmental agency (described by WRI as emerging leaders in acquiring and using climate finance) that centered on challenges in developing countries in accessing, and effectively deploying, international climate finance. The lessons are: develop and maintain a strong relationship with executing partners; create clear procedures to support project implementation; and engage communities throughout the project cycle.

Disaster Resilience and Relief Financing in the Caribbean

In project financing, August was a quiet month. Multilateral financing was directed at disaster recovery and future climate-proofing of roads in the Caribbean.

The Caribbean Development Bank (CDB) and the French development agency, the Agence Française de Développement (AFD), signed an agreement on providing US$33 million in financing for sustainable infrastructure projects in the Caribbean, which includes a 50% minimum earmark for climate change adaptation and mitigation projects. In addition, the agreement includes a €3 million technical assistance grant for financing-related feasibility studies.

The CDB also approved two grants from the United Kingdom Caribbean Infrastructure Partnership Fund (UKCIF) for feasibility studies and rehabilitation designs for roads: a £794,000 grant in Dominica, which is recovering from the impacts of Tropical Storm Erika; and a £186,000 grant for Antigua and Barbuda, where the project design will incorporate considerations of climate resilience.

In Belize, which was hit by Hurricane Earl in early August 2016, the Inter-American Development Bank (IDB) confirmed a US$200,000 humanitarian assistance grant to communities affected by the high winds and floods. [

Disaster risk reduction (DRR) was also the focus of a World Bank project, but this time in Africa. The World Bank highlighted the benefits of flood forecasting in the White Volta River basin of Ghana, where an operational system currently enables the issuance of timely warnings and is being expanded to other parts of the basin. The project is supported by the Disaster Risk Management Hub, Tokyo, and includes a technical capacity building element between Japanese and Ghanaian universities.

Lessons from Climate-smart Agriculture, South-South Cooperation, Resilience

A number of multilateral development banks (MDBs) and regional development funds reported on project outcomes. Lessons from the agricultural sector in particular were highlighted, including through the International Fund for Agricultural Development (IFAD) annual report for 2015.

IFAD reported that, in 2015, new funding to the Adaptation for Smallholder Agriculture Programme (ASAP), which is the world’s largest financing source supporting smallholder farmers’ climate change adaptation, totaled US$94 million. The report also discusses project lessons with regard to natural resource management and climate change adaptation in Africa, Asia and the Pacific, Latin America and the Caribbean, and Near East, North Africa and Europe. [

In Myanmar, World Bank community programmes aimed at crop diversification and resilience have improved local farmers’ technical knowledge and income. Measures have included the introduction of sticky rice, resilient to salt intrusion, as a summer crop and new seed sowing techniques.

In Viet Nam, the Annual Meeting of the Working Group on Agriculture of the Greater Mekong Subregion (GMS) discussed, inter alia, food safety, bioenergy and climate-friendly agriculture, including ways to improve market access of GMS-produced safe and climate-friendly agriculture products in the region and worldwide.

A short video produced by the World Bank explains how Portuguese-speaking Mozambique is working with Brazil to learn “lessons in management, technology and governance” to address deforestation as part of the country’s REDD+ strategy.

The Nordic Development Fund (NDF) reported on the benefits of a pilot project focusing on small-scale low-cost production and use of biochar fertiliser in Nepal. The next challenge, according to the Fund, will be scaling up the use of this technology, which results in reduced emissions of greenhouse (GHG) gases.

The NDF also reported on the ‘Resilient Cities in the Greater Mekong Subregion: Adapting Cities to Climate Change’ project, implemented in collaboration with the Asian Development Bank (ADB), which sought to tackle constraints to implementing climate resilience policies, including lack of awareness, technical barriers and financial limitations. The project resulted in a ‘Resource Kit on Building Resilience and Sustainability in Mekong Towns,’ available on NDF’s website.

Scaling Up Finance through Green Bonds and the Private Sector

August brought some positive news regarding investor and private sector interest in climate financing.

The ADB reported raising a total of US$1.3 billion in finance for low-carbon and climate-resilient projects through the issuance of green bonds: a three-year bond with an issue size of US$800 million; and a 10-year bond with a size of US$500 million. The ADB issued its first green bond in 2015. The ADB also reported that, since 2010, it has raised over US$820 million in clean energy bonds.

A coalition of six organizations representing 130 investors and over US$13 trillion in assets wrote a letter to the Group of Twenty (G20) Heads of State that urges these countries to ratify the Paris Agreement, “double global investment in clean energy, tighten up climate disclosure mandates, develop carbon pricing and phase out fossil fuel subsidies.” The investors state that governments have a responsibility to work with the private sector to ensure that the transition to a low-carbon, clean energy economy happens fast enough to reach the Agreement’s goals. The 11th G20 Summit will be held in Hangzhou, Zhejiang, on 4-5 September 2016.

A CIF Voices blog article on innovative finance describes the private sector’s role as “providing much of the financing needed to help developing countries meet the climate goals” set in Paris in 2015. The article highlights the Climate Investment Funds’ (CIF)’s work to support private sector investment, inter alia, the CIF’s “MDB-driven business model” that enables “address[ing] upstream political and regulatory challenges,” and the CIF Clean Technology Fund’s (CTF) Dedicated Private Sector Programme, which has “allocated over $450 million to ramp-up innovative investments in technologies such as geothermal, solar [photovoltaics], and mini-grids.”

GCF Progress in Partnerships, Implementation; MDBs Report on 2015 Financing

In August, climate finance institutions signed new partnerships and published reports on their 2015 activities and on progress on Paris pledges.

The GCF and the UN Development Programme (UNDP) signed an Accreditation Master Agreement (which contains the basic terms and conditions for the use of GCF resources), raising the total number of GCF partners to 11. The GCF is working to finalize similar agreements with other accredited entities.

The GCF also signed a Funded Activity Agreement (which enables the disbursement of funds for project implementation) with Acumen Fund Inc. for a project focused supporting access to off-grid solar power in Rwanda and Kenya through investments in companies along the value chain. The project marks the first GCF project to move to disbursement.

Six MDBs published their 2015 joint report, which concluded that the banks had jointly committed more than US$25 billion in climate finance that year, in addition to US$55.7 billion committed in co-finance. While the sum committed by the MDBs is less than in 2014, it remains above 2013 levels. The report adopts a common tracking approach for climate co-financing, described as “a significant step forward in making the reporting of climate finance flows more robust and transparent.”

IFAD reported that it had offset its emissions from 2013 and 2014 through the Adaptation Fund, making it a climate neutral UN agency.

The Global Environment Facility (GEF), celebrating 25 years of existence, launched a series of articles highlighting institutional cooperation with a number of UN entities and MDBs, including the UN Industrial Development Organization (UNIDO), the UNDP, the African Development Bank (AfDB) and the European Bank for Reconstruction and Development (EBRD).

According to the UN Environment Programme’s (UNEP) ‘Pledge Pipeline’ August 2016 edition, total support requested until 2030 in countries’ (intended) nationally determined contributions (INDCs/NDCs) totaled US$421 billion for mitigation and US$615 for adaptation. The Pledge Pipeline covers INDCs and NDCs submitted to the UNFCCC.

The Adaptation Fund announced it had received 31 concept and project proposals requesting for a total funding of US$208.6 million – a record high for the Fund. The proposals, which will be considered by the Adaptation Fund Board (AFB) at its 28th meeting in October 2016, include 19 single-country proposals and 12 regional proposals. The proposals are available on the Fund’s website.

August also saw the approval of the World Bank’s Environmental and Social Framework (ESF), aimed at expanding “protections for people and the environment.” The ESF, which includes ten Environmental and Social Standards, constitutes the Bank’s policy for project finance and borrower requirements.

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