Latest update on climate finance

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

 

October 2016 Climate Finance Update: Developed Countries Issue Roadmap, Funds Approve Financing

During the month of October, governments reached two major agreements aimed at reducing emissions and, with countries gearing up for the November UN Climate Change Conference, developed countries issued their long-awaited climate finance roadmap.

Three major multilateral climate funds also held their governing meetings in October.

Involving the private sector in investing in climate action is receiving growing attention, as was demonstrated by various meetings and developments taking place this month.

31 October 2016: The month of October saw a flurry of activities in the climate arena. Governments reached two major agreements aimed at reducing emissions, namely on hydrofluorocarbons (HFCs) and civil aviation. With countries gearing up for the November UN Climate Change Conference, developed countries issued their long-awaited climate finance roadmap. Three major multilateral climate funds also held their governing meetings in October. Involving the private sector in investing in climate action is receiving growing attention, as was demonstrated by various meetings and developments taking place this month. This Update brings you news on these and other finance-related developments.

In the Paris Agreement on climate change, 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 leading 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).

Agreements on HFCs, Aviation Emissions, Urban Agenda to Mobilize and Require Funding

October saw the finalization of three major intergovernmental agreements that are expected to have major positive consequences for addressing climate change, and will either mobilize or require financing over the coming years: the International Civil Aviation Organization’s (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA); the Montreal Protocol’s Kigali Amendment to phase down HFCs; and the Habitat III New Urban Agenda. The CORSIA will start generating financing through carbon offsets from 2021 onwards, and developed countries will receive technical and financial support, including US$80 million from a group of donor countries and philanthropists, for meeting their HFC production and consumption reduction targets.

Developed Countries Issue Finance Roadmap, Green Funds Meet

Also in October, coinciding with the Pre-COP Ministerial Meeting held by the Moroccan Presidency of the 2016 UN Climate Change Conference, developed countries, led by Australia and the UK, presented a climate finance ‘Roadmap to US$100 Billion,’ to meeting their collective annual mobilization goal by 2020. The roadmap “aims to provide increased predictability and transparency about how the goal will be reached, and sets out the range of actions developed countries will take to meet it.” Meeting earlier in October, the finance ministers of the Vulnerable Twenty (V20) Group had reiterated the longstanding call by developed countries for “a clear roadmap for raising US$100 billion in additional financing to build resilience to climate impacts in countries most vulnerable to climate change.”

The two operating entities of the UNFCCC Financial Mechanism (FM), the Green Climate Fund (GCF) and the Global Environment Facility (GEF) held their Board and Council meetings, respectively. The GCF Board approved funding proposals for ten projects, totaling US$745 million, and the GEF Council approved its Work Program, comprising 16 project concepts and three programmatic frameworks, with total resources amounting to US$302 million. In addition, the Adaptation Fund Board held its 28th meeting, approving two new projects totaling US$7 million, and the World Bank’s Partnership for Market Readiness (PMR) organised its Partnership Assembly Meeting.

World Bank Head Calls for Slowing Down Coal Finance, EU Confirms 2015 Finance Data

Speaking at the World Bank-International Monetary Fund (IMF) Annual Meetings 2016 Climate Ministerial meeting, World Bank Group President Jim Yong Kim called ministers to accelerate the transition to low carbon, noting that the Paris Agreement goals cannot be met if current plans for coal-fired stations are implemented. He called for concessional finance that is: well targeted and “follows the carbon”; leveraged and blended to crowd in the private sector; and available quickly, at scale and easily deployed.

The EU Economic and Financial Committee confirmed that, in 2015, the EU, the European Investment Bank (EIB) and the EU Member States provided €17.6 billion to developing countries in climate finance. In a press release, the European Commission stated that this demonstrates the Union’s “determination to contribute its fair share of the goal set by developed countries to provide US$100 billion in annual finance to developing countries from various sources by 2020.”

Climate Finance, UNFCCC Budget Documents Released Ahead of COP 22

In preparation for the 22nd Session of the Conference of the Parties (COP 22) in November, the UNFCCC Secretariat released a number of climate finance-related and budgetary documents during the month of October, namely: the report of the Standing Committee on Finance (SCF) to the COP (FCCC/CP/2016/8); views on the terms of reference (ToR) for the review of the functions of the SCF (FCCC/CP/2016/MISC.1); information provided by the GEF on its activities relating to the preparation of national communications (NCs) and biennial update report (BURs) (FCCC/SBI/2016/INF.18); a note on the evolving functions and operations of the Secretariat in the light of Decision 1/CP.21 (adoption of the Paris Agreement; FCCC/SBI/2016/INF.13); a note on improving the efficiency and transparency of the UNFCCC budget process (FCCC/SBI/2016/INF.14); and the financial report and audited finance statements for the year 2015 and report of the UN Board of Auditors (FCCC/SBI/2016/INF.12 and Add.1).

In addition, the UNFCCC Secretariat released a compilation list of recent climate funding announcements titled the ‘Climate Funding Snapshot,’ and invited stakeholders to contribute by sending further information.

Innovative Climate Finance, Green Bonds Keep Gaining Momentum

October was an active month for discussions around mobilizing private climate finance and developments around green financing platforms and standards.

In Morocco, a conference on ‘Creating Green Banking Markets in Africa,’ organized jointly by the European Bank for Reconstruction and Development (EBRD) with banks from the region, discussed, inter alia, steps required for turning the “Paris vision into reality.” The EBRD also published an article explaining how the green bond market works.

In the United Arab Emirates (UAE), the UN Environment Programme Finance Initiative (UNEP FI) held its 2016 Global Roundtables, which brought together 500 finance stakeholders from the private sector and government. The event also marked the launch of the ‘Dubai Declaration on Sustainable Finance,’ which was signed by 11 UAE-based financial institutions.

In the area of blended finance, Luxembourg and EIB launched the ‘Luxembourg-EIB Climate Finance Platform,’ aimed at mobilizing investments with a “strong” impact. Luxembourg will make available €30 million in subordinated funding, over a three-year period, for Luxembourg-based investment vehicles that are financing high-impact climate projects.

Luxembourg also announced the launch of the ‘Luxembourg Green Exchange’ under its Stock Exchange, as “the world’s first exchange that will trade nothing but green securities.”

The EIB further announced it had published a comprehensive statement of its green bond activities in 2015, as well as an Independent Reasonable Assurance Report issued by KPMG Luxembourg, both reportedly first in their kind.

Resilience Programmes, Sustainable Forests, Industrial Mitigation Receive Funding

Project funding news in the month of October came from climate resilience projects in the agriculture, livestock and infrastructure sectors in Asia and Africa. Caribbean countries received payouts following destruction by hurricane Matthew. Ghana will enhance its forests with the help of a public-private partnership (PPP), Ukraine is taking steps towards a national emissions trading system (ETS), and Egypt received recommendations for reducing industrial emissions. Also, a regional platform in the Latin America and the Caribbean will support implementation of nationally determined contributions (NDCs).

Climate Change and Disaster Risk Resilience, Disaster Recovery

In Afghanistan, a US$26 million grant from the Asian Development Bank (ADB) and a US$50 million grant from the EU will support enhanced crop diversification and food security by improving irrigation in a country whose agriculture is highly vulnerable to the negative impacts of climate change, including more frequent floods and droughts. Cameroon will receive US$100 million from the World Bank for improving the productivity and competitiveness of livestock production systems, as well as their climate resilience, over a period of six years.

Chinese province of Qinghai will benefit from a US$150 million loan from the ADB aimed at protecting its second largest city from flash floods, and improving the city’s urban environment and services. In Indonesia, two provinces will leverage a US$109 million loan from the ADB to support community-level flood risk management, including through resilient infrastructure.

Bangladesh received a pledge from the World Bank of US$2 billion in new funding aimed at helping reducing the country’s vulnerability to climate change. The pledge was made by World Bank Group President Jim Yong Kim during his visit to the country. The Bank is already supporting Bangladesh in increasing community-level climate resilience through a number of projects.

In the area of disaster recovery, Haiti will receive a payout of US$20 million from the CCRIF SPC (formerly the Caribbean Catastrophe Risk Insurance Facility) on its tropical cyclone policy following the passage of hurricane Matthew in October 2016. Other Caribbean countries are also receiving payouts.

Sustainable Forests and Landscapes

Ghana will receive support through a PPP for restoring degraded forest reserves and doubling a sustainable forest plantation, which includes a US$10 million concessional loan from the Climate Investment Funds’ Forest Investment Program (CIF FIP) and US$14 million in co-financing from the AfDB.

In Indonesia, UNEP launched the Tropical Landscapes Finance Facility, which aims to unlock private finance for renewable energy production and sustainable landscape management. The Facility consists of a loan fund and a grant fund, with partners including BNP Paribas, ADM Capital and the UNEP Secretariat.

MRV Systems, Industry Emissions

As part of its cooperation with the World Bank’s PMR, Ukraine will receive a US$3 million grant to support the design and introduction of a national GHG monitoring, reporting and verification (MRV) system for emitters in the energy and industrial sectors, which in turn will support the establishment of a national ETS in Ukraine. According to the World Bank, industries contribute more than a third of direct and indirect global GHG emissions.

Egypt received recommendations on reducing industrial GHG emissions from the EBRD in a report produced in cooperation with Egyptian authorities. The report presents a roadmap with policy actions for generating incentives for the cement industry to improve its energy efficiency and to reduce carbon dioxide emissions.

From NDCs to Investment Plans

The Inter-American Development Bank (IDB) launched ‘NDC Invest,’ which it describes as a “one-stop shop to help countries access resources needed to translate national climate commitments into investment plans and bankable projects.” The public-private platform comprises four elements, NDC Programmer, NDC Pipeline Accelerator, NDC Market Booster and NDC Finance Mobilizer, and will be developed over the coming months.

Lessons in Climate-friendly Agriculture, Sustainable Transport

The World Bank shared lessons from multilaterally funded climate action projects. In Uruguay, the World Bank has supported ‘sustainable intensification’ in the country’s agriculture sector by evaluating different options for their emissions reduction potential and costs and benefits. The results have influenced domestic policy debates, informed the government’s contributions to the UNFCCC and the SDGs.

In Argentina, the ‘Sustainable Transportation and Air Quality Project,’ financed by the GEF, has helped strengthen the institutional capacity of several municipalities to integrate the concept of sustainable transport into public policy agendas.

October Reading List

During the month of October, international organisations published several studies highlighting, inter alia: financial benefits of low-carbon transitions and urban resilience; the role of infrastructure and climate risk reduction in achieving the SDGs; and a carbon pricing gap in major economies. A guide focuses on driving engagement on climate risk in the automotive sector, and an online tool supports GCF accreditation. Below is a list of recommended reads:

  • An ADB study titled ‘Meeting the Low-Carbon Growth Challenge’ concludes that “by transitioning to low-carbon growth, developing Asia is poised to reap outsized rewards as an essential player in the global effort to contain climate change.”
  • A World Bank study on ‘Investing in Urban Resilience’ notes that, by 2030, climate change may force up to 77 million urban residents back to poverty and calls for “invest[ing] today in resilience measures that will help secure a safe and prosperous future for our cities and the people who live in them.”
  • The Global Commission on the Economy and Climate’s ‘2016 New Climate Economy’ report concludes that “investing in sustainable infrastructure is critical to reigniting global growth, delivering on the SDGs and reducing climate risk.”
  • An Organisation for Economic Co-operation and Development (OECD) analysis finds an carbon pricing gap of 80.1% in the OECD member countries and stresses that “if all countries matched the efforts being achieved by the upper half of countries surveyed,” the gap would drop to 53.1%.
  • A World Bank analysis on the ‘State and Trends of Carbon Pricing 2016’ finds that “greater cooperation through carbon trading could reduce the cost of climate change mitigation by 32% by 2030.”
  • Two ADB publications: ‘Disaster Risk in Asia and the Pacific’ summarizes the proceedings of three events focusing on disaster risk assessment, management and finance in the region; and a report compiling climate change-related books and reports published by the ADB from 2012-2016.
  • A Report by the GEF celebrates the Fund’s 25 years.
  • A guide by the Institutional Investors Group on Climate Change (IIGCC) titled ‘Investor Expectations of Automotive Companies 2016’ aims to support investor engagement with the automotive sector to curb carbon asset and climate risk.
  • The GCF’s online Accreditation Self-Assessment Tool outlines the minimum requirements for an institution to be accredited and receive funding through the GCF.

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