The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the July update on global developments in climate finance.
Climate Finance Update: Climate Funds Announced for Africa
During the month of July, major multilateral meetings drew attention to the need for adequate and predictable climate finance for developing countries, with only the US abstaining from the calls. The Green Climate Fund (GCF) Board met amidst calls from civil society to broaden the scope of qualifying adaptation activities. Two new climate financing platforms were launched for Africa, in support of climate-resilient urban development, and investments in emission reduction measures and climate resilience.
HLPF, G20 Reaffirm Climate Finance Commitments -Without US; GCF Board Urged to Revise Adaptation Activity Definition
In July, two major multilateral events put climate finance on the table. The US did not join the consensus on related declaration paragraphs in either meeting. The UN High-level Political Forum on Sustainable Development (HLPF) 2017, held in New York, US, adopted a Ministerial Declaration, which, inter alia, encourages all parties to implement the Paris Agreement and stresses the need for adequate and predictable financial resources for combating it. The leaders’ declaration of the Group of Twenty (G20) Summit, held in Hamburg, Germany, also contains a paragraph on climate change, in which all G20 leaders, except the US, reiterate the importance of the developed countries’ commitment to provide climate finance to developing countries and agree to the ‘G20 Hamburg Climate and Energy Action Plan for Growth.’ The action plan contains a section on aligning finance flows, which highlights the role of mobilizing private finance in meeting the significant investment needs for climate action and outlines a number of ‘roles and responsibilities’ for the G20 governments, developed countries and international agencies in this regard.
Also in July, the Green Climate Fund (GCF) Board met and decided to develop policies and guidelines to strengthen and scale the Fund’s proposal pipeline. Other decisions included the acceptance of six new Accredited Entities and the procedures and modalities of the Fund’s engagement with the REDD+ mechanism.
Preceding the GCF Board meeting, 80 non-governmental organizations (NGOs) wrote a letter to the Board expressing concern over the assessment of “what qualifies an activity as an adaptation activity” by Board members. The letter came in the context of the Board’s inability to reach a decision on two recent funding proposals in least developed countries (LDCs) in the area of climate resilience. In the letter, the NGOs argue that “it is not the activity in and of itself, but the analysis of vulnerabilities exacerbated by climate change, capacities and impacts, and an explicit intention to address the climate context — all of which together lead to the choice of a particular intervention.” They call for the Board’s guidance to “recognize the process-oriented nature of what qualifies as adaptation financing.”
Climate Fund Seminars Build Readiness
Also this past month, two events centered on climate finance readiness in developing countries. An Adaptation Fund global seminar for its National Implementing Entities (NIEs), held in San José, Costa Rica, gave participants an overview of the Fund’s programmes, strategies, processes and policies, and included a site visit to an Adaptation Fund-supported, US$9.9 million project that builds climate resilience in agriculture, water resources and coastal management.
A GCF Structured Dialogue with the Pacific, organized in Tonga, provided guidance for directing climate finance in the region, in particular in the areas of climate resilience, renewable energy and energy efficiency.
Two Funds to Be Launched for Africa
Two new funding platforms were launched for Africa. A €4 million grant from the Nordic Development Fund (NDF) will support the establishment of the ‘Urban & Municipal Development Fund for Africa’ of the African Development Bank (AfDB), which will target urban growth management and climate-resilient development in African cities and municipalities through improving governance and the quality of basic services, including infrastructure. Also, participants at an Economic Community of West African States (ECOWAS) roundtable on catalyzing investments, held in Abidjan, Cote d’Ivoire, agreed to establish, at the November 2017 UN Climate Change Conference in Bonn, Germany, a sub-regional platform for climate action. The platform will catalyze investments in renewable energy, energy efficiency, other emission reduction measures and climate resilience.
Climate Risk Disclosure and Insurance Draw Attention
The Sustainable Insurance Forum (SIF), a global network of insurance industry supervisors and regulators, met in July in Windsor, UK, to exchange views on climate disclosure in the insurance sector, including related benefits to insurance supervisors’ efforts to enhance the stability of the sector. The meeting concluded in a joint statement, issued by supervisors and regulators from 16 jurisdictions, which welcomes the recommendations and guidance of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD), published in June 2017, and identifies areas where supervisors can support their uptake.
At the ‘Pacific Regional Dialogue on Financial Management of Climate Risks,’ which convened in Apia, Samoa, participants representing various governments and stakeholder organizations shared experiences in climate risk financing with an eye on exploring the potential for setting up a Pacific climate change insurance facility.
Meetings Promote Green Bonds, Securities
In green bond news, the not-for-profit Climate Bonds Initiative and the European Covered Bond Council (ECBC), with the support of the UNEP Inquiry into the Design of a Sustainable Financial System, convened the first meeting of the European Green Securities Steering Committee (EGSSC). With 22 industry stakeholders as founding participants, the EGSSC will promote the development of the green securities market in Europe, including covered, asset-backed and senior unsecured bonds.
The International Training Centre for Authorities and Leaders in Argentina (CIFAL) held a seminar for 59 government and private sector representatives to encourage development of green bonds by the transboundary hydropower plant Yacyretá Binacional, located on the River Paraná between Argentina and Paraguay.
July 2017 Resources and Opportunities
Climate finance reading recommendations from the month of July include:
- The ‘Green Finance Progress Report’ by the UN Environment Inquiry, which finds that, since the G20 Green Finance Study Group (GFSG) meeting in June 2016, progress made in adopting the seven options to accelerate the mobilization of green finance recommended by the GSFG indicates that “momentum is growing in mainstreaming climate finance into the architecture and practice of financial and capital markets” [UN Environment Inquiry Report];
- A SDG Knowledge Hub Story highlighting various initiatives by global banks, advisory groups and the European Environment Agency, aimed at integrating climate risks into decision making within the financial sector [SDG Knowledge Hub Story];
- A working paper by the Climate and Development Knowledge Network (CDKN) on ‘Understanding “Bankability” and Unlocking Climate Finance for Climate Compatible Development,’ which speaks to the challenges of developing countries with “meeting the stringent requirements of prominent funds like the Adaptation Fund and the Green Climate Fund” [CDKN Working Paper];
- The Climate Investment Funds’ (CIF) annual report for 2016, which details CIF’s ongoing work in 72 countries [CIF Annual Report 2016 Webpage] [CIF Annual Report 2016]; and
- The annual review 2016 of the Nordic Climate Facility, which is a fund that provides grants to promote technological innovations in climate-vulnerable areas in low-income countries [NCF Annual Review 2016].
Also, the Adaptation Fund launched calls for its 2017 Readiness Grants, including in the areas of South-South Cooperation, project formulation and assessing and the management of environmental and social risks and gender-related issues. [Adaptation Fund Calls]