Capacity building for access to climate finance is essential

SmarthEarth.ie Managing Director, Noel Casserly, writes about the challenges for developing countries in accessing climate finance and how to improve direct access to such funding.

At the close of the latest round of climate change negotiations in Bonn this June, UNFCCC Executive Secretary, Christiana Figueres welcomed the progress towards a new global climate agreement but also called on developed countries to follow through on their funding commitments, particularly the capitalisation of the new Green Climate Fund.

Under the Copenhagen Accord, developed countries have committed to mobilising up to $100 billion per annum by 2020 in climate finance.  This presents challenges, not only for developed countries but also developing countries and these issues will need to be addressed in the context of the wider negotiations on the new global climate change agreement to be finalised next year. While public funding will remain a key element of the climate finance envelope there will also be significant challenges associated with  mobilising private sector and innovative sources.

For developed countries, the scaling up of climate finance and mobilising private and innovative sources are central concerns but other issues also need to be addressed including how to count and report on contributions in the absence of internationally agreed criteria, and how to secure synergies and coherence with international funding mechanisms under the Convention such as the Adaptation Fund and the new Green Climate Fund.

For developing countries, there are challenges also.  A complex international climate finance framework has evolved over the years, with more than 60 different international funds available for developing countries through bilateral, multilateral and private sources. Traditionally, multilateral and bilateral financing intermediaries, such as the World Bank, UN Agencies, and multilateral development banks (MDBs), have played an important role in distributing and channelling climate finance to developing countries.

Finance for climate action remains a key concern for many developing countries and, understandably, they are pressing not only for a “pathway” for scaling up but for direct and easier access.

Direct access is the modality whereby the recipient country can access funds directly from the relevant fund without going through a third-party intermediary. The principle of direct access to climate finance seeks to promote enhanced country ownership of activities by bringing developing countries to the forefront, ensuring decentralised decision making at the national level. This aims to ensure that climate change measures are aligned with national strategies, and that monitoring and evaluation takes place at the lowest possible jurisdictional level.

However, different requirements can cause a duplication of efforts and the access modalities and associated processes are not always easily understandable for applicants.

The Adaptation Fund (AF)[1] was the first climate fund to promote the principle of direct access and thus has been cited as a “model for the future” in the international climate finance arena.

The new Green Climate Fund will play a pivotal role on climate finance in future years. The operating modalities are currently being established and have been guided by the experience of the Adaptation Fund and other Funds under the UNFCCC.

The Board of the Green Climate Fund meeting in Korea on 21st May took a number of major decisions necessary to begin mobilising significant funds to tackle global climate change.  The Board agreed on the essential requirements for the Fund to allow it to begin its initial resource mobilisation, including the initial proposal approval process, the guiding framework and procedures for accrediting entities, and the Fund’s financial risk management and investment frameworks.

A recently published study by the Frankfurt School (FS)-UN Environment Programme (UNEP) Collaborating Centre for Climate and Sustainable Energy Finance aims to assist developing country climate finance institutions in directly accessing funding from the Global Environment Facility [2] and the Adaptation Fund. The report, titled ‘Direct Access to International Climate Finance and Associated Fiduciary Standards,’ compiles the minimum fiduciary standards required by these Funds and uses case studies to illustrate necessary supporting documentation.

There is currently no one set of internationally agreed and accepted fiduciary standards and procedures.  However, there is a common understanding among those administering climate finance that in order to mobilise international climate finance, developing countries need to demonstrate robust financial integrity and effectiveness and accountability based on transparent rules and procedures. More specifically, a set of minimum fiduciary standards need to be fulfilled and demonstrated by all potential funding recipient governments/entities to ensure that the funds are transferred to recipient governments with a proper framework in place.

The number of national implementing entities is still quite small but is increasing.  The FS-UNEP report provides some data up to mid-2013, when fifteen national implementing entities had been accredited by the Adaptation Fund Board, with approximately ten applications in the pipeline while eight applicants had not been accredited (including Ghana, Zambia and Bangladesh). There are valuable lessons here from those who have been successful in accreditation and this can help to guide others in that process. For example, the Pacific Regional Environmental Programme (SPREP) is a really nice regional example.

Quite clearly, there is still a real need for capacity building to help developing countries establish and secure accreditation for national implementing entities with appropriate fiduciary principles and standards, institutional capacities, and readiness preparatory support. These entities would also be the appropriate mechanisms to oversee the preparation of low emission carbon resilient development strategies.

At a recent workshop hosted by the African Climate Policy Centre (ACPC) for the African Group of Negotiators on the 12-14 May 2014, in advance of the Bonn session, participants were in agreement that Africa’s ability to respond to climate change, including accessing climate funds, implementing projects and developing policies, continues to be hampered by lack of adequate capacity. Although UNFCCC includes a capacity-building programme and has records indicating activities in Africa, a lot more needs to be done.

There are clear messages here for developed countries as they plan for more long-term programmes in climate finance and capacity building in line with international commitments.  Ireland, for example, which has had a very valuable and effective bilateral aid programme for many years, targeted mostly at a number of least developed countries in Africa, could play an important catalytic role with our partners (Ethiopia, Mozambique, Uganda, Tanzania, Zambia, Lesotho and Malawi) in supporting and developing appropriate institutional capacity and readiness to access climate finance.

In future Blog postings, the SmartEarth team will explore how new innovative partnership models involving government, civil society and research/academia could drive capacity building.