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Strengthening Ownership and Effectiveness of Climate Finance

The Climate Investment Funds (CIFs), one of the world’s largest dedicated funding facilities for climate change mitigation/adaptation projects, have now been in operation for five years. It’s a good time to step back and evaluate what lessons we’re learning from these important sources of climate finance.

WRI recently did just that, inviting a group of representatives from countries accessing CIFs funding to speak at our offices. It became clear from the discussions that while some valuable progress has been made, there is still plenty of room for improvement. In particular, lending institutions involved with the CIFs could deploy climate finance more effectively by fostering a stronger sense of country ownership over mitigation/adaptation projects.

The Good News: Climate Investment Funds Are Contributing to Change on the Ground

We’re starting to see some countries make progress on implementing climate change mitigation and adaptation projects with funds from CIFs programs (see text box). Panelists at the WRI event highlighted a few examples:

  • In Tajikistan, the government established a coordinating Secretariat in the Office of the President, using resources from the Pilot Program for Climate Resilience (PPCR). The secretariat allows for a single body to coordinate all resilience activities in the country—a more streamlined approach to carrying out climate change adaptation activities.

  • By blending resources from the Forest Investment Program (FIP) and other sources, Brazil aims to simultaneously address rural poverty and deforestation by conserving its fragile ‘cerrado’ ecosystem. It will use FIP money to improve the management of the ecosystem by deploying forest information tools such as remote sensing monitoring, forest cover inventories, and early warning systems for fires.

  • In Kenya, the Scaling-Up Renewable Energy Program (SREP) is supporting the government in its efforts to boost private sector development in the geothermal sector. Kenya has immense potential for geothermal energy, but tapping into the resource presents many risks that SREP concessional financing will help alleviate.

  • With PPCR resources, Zambia is seeking to make its development investments more resilient to climate change impacts by identifying and addressing cross-sectoral risks in its Sixth National Development Plan. This has effectively provided individual ministries the mandate to work on climate change issues, because budget allocations are linked to the Plan.

Room for Improvement: Strengthening Ownership and Effectiveness

While the CIFs have led to some encouraging initiatives, there’s still work to do—namely, in more effectively delivering climate finance to strengthen country ownership and effectiveness.

CIFs resources are delivered through the multilateral development banks (MDBs). These banks work jointly with recipient country governments to develop investment plans, or sometimes directly with the private sector to implement mitigation or adaptation projects. This approach capitalizes on the MDBs’ institutional and technical capacities. However, the MDBs’ dominant role often makes recipient country governments feel a lack of ownership over how climate finance is spent in their countries.

Strengthening national ownership enables countries to develop expertise, build durable local institutions and systems to use climate finance effectively, and exercise leadership in implementing projects. This is a necessary condition for these investments to yield better, more sustainable results in the long-term – a lesson that the international community has learnt from decades of experience with development assistance.

Lessons on strengthening country ownership are beginning to emerge, from early practice and from the recent discussions at WRI. These lessons provide cues for developing the operational rules for the Green Climate Fund, which is expected to eventually become the main global fund for climate finance.

1. Provide for a flexible range of institutions – in addition to the MDBs – to perform different functions that better respond to countries’ needs.

National institutions and country systems may deliver more effective results than multilateral ones in countries with relatively strong capacities to implement and monitor projects using international climate finance. For example, the panelist from Brazil felt that his national institutions and country systems could do better than the MDBs, particularly on monitoring and evaluation of FIP activities in Brazil. National ownership in this case would also cut transaction costs associated with MDBs’ reporting systems.

2. Climate finance should link more strongly with countries’ development plans, not create stand-alone projects.

It’s important to have climate resilience reflected in strong, national development plans, as Zambia does. These plans often act as a tool to mobilize domestic resources and action across ministries; they can empower country governments to take ownership of adaptation efforts.

3. The international institutions delivering climate finance – such as the MDBs – need to improve coordination and harmonize their systems.

Recipient countries often need to work with multiple MDBs as well as other development partners in accessing and deploying climate finance. Each of them tend to have their own perspectives, approaches, and processes. This makes the country’s task of coordinating international climate finance quite challenging, which is disempowering and can lead to less effective results. Better coordination and streamlined processes will go a long way in improving the impact of climate finance.

4. Climate finance should strengthen its focus on development co-benefits to more firmly link climate outcomes to the country’s development goals.

The panelists’ examples demonstrate recipient country governments’ efforts to strengthen the link between climate and development. For example, Brazil links its FIP goals of reducing emissions from its forests to reducing rural poverty, while Kenya is combining SREP’s goal of promoting renewable energy with the country goal of expanding poor communities’ access to electricity. Forging these links are key to ensuring that climate goals are more firmly embedded with national development priorities.

Much improvement is still needed to ensure that climate finance empowers countries to drive their own mitigation and adaptation initiatives. As work on making the Green Climate Fund operational gets underway, the international community has an opportunity to learn from the CIFs and design a better delivery mechanism for international climate finance.

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