Monitoring the Receipt of International Climate Finance by Developing Countries

Executive Summary

The 2010 Cancun Agreements and 2011 Durban Outcome call for developing countries to register, monitor, and report on support received, and for developed countries to improve their reporting by using more complete climate finance reporting guidelines. Doing so will enable information on climate change finance from developed countries to be matched with information from developing countries. The lack of detailed guidance makes it difficult for developing countries to decide how to respond to calls to report climate finance received.

This paper explores the challenges faced by three Asian countries, that is, Indonesia, the Philippines, and Vietnam in monitoring finance for climate change. Challenges faced in the three focus countries can be grouped into five categories, and are summarized as follows:

1. Definitions and Criteria: Countries and donor institutions use a variety of definitions and criteria in identifying climate finance and distinguishing it from other development finance. For the three focus countries, no formal climate finance marker system or definitive guidance exists to help address this definitional issue.

2. Classifications and Indicators: Sector and activity type classifications also vary widely among donor and recipient institutions, and often do not lend themselves well to climate finance. For example, in the Philippines, there is no energy-specific classification in its current official development assistance (ODA) monitoring system.

3. Financial Instruments: The type of financial instrument monitored can carry both political implications as well as technical challenges. From a political standpoint, many developing countries and NGOs hold that climate finance—especially adaptation finance—should be delivered primarily in the form of grants. From a technical standpoint, all three countries expressed challenges in monitoring grants, while their loan monitoring systems are fairly developed.

4. Source: Private finance could potentially play a very important role in international climate finance and its monitoring may be something developing countries could explore for domestic purposes. However, domestic private finance monitoring efforts in the focus countries are often not coordinated with ODA monitoring efforts, nor do they include climate-specific information.

5. Institutional Arrangements: In the three focus countries, institutional responsibility for the coordination of national climate finance and development of monitoring systems is generally fragmented. Institutional platforms and databases for gathering data on climate finance in particular do not exist. Countries have two options, that is to either modify existing systems or to develop standalone/complementary standardized climate data systems for climate finance.

Despite significant challenges in building their capacity to monitor the receipt of climate change finance, government officials consulted in all three countries expressed an interest in doing so. Such efforts would require several steps, including, for example:

• Developing the institutional arrangements and technical platforms necessary to monitor climate finance received. This may include the formation of an interministerial working group on climate finance with an agenda item dedicated to monitoring climate finance, and a complementary (stand-alone) management information system.

• Agreeing on and adopting climate finance-specific definitions, criteria, and classifications.

• Agreeing on the scope of information to be tracked (type of financial instrument, private versus public, etc.).

Such efforts should be complemented and furthered by support at the international level, both in the form of consistent yet flexible guidance that takes into account the domestic challenges outlined in this paper, as well as financial and capacity building support from developed countries.