Synopsis

This working paper reports on a series of three regional workshops in which participants from governments in Latin America, Africa and Asia reflected on the main technical, policy, and capacity challenges to monitoring climate finance, and exchanged experiences on efforts that are under way in their respective countries to improve information on climate finance flows.

Key Findings

Some of the key challenges faced by developing countries in monitoring climate finance include:

  • The lack of a consistent definition of climate finance makes it difficult to identify what counts, and to develop markers and indicators to effectively quantify finance flowing to climate related projects.

  • Insufficient institutional arrangements, unclear institutional roles and functions, and limited inter-agency coordination impede effective information management around climate finance flows.

  • The omission of climate change considerations in budgeting, monitoring, and reporting processes and systems hampers the systematic and effective tracking of climate finance.

  • The limited access to data on climate finance channeled through nongovernmental organizations and climate-related investments by private actors limits the accuracy of climate finance estimations.

  • Poor coordination among development partners and unpredictability of financial flows can undermine the capacity of developing countries to track climate finance received.

  • The limited use of recipient country systems for monitoring and managing financial flows by development partners hampers the development of climate specific tracking systems in developing countries.

Some of the key recommendations and next steps that are identified in the paper include:

  • Until the international community agrees to a definition of climate finance, countries should decide on a definition that is appropriate for their national circumstances by reviewing current definitions and adjusting them to their specific needs.

  • Developing countries should put in place or strengthen institutional arrangements that enhance inter-agency coordination and facilitate the integrating of climate finance into development policies and planning. This could include the creation of focal units for climate change in ministries; multi-stakeholder coordinating committees on climate change, and climate finance committees to prioritize projects for funding and track public expenditure on climate change.

  • Recipient countries should put in place the appropriate technical processes and systems to monitor finance flowing toward climate change activities (both from international and domestic sources). Countries will need to determine whether to modify existing financial management systems to explicitly capture climate-related expenditures, or to develop new systems tailored to climate finance.

  • In developing indicators and codes to track climate finance, countries will need to determine the level of detail that they wish to capture in their tracking systems. They should also consider options to capture information on finance that flows to non-government actors, such as NGOs and private sector actors.

  • Development partners should improve the transparency and predictability of their support, and make efforts to use recipient country systems for monitoring and reporting where possible. Strengthened communication and dialogue between development partners and recipient governments is an important step.

The paper highlights opportunities for South-South learning and capacity building in monitoring climate finance. Workshop participants were keen to pilot new tracking systems and processes and learn from the experience of other countries. Additional initiatives can scale up towards sound capacity development efforts. Further dialogue and work to develop a common reporting format for developing countries to report on climate finance received is recommended.

Executive Summary

This working paper reports on a series of three regional workshops in which participants from governments in Latin America, Africa and Asia reflected on the main technical, policy, and capacity challenges to monitoring climate finance, and exchanged experiences on efforts that are under way in their respective countries to improve information on climate finance flows. The workshops were held by WRI and its partners in 2012 and 2013 in Jakarta, Nairobi and Bogota respectively, and brought together government representatives from the region, as well as regional development banks and other stakeholders. The paper presents a number of country-specific experiences and examples of efforts to address the challenges, and discusses some recommendations and next steps that countries and their development partners can take to strengthen climate finance tracking.

Developed countries have obligations under the UNFCCC to report on the finance they have provided in support of developing countries’ adaptation and mitigation efforts. Similarly, developing countries have obligations to report on climate finance received. Initial attempts to measure and report climate finance suggest that there is often a mismatch between information on finance provided and that on finance received. Monitoring climate finance is not only crucial to determine compliance with climate finance pledges within the context of the UNFCCC, but it also has important implications for recipient countries at the national level. Indeed, accurate reports on climate finance flows will allow recipient countries to make more informed decisions about planning, prioritization, and allocation of resources for climate change.