WRI Publications Feed: International Financial Flows and the Environment (IFFE)

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Maggie Barron — Wed, 23 Nov 2011 15:41:50 -0500

Reiterating a pledge made in Copenhagen in 2009, the Cancun Agreements of December 2010 formally commit developed countries to collectively provide resources “approaching USD 30 billion for the period 2010 - 2012” to support developing countries’ climate efforts. This so-called “fast-start” finance will help developing countries, particularly the poorest and most vulnerable, mitigate (reduce) their greenhouse gas emissions, and adapt and cope with the effects of climate change. These pledges also present an opportunity to build trust between developed and developing countries in the international climate arena, in turn fostering progress towards a comprehensive post-2012 international climate agreement.

WRI has carried out a preliminary analysis based on available information on countries’ immediate pledges announced thus far. The accompanying table sets out both the amounts and the mechanisms by which funding would be delivered. WRI has also looked at how countries indicate whether their pledges will provide “new and additional” funds compared to what they provide as official development assistance.

This table will be continuously updated as more information becomes available.

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Q&A on this Analysis

(Updated on November 23, 2011)

Have developed countries met their fast-start finance pledge?

Based on our research, as of November 18, 2011, 23 developed countries and the European Commission have publicly announced their individual fast-start finance pledges, in addition to the European Union’s collective pledge. These pledges total USD 28.22 billion.

While this represents a significant step in the right direction, developed countries still have much to do in meeting the fast-start pledge. The Cancun Agreements mandate that fast-start funds have a “balanced allocation between adaptation and mitigation,” are “new and additional,” are “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa,” and include “forestry and investments through international institutions.” It is not clear that developed countries’ fast-start finance contributions fulfill these criteria.

Finally, ensuring that pledges are actually delivered will be essential. Though the pledges are clear, their delivery is uncertain. According to reported information, of the pledged funds, USD 16.23 billion has been requested and/or budgeted by the executive bodies of the countries during the fast-start period. In some cases, the legislative bodies have also approved these requests. Some of the requested or budgeted funds may have even been delivered, yet the actual delivery and implementation of the finance is often not clear in countries’ fast-start finance reports.

Do the funds have a “balanced allocation between adaptation and mitigation”?

Countries often specify the general objective that their fast-start funds will support. For example of the EUR 4.68 billion mobilized for fast-start by the EU, 39% will support mitigation, 31% will support adaptation, 12% will support REDD+, and 18% will support multipurpose activities. While Germany has pledged that one-third of its 2010-2012 fast-start funds will support adaptation, only 21% of its 2010 reported funds do so. In its 2010 fast-start finance report, Germany highlighted the challenges of identifying suitable adaptation projects as the reason for this, and recognized the remaining need to adjust the allocation of funds across the three areas of mitigation, adaptation and REDD+. Several countries involved in the Interim REDD+ Partnership — a process created parallel to the UNFCCC to ensure effective and sustainable REDD-plus (reduced emissions from deforestation and forest degradation) actions over the next few years — have also specified that at least 20% of their funds will support REDD-plus. However, without an agreed-upon definition among countries of what constitutes a “balanced allocation,” we cannot answer this question.

Are the pledged funds “new and additional”?

“New” funding represents an increase relative to pledges or allocations from previous years. However, a number of pledges include commitments already made in the past. For example, Japan’s USD 15 billion fast start pledge announced in December 2009 as the Hatoyama Initiative includes USD 10 billion announced previously in 2008, while the fast start pledges of the United Kingdom and the United States also include their 2008 commitments to the Climate Investment Funds (CIFs) of roughly USD 1.4 billion and USD 2 billion respectively.

Funds that are “additional” ensure that their delivery does not result in the diversion of funds from other important development objectives. In other words, climate mitigation and adaptation funds should be additional to development aid. Parties to the UNFCCC have not yet achieved consensus on a clear and specific definition of ‘additionality’ that can be applied uniformly to developed country financial pledges. As a result, countries have proposed a variety of methods for defining the additionality of their fast-start finance.

Do the pledges include “investments through international institutions”?

Countries are channeling investments through a mix of multilateral, bilateral, and public-private institutions. Several countries, including Japan and the United States, are channeling a considerable amount of their funds through export credit agencies and other public-private channels. The Climate Investment Funds (CIFs) and the Global Environment Facility (GEF) are the primary multilateral institutions of choice through which other funds will be channeled. Still, a significant portion of this funding, particularly for 2011 and 2012, has not been specified by the countries. The governance of the funds has implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Developing countries generally prefer that institutions governing finance ensure developing country ownership of funded activities and prioritize funding for climate vulnerable countries. Developed countries tend to emphasize the need to minimize bureaucratic costs and ensure the effective use of resources.

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa”?

Countries under the Convention recognize that developing countries are highly vulnerable to climate change impacts because they have fewer resources to adapt to the effects of climate change, which can include increased droughts and floods, rising sea levels, and greater uncertainty in the agricultural sector. Least developed countries (LDCs) and small island developing States (SIDS) in particular are recognized as needing special consideration due to their extreme vulnerability. For these reasons, developed countries have pledged to prioritize fast start funds for the “most vulnerable countries.” Several countries are channeling their fast start finance through the Least Developed Countries Fund or the Adaptation Fund, many are channeling finance directly to SIDS and LDCs. Australia in particular states that it will channel at least 25% of its fast-start finance to SIDS. Japan has specified that over 50% of it is grant aid to vulnerable countries, including Africa and the LDCs, is devoted to the area of adaptation.

What types of financial instruments are countries using?

There are several different types of financial instruments countries are using to deliver their fast-start finance, including grants, loans, equity, loan guarantees, insurance, and private investments. Many countries have provided some information on the type of financial instruments used. For example, the EU’s internal reporting process for fast-start finance distinguishes between “grants” — which made up about 45% of EU Member State contributions in 2010 — and “loans, equities or others” — which constituted 55%. Norway reports that all of its fast-start finance will be grants. Meanwhile, Japan’s fast-start finance includes grants and loans that meet ODA standards, finance in the form of ‘other official flows’, and private finance. However, reporting on the type of financial instrument used is neither comprehensive nor consistent. For example, no information is reported on the concessionality of the loans when used, save for by the United Kingdom.

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

The UNFCCC system for developed countries to report on the delivery of climate finance faces several challenges, which limit the utility of available data. For example, countries currently use multiple methods for reporting and often provided insufficient information even where requested. To address this, the Cancun Agreements mandate more frequent reporting by developed countries using an enhanced common reporting format.

While these enhanced reporting provisions will be essential for successful tracking of developed country climate financial flows, they will not be ready in time to provide guidance for reporting on the short-term, fast-start finance. In the meantime, the Cancun Agreements invited developed country Parties to submit information to the UNFCCC secretariat, for compilation, on the resources provided to fulfill their fast-start finance commitment by May 2011, 2012, and 2013. Nine developed countries and the EU¹ submitted their reports on or around the May 2011 deadline. While the Cancun Agreements include reporting provisions for fast-start finance, it does not provide guidance on what these reports should include, resulting in reported information that is neither fully comparable, transparent, nor complete, as is demonstrated by the gaps in information in WRI’s fast-start table and in a report by IIED assessing the transparency of the May 2011 fast-start finance reports. The UNFCCC secretariat recently launched a fast-start finance module on its finance portal that enhances the comparability of the May 2011 reports but it remains limited to information provided by developed country Parties. It also does not capture information available on the faststartfinance.org website or on individual donor or recipient websites, or other sources such as NGOs, the private sector or multilateral development banks.

To build trust with developing country counterparts, developed countries should improve their fast-start finance reporting in the future, for example, by including more comprehensive, comparable and transparent information on the following seven elements in their annual fast-start finance reports: scale, method for determining that the money is “new and additional,” channeling institutions, objective, geographic distribution, status of the pledge, and type of financial instrument.

While the EU does not report comprehensively on individual Member State pledges that fulfill the EU EUR 7.2 billion collective pledge, some Member States provide information on a voluntary basis on their individual pledge, for example, on faststartfinance.org, or on their bilateral donor institution websites. ↩

Grounding Green Power: Bottom-Up Perspectives on Smart Renewable Energy Policy in Developing Countries

Maggie Barron — Tue, 24 May 2011 12:51:13 -0400

Watch the summary interview with Lead Author Lutz Weischer

This paper was published by the German Marshall Fund of the United States in cooperation with the Heinrich Boell Foundation and the World Resources Institute.

Developing Countries in the Renewable Energy Transformation

In order to meet the intensifying climate challenge, the global energy system must undergo a fundamental transformation, with a rapid increase of renewable energy worldwide. Developing countries are at the forefront of this challenge, since they are expected to add around 80 percent of all new electric generation capacity worldwide in the next two decades.

The deployment of energy from renewable sources is accelerating in developing countries, and already accounts for a higher percentage of electricity generation than in the developed world. In 2008, non-OECD nations generated 21 percent of their electricity from renewable sources including large-scale hydroelectric power (compared with 17 percent in OECD countries), according to International Energy Agency (IEA) statistics. However, this figure must more than double by 2035, to 46 percent, in order to meet the IEA’s “450 scenario,” which outlines a climate friendly pathway for meeting global energy demands.

Transforming the energy system on this scale will require significantly increased support from developed countries, channeled through both bilateral assistance and multilateral institutions, as well as philanthropic initiatives. Our conclusions, derived from a series of case studies and a comprehensive review of existing literature, suggest that donors should deploy financial support more effectively by moving beyond a project-by-project approach to one that creates the right environment for investments in scaled-up, nationwide deployment.

This working paper seeks to assist in this process, by identifying key components of smart renewable energy policy in developing countries, focusing on the power sector. It also provides recommendations for maximizing the effectiveness of international support for deployment of renewable energies, drawn from these on-the-ground experiences in developing countries.

About this Working Paper

Chapter 1 introduces the approach and methodology taken in this paper and describes the key concepts we address. The second chapter discusses what developing countries are already doing to deploy renewable energy sources, and how they can be supported in scaling up such efforts. It also introduces a set of principles of smart renewable energy policy to propel such a transformation, developed by the World Resources Institute. These are based on insights drawn from case studies of existing renewable energy policies in 12 countries in Africa, Asia, and Latin America as well as from existing literature.

The following five chapters each examine one key element of smart renewable energy policy, discuss lessons learned, and identify needs for international support. These cover planning and strategy (Chapter 3), well-designed generation-based incentives (Chapter 4), an enabling policy and regulatory framework (Chapter 5), attractive financing conditions (Chapter 6), and the necessary technical environment (Chapter 7). Our findings and recommendations are summarized in Chapter 8.

Principles of Smart Renewable Energy Policy

We define smart renewable energy policy as the set of rules, regulations, and government actions that lead to an increased share of renewables in total electricity consumption in line with a country’s development objectives. Smart renewable energy policy encourages private investment, achieves its objectives in a cost-effective way, promotes continuous innovation, and is designed through transparent, accountable, and participatory processes.

Presentation

Download Slides (PDF, 16 pages, 839 Kb)

Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance

Maggie Barron — Tue, 14 Dec 2010 12:27:05 -0500

Executive Summary

The 2009 Copenhagen Climate Summit left unresolved major questions about how to fund lowcarbon development in developing countries. In a high-level political declaration—the “Copenhagen Accord”—developed countries agreed to “provide new and additional resources … approaching USD 30 billion for the period 2010–2012” and to a goal of jointly mobilizing USD 100 billion a year by 2020 from both public and private sources, to address the needs of developing countries. As the negotiations on a global climate deal continue, disagreement remains on how much of these funds will come from public or private sources and whether these billions should be delivered through new or existing institutions. There is also heated debate over whether a single centralized institution or a decentralized approach that coordinates international, regional, and national institutions would be more effective.

Although there are many variations in government positions, broadly speaking, developed countries favor a substantial role for existing institutions, such as the multilateral development banks (MDBs) that they have funded and led for the past 60 years. Developing countries prefer new institutions, arguing that existing ones favor the interests of contributor countries and have failed to deliver on promises to support poverty alleviation and sustainable development. The ongoing negotiations on a global climate deal reflect this “northsouth” gulf. Despite these differences, one thing is clear: if the institutional arrangements entrusted with managing new flows of climate finance are to succeed in raising the required resources and in investing these resources effectively, they will need to be perceived as legitimate by both contributors and recipients.

Institutional Arrangements for Climate Finance: Power, Responsibility, and Accountability

Box A. Dimensions of Power, Responsibility, and Accountability in the Design of a Climate Finance Mechanism

Power: The capacity—both formal and informal—to determine outcomes

How will the financial mechanism’s governance structure distribute voice and vote between and among contributors and recipients?
What role will the United Nations Framework Convention on Climate Change’s (UNFCCC) institutions, including the Conference of the Parties, play in guiding the financial mechanism?
To what extent will contributors be able to determine funding priorities by placing conditions on the resource mobilization and allocation process?
How influential will the secretariat and management staff of the financial mechanism be in determining project design and selection?
Will advisory groups, civil society observers, and local communities play a role in determining how the financial mechanism operates?

Responsibility: The exercise of power for its intended purpose

Are the financial mechanism’s standards, program priorities, and eligibility criteria strong enough to ensure its resources are invested fairly and effectively?
How do cost-sharing formulas (e.g., incremental, marginal, transformative costs) allocate responsibilities between contributor and recipient countries, and between the financial mechanisms and recipient countries?
To what extent are national institutions and local civil society entrusted with ensuring the effective design and implementation of investments?

Accountability: The standards and systems that ensure power is exercised responsibly

How does the financial mechanism measure, evaluate, and incentivize results?
Are effective environmental and social safeguards in place to ensure the investments do no harm?
How are fiduciary duties and financial management standards supported and enforced?
Are grievance and inspection mechanisms in place to ensure that standards are followed?

The full report seeks to ground the debate on the future of climate finance in an objective analysis of existing efforts to finance climate mitigation and adaptation in developing countries. The authors step back from the question of which institutions should be entrusted with new flows of climate finance to examine instead how governments can design a climate financial mechanism in a way that is widely perceived as legitimate. We identify three crucial dimensions of legitimacy: power, responsibility, and accountability (see Box A). While these three dimensions interrelate and overlap, we have found them to provide a useful analytical framework to analyze and guide choices in institutional design.

We review the governance structures, operational procedures, and records to date of 10 international and national financial mechanisms, with reference to these core dimensions of legitimacy, to draw lessons for future institutional arrangements (see Box B). We place special emphasis on the experiences with the Global Environment Facility (GEF), which, in operation since 1994, is the longest serving operating entity of the United Nations Framework Covention on Climate Change (UNFCCC) financial mechanism. In addition to the GEF, we review experiences from the Multilateral Fund for the Implementation of the Montreal Protocol, in operation since 1990, which is often referred to as a model for future funds. The remaining funds reviewed are much newer and yield more insights with regard to design, rather than operation.

We recognize that perceptions of the legitimacy of a financial mechanism are inherently subjective and that this subjectivity is revealed in the very different preferences expressed by contributor and recipient countries. We believe, however, that if governments were to discuss the dimensions of legitimacy more explicitly, the stakes and the trade-offs would become more apparent, and a more shared understanding on how to design a legitimate financial mechanism would emerge. We believe that the failure, thus far, to address the distribution of power, responsibility, and accountability more explicitly has led to a proliferation of financial mechanisms that are underfunded, which in turn leads to calls to create new mechanisms.

We recognize that perceptions of a financial mechanism’s legitimacy will also depend upon an institution’s performance—its demonstrated capacity to commit funding to investments that reduce greenhouse gas emissions and build resilience to climate change. Most of the climate financial mechanisms studied have not been operating at a scale or for a time period that would allow a full assessment of their performance. We nonetheless seek to make recommendations that could improve the design and the performance of new and existing climate financial mechanisms.

We conclude that a new global deal on climate finance is likely to significantly redistribute power, responsibility, and accountability between traditional contributor and recipient countries. Most significantly, the power of emerging economies to control climate finance mechanisms will grow, as will their responsibility and accountability for the performance of these institutions. In light of the dramatic changes in global politics and the global economy in past decades, this redistribution seems both long overdue and necessary to provide the basis for a successful global partnership on climate finance.

Conclusions and Recommendations

This is a dynamic time for climate finance, as the international community struggles to craft mechanisms that are perceived to be legitimate by all UNFCCC Parties and that are capable of funding climate-related activities efficiently and at scale. Our analysis of established and new climate financial mechanisms and the current UNFCCC negotiations leads us to conclude the following:

Change is coming. A new global deal on climate finance will likely reinterpret the principles that in the past have guided the design of climate finance mechanisms in a way that significantly redistributes power, responsibility, and accountability between traditional contributor and recipient countries.
A new balance of power, responsibility, and accountability could enhance recipient country ownership. Greater representation of developing countries on the governing bodies of international financial institutions more generally, and climate finance mechanisms more specifically, should help ensure greater emphasis on the national and local “ownership”—and thus the effectiveness—of climate finance investments.
A new understanding of how to balance national interests with global responsibility and accountability is required. This will require assurance that nationally driven investments contribute to global benefits in the form of net emission reductions and that investments protect the most vulnerable countries and communities.
New financial mechanisms—at both the global and the national level—are necessary. If the international community raises the scale of public finance necessary to move developing countries onto a low-carbon, climate-resilient pathway, the capacity and the creativity to spend these resources well will necessitate the creation of one or more new financial mechanisms at the global level and multiple nationallevel institutions.
Existing institutions must also be reformed. The scale of the climate change challenge and of the scale of the funding necessary to respond to that challenge will also necessitate the reform of existing financial institutions, many of which have been supporting fossil fuel–led growth and have yet to mainstream concerns about the impacts of climate change into their strategies.
Current negotiating positions reflect deep historical and ideological divisions—particularly between developed and developing countries—that will need to be overcome by building trust and experimenting with new kinds of relationships. Developed countries have been keen to build on existing financial institutions they have shaped and traditionally controlled. Developing countries are wary of these same institutions, which they see as historically having advanced contributor interests and theories of development, through both the formal and informal exercise of donor power.
At the international level, the choice between reforming traditional development agencies, such as the GEF, U.N. Development Programme (UNDP), the U.N. Environment Programme (UNEP), and MDBs, and creating new financial mechanisms will raise issues of institutional economy and effectiveness. In order to generate a greater sense of trust and ownership, backers of existing agencies may have to accept a degree of duplication of existing capacity through the creation of new mechanisms—particularly where significant gaps in capacity are identified—and to accept strengthened lines of accountability of climate finance mechanisms to the UNFCCC Conference of the Parties (COP). On the other hand, those calling for the creation of new institutions may need to concede that it may waste precious resources to replicate the staff and services provided by existing agencies.
Balancing the roles of international and national institutions will also involve trade-offs. Traditional development agencies have gained the trust of contributors by putting in place systems to both measure and manage impacts of their investments. Developing country recipients, however, have been frustrated by the bureaucracy and the focus on generic rather than country-specific concerns that these systems can generate. Many developing countries will likely struggle to convince contributors that their national institutions have the capacity to manage large-scale development finance without the support of development agencies. Notably, a number of developing countries are taking steps to build and strengthen this capacity and will need support to do so.
Delivering climate finance at scale, at least in the short term, will likely involve multiple mechanisms, both new and reformed. This is true because of the complex politics of the international negotiations and the differing views of legitimacy held by contributors and donors. The urgency and complexity of delivering funds at scale argues for moving forward, at least in the near term, with the institutions that we have, and investing in the strength and quality of COP guidance and national planning processes to ensure coordination and coherence. This experience should then guide the design and operation of the new institutions that will become necessary as the scale of resources grows.
Low-carbon, climate-resilient development is an unexplored frontier for all countries and has potential risks as well as benefits. While high standards will have to be developed and maintained to ensure emissions fall and the vulnerable are protected, climate finance will necessarily entail experiments with new policies and technologies that will need to be watched closely for unintended environmental and social impacts.
Policymakers must agree on ways to diversify the sources of climate finance and to de-link them from the levers of informal power. If existing institutions are to meet evolving standards of legitimacy, then their fundamental governance structures, as well as their operational procedures, will need to be reformed to give greater voice to developing country recipients. If formal grants of power are to lead to the effective exercise of that power, the international community must also make greater efforts to identify sources of revenue, such as new levies or longterm commitments, that are independent from the discretion of contributor governments.
It is necessary to build the capacity of non-state actors and civil society to monitor climate finance governance. Civil society groups at all levels can and are playing an important role in monitoring and influencing decision-making within climate finance funds. But they need to occupy such spaces more effectively than they have to date by monitoring and engaging in more inclusive decision-making processes with technical rigor and authority. However, “representation” of nonstate actors can be a very difficult issue—civil society is diverse with widely differing views.
Near- and medium-term climate finance should focus on strengthening national institutions. A next generation of climate investments should promote the responsibility of recipient countries by strengthening the national institutions that will implement mitigation and adaptation activities and by ensuring their transparency and accountability to citizens within countries, as well as to the international community. While it is important that development agencies provide technical support to national institutions, they should work in closer partnership with national stakeholders. It will be particularly important to engage with stakeholders outside of government, including the private sector, independent research institutions, and civil society. Such collaborations can help ensure climate finance proposals more appropriately reflect national circumstances and priorities.
It is important to draw from the lessons learned from decades of development finance to build national institutions that reflect universally accepted principles of good governance. Traditional finance and development institutions have decades of experience—both good and bad—in translating internationally agreed upon agendas into national and local investments. National institutions should draw from these experiences and be designed and supported to operate in accordance with universal principles of good governance. Strong provisions for accountability should be put in place, including sound fiduciary management, anticorruption measures, and grievance mechanisms and inspection procedures that ensure compliance with environmental and social standards and safeguards.

Guidelines for Reporting Information on Public Climate Finance

Maggie Barron — Fri, 03 Dec 2010 14:06:40 -0500

Executive Summary

Reporting and reviewing financial information has become an increasingly urgent issue in the international climate negotiations. In the Copenhagen Accord, which resulted from the United Nations Climate Change Convention in Copenhagen in 2009, developed countries pledged to provide USD$30 billion for the period of 2010-2012 and $100 billion per year by 2020 for climate adaptation and mitigation in developing countries. Developing countries want assurances that developed countries are fulfilling their climate finance pledges. To address this need, the Bali Action Plan (2007) mandates that support from developed countries for developing country Nationally Appropriate Mitigation Actions be “measurable, reportable and verifiable.” The Copenhagen Accord, building on these provisions, calls for “financing by developed countries [to] be measured, reported and verified in accordance with existing and any further guidelines adopted by the Conference of the Parties,” and that accounting of such finance is “rigorous, robust and transparent.” However, countries have yet to agree on next steps for tracking progress against climate finance pledges under a post-2012 international climate regime and what, if any, common reporting format will be required.

Current United Nations Framework Convention on Climate Change (UNFCCC) reporting guidelines are neither transparent nor comprehensive, and efforts by multilateral and bilateral development finance institutions to fill this gap are emerging but have so far remained limited in scope. As a result, existing data collection systems provide only limited information on the levels of financing, what financing is used for and which countries are benefiting. They do not provide information on whether funds are new and additional. The result is a lack of coordination among donor countries to ensure that funding efforts address needs in a balanced and thorough way that avoids duplication. This also generates a lack of trust between developed and developing countries that hinders progress in the negotiations for a post-2012 international treaty to address climate change.

Therefore, for public climate financing to be evaluated and flow effectively and efficiently, it is critical that data on climate finance are reported using a common reporting system as well as reviewed. Depending on the level of detail required by a reporting system, the reported data should help determine how Parties are meeting their financial commitments, improve understanding of sectoral and technological investment trends, and lead to assessments of the effectiveness of different forms of financing.

The goal of this paper is to help Parties to the UNFCCC develop robust reporting processes for climate finance, starting with a decision in Cancun that addresses the measurement, reporting, and verification (MRV) of finance. The paper discusses:

The characteristics and principles of an improved reporting system for climate finance.
How and what kind of financial data are currently collected and reported by the UNFCCC, the OECD DAC, private organizations, and multilateral development banks (MDBs).
Options to improve on current reporting systems, including a proposed reporting format.
The potential implications and operational consequences of an improved reporting system for the review process, institutional structures, and fast-start climate finance.

This paper aims to inform not only the nature of the text to be adopted by the Conference of the Parties at COP-16, but will also be pertinent over the next two years as improved reporting guidelines are drafted, agreed to, and implemented.

Key Observations and Recommendations

An ideal reporting process for climate finance should ensure that reporting by developed countries is complete, transparent, comparable, accurate, and efficient. However, current reporting of public sector financing for climate change projects by bilateral and multilateral institutions do not completely fulfill these principles. Consequently, Parties to the Convention should at COP-16:

Request the SBSTA to revise the guidelines for the reporting of information in national communications by Annex I Parties to the Convention, part II: UNFCCC reporting guidelines on national communications (Decision 4/CP.5), including the development of reporting formats for finance, with a view to adoption of the enhanced reporting guidelines by COP-17.

The process of revising the guidelines should be informed by the insights and experiences of the Multilateral Development Banks (MDBs), bilateral financing institutions (BFIs), the OECD DAC, and experts from developed and developing countries.

Parties could significantly improve the transparency of financing by adopting a standardized financial reporting format with common definitions and methodologies to quantify climate finance. However, in launching an effort to either revise or initiate a new means to collect financing data, Parties to the Convention will need to determine the kinds of data they want a climate finance reporting system to provide. This will determine the extensiveness of any expanded data collection effort and its likely cost.

Improved climate finance data alone will not be able to shed light on whether or not funds for climate change are new and additional to official development assistance, a topic on which there are widely divergent political views. Better data would eventually allow Parties to determine from a technical standpoint whether there has been an increase or decrease in climate finance over time. However, judging newness and additionality is a subsequent and separate step which necessitates a political agreement on methodologies and a reliance on other data sources outside of the UNFCCC. A transparent reporting process can nevertheless help inform this discussion and build trust and understanding between developed and developing countries.

Parties should consider implementing a more robust process to review reported data. This could include launching voluntary pilot projects to establish how reviews could be successfully conducted, using independent, non-political technical financial experts, formally establishing clear rules and guidelines for civil society participation in the review process, and improving record keeping so that data between countries can be compared.

A revised reporting system will likely require the redesign of existing databases and search engines. If Parties wish to have a centralized data system, they will need to decide where such a system should be located and will need to develop new procedures for collecting and processing financial data.

The introduction of an improved reporting system will take time to implement. It will thus not satisfy the need for more transparency in the short-term, and in particular for fast-start funding under the Copenhagen Accord. It is important to ensure that financial support to developing countries is accounted for in a clear and transparent manner during the fast-start period through existing reporting systems and through short-term multilateral efforts and efforts on the part of donor countries. Lessons learned from this experience could shape the implementation of new reporting and review systems in the longer term.
With the exception of financing for renewable energy, there are limited data on how much financing is currently being provided by the private sector through channels such as venture capital funds, bank loans or equity finance. Further research is needed to track private sector funds for climate change, including the amount of private sector funds leveraged with public funds.

The Clean Technology Fund: Insights for Development and Climate Finance

admin — Fri, 12 Nov 2010 14:15:11 -0500

Over the past year, the Clean Technology Fund (CTF) administered by the World Bank in partnership with Regional Development Banks has begun financing clean technology deployment projects in fast growing developing countries. The objective of the CTF is to use the minimum level of concessional finance necessary to realize investment opportunities that will have transformative effects on the greenhouse gas (GHG) emissions of the recipient country over the long term. As of March 2010, US$4.35 billion –nearly the entirety of the $4.405 billion in funds pledged to the Clean Technology Fund (CTF)– have been earmarked to support investment plans in 12 countries, and a regional concentrating solar program in North Africa. $888 million dollars in financing for 15 projects in 8 countries has been approved to date.

This working paper reviews recent developments at the CTF, including the status of contributions to the fund, its governance structure, and evolving results framework. Its focus is on the projects for which CTF financing has been approved to date. It analyzes the Mexico and South Africa investment plans and projects as case studies to illustrate some of the challenges and opportunities of addressing policy, regulatory and governance issues in project design and implementation. It is part of a series of working papers WRI has produced analyzing evolving developments at the CTF. Our March 2010 Working Paper, The Clean Technology Fund: Insights for Development and Climate Finance, reviewed the basic mechanics of the Fund and the Clean Technology Investment Plans approved.

Note: This version of the Working Paper was updated on 30 November 2010 from the version posted on 11 November 2010. Corrections were made on page 4 regarding the role of private sector observers, and on pages 9 and 13 regarding the implementing modalities of the Turkey Commercializing Sustainable Energy Financing Program. A revised paper reflecting on developments at the November 2010 meeting of the CTF governing committee will be released in early 2011.

Investing in Sustainable Energy Futures: Multilateral Development Banks' Investments in Energy Policy

Maggie Barron — Thu, 22 Apr 2010 11:41:00 -0400

Executive Summary

The electricity sector lies at the nexus of two urgent global imperatives: powering economic activities and livelihoods and reducing greenhouse gas (GHG) emissions from the use of fossil fuels. The international community is looking to multilateral development banks (MDBs) to help developing countries balance these sometimes conflicting imperatives. Historically, developing countries have drawn on the public financial resources of MDBs to develop electricity infrastructure. The MDBs have propagated their ideas about technology choice, regulatory policy, and service delivery alongside their capital investments in new power lines and plants.

Energy prices do not reflect the true costs of fossil-fuel technologies to public health, to the local environment, and to the planet’s climate system. Decision making in the electricity sector has tended to be both exclusive and opaque, dominated by interests with a stake in “business as usual” practices. As the prices of fossil fuels rise along with our understanding of the environmental and social costs of conventional energy, we need new and better ways to meet energy demand and to support long-term development. Standard energy policy and regulatory mechanisms do not support the renewable energy and energy efficiency necessary to reduce emissions from the energy sector. In most countries, policies and regulations tend to emphasize short-term cost and supply considerations rather than the long-term benefits of the enhanced energy security, environmental performance, and cost savings over time offered by clean technologies.

Enabling Investment in Sustainable Energy

Policies & Regulations

Long-term integrated energy planning.
Policies and regulations encouraging energy efficiency.
Policies and regulations promoting renewable energy.
Access to electricity for the poor.
Pricing structures encouraging efficiency and reducing consumption.
Subsidy reforms to reveal true costs of fossil fuels and promote the viability of sustainable energy options.

Institutional Capacity & Governance

Executive agencies’ capacity for sustainable electricity.
Regulatory agencies’ capacity to oversee implementation of sustainable electricity policy.
Utilities’ capacity to promote energy efficiency and renewables.
Transparency of policy, planning, and regulatory processes for electricity.
Stakeholders’ engagement in policy, planning, and regulatory processes.

MDBs are in a position to work with stakeholders in developing countries, including other donors, to pursue low-carbon growth options that also support poverty alleviation. This report examines those policies, regulations, and institutional capacities in the electricity sector that will direct both public and private investment in sustainable energy options. The elements we have proposed do not prescribe a particular mix of technologies or approaches that should be emphasized in any country or region, as this would be neither appropriate nor possible. Every country is endowed with a unique set of energy resources, and the economic, social, and political circumstances that affect how it can meet energy demand are also unique. These elements are instead intended to help any country consider the options for how best to provide electricity services in light of intertwined economic, social and environmental considerations, in order to provide critical development benefits and reduce greenhouse gas emissions.

Summary of Analysis

We reviewed loans provided by MDBs to developing countries for electricity policy from 2006–2008, to understand how the various elements of sustainable energy we identified were reflected in these investments. The results are described in full in section III of this report. Although all the elements are relevant to countries, we recognize that it may not be necessary or possible to include all these elements in a single loan by an MDB. Our review is limited to publicly available loan program preparation documentation: as a result, it does not capture issues that may have been addressed in program implementation. Our research findings should therefore be treated as indicative, and not as a definitive assessment of MDB programs. The objective of this exercise is to highlight those MDB interventions that have taken a comprehensive approach to framing interventions in the electricity sector.

Summary of Findings

A relatively small number of MDB projects addressed many of the elements of sustainable energy proposed in our framework. Many of the associated interventions represent important examples of how the MDBs can bring expertise, networks, and finance to help align investment in the electricity sector with sustainable, low-carbon development. These examples are emphasized in the main text of the report.

Recommendations

The MDBs’ support for the electricity sector should more consistently and comprehensively address policy, regulatory, and institutional capacity to align investment with environmentally and socially sustainable energy using the framework proposed in this report.

More attention should be paid to integrated electricity planning and the implications of choices for greenhouse gas (GHG) emissions over the long term.
MDB support for energy policy should more consistently and creatively support access to clean and affordable electricity for the poor.
The cumulative effects of sustained support for technologies such as hydropower and transmission and distribution infrastructure must be managed.
Project development and implementation must be transparent and must engage stakeholders throughout.

A Roadmap for Integrating Human Rights into the World Bank Group

Maggie Barron — Mon, 19 Apr 2010 15:01:07 -0400

Purpose of this Report

This report argues that human rights are an integral part of effective and sustainable development, and thus should be explicitly considered in all World Bank Group (WBG) investment decisions. We examine the WBG’s integration of human rights standards into its operations—highlighting accomplishments, shortcomings, and barriers—and suggest ways forward. The international human rights framework has a complex and often politicized history. Human rights have traditionally been seen as duties held by a government with respect to each citizen in its jurisdiction.

Foreword by Mary Robinson

Introduction: The Changing Nature of the World Bank Group
What Are the Links Between Human Rights and Development?
What Does Human Rights Integration Look Like?
What Has the World Bank Group Accomplished So Far?
Where Are the Gaps?
What Are the Next Steps?
Conclusion

Defining the role of other actors — whether private or intergovernmental—has proved more controversial. Human rights are also difficult to quantify, and thus difficult to manage. While many countries recognize a human right to clean water, for example, the question of how much clean water per day is essential for individual human dignity remains unresolved. Furthermore, the implementation of human rights remains a challenge.

The UN and numerous human rights organizations are working to clarify roles and responsibilities, help guide implementation and resolve key questions such as: which rights are universal? Do human rights refl ect cultural biases of western countries? How does the human rights framework help manage trade-offs when resources are scarce?

Given the complexity of human rights, we recognize the challenges of defining the appropriate role of the WBG. The WBG is owned by more than 180 countries with diverse traditions, has a culture of quantifying the costs and benefits of its investments at the level of national economies rather than individuals, and aspires to be respectful of the boundaries between its role and the role of governments.

We therefore do not advocate that the WBG should shift its identity from a development to a human rights institution. We argue instead that as a development institution, the goals and values that human rights represent are already at the core of the WBG’s mission, and that the explicit and systematic integration of human rights into WBG operations could improve its effectiveness by enhancing the WBG’s ability to manage risks and improve development outcomes. We hope this report will encourage staff and executive directors to begin examining how the WBG can incorporate human rights approaches beyond niche programs into mainstream activities.

Human Rights and Development

In the past decade, a wide range of development actors, from private multinationals to international development agencies, has begun to use human rights standards as a means of managing risks and recognizing the rights of disempowered people, particularly the poor. In many cases these efforts respond to the growing incorporation of human rights—ranging from the right to life, food, and health to freedom from discrimination—into national constitutions and laws. The goals of human rights and development are inextricably linked and mutually reinforcing.

Upholding human rights can help ensure the success of a development project by addressing the root causes of poverty. Conversely, violations of human rights—such as the repression of dissent, loss of community access to food and water supplies, poor health conditions for local laborers, or discrimination against poor communities— can prevent the investment from generating net development benefits.

Despite this clear linkage, the integration of human rights policies and programming into the World Bank Group’s activities has met with resistance. The economic benefits of human rights protections are often difficult to quantify. As a result, the WBG has often judged investments successful on the basis of short term economic returns, rather than the extent to which they protect and promote human rights — particularly those of the poor. As this report discusses, this can raise risks that lead to the suspension of WBG investments, as it did in 2009 in the context of the entire oil palm sector.

Internal constraints are a major factor limiting the WBG’s ability to integrate human rights into its practices. The WBG’s governing boards have thus far failed to reach consensus on whether human rights risk management is within the explicit mandate of these institutions. Even governments that have supported human rights in other forums have been hesitant to discuss human rights at the WBG. This is despite the fact that in practice, the WBG’s safeguard policies already protect some rights of affected communities. This report argues that the failure of the WBG to more fully and systematically integrate human rights into its policies and programs has prevented these institutions from delivering on the development outcomes they seek.

Benefits of a Human Rights Approach

Human rights standards can help guide development institutions towards investments that focus on the needs and concerns of the poor and the vulnerable. Human rights standards can help empower citizens to engage in making development decisions, by directing attention to the structural causes of poverty, including discrimination, exclusion, lack of accountability, and abuse of state power. They are also increasingly employed as a tool for managing risks and measuring the effectiveness of development. And studies have shown that many countries that demonstrate a higher respect for human rights experience higher economic growth.

Key Findings

Our report draws on existing World Bank Group, UN, and civil society reports to create a snapshot of where the WBG is today, and discusses how we believe it is politically feasible to make further progress. The WBG’s activities affect a wide range of human rights, but we draw primarily from examples of rights of communities related to the environment and natural resource use.

Examples include access rights (access to justice, public participation, and access to information), the rights of indigenous and vulnerable communities with strong ties to the land, and rights to food and water. Although we do not examine the full range of human rights— which range from the right to education to freedom of religion—we believe that many of our observations and recommendations apply broadly.

In 2009, an internal survey of the World Bank revealed that overall, its staff considers human rights to be relevant to their work but are unsure how to implement them. Despite this interest, efforts to more systematically integrate human rights into WBG operations have met with resistance, particularly from the member governments on the governing boards.

In 2002, for example, the WBG’s president, James Wolfensohn, formed a task force to draft a strategy paper on human rights and the World Bank. The task force presented its report to the board’s development committee and recommended the adoption of human rights principles, but the committee did not approve the report. This was the last significant effort to engage the board on a comprehensive human rights strategy.

Many of the WBG’s activities protect and promote human rights, but the result is piecemeal, leaving significant gaps in efforts at protection.

Even in the absence of a comprehensive human rights policy, many of the WBG’s activities promote rights both explicitly and implicitly. Several WBG programs, for example, promote gender equality and legal empowerment of the poor. Nevertheless, our analysis has concluded that the WBG’s integration of human rights remains low.

Opportunities to Move Forward

Many development institutions—such as UN agencies, the European Bank for Reconstruction and Development, and some private financial institutions that invest jointly in development projects—have begun integrating human rights into their operations in earnest.

The next few years offer an important opportunity to advance the dialogue and action on human rights in the World Bank Group. First, the balance of power is changing on the WBG’s board of directors, which so far has been reluctant to embrace a human rights approach. The previous voting structure allowed a small number of donor countries to determine WBG financing. In this environment, discussion of human rights risks opened the possibility that WBG donors would use financial conditionalities to coerce changes in national legal and governance systems, or to censure governments for their human rights records.

Now, however, a series of reforms are expanding the voting power of China, Brazil, India, and other emerging economies. The outcomes of these changing political dynamics are not yet clear. Reforms could lead to a complete dismissal of human rights integration at the WBG. But reforms could also lead to a greater willingness to discuss human rights risk management more openly without the risk of interference, because borrowing countries will have a greater voice in investment decisions.

As discussed in this report, one starting point for dialogue could be human rights risk management for the WBG’s private sector investments—many governments on the board have already endorsed the UN Framework on Business and Human Rights, which identifies key components of a corporate human rights risk management system. Numerous policy reviews are also underway at the WBG that open other opportunities for dialogue. Each of these policy reviews has a potential human rights component.

Recommendations

This report proposes eight time-bound goals for integrating human rights more explicitly and consistently into the World Bank Group’s policies, processes, and operations. We recommend that by 2015, the WBG increase the dialogue among its staff and board and introduce human rights risk management practices into its operations to achieve a “medium” level of integration. After 2015, we recommend adopting an institution-wide strategy for human rights integration, in a manner both politically feasible and consistent with the WBG’s mandate. This would enable the World Bank Group to use the international human rights framework as a means to empower communities, improve risk management, and strengthen development outcomes.

Banking on Nature's Assets: How Multilateral Development Banks Can Strengthen Development by Using Ecosystem Services

Maggie Barron — Mon, 09 Nov 2009 16:57:27 -0500

Humanity depends on nature for physical and spiritual sustenance, livelihoods, and survival. Ecosystems provide numerous benefits or “ecosystem services” that underpin economic development and support human well-being. They include provisioning services such as food, freshwater, and fuel as well as an array of regulating services such as water purification, pollination, and climate regulation. Healthy ecosystems are a prerequisite to sustaining economic development and mitigating and adapting to climate change.

The UN-led Millennium Ecosystem Assessment audited the health of 24 ecosystem services globally and reported that two-thirds had been degraded over the past half century. This degradation is undermining development progress. However, by accounting for and managing ecosystem service trade-offs, multilateral development banks (MDBs) and partner countries can improve development outcomes, help address climate change, and reduce costs to people and economies. Toward this end, a growing number of tools are emerging to help factor ecosystem services into economic development decisions.

Traditionally, development planners have focused narrowly on provisioning services with a value in the market place while overlooking regulating services. Expansion of aquacultures has increased shrimp production, for example, but at the same time degraded the fish spawning ground and storm protection services provided by mangroves. Construction of dams has increased power and freshwater for irrigation while leading to downstream loss of wetlands and their purification and flood protection services.

MDBs have already begun to experiment with ecosystem service concepts in development planning and practice. This report makes the case for expanding beyond the current focus on single services and “add-on” projects. The authors recommend a more systematic approach, one that would take into account multiple ecosystem services in all development operations from the earliest stages of the planning process. Such an approach will enable MDBs to make the links among climate, environment, and development and identify risks and opportunities associated with development plans. Banking on Nature’s Assets identifies entry points for mainstreaming ecosystem services in MDBs’ core operations of strategic direction setting, advisory services, and investments and describes a portfolio of tools to help. It also presents a range of policy options that MDBs can help country partners implement to sustain critical ecosystem services.

The report concludes with five interrelated recommendations to scale up MDB and partner-country application of ecosystem services:

Incorporate into environment strategies;
Integrate into core operations;
Build capacity to implement an ecosystem services approach;
Empower local authorities, organizations, and communities; and
Strengthen policies and incentives.

Entry Points for Integrating Ecosystems Services into MDB Operations

The Legal Character of National Actions and Commitments in a Copenhagen Agreement: Options and Implications

Maggie Barron — Wed, 04 Nov 2009 15:54:28 -0500

Executive Summary

The world’s governments may be negotiating the most important treaty in modern history: a multilateral environmental agreement (MEA) that may determine whether humanity can successfully reduce anthropogenic sources of greenhouse gases and avoid the most dangerous consequences of climate change. With less than two full weeks before negotiations are scheduled to conclude in Copenhagen, delegations have yet to agree whether they are aiming at a legally binding treaty or at a political declaration. If it is a treaty, will the text contain legally binding, specific commitments, backed by robust review procedures, or will it be a legally binding agreement with a hollow core?

Introduction
The elements of legal character
A brief history of legal character under the climate change regime
The Bali Action Plan and legal character under a Copenhagen agreement
State of play: Snapshot of a moving process
Unilateral standard setting for legal character: A case study of draft U.S. climate legislation
Conclusions: the benefits and risks of legal character

Even as consensus builds around the need for urgent, collective action to combat climate change, countries remain deeply divided on how efforts to reach this global goal will be equitably shared among and between developed and developing countries. Part of the controversy centers around how developing country “nationally appropriate mitigation actions” (NAMAs) will be expressed in an international agreement, and how procedures for measuring, reporting, and verifying these actions might promote implementation. This Working Paper focuses on the choices facing developing country major economies participating in the Major Economies Forum (MEF) (China, India, Brazil, South Africa, and others) that are under pressure from industrialized negotiating partners to commit to actions that are comparable to those contemplated by richer nations.

This Working Paper clarifies a complex set of issues around the legal character of commitments that lie beyond the threshold question of whether Copenhagen should result in a legally binding treaty, and helps weigh the potential risks and benefits to developing country Parties of expressing their NAMAs in a legally binding form. The analysis reveals that commitments can differ in terms of their form (binding v. non-binding), their content (specific v. vague), and in terms of the procedures and institutions by which their implementation is reviewed.

To provide context, the authors note recent discussions within the Major Economies Forum (MEF) which suggest that MEF countries seem to be moving towards a “bottom up” approach to a climate agreement that places less emphasis on the international legal character of countries’ commitments. The authors then review the legal character and legal implications of previous undertakings in the UN Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. The paper then reviews the major proposals submitted by countries to the Copenhagen process, as well as recent versions of the negotiating text (described in the Appendix). The paper also provides a case study of draft U.S. climate legislation, and analyzes the special challenges facing developing country major economies under pressure to take actions comparable to richer countries.

A key conclusion from our analysis is that a post-2012 climate agreement, whether agreed in Copenhagen or thereafter, should take a legally binding form, but one that contains undertakings by countries with a wide range of legal form and content, and that are subject to differentiated review procedures. It notes that some developing country major economies are likely to be held to a higher standard of legal content and review, than other, poorer or smaller developing countries.

Lessons from other treaties tell us that international agreements with binding, specific content backed by robust review procedures are generally more effective than those with vague content or limited review procedures. The table below indicates some of the benefits and risks associated with strengthening and weakening an international agreement’s legal character, content, and review procedures designed to promote implementation of the agreement.

General Benefits and Risks of Legal Character

Each country has the opportunity to influence the design the agreement’s content and, ultimately, will have to decide whether to become a Party. Signing up to legally binding, clear, specific, measurable, and ambitious commitments demonstrates strong political will to contribute and comply, encourages other countries to do the same, and thus should lead to stronger environmental outcomes. In most cases the international penalties associated with failing to comply with an international treaty are unspecified, and thus the risks of being found in non-compliance seem low. However, a post-2012 climate change regime, built from the “bottom-up” will likely combine multilaterally agreed rules and bilateral arrangements. There are indications that this regime will support performance-based financial mechanisms and carbon markets that could reward countries willing to make more specific undertakings. For example, our case study of draft U.S. climate change legislation suggests that countries undertaking commitments of a stronger legal character may have preferential access to large scale carbon markets, and may be able to avoid the unilateral trade sanctions contemplated by the U.S. and other countries. While each country must weigh these risks and benefits for itself, this Working Paper seeks to assist in this process.

Breaking Ground: Engaging Communities in Extractive and Infrastructure Projects

Payson Schwin — Wed, 04 Feb 2009 10:18:01 -0500

Growing demand for energy and natural resources has led many low-income, resource-rich countries to open remote areas to industrial development. Even as a financial crisis engulfed the global economy in 2008 and 2009, projects such as oil pipelines, roads, and mines continued to remain key development priorities.

Engage Communities, Avoid Conflict

Kirk Herbertson explains the story of the Mae Moh coal plant in Thailand and how it demonstrates why early community engagement is critical.

In many of these countries, however, strong institutions and governance systems are not yet in place to ensure that extractive and infrastructure projects do not adversely affect local communities. As a result, these sectors have generated a history of harmful environmental and social impacts on local communities. These impacts create risks for companies, governments, and financiers.

For several years, companies, governments, and financial institutions have responded to these challenges by signing up to various initiatives that provide standards and guidance to foster better industry practices. Financial institutions, in particular, often require clients in these sectors to meet environmental and social standards, in order to avoid or mitigate risk.

Many project proponents, host governments, and financial institutions recognize that a strong relationship with those affected by a project can improve the identification and management of risks, as well as long-term project viability. But community engagement efforts often fall short because of a failure to understand local political and community dynamics, or a failure to fully engage all local stakeholders affected by a project.

Establishing Effective Community Engagement Principles

WRI analyzed existing community engagement standards and guidance, as well as experiences in several high profile projects. Our analysis revealed that key gaps remain in the knowledge base and on-the-ground application of community engagement standards. Despite the abundance of existing reports and manuals that provide guidance on community engagement, much of the publicly available information on how project proponents engage communities reveals great difficulty in applying existing guidance effectively.

Based on this analysis, we developed seven Principles for Effective Community Engagement for extractive and infrastructure projects. These principles are intended to serve two key purposes:

For companies and governments developing projects: to provide a framework for identifying solutions to core community engagement challenges.
For citizen organizations supporting communities: to serve as a resource, in order to empower local communities to provide more meaningful input into project design and implementation.

Principles For Effective Community Engagement

Prepare communities before engaging.
Determine what level of engagement is needed.
Integrate community engagement into each phase of the project cycle.
Include traditionally excluded stakeholders.
Gain free, prior and informed consent.
Resolve community grievances through dialogue.
Promote participatory monitoring by local communities.

Next Steps for Key Players

Extractive and infrastructure projects do not exist in a vacuum—they will both affect and be affected by the surrounding communities and environment. Effective community engagement strategies must create win-win situations for the proponent and communities over the life of a project. To address the gaps remaining in the knowledge base and application of community engagement standards, we recommend the following next steps:

For project proponents: identify and promote best practices. Proponents of extractive and infrastructure projects should prioritize the collection and public dissemination of community engagement best practices, including examples of how community engagement creates value for companies. The seven principles proposed in this report can serve as a framework around which best practices can be collected.
For financial institutions: increase disclosure, promote improved community engagement. Financial institutions can play a critical role in guiding their clients to link community engagement with project risk management, and should send strong signals to their clients that community engagement is a priority. By improving their own public reporting on community engagement, financial institutions can promote more open sharing and improvement of engagement strategies. For example, the International Finance Corporation (IFC)—the private sector financing arm of the World Bank Group—should begin to routinely disclose how it determines that each of its projects has “broad community support.” Similarly, the Equator Principles financial institutions should disclose the projects where they are applying the IFC Performance Standards.
For citizen organizations: advocate for inclusive, accountable, and transparent processes. The ultimate goals of community engagement are tangible outcomes, such as providing benefits and mitigating risks to improve the lives of communities and strengthen a project’s viability. However, these outcomes often depend on the integrity of the process for achieving them. Community engagement that is inclusive, accountable, and transparent is more likely to result in optimal outcomes for both communities and project proponents. Informed by this report, citizen organizations supporting affected communities can more clearly articulate the type of processes in which they would like to engage.

When communities have the opportunity to collaborate with project proponents during the design and implementation of a project, proponents can more effectively identify and mitigate potential impacts, prevent harm, and shape the project to fit local conditions. Communities, in turn, can have a voice in determining how they will benefit from a project and whether a project fits their development priorities. This creates local ownership and support for the project, which is also good for the bottom line.

This report is the first of two reports to be produced by WRI’s Institutions and Governance Program, the second of which will identify examples of best practices for each of the principles identified.

WRI Publications Feed: International Financial Flows and the Environment (IFFE)

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Q&A on this Analysis

Have developed countries met their fast-start finance pledge?

Do the funds have a “balanced allocation between adaptation and mitigation”?

Are the pledged funds “new and additional”?

Do the pledges include “investments through international institutions”?

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa”?

What types of financial instruments are countries using?

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

Grounding Green Power: Bottom-Up Perspectives on Smart Renewable Energy Policy in Developing Countries

Presentation

Power, Responsibility, and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance

Executive Summary

Institutional Arrangements for Climate Finance: Power, Responsibility, and Accountability

Box A. Dimensions of Power, Responsibility, and Accountability in the Design of a Climate Finance Mechanism

Conclusions and Recommendations

Guidelines for Reporting Information on Public Climate Finance

Executive Summary

Key Observations and Recommendations

The Clean Technology Fund: Insights for Development and Climate Finance

Investing in Sustainable Energy Futures: Multilateral Development Banks' Investments in Energy Policy

Executive Summary

Enabling Investment in Sustainable Energy

Summary of Analysis

Summary of Findings

Recommendations

A Roadmap for Integrating Human Rights into the World Bank Group

Purpose of this Report

Table of Contents

Human Rights and Development

Benefits of a Human Rights Approach

Key Findings

Opportunities to Move Forward

Recommendations

Banking on Nature's Assets: How Multilateral Development Banks Can Strengthen Development by Using Ecosystem Services

The Legal Character of National Actions and Commitments in a Copenhagen Agreement: Options and Implications

Executive Summary

Contents:

Breaking Ground: Engaging Communities in Extractive and Infrastructure Projects

Engage Communities, Avoid Conflict

Establishing Effective Community Engagement Principles

Principles For Effective Community Engagement

Next Steps for Key Players