How can developing countries access international funding to help mitigate and adapt to climate change? This is one of the most important questions being debated at the COP 21 climate change negotiations, and it could be critical to securing support for an international agreement.
Many of the world’s poorest countries will need funding beyond their means to adjust to sea level rise, extreme weather, and other negative impacts of climate change. At the same time, they’ll need to emerge from poverty without creating too many new greenhouse gases and keeping emissions on a trajectory consistent with limiting warming below the internationally agreed 2°C target.
At previous COP negotiations, developed countries agreed to create dedicated funds – the Adaptation Fund and the Green Climate Fund – to help developing countries pay for climate change adaptation and mitigation activities. These funds are unique in their emphasis on providing money directly to national institutions in developing counties (so called “direct access”). Unfortunately, meeting requirements to apply for funding has not been easy for all countries.
In order to help clear this hurdle, WRI engaged a number of representatives from countries that have been accredited to receive money to highlight best practices learned to date. Our new working paper, Direct Access to Climate Finance: Lessons Learned by National Institutions, describes the main lessons learned and provides practical recommendations for institutions seeking to access finance directly from the climate funds. And yesterday at a side event in Paris, we invited representatives from Fiji, Kenya and South Africa to share their experiences with applying for funding. The following are three main lessons that have emerged:
1) Make a plan based on national strategies
Countries have generally found it easier to develop high-quality and ambitious funding proposals to submit to climate funds if they already have in place strong national plans for combatting climate change. Effective national plans are generally based on high-quality data and cross-sector collaboration, and include strategic thinking around how to best access and leverage finance to support nation-wide change. For example, Rwanda’s Green Growth and Climate Resilience Strategy outlines 14 adaptation and mitigation programs that aim to foster sustainable growth, food security and integrated resource management. The strategy resulted from a stakeholder consultation process and splits each program into distinct actions, which are ranked according to their emission-reduction potential, contribution to climate resilience, timing and costs. The strategy played a key role in Rwanda’s decision-making in relation to the Adaptation Fund and Green Climate Fund.
2) Build strong institutions
Using climate finance effectively requires strong institutions capable of overseeing high-impact initiatives. Before developing nations can receive direct access to finance, the climate funds require countries to show they have institutions to effectively deploy money and oversee implementation of financed initiatives. As part of this requirement, countries must ensure that one or more institutions become accredited to the relevant fund as so-called implementing entities. During the accreditation process, the Adaptation Fund or Green Climate Fund assesses whether institutions have the capacity to make sure that money is managed and projects are implemented according to international standards. So far, the Green Climate Fund has accredited five national institutions, while the Adaptation Fund has accredited nineteen. Many of these institutions were chosen by their countries based on their relatively strong systems for managing environmental, social and fiduciary risks. Nonetheless, most also had to make some management system changes to meet the relevant fund requirements. The Fiji Development Bank, for example, has had to incorporate considerations of gender more effectively into their programming.
3) Ensure coordination and stakeholder engagement
Effective action against climate change requires solutions cutting across multiple sectors with the buy-in of affected stakeholders. The countries able to coordinate activities between different ministries, agencies and non-governmental actors can more easily arrange for and implement effective climate initiatives. The climate funds also look positively on funding requests reflecting support from affected people. In South Africa, for example, a steering committee including representatives from the national treasury, the national planning commission, and a civil society coalition helped assess project proposals and determine the winning project idea.
Securing Better Access to Finance
In sum, countries have found that successfully accessing money from the climate funds created through the UNFCCC requires putting in place the right people and plans. Those who go through the process of applying to the funds invest significant time and resources in the process, often more than originally planned. These investments generally benefit the country, not only in the form of access to climate finance, but also in better plans for dealing with climate change, stronger institutions and more effective partnerships.
Developing nations face similar challenges in accessing and using climate finance. Sharing lessons on how to apply for, deploy and manage climate finance can catalyze more access to finance and more effective use of funds.