Tracking Climate Finance in Developing Countries: Easing the Way Forward
When developing countries estimate how much funding they've received from developed country partners for climate change mitigation and adaptation, their figures don't always match what developed countries report they have provided for climate finance. There are several reasons for this mismatch, including the lack of a common definition for what counts as climate finance, and the fact that not all of the climate finance provided to developing countries flows through the recipient countries’ government agencies. And many countries lack systems to track climate finance flows within their borders.
Improved monitoring and reporting of climate finance is important because:
At the international level, it would contribute to the development of a more accurate picture of how much funding is going to climate change activities. It would also allow transparency in the discussions about international climate finance pledges of developed countries within the context of the United Nations Framework Convention on Climate Change (UNFCCC).
At the national level, it would let developing countries plan more effectively on how to use climate finance, allocate funding in line with national priorities, monitor how effective funded activities are, and verify support provided by developed countries. It would also strengthen trust by making accountability clear to citizens and funders.
A new World Resources Institute (WRI) working paper, “Monitoring Climate Finance in Developing Countries: Challenges and Next Steps,” draws on a series of three regional workshops in Latin America, Africa, and Asia where representatives from governments and other agencies discussed the challenges in monitoring climate finance flows, and some of the efforts their countries are making to overcome these challenges.
The paper highlights two lessons for developing countries to strengthen tracking of climate finance:
1. Develop/modify systems and procedures to monitor finance received that suits developing countries’ needs
The lack of an internationally agreed definition of climate finance makes it difficult to monitor and report climate finance flows. However, this should not prevent countries from attempting to estimate climate finance flows, by adapting one of the various definitions that have been developed to suit their needs and context. Countries should also make public what they count as climate finance to increase transparency in climate finance reporting. Kenya provides a good example of enhancing information about climate finance received in this regard. The Kenyan government estimated how much climate finance it got from its development partners when it prepared its National Climate Change Action Plan. Kenya’s estimates on climate finance received didn’t match what development partners said they provided. This type of process can help prompt a transparent and constructive discussion on funding flows and the work by international partners in recipient countries.
Several developing countries are also looking at how to establish tracking systems for financial flows. As an example, Malawi developed an aid management platform to monitor and report Official Development Assistance (ODA). Although this system does not have an explicit marker to capture climate finance flows, countries could build on this type of experience to develop tracking systems for climate finance.
2. Enhance institutional arrangements and coordination among stakeholders
An institutional set-up that promotes coordination among ministries and ensures that climate finance is integrated into budgeting and planning processes is an important starting point for tracking and reporting climate finance across various sectors. Coordination reduces information gaps and harmonizes efforts across the wide array of government agencies tackling climate change. This has already begun in El Salvador, which has established focal points for climate change in all relevant ministries to encourage a better overview of climate finance flows across sectors.
Coordination of government agencies vis-à-vis civil society and private sector stakeholders is also important for developing an accurate picture of climate finance received. To strengthen coordination, several countries, including Laos, Malawi and El Salvador, are developing online platforms where multiple stakeholders including non-government organizations can report ODA received. This type of initiative helps coordination among public, civil society, and private stakeholders and could be replicated or modified to explicitly capture information on climate finance.
Developing countries should build on these efforts to set up tracking systems and increase coordination among relevant stakeholders to improve information on climate finance received. Development partners should work with them to build monitoring and reporting capacities.
That said, it is important to keep in mind the important role that developed countries play in enhancing information about climate finance. In particular, they should make information available to the public about climate finance that is provided to developing countries, and about how climate finance is defined and measured. This topic is particularly relevant now as the Standing Committee on Finance (SC)—which is mandated to ensure coherence in the delivery, monitoring, and reporting of climate finance within the framework of the UNFCCC—meets for the seventh time in Bonn from June 16th to 18th. For this meeting, the SC will agree on guidelines for developed countries’ biennial reports, which present estimates of funding provided by developed countries to developing countries for adaptation and mitigation activities. These reports will allow comparison and tracking of finance flows, and will also help determine whether we are on track to leverage the $100 billion pledged by developed countries for climate change mitigation and adaptation. Although the meeting of the SC might not address all reporting issues, clear guidance from the committee could greatly improve the reporting capacities of climate finance providers. Progress on this subject will help to develop a more accurate picture of how money flows to climate projects in the developing world.