This working paper explores the concepts of ownership and accountability in climate finance in detail, and draws on experiences from development effectiveness and more recent experience of climate finance to consider options for enhancing ownership and strengthening accountability through various access modalities, including direct access. Finally, it looks at options for balancing ownership and accountability in the Green Climate Fund.

Executive Summary

Developing countries are calling for greater ownership of climate finance and a greater voice in climate finance decisions. Decades of evidence with official development assistance shows that when support is aligned with country development plans and priorities—and funding is delivered through country institutions and fiduciary systems—development efforts can have a greater impact. Recent evidence on climate finance also suggests that appropriate national capacities, institutional arrangements, and accountability systems are essential if developing countries are to effectively and transparently deploy finance toward low-carbon, climate-resilient development. In practice, international climate finance contributors and recipients must find ways to balance the sometimes conflicting goals of country ownership and accountability for results, financial management, and protection against environmental and social harm. This paper identifies the essential elements of country ownership and the types of accountability systems that countries need to manage climate finance. It explores how different avenues available to recipients to access climate finance can balance these interests. It offers recommendations to climate finance recipients and contributors—notably the GreenClimate Fund (GCF)—on how climate finance can be deployed to support both country ownership and the use of country accountability systems over the long run.

Learning from experience

In our analysis of how developing countries are taking ownership of their climate change agenda, we found that most are beginning to develop policies and plans around climate change. At the same time, they are reforming institutional arrangements and strengthening capacity to implement these plans. In many countries, however, the extent to which climate planning is integrated with broader development planning and included in national budgeting processes is limited. Developing countries need to clearly articulate appropriate priorities, through a participatory process that ensures broad stakeholder support. There is also a need for greater integration between development and climate planning and budgeting processes. The majority of international funds and institutions ensure accountability for the use of climate finance through their own policies and procedures. Some institutions are exploring ways to use country systems for accountability, through an accreditation process for national implementing entities (in the cases of the Adaptation Fund and the Global Environment Facility) or through a review and selective use of country policies and systems (in the case of the World Bank’s pilot country systems approach). Although international institutions’ standards are viewed by many contributors as generally higher than those of developing countries, our research found that while country systems for accountability vary, financial management systems are reasonably strong in many countries, including some of the least developed countries. Indeed, several developing country financial management systems are as stringent as those of developed nations.

In contrast, systems for managing for results are often poorly developed, and the quality of environmental and social safeguards in developing countries is mixed, with generally better performance on environmental than social safeguards. Thus, while developing countries are making good progress on accountability systems, climate finance contributors should invest in strengthening systems for fiduciary management, managing for results, and safeguarding against environmental and social harm. Development partners could enhance the effectiveness of their support by focusing on supporting developing countries to strengthen their own systems, rather than creating separate systems that result in duplication of effort and an increased administrative burden on countries. Developing countries need to take proactive steps to apply stronger standards of accountability to their own domestic climate finance.

Strengthening ownership and accountability through various access modalities

Three broad models of balancing ownership and accountability are in use in the current climate finance landscape.

The emphasis on accountability model favors contributorcentered accountability, often at the expense of recipient country ownership. Although there may be some attempt to align funding with national priorities, contributors retain considerable control over how funding is used and which institutions it is channeled through and to. Although this model is currently prevalent, it is neither empowering to recipient countries, nor does it strengthen country accountability systems. This model is appropriate only in countries with very weak accountability systems and little political will to reform them—a relatively rare combination. Post-conflict countries (where country systems may be fragile and unreliable) and countries plagued by high levels of corruption (where there is a high risk of mismanagement of funds) may be appropriate venues for this model. Country ownership comprises three elements: Alignment of climate finance with national strategies and priorities; Decision-making responsibilities vested in national institutions; and The use of national systems for ensuring accountability in the use of climate finance. Accountability to manage climate finance well requires systems for: Managing for and demonstrating the achievement of results; Ensuring sound financial management and fiduciary practices; and Providing robust environmental and social safeguards.

In the transitional shared ownership and accountability model, the recipient country has partial ownership of climate finance, but the contributor or an international intermediary retains some control, usually to ensure adequate accountability for its effective and responsible use. This model has many variants and many possibilities for how it could be applied in different country contexts. The transitional model is appropriate for a diversity of country contexts, and offers the opportunity to pursue novel ways to strengthen country ownership and systems for accountability over a realistic time horizon (which will differ from one country to another). It takes a pragmatic approach to managing the trade-offs that may exist in the short term as a result of weaknesses in country systems.

The full recipient country ownership and accountability model represents an “ideal” that recipient and contributor countries should aim to graduate toward as systems for accountability in developing countries are strengthened. In this model, the recipient country has full ownership of climate finance, and the contributor fully entrusts the funding it provides to national institutions and national systems. Decisions on how funding is used are made by national actors, in line with national plans and priorities, within the boundaries of the agreement with the contributor (for example, the contributor may provide funding for a particular sector). Country systems for results management, fiduciary standards, and environmental and social safeguards are used and the recipient country is fully accountable for results. This model may be most appropriate for countries with fairly strong national systems for accountability, or with institutions that can ensure robust accountability mechanisms. Although the contributor relinquishes control of finance to the recipient country, it maintains some leverage through the ability to discontinue funding if conditions are breached.