As climate change impacts grow ever more apparent, it becomes more urgent to stop carbon flowing into the atmosphere and increase resilience to rising threats. Much will depend on how and where finance flows. Countries are enacting plans for adapting to and mitigating climate change, so they need to know what money is available and — crucially — if any flows of finance are working against their climate objectives.
Monitoring past, present, and future spending and investment patterns is therefore essential. Such information can help countries to measure progress, identify gaps, and align flows and instruments for maximum impact and scale. It can optimize the deployment of public resources in a way that can effectively and efficiently unlock private investment at the transformational scales needed.
To discuss how best to do this, the EU REDD Facility, Climate Policy Initiative (CPI) and the United Nations Development Programme (UNDP) gathered experts from governments, donor agencies, and organisations that are engaged in tracking domestic climate finance during the COP25 climate change conference.
Different approaches and tools are already used by countries to map and track domestic climate finance. These include: climate budget tagging; land-use finance mapping; climate public expenditure and institutional reviews; private sector climate expenditure and institutional reviews; and investment and financial flows assessments. Countries like Nepal and Kenya have been at the forefront of developing such national systems and are now joined by many countries around the world following similar approaches.
There is also something called the ‘climate finance landscape approach,’ which CPI developed with partners in 2011. It tracks the life cycle of climate finance flows – from provider of finance, through intermediaries, instruments and disbursement channels to end uses. This approach has been key in helping policymakers understand who finances what, and the extent to which finance is aligned with policy objectives.
It also identifies barriers to investment, potential incentive mechanisms, and provides a baseline for monitoring progress in mobilising resources. CPI and the EU REDD Facility have since developed an open source tool that makes this methodology available to countries. Côte d’Ivoire is among the countries to have used it to map investments related to their climate and forests objectives.
During the event, a panel of country representatives, practitioners, and partners shared their experiences of monitoring and planning domestic climate and land-use finance. They gave examples of positive outcomes, but also raised a number of challenges. These ranged from the methodological —such as a lack of data gaps and a lack of clarity about definitions of climate finance in the national context — to the institutional, such as a lack of capacity and poor inter-ministerial coordination.
Taking it to the next level
Given the challenges, it is clear that simply quantifying financial flows is itself a big step. The next level is using those estimates to influence policy, plan investments and measure progress. Critically, mapping finance can also help to mobilize new money and redirect old towards climate objectives. So how do we move from producing nice reports to bringing systemic changes to budgeting and spending patterns at domestic level?
Participants spoke of a need to simplify information and present it visually to facilitate dialogue among stakeholders and garner support for proposals. They also raised the need for more transparency, better sharing of data and a greater understanding of best practices based on what has worked in different countries. To support this, governments would also need to improve coordination among ministries and ensure their staff have adequate capacity through training.
Summing up the event, Dr. Barbara Buchner, Global Managing Director at CPI, highlighted the need for improved coordination among technical partners to develop and share methodologies, tools and potentially data. One suggestion was that continued and regular exchanges among the participants and other interested parties would help start to create an informal community of practice enabling us to share experiences and best practices. With this in mind, CPI and the EU REDD Facility are planning to organise a follow-up and virtual half-day workshop at the end of 2020. If you want to know more about climate finance tracking and mapping, or if you have experiences to share, we hope to see you there.
– Dr. Angela Falconer, Associate Director in Climate Policy Initiative’s climate finance division, is also an author of this blog post.
– The workshop was funded by the EU REDD Facility and International Climate Initiative (IKI) of the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU).
– This blog post was originally published on 14 February 2020.
Adeline leads the Facility’s work on land-use finance analysis and supports governments and stakeholders in Francophone Africa and South-East Asia in designing and implementing incentives to reduce deforestation and forest degradation.
Adeline was previously based in the Philippines, as climate change and environment project officer for the French Development Agency (AFD). Before that she worked at the European Commission as part of the EU international climate negotiations team, focusing on climate finance. She has a background in EU policy and risk analysis.