Tracking Climate Finance, Part 1: Who’s Funding Who?
The impacts of climate change are unequally distributed, hitting the world’s poorest the hardest. How are the world’s wealthiest pooling their resources to help?
What happens when you get representatives from nearly 200 counties in a building together to discuss climate change? Long overdue recommendations, some embarrassments, and perhaps even a near universal agreement. The UN Conference of the Parties (COP for short) has been convening once a year for almost a quarter century. And now they’re back at it again at COP24 in the heart of Poland’s coal country.
It’s not news that our world’s poorest and most vulnerable regions are already feeling the impacts of climate change. And much of the world’s wealthiest nations have responded by providing financial assistance. For instance at COP15, they promised to provide $100 billion for mitigation and adaptation activities by 2020. It’s an ambitious goal, and also a logistical nightmare. Who exactly is providing these funds? Who’s measuring and who’s reporting those numbers?
In part one of this series, I’ll breakdown a few key institutions involved in climate finance. Then we’ll see why tracking how cash flows from one country to another presents a whole new challenge.
Who’s Funding Who?
There are lots of ways money is transferred within and between countries. Here, we’ll focus on bilateral and multilateral development institutions, which specialize in providing finance to developing economies. Bilateral development agencies are owned by one government and serve to implement their foreign development policies. Multilateral development agencies are established by multiple countries and are governed by international law.
You’re probably already familiar many of these institutions. USAID helps nearly 50 countries prepare for and adapt to climate change, like by helping local insurance companies in Ethiopia develop index insurance for farmers. The World Bank is made up of 189 member countries and, due to its size, generally has a larger capacity to invest in long-term projects.
The United Nations Framework Convention on Climate Change (UNFCCC) provides their own financing outside of the institutions mentioned above. These include: the Global Environment Facility(GEF) which manages the Special Climate Change Fund(SCCF) and the Least Developed Countries Fund(LDCF); the Adaptation Fund(AF); and the Green Climate Fund(GCF).
Exactly how much money is distributed between countries depends on who you’re asking. According to a recent report published by the Organisation for Economic Co-operation and Development (OECD), 2017 saw an aggregate flow in public finance of around $54 billion dollars, a 44% increase from the $39 billion raised 2013. Not too shabby, right?
Before we start patting ourselves on the back, we need to consider where these funds are coming from, and who’s doing the reporting. OXFAM points out that bilateral finance relies on self-reporting, leading to the use of “disparate and in many instances questionable methods.” In a piece for the Bookings Institute, Romain Weikmans and Timmons Roberts of AdaptationWatch, a worldwide partnership of organizations that tracks and raises transparency on development finance, also argue that the report is rife with flaws. (Apparently much hasn’t change from OECD’s last report published in 2015, which was also met with criticism from both the global North and South). What’s alarming here is much of the reported finance comes in the form of loans, which account for 60% percent of bilateral funds, and nearly 90% of multilateral funds. In essence, we’re still making our world’s most vulnerable pay for the mess we’ve created.
Delegates at COP24 have their work cut out for them. Funds, whether in the form of loans or grants, are continuing to expand. Take the World Bank, which just announced they are raising their climate targets for 2021–2015 to $200 billion. The world needs a much clearer definition of what constitutes climate finance, and better mechanisms for reporting finance to ensure accuracy, transparency, and trust.
In part two, I explore what issues arise once those funds arrive at their destination country. How can we be sure that the money is being used to equitably adapt to climate change impacts?