Climate Finance: Progress is underway, but it needs more pace

Climate Finance: Progress is underway, but it needs more pace

Thoughts from the 8th Meeting of the Standing Committee of Finance.

Fragmentation and opacity of the financial flows are major concerns that derive from the lack of unified definition of climate finance, as well as the variety on type and robustness of systems and methodologies to report these finance flows. This ultimately makes data collection and analysis more difficult.

The recent meeting of the Standing Committee of Finance (SCF), 1st-3rd October in Bonn, focused on addressing these as part of its busy agenda which also included the Biennial assessment and overview of climate finance flows (BA) and the Fifth review of the financial mechanism (FM).

The first Biennial Assessment and overview of climate finance flows (BA) report is close to be completed and on track to be published early November ahead of the COP20 in Lima. This technical report provides a picture of climate related finance issues from 2010 to 2012, both inside and outside the UNFCCC. The BA includes estimations of quantities, sources, channels, and uses of climate finance, as well as the methodologies currently used for MRV of finance flows. The report is a fact based snapshot of the state of climate finance up to date which points out where more work is needed to improve understanding of climate finance, in order to facilitate flows and increase its effectiveness.

However, lack of data is a major challenge, especially when it comes to reporting received climate finance within developing countries. This side of the story remains unheard, with work to be done by both the providers and the receivers of climate finance.

During the SCF meeting, board members worked to produce “Summary and recommendations by the Standing Committee on Finance” that is to be presented to the COP in Lima. This summary highlights the challenges the BA report encountered and the key findings, offering as well a set of recommendations from the SCF to the COP. The recommendations focus on:

  • Improving guidelines for reporting methodologies under the convection, of both provided and received finance;
  • Strengthening cooperation with other international organizations working on similar issues;
  • Raising the need for an operational definition of climate finance and points to a definition of climate finance, yet stops short of recommending that the COP endorses this;
  • Ownership, impact and effectiveness of multilateral climate finance.

Although these recommendations point in the right direction, they are still timid and provide little specifics on how, who and when.

While progress has been achieved through this work, much more will need to be advanced at a faster pace if we are to secure an under 2 degrees world. A clear challenge is the confusion on where responsibilities lay within the UNFCCC, this was more critical when discussing matters on MRV beyond the BA and the recommendations to the operating entities of the FM.

To enable progress the COP will have to empower the SCF and encourage it to have a holistic view of the climate finance architecture, acting as the central coordinator of the system to improve coherency and transparency. This could include guidance on:

  • Clarity to the roles of the SCF and the subsidiaries bodies of the convection (SBI and SBSTA), so that they can develop specific work and interact effectively.
  • Definition of the relationship between the SCF and the operating entities of the FM.

It became apparent in this meeting that the GCF needs to improve and tighten its relationship with the SCF, and vice versa. The GCF is set to channel an important share of the climate finance under the UNFCCC, and thus a clear and dynamic relationship with the SCF is critical, this could be achieved with:

  • Clear definition of responsibilities and communication channels, to enhance coordination and transformational impact of their work.
  • A vision to lead by example: setting up the rules of the game when it comes to climate finance, for example:
    – MRV of finance provided and received should be championed by the GCF under SCF guidance.
    – Problems on assessing the effectiveness of climate finance could be addressed with the GCF Results Management Framework. Although decisions are currently in progress in the GCF board.

Dialogue and coordination within various actors, such as the SCF, the OECD’s task team on the Rio Markers, CPI, MDBs, IDFC and UNDP is taking place. This represents an opportunity for the SCF to scale up this momentum to define and operationalize basic rules needed under the UNFCCC. This will take time, and flexibility will be needed as a perfect system is not the final aim; yet the SCF should facilitate the evolution of the system at a pace that can enable the urgent action required.

2015 will be a critical and exciting year for the SCF, a lot could be achieved to advance the establishment of a fully operational system for climate finance. It is clear that transparency, cooperation and ambition will be key throughout the process.


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