Which international institutions are involved in providing and monitoring climate finance?
The organizations which provide climate finance ranges from multilateral and bilateral financial institutions and organizations to development agencies.
The adoption of United Nations Framework Convention on Climate Change (UNFCCC) was followed by establishing UN Climate Change (UNFCCC Secretariat) in 1992. ‘Focusing in its early years largely on facilitating the intergovernmental climate change negotiations, the secretariat today supports a complex architecture of bodies that serve to advance the implementation of the Convention, the Kyoto Protocol and the Paris Agreement’ (UNFCCC website, 2019).The main multilateral channels of climate finance to developing countries under the guidance of the UNFCCC include:
- The Green Climate Fund (GCF) is an operational entity of the financial mechanism of the UNFCCC and the Paris Agreement. It is expected to become the primary channel for international public climate finance and is intended to fund the transition towards climate-resilient and low-carbon development in developing countries with a country-driven approach, and a commitment to balance investment between adaptation and mitigation
- Adaptation Fund (AF) was established in 2001 to finance adaptation projects and programmes in developing countries that are particularly vulnerable to the adverse effects of climate change. The Fund is financed through a 2% levy on the sale of emission credits from the Clean Development Mechanism of the Kyoto Protocol. The AF pioneered direct access to climate finance for developing countries through accredited National Implementing Entities that are able to meet agreed fiduciary as well as environmental, social and gender standards
- Global Environment Facility (GEF) was established in 1991, before the adoption of the UNFCCC, but serves as an operating entity of the financial mechanism of the Convention. Furthermore, it also serves as financial mechanism for several other conventions, including on biodiversity and desertification. Resources are allocated targeting multiple focal areas, including climate change, according to the impact of dollars spent on environmental outcomes, but ensuring all developing countries have a share of the funding. The GEF also administers the Least Development Countries Fund (LDCF) and the Special Climate Change Fund (SCCF) under guidance of the UNFCCC.
- CIimate investment funds, Invest4climate, carbon funds, green bonds, etc.?
The EU, its Member States and the European Investment Bank are together the biggest contributor of public climate finance to developing countries, giving €20.4 billion in 2017 alone. The main channel for EU support to policy dialogue and specific, targeted climate action in developing countries is the Global Climate Change Alliance Plus (GCCA+). Some EU Member States and Regions also contribute voluntary pledges to the Adaptation Fund. Through the External Investment Plan, the EU will invest blended (private and public) financial resources aimed to reduce climate induced impacts.
The World Bank Group (WBG) provides low-interest loans, interest-free credits, and grants to developing countries for climate action. Some of the programmes and projects are co-financed with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors. ‘In 2018, the WBG provided $20.5 billion in climate finance.
Multilateral financial institutions also include development banks (MBDs). Climate financing by six largest MBDs in 2017 constituted $35,2 billions, 72% of which was channeled to mitigation efforts while the remaining 21% was given to adaptation measures in developing countries. In 2017, 81% of climate finance by MBDs was provided in loans. Other types of financial instruments included policy-based lending, grants, guarantees, equity and lines of credit (Joint report on MBDs, 2017).
The OECD is an international organization which among others works on financing climate change action focusing on developing frameworks, tools and analysis to provide guidance to countries in this transition. Recent OECD work focuses on tracking financial flows – both public and private – to support climate action. The OECD is the only international institution to which bilateral finance institutions (BFIs) report their development funding with respect to climate change (OECD website, 2019).
For International Monetary Fund (IMF) climate policy including those on climate finance were not a priority area until recent times. Currently, the IMF integrates some of the macro-fiscal and financial implications of climate change into other areas of its work. The IMF has also recognized the role of monetary and financial policies to complement fiscal measures – such as carbon pricing - to help mitigation efforts’.