Making climate money work

This post is authored by Andrew Clarke, Advocacy Manager at Publish What You Fund, which campaigns for aid transparency – more and better information about aid.

Responding to climate change requires massive investment flows. It has been estimated that at least US$ 0.8 trillion will be needed each year for clean energy, transport, energy efficiency and forest conservation and to enable developing countries to adapt to climate change.

Developed countries have pledged to mobilise $100 billion each year in to support this transition in developing countries.  It is critical both that this money is delivered, and that public funds are used effectively to reduce emissions and to protect the most vulnerable from the impacts of climate change.

Climate vulnerable countries like Bangladesh need to know what money is going where to protect climate finance against waste and abuse.

Can recent lessons and tools for making development aid more transparent, also support the effectiveness of public funds mobilised for climate finance? That is what a recent report by Publish What You Fund asks.

There are so many questions. What funds will count as climate financing? How can we make sure that donors do not double count development aid they already have pledged as ‘new and additional’ resources for climate action? And how can we measure the benefits of using public resources to leverage private investment for climate financing?

Some of these questions are specific to climate finance, others reflect the same challenges of transparency and coordination as development aid.

At a recent Transparency International meeting on climate finance, I was particularly struck by the concerns of national chapters working on climate issues about how financing is being accounted for. Many claimed that once money reaches a government, it often does not go to a national budget where it would be subject to national transparency rules. Instead it remains outside the budget process as an independent pot of money at the discretion of the executive. By not putting this money on the books, it massively reduces citizens’ ability to hold governments to account for the way they use those funds.

Another challenge – the national climate funds receive funding from different international actors (the World Bank, governments, the UN), often in a less than transparent or coordinated manner. Many of these donors require that the money be spent in a certain way. The fact that each donor has its own requirements and monitoring frameworks makes it complicated to administer at the receiving end and then to easily and properly account for it. This conditionality of donor financing was a hot topic at the workshop.

The lack of clear definitions and reporting mechanisms for climate finance meant that it has been difficult to compile data to determine whether and how the initial pledge of fast ‘Fast Start Finance’ under the Copenhagen agreement was delivered.  Researchers from the Open Climate Network investigating US climate finance flows, for example, first had to find and search through some 200 documents, just to compile the raw data.

These challenges are very similar to those that led to the development of the common standard for publishing information about development aid.

Making aid more transparent

Transparency International, Publish What You Fund and other organisations operating in this field work with donors and recipients towards a common open data standard for climate finance.

The International Aid Transparency Initiative (IATI) provides a common standard and streamlined mechanism for publishing aid information. It defines the types of information that funders should publish so that legislators, citizens, civil society and experts can understand resource flows, and to hold governments, and international partners to account.

The standard provides a template for publishing vital information such as conditions, contracts, and sectors. It is currently being mapped against recipient governments’ budget classifications, helping to trace the flow of funds into line ministries.

Climate finance and aid have different aims and accountabilities. Nevertheless this approach could also support climate finance transparency.

At the international climate conference in Doha at the end of last year countries agreed a common reporting template for public climate finance. This will go someway to providing clarity and coherence in future. However, countries will only report to the UNFCCC every two years, with limited statistics. This will not be sufficient to meet all the needs of users concerned with climate finance.

There is therefore a danger of a proliferation of channels and formats which make data hard to access and use.

IATI could be used to bridge between these official climate finance reports and the more detailed and timely information that line ministries and civil society need. Not only will IATI help to reduce the high transaction costs, inefficiencies and potential corruption associated with multiple tracking systems, it also enables civil society to scrutinise overlapping actors, objectives, activities and financing streams more effectively.