MDBs reported increased climate finance in 2018, including USD 43.1 billion in direct financing and USD 111.2 billion in climate co-finance.
World Bank Group Development Financing reached USD 60 billion fiscal year 2019, including increased climate commitments.
The GCF Board approved ten projects, and agreed on voting procedures in the absence of consensus.
A joint OECD-IEA report shows that fossil fuels subsidies remain too high, informing G20 reaffirmation to phase out inefficient fossil fuel subsidies.
UNDP released a technical note on climate budget tagging to identify national climate-relevant expenditures and funding gaps.
11 July 2019: In June and July 2019, multilateral development banks (MDBs) and the World Bank Group reported on progress towards increasing climate finance, as the Green Climate Fund (GCF) approved funding for ten new projects and programmes. “Negative expenditures” on the climate in the form of fossil fuel subsidies were highlighted in a joint report by the Organisation for Economic Co-operation and Development (OECD) and the International Energy Agency (IEA) raising concerns about a global slowdown in reducing fossil fuel subsidies. Informed by this report, G20 leaders reaffirmed their commitment to phase out fossil fuel subsidies.
In related news, the UN Development Programme (UNDP) presented guidance on tracking national climate-relevant expenditures through Climate Budget Tagging. Several stakeholders issued strong calls for accelerated climate action, including investors who urged governments to put a meaningful price on carbon and set deadlines for phasing out fossil fuel subsidies.
Climate Finance by MDBs Increased to USD 43 Billion in 2018
The 2018 Joint Report on Climate Finance provided by a group of MDBs, released in June, shows that MDBs’ climate financing in developing countries and emerging economies rose by 22% to USD 43.1 billion in 2018. Climate change mitigation investments increased the most, accounting for 70% of the total financing. The remaining 30% were invested in adaptation efforts addressing impacts such as worsening droughts and flooding, and impacts of rising sea levels. The MDBs also report USD 68.1 billion in net climate co-finance, which includes investments from the public and private sectors, adding up to total climate finance of USD 111.2 billion in 2018. [World Bank Press Release]
World Bank Group Provides Almost USD 60 Billion in Development Financing in Fiscal Year 2019
The World Bank Group’s financing support for development outcomes reached USD 59.5 billion in fiscal year 2019, including increased commitments related to climate and the environment. Among the Group’s four international financing organizations, the International Finance Corporation (IFC) increased investments in regions with acute development challenges. Of the projects financed by the International Bank for Reconstruction and Development (IBRD) and International Development Association (IDA), 30% provided climate co-benefits, which exceeded the Bank’s target of 28% by 2020. Almost two-thirds of the Multilateral Investment Guarantee Agency’s (MIGA) guarantee program contributed to climate change adaptation and mitigation activities. Looking forward, the World Bank Group announced in November 2018 a five-year target of USD 200 billion for 2021-2025 to help countries address climate challenges. [World Bank Press Release]
GCF Board Approves Ten Projects and Agrees on Voting Procedures
At the 23rd meeting of the Green Climate Fund (GCF) Board from 6-9 July 2019 in Songdo, Republic of Korea, the GCF Board approved ten new projects worth USD 267 million, and developed procedures for decision making in the absence of consensus. After extended discussions on unilateral veto power in decisions on internationally-funded climate projects, delegates agreed that decisions can be taken with a four-fifths majority. This threshold exceeds the two-thirds majority originally proposed in the draft ‘Procedures for Adopting Decisions in the Event that All Efforts at Reaching Consensus Have Been Exhausted,’ suggested in Annex II of GCF/B.23/09.
The GCF Board approved the following projects and programmes:
- USD 60 million for Espejo de Tarapacá in Chile, with Japanese MUFG Bank;
- USD 35 million for Promoting Climate-resilient Forest Restoration and Silviculture for the Sustainability of Water-related Ecosystem Services in Honduras, with the Inter-American Development Bank (IDB);
- USD 35 million for Transforming the Indus Basin with Climate-resilient Agriculture and Water Management in Pakistan, with the the Food and Agriculture Organization of the UN (FAO);
- USD 25.3 million for Supporting Climate Resilience and Transformational Change in the Agriculture Sector in Bhutan, with UNDP;
- USD 23.1 million for a programme titled, ‘Towards Ending Drought Emergencies: Ecosystem-Based Adaptation (TWENDE) in Kenya’s Arid and Semi-Arid Rangelands,’ with the International Union for Conservation of Nature (IUCN);
- USD 22.4 million for Safeguarding Rural Communities and Their Physical and Economic Assets from Climate-induced Disasters in Timor-Leste, with UNDP;
- USD 20 million for the Programme on Affirmative Finance Action for Women in Africa (AFAWA): Financing Climate-resilient Agricultural Practices in Ghana, with the African Development Bank Group (AfDB);
- USD 18.6 million for Ecuador for REDD+ through results-based payments for the Results Period 2014, with UNDP;
- USD 18.6 million for Addressing Climate Vulnerability in the Water Sector (ACWA) in the Marshall Islands; and
- USD 8.9 million for Integrated Climate Risk Management for Food Security and Livelihoods in Zimbabwe.
The GCF Board also approved accreditation applications of four entities: Banco Nacional de Desenvolvimento Econômico e Social (BNDES) based in Brazil; Ecobank Ghana Limited (EGH); Enabel, Belgian Development Agency; and Uganda’s Ministry of Water and Environment (MWE). [GCF Press Release]
OECD, IEA Report Slowdown in Fossil Fuel Subsidies Reduction
The OECD and IEA report that government support for fossil fuel consumption and production remains too high and is on the rise again. The OECD-IEA Update titled, “Recent Progress in Reform of Inefficient Fossil Fuel Subsidies that Encourage Wasteful Consumption,” shows that the pace of fossil fuel subsidy reduction among members of the OECD and the G20 has slowed. Support in these countries decreased by 9% in 2017, compared to 12% in 2016 and 19% in 2015. Outside of these Groups, an increase in fossil fuel subsidies was observed in 76 countries and economies that together contribute 94% of global carbon dioxide (CO2) emissions. Across these countries, subsidies increased by 5% to USD 340 billion in 2017.
The report was presented to energy officials ahead of the G20 Ministerial Meeting on Energy Transitions and Global Environment in Karuizawa, Japan. At the subsequent G20 Leaders’ Summit, which met from 28-29 June, countries reaffirmed their commitment to medium-term rationalization and phasing-out of inefficient fossil fuel subsidies that encourage wasteful consumption. [OECD Press Release] [SDG Knowledge Hub Story on Methodology for Measuring Fossil Fuel Subsidies] [SDG Knowledge Hub Story on G20 Meetings Urging Energy Transitions for Sustainable Growth]
UNDP Presents Climate Budget Tagging Tool to Identify National Climate-relevant Expenditures and Funding Gaps
Fossil fuel subsidies are an example of public expenditure with a negative impact on climate change. Accounting for these costs could help identify opportunities to develop subsidies that promote the use of more sustainable energy sources without damaging economic activity. Climate Budget Tagging (CBT) is a tool to identify, classify, weight and mark climate-relevant expenditures in a government’s budget system. CBT allows governments to estimate, monitor and track these expenditures. By providing data on government allocations or existing spending, CBT can also identify funding gaps and under-resourced priorities in national climate change policies and action plans, and support monitoring their implementation.
A UNDP technical note titled, ‘Knowing What You Spend: A Guidance Note for Governments to Track Climate Change Finance in Their Budgets,’ presents steps for setting up a national CBT system as an element of national Climate Change Financing Frameworks. Besides defining key objectives and stakeholders of CBT, these steps relate to technical and implementation design, such as: classifying and identifying climate-relevant expenditures; defining the methodology for weighting the tagged expenditure; assigning responsibilities for CBT implementation; determining modalities of the tagging system; and determining the format for reporting. The publication also summarizes typical operational challenges, benefits and lessons to date from case study countries. [UNDP Press Release]
Investors, Civil Society, Businesses and UN Leaders Call on Governments and Companies to Curb GHG Emissions
In a Global Investor Statement to Governments on Climate Change, 477 investors with USD 34 trillion in assets under management urge governments to enact strong policies by 2020 to achieve the goals of the Paris Agreement on climate change. They call on governments to, inter alia:
- Incorporate Paris Agreement-aligned climate scenarios into all relevant policy frameworks and energy transition pathways;
- Phase out thermal coal power worldwide by set deadlines;
- Put a meaningful price on carbon;
- Phase out fossil fuel subsidies by set deadlines;
- Commit to implement the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), no later than 2020; and
- Request international standard-setting bodies to incorporate the TCFD recommendations into their standards.
In turn, a broad coalition of businesses, civil society and UN leaders urged private companies in an open letter to make their critical and necessary contribution to reducing greenhouse gas (GHG) emissions. They call on companies to step up and commit to set science-based targets aligned with limiting the global average temperature rise to 1.5°C above preindustrial levels. Specifically, they recommend verifiable science-based targets through the Science Based Targets initiative (SBTi), which independently assesses corporate emission reduction targets against scientific best practice and to date has verified the targets of more than 200 companies. In April 2019, the SBTi released new target validation resources to enable companies to set targets consistent with keeping warming to 1.5°C. [UNFCCC News on Global Investor Statement to Governments] [UNFCCC News Article on Call to Action for Private Business]
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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past IISD climate finance updates can be found under the tags: Finance Update: Climate Change; and Finance Update: Sustainable Energy.