Given the dire need for funds, all eyes at COP 24 were on the major international sources of finance
At the recently concluded International Climate Conference COP 24 in Katowice, Poland, mobilizing money for climate action was one of the key issues of negotiation.
The agreed-upon Katowice package has guidelines on establishing new targets for finance from 2025 to follow on from the current target of mobilizing $100 billion in climate finance every year from 2020 to support developing countries.
Given the dire need of funds for developing countries to adapt to the impacts of climate change and reduce carbon emissions, all eyes at the conference were on the major international sources of climate finance.
One fund that took the limelight in COP 24 was the Adaptation Fund, which received $129m in new contributions from Germany, Sweden, Italy, France and the European Union. Germany alone contributed $80m. This is a new record in the raising funds for the Adaptation Fund.
“Since the collapse of the carbon markets, we have relied on voluntary contributions from developed countries, and there is a lot of uncertainty when you rely on voluntary contributions,” said Saliha Dobardzic, senior climate change specialist at the Adaptation Fund.
“It is nice to have certainty on funding and have continued support,” she said, expressing hope that things would change with the new funds received.
The fund focuses on helping people and regions particularly affected by climate change to better prepare themselves for climate impacts. So far, the fund has approved over 80 projects and programs with a total funding volume of $532m. Applications have been submitted for a further 45 projects with a funding volume of approximately $335m.
Green climate fund
For the replenishment of the Green Climate Fund (GCF), the largest source of international climate finance, Germany pledged $1.71bn at COP 24, while Norway pledged $590m, followed by France, Sweden, UK, Japan and other developed nations. While the GCF has taken a blow due to the withdrawal of its biggest donor – the United States who had pledged $3bn ¬– from the Paris Agreement, it is expected that the EU will lead to fill the funding gap.
A key feature of the GCF is the private sector facility, which aims to engage private sector firms in developing countries in climate action. This is becoming increasingly important as there is a general consensus that public climate funding alone would not suffice, and billions need to be mobilized in private funding to mitigate emissions and adapt to climate change.
“We are supporting developing countries to transition to a green economy,” said Ayaan Adam, director of the GCF’s private sector facility, during a side event on innovative financing at COP 24.
“The GCF has a huge menu of instruments that are flexible, including structured finance solutions and blended finance. We aim to invest in a way that supports a transaction to scale in a market,” she said.
Its current portfolio is comprised of $1.8bn approved for around 20 projects. These would result in reduction of a billion gigatons of CO2, and support 29 million people to adapt to climate change, according to Adam.
The loan portfolio is the largest, being 64% of the total, and some of the projects have a grant component.
The World Bank
One of the biggest players in the climate finance space, World Bank, unveiled $200bn in climate action investment for 2021-25 at COP 24, of which around half would be in direct finance from the bank, while the rest would come from other parts of the World Bank group and leveraged private sector finance.
“If you look at the amount of finance that will be needed to drive the changes in the economy, the vast majority of it will have to come from the private sector,” said John Roome, senior director of climate change of World Bank, adding that the bank is now focusing on working with countries to have the right policy and institutional arrangements in place to pull in the private sector by de-risking investment.
Roome said they would also focus on ministries of finance and planning to mainstream climate policy in budgeting, public procurement and expenditure, with the first area being budgeting and tracking of climate expenditure. It is also trying to create a coalition of finance ministers to facilitate knowledge exchange among countries.
“We are focusing on making government expenditure as smart as possible, because even if we put $200b out there, it will still be a small amount of money relative to the total amount of money that governments spend of their own budget.”
Global Environmental Facility (GEF)
The Global Environmental Facility – an organization that aims to tackle the most pressing environmental issues – had a strong presence at COP 24, having a pavilion where they hosted various events, briefings, and receptions. It also hosted a Rio Conventions Pavilion at the conference and organized other events.
“Every year we come to the COP to follow the negotiations and hear what the countries want. We replenish the fund every year, and just finalized the seventh replenishment, said Gustavo Alberto Fonseca, director of programs at GEF.
“Being in Katowice is important as we can give countries information on how to best access GEF resources, as finances are essential for countries to be able to achieve their mitigation and adaptation commitments,” Fonseca added.
Since its establishment in 1992, GEF has provided almost $18bn in grants and mobilized an additional $93b in co-financing for more than 4,500 projects in 170 countries.
It also funds the Least Developed Countries Fund (LDCF) and the Special Climate Change Fund which complement each other and provide support to countries most vulnerable to climate change.
Complementarity of climate funds
With so many different funds, the landscape of climate finance can seem extremely convoluted. So how does a country decide which fund to approach for a particular climate change intervention?
“All of these funds have national focal points. They are the ones who decide which fund to access,” explains Fonseca of GEF.
In Bangladesh, the operational focal point of GEF is the secretary of the Ministry of Environment and Forests, while the political focal point is the secretary of the Economic Relations Division (ERD) of the Ministry of Finance. For GCF, the National Designated Authority (the focal point for Bangladesh) is the ERD.
As countries struggle to meet the disparate and complex requirements of funds to access climate finance, the issue of complementarity of multiple sources of climate funds is becoming important.
“We are starting to create a dialog across all these funds. We have organized a session here at COP with the countries, GCF and GEF. We help countries decide how to find synergy so the money can come together easily,” said Fonseca.
The Adaptation Fund is also taking steps in this regard, as explained by their senior climate change expert Saliha Dobardzic.
“We have a very strong collaboration with GCF. We are trying to ensure complementarity between the funds and there is a lot of dynamism,” she said.
“The fund is very experienced right now in financing what, relative to the GCF, are small projects. We have a body of knowledge on what works and what does not in these countries. and that is something the GCF can work on scaling up,” she added.
“Getting the right partnerships in place is necessary for adapting to climate change. Otherwise it is going to be much more expensive to pull off,” she further added.