Climate finance is at the heart of development discourse
Following the Paris Agreement adopted by the parties to the United Nations Framework Convention on Climate Change (UNFCCC), countries are now embarking on comprehensive climate action either to reduce the GHG emission, and to build resilience against the adverse effects of climate change.
This triggers a major transformational shift in dealing with climate issues that are inextricably linked with the agenda for sustainable development being pursued by the governments across the world.
While the inevitable climate actions are on the cards, there is an overriding need to finance them by mobilizing resources both from domestic sources and international financing windows. Hence, climate finance is at the heart of development discourse aimed at ensuring greater welfare of the communities -- most vulnerable and marginalized.
The global pledge to strengthen resilience against climate change and enhance human and institutional capacity for climate change mitigation and adaptation by integrating relevant actions into national policies, plans, and strategies has been articulated in SDG 13 and in tandem, a target has been set, which lays emphasis on implementing the commitment undertaken by developed country parties to the UNFCCC to mobilize funds ($100 billion annually by 2020) from all sources to address the needs of developing countries.
Bangladesh is well ahead of many countries in the world in terms of integrating climate change in its overarching national policies, plans, and strategies. In addition to articulating its commitment in the national plan documents, it has taken a number of landmark initiatives to meet its commitment to combat the harmful effects of climate change on the lives and livelihoods of the people, particularly the marginalized.
As part of the process of implementing these initiatives, the government with support from UNDP Bangladesh is now turning its public financial management system climate inclusive by embedding climate dimension in (i) the macroeconomic framework to inform the policy-makers about the consequences of business as usual approach of climate investment while highlighting the benefits of cost of action, (ii) the medium-term budget framework (MTBF) and line ministry budget framework (MBF) to show the proportion of total expenditure of the relevant ministries spent for addressing the adverse effects of climate change, (iii) laying emphasis on strengthening oversight functions by involving the key integrity institutions like the office of the comptroller and auditor general (OCAG) and relevant parliamentary standing committees, and (iv) cascading the climate finance agenda at the local level for more effective planning and budgeting.
The government is now set to pursue the agenda bearing in mind a much broader context involving all key actors and demonstrate how the climate strategies for stronger resilience are translated into actions using the available resources. Apart from public sector, private sector, NGOs, civil society organizations, think tanks and academics, individual households would be given space to play their roles so that the agenda covers the whole of the society.
Given the realities on the ground, the inherent challenges of pursuing the agenda of mainstreaming climate finance with the country’s public financial management (PFM) system are many. These are of three broad categories: Policy challenges, institutional challenges, and operational challenges.
Some of the key policy challenges include securing full buy-in of the agenda of incorporating climate change in PFM reforms by stake-holders, having strategic framework at the central level to include climate finance issues in budgeting and planning process, improving country fiduciary arrangements to access international climate financing windows (eg green climate fund), private sector investment mapping to avoid overlaps in climate funding and providing policy support to establish linkages between national CFF and local CFF.
The institutional challenges lie in: (i) The capacity of the line ministries to track climate spending, (ii) capacity of the finance division to embed climate dimension in the MTBF process, (iii) capacity of implementation monitoring and evaluation division to develop and institutionalize mechanisms to monitor the projects and programs with climate relevance (iv) capacity of the office of comptroller and auditor general (OCAG) to conduct climate performance audit, (v) capacity of LGIs to incorporate climate dimension in their budgeting and planning, (v) absorption of transformational changes arising from the introduction of reforms in PFM system to incorporate climate change.
Operational challenges are mainly coming from several areas like monitoring systems, audit methodology, and striking a balance between revamping of policies and capacity strengthening for their improvement.
In meeting these challenges, Bangladesh has made significant headway and achieved several important milestones. These include, among others, production of climate budget reports in 2017 and 2018, turning the MTBF process together with the Medium Term Macroeconomic Framework climate inclusive, development of a comprehensive climate finance tracking methodology, supporting completion of two climate performance audits by OCAG, and working out proposals for inclusion of climate dimension in the existing government audit protocol.
However, in the areas of monitoring, a lot more ground needs to be covered to set it right for improved governance. Absorption of transformational changes will take time, as they call for institutionalization of tools, methods, and procedures developed.
Meeting the challenge of striking a balance between policy development and capacity strengthening will require periodic checks and gap identification.
There is scepticism surrounding the task of mainstreaming climate finance, as it entails a complex web of activities.
However, it is reassuring to note that PFM reforms in Bangladesh which were charted out following the country-led diagnostics passed through a long period of experimentation, since their initiation in the mid-1990s and the system itself has by now gained the strength and stature of absorbing any changes required to meet the emerging challenges.
MTBF apart, it has already developed a very comprehensive and flexible budget and classification system, which can accommodate the requirements of assigning budget codes for tracking expenditure. Secondly, it has developed over the years a robust financial management information system which can capture all required climate finance related information and generate reports to meet the requirements of relevant stake-holders.
What appears to be more reassuring is that while there is a critical mass of change agents brave enough to take the agenda of mainstreaming climate change to the point of execution, there are champions at the policy level to guide the process and manage changes.
Ranjit Kumar Chakraborty is Project Manager, Inclusive Budgeting and Financing for Climate Resilience (IBFCR) Project, being implemented by Finance Division with support from UNDP.