Adeline Dontenville is also an author of this blog post*
As climate change impacts grow ever more apparent, it becomes more urgent to stop carbon flowing into the atmosphere and increase resilience to rising threats. Much will depend on how and where finance flows. Countries are enacting plans for adapting to and mitigating climate change, so they need to know what money is available and — crucially — if any flows of finance are working against their climate objectives.
Monitoring past, present, and future spending and investment patterns is therefore essential. Such information can help countries to measure progress, identify gaps, and align flows and instruments for maximum impact and scale. It can optimize the deployment of public resources in a way that can effectively and efficiently unlock private investment at the transformational scales needed.
To discuss how best to do this, the EU REDD Facility, Climate Policy Initiative (CPI) and the United Nations Development Programme (UNDP) gathered experts from governments, donor agencies, and organisations that are engaged in tracking domestic climate finance during the COP25 climate change conference.
Different approaches and tools are already used by countries to map and track domestic climate finance. These include: climate budget tagging; land-use finance mapping; climate public expenditure and institutional reviews; private sector climate expenditure and institutional reviews; and investment and financial flows assessments. Countries like Nepal and Kenya have been at the forefront of developing such national systems and are now joined by many countries around the world following similar approaches.
There is also something called the ‘climate finance landscape approach,’ which CPI developed with partners in 2011. It tracks the life cycle of climate finance flows – from provider of finance, through intermediaries, instruments and disbursement channels to end uses. This approach has been key in helping policymakers understand who finances what, and the extent to which finance is aligned with policy objectives.
It also identifies barriers to investment, potential incentive mechanisms, and provides a baseline for monitoring progress in mobilising resources. CPI and the EU REDD Facility have since developed an open source tool that makes this methodology available to countries. Côte d’Ivoire is among the countries to have used it to map investments related to their climate and forests objectives.
During the event, a panel of country representatives, practitioners, and partners shared their experiences of monitoring and planning domestic climate and land-use finance. They gave examples of positive outcomes, but also raised a number of challenges. These ranged from the methodological —such as a lack of data gaps and a lack of clarity about definitions of climate finance in the national context — to the institutional, such as a lack of capacity and poor inter-ministerial coordination.