A JOINT STUDY BY THE ENVIRONMENTAL DEFENSE FUND, CLIMATE POLICY INITIATIVE, BROOKINGS INSTITUTION, AND THE OVERSEAS DEVELOPMENT INSTITUTE.

Flows of finance to developing countries to support climate mitigation and adaptation efforts are growing in speed and scale, yet in most cases they are still insufficient in comparison to projected needs. Ensuring that money is well spent, and hence maximizing its impact and effectiveness will therefore be critical to maintaining support and realizing the transition to a low-carbon, climate-resilient future. However, the practices that are being used now to measure and ensure the effectiveness of climate finance will not be sufficient to support this expansion. With many international institutions and bilateral agencies boosting their climate portfolios, as well as the creation of the Green Climate Fund, the time is ripe to examine the effectiveness of climate finance.

In Spring 2011, experts from Environmental Defense Fund, Climate Policy Initiative, Brookings Institution, and Overseas Development Institute began a joint study on the topic of the effectiveness of climate finance. In Bonn in June, the team brought together key thinkers from development finance institutions and think tanks for a round table discussion to inform its work. Following this guidance, the team continued to survey the tools and methods being used to estimate, measure, monitor, and disseminate the impact of climate finance across a broad array of institutions and financing frameworks, including:

• public climate finance, in particular the practices of the UNFCCC, ABD, the World Bank, the Climate Investment Funds, KfW, GEF, AFD, and Norad;
• private climate finance supported by public funding or multilateral balance sheets, in particular the practices of IFC, Regional Development Banks (EBRD, IADB, AfDB), EIB;
• market-based finance – CDM, REDD, and voluntary markets; and
• the broad field of development finance beyond climate finance.

Paper 1: Improving the Effectiveness of Climate Finance: Key Lessons

The first paper in this series presents a summary of the key findings from this literature review. It seeks to discern lessons for policymakers by addressing two key questions: What makes climate finance effective? and What tools, methods, or systems might improve the effectiveness of climate finance?

Paper 2: Improving the Effectiveness of Climate Finance: A Survey of Leveraging Methodologies

‘Leveraging’ private sector investment to extend limited public climate funds is key to funding the transition to a low-carbon, climate-resilient future. Yet it is often unclear what we mean when we talk about the very concept of leverage

“Improving the Effectiveness of Climate Finance: A Survey of Leveraging Methodologies” provides a closer look at the theory and practice of leveraging private sector investment.