Photo: Ervins Strauhmanis

Is Paris Finance on the move or stuck? Results Part 2

23/10/2017

In last week’s round-up of the responses to our reader survey on Paris Agreement finance, we looked at definitions of climate and green finance, the pace we’re going at, the preparedness of governments and the private sector, whether we need a “finance director” to coordinate these aspects of the Paris Agreement, and the performance of the DFIs. 

This week we look at our respondents’ thoughts on issues such as the climate funds, the role of philanthropy, the efficacy of technical assistance, where they source their information on Paris finance, and their more general thoughts on where we stand in the process.

How are the official climate funds doing?

We asked:  Are official climate funds such as the GCF playing their role properly? Only one in seven respondents said yes.  43% said no and (perhaps reflecting the lesser visibility of these funds than the DFIs) the same number said maybe.

There are some 30 bi- and multi-lateral climate funds channeling mainly developed country funds to developing countries. The 21 multilateral funds are tracked by the ODI’s Climate Funds Update website, which found just under $30 billion pledged to these funds as at May 2017. The biggest beast in this ecosphere is, of course, the GCF, which unsurprisingly attracted quite a lot of specific comments.  Collectively the climate funds are an extremely significant resource, especially for least developed countries.

The main commentary on the performance of these funds centred on the levels of bureaucracy involved in accessing them, governance issues and how funds are employed and disbursed.

On access:  “Too slow, too strict”; “the red tape is immense”; “too much bureaucracy”; “they privilege MIEs [multilateral implementing agencies] delivering their usual projects, rather than supporting countries to develop innovative investments”; “struggling to fund adaptation or distributed local action, struggling to build country partner capabilities”

On governance:  “Too political and unwieldy. Staffed by politicians and not investors.  Boards are too big for effective governance”; “GCF administrative actions and decision-making need to be streamlined and made more private-sector friendly (e.g. separate project decision-making from the politicised board)”; “Lack of sufficient policy guidance [at the GCF] leads to low-quality projects/programmes and a slow rate of project/programme approval”; “GCF should draw more on the resources of the private sector to increase quality of project proposals and speed up both the accreditation and project approval processes. There is plenty of capacity from the carbon markets, auditors and certification agencies that can be drawn on. GCF should also expand their operations into more territories to attract and retain the right talent”.

On positioning:  “GCF funding shouldn’t be used for grants, it should only be for super senior de-risking. Other sources of public capital should work alongside to help prepare countries investment plans to work with the private sector and to provide TA support”.

And what about philanthropic donors?

We asked:  “There are a number of philanthropic funders supporting work in climate finance. Do you think their current programmes are effectively focused?”

Again probably reflecting a lower awareness of the roles of these important actors in the climate finance arena, nearly 6 in 10 respondents answered maybe.  23% said yes and 18% said no.  Notwithstanding the high-level of ‘maybes’, there were wide-ranging views on how philanthropy should engage (or not).  Comments clustered around capacity building, focus and coordination.

On capacity building:  “More technical support for governments on the economics of climate change”; “Capacity building within governments”; “Strategic dialogues and workshops leveraged to real time project development“; “Funding for feasibility studies is scarce and yet this is the way forward to obtain finance for the bankable projects DFIs and commercial banks want to see; more hedge funds to de-risk some aspects of projects; funding projects that need to scale or proofs of concept that have been peer-reviewed”; “Need to act as venture capital and build national capabilities to help create novel pipeline”.

On focus:  “Consolidate their support for climate/ESG disclosure organisations, be willing to provide more risk investments than just grants, and be more willing to implement ESG and EM impact investments within their foundation’s investments”; “They should fund adaptation and NOT fund (as is happening with some philanthropies) approaches such as ‘climate smart agriculture’, since this is a vehicle for business as usual chemicals-based agribiz”; “Their work to hold governments and companies to account is important, as too is the work to accelerate new technologies”.

On co-ordination: “Given the multiple viewpoints and agendas, it is impossible that all the programmes are effectively focused”; “There is urgent need for synergy to scale up the outcomes”:  “It would be great to see a collective commitment from several major philanthropists to work together with the change agents to develop a coherent view of the changes needed and to commit to a spread of initiatives with co-funding, reduced duplication etc”; “Centralise efforts through a co-ordinated UNFCCC approach”.

Is Technical Assistance assisting?

We asked:  “Most development finance institutions have Technical Assistance programmes to lift competencies and capacities in support of their funding programmes. Do you think this TA support is being used effectively?”  Again, there were a lot of maybes among the responses (41%), with yes’s and no’s roughly equal at 27% and 31%.  But the maybes again had plenty of thoughts on the issues. Responses clustered around access, context and onward linkages.  There was one forthright outlier:  “Waste of time and money.  Private sector is far better at this”.

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On access:  “Genuine stakeholders need to know how to access them [TA programmes] properly”; “Extremely difficult to access! Lots of funds are trapped in bilateral institutions [focussed on government, that instead] need to make their way to the private sector that delivers on the actual jobs”; “Mapping has found overlap, non-uniform procedures and that not all the different forms of TA were being used”.

On context:  “There are too many reports and consultancy projects by foreign consultants. Governments need more practical support with energy planning, feed-in tariffs, phasing out fossil subsidies”; “Not being used efficiently in the context of achieving the Paris Agreement goals, shortage of staff familiar with CC issues”; “Too focused on flying in experts to design a project or deliver a plan. Insufficient ownership and local capabilities created. Some notable exceptions of course”. “ [A lot of] TA support lifts the competencies for compliance with the funding programmes, without a full recognition of the conditions that the programmes exist in.  The conditions in which the TA support was created to succeed were in the home countries/1st world scenarios, and not in the countries [they are deployed in]”.

On linkages:  “TA needs to be targeted alongside direct investment and other support programmes to bring in the private sector to have maximum impact”; “Technology Transfer and Skills Improvement need to be linked”; “Not being leveraged enough by the private sector”.

Who’s keeping you up to speed?

We asked what sources of information people use to help stay informed about financing for Paris.

Somewhat by definition, but nevertheless appreciated, 80% responded that NDCi.global was a source.  Other main sources were Climate Home, think tank outputs, the Climate Bonds Initiative, bank research and mainstream media. Paid resources such as Environmental Finance and Responsible Investor were perhaps unsurprisingly less used, but the low scale for Twitter was somewhat unexpected.

 

And finally …

We asked for any other observations on the progress of finance for Paris.

The main characteristic of responses was the need to get more finance more visibly flowing in order to increase confidence.  Ideas ranged from mature market investors publicising their investments better, “especially to their peers.  There is a very strong ‘comfort’ factor in these investments, which means that if there is knowledge that peers, and especially admired peers, are making such investments, it is a ‘safe’ not a ‘brave’ investment.”

There was also a call for “a far-sighted roadmap from civil society to ensure that sufficient funds will become available (traditional, innovative) to achieve low-carbon development worldwide as soon as possible.  A critical rethink of the $100billion  finance from developed nations  as from 2020, and a new target from 2025 (as agreed in Paris) is also an absolute must.”

In the emerging market context, “there is an urgent need to de-mystify access to finance and re-think approaches to fund green businesses. More needs to be done to find ways around the risks that foreign investors perceive and where possible de-risk these. There is a glut of talk-shops and fatigue on the part of those attending them, when the overwhelming majority of businesses are not then able to access finance.”

It’s not just the amounts of money flowing though:  “We … need to pay more attention to how effectively the finance is used to realise low-emission and climate-resilient societies.”

And finally, a simple call:  “The global effort must continue!”

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