Climate finance for those who need it most

Article, 13 May 2016

IIED's work on climate finance aims to generate evidence to help design effective funding mechanisms and ensure that finance reaches the poor and vulnerable.

Officials on a climate finance course meet farmers in Bangladesh to learn about the benefits of solar irrigation pumps (Photo: ICCCAD, Creative Commons via Flickr)

IIED researchers are generating practical evidence on how best to design and deliver climate finance at international, national and local levels. We are working with government, local partners and other stakeholders to improve capacity and strengthen decision-making. 

The issue

Climate finance – international, national and local sources of funding for mitigation and adaptation – is critical in enabling developing countries to respond to climate change.

The finance levels are increasing rapidly. And so are the needs. The United Nations Framework Convention on Climate Change's (UNFCCC) Green Climate Fund (GCF) has achieved pledges of nearly US$10 billion. In addition, individual countries are spending greater sums than this from their own climate-related domestic budgets.

But these funds still fall short in making a real difference in the Least Developed Countries (LDCs) that are most vulnerable to climate change.

The cost for all LDCs to implement their intended nationally determined contributions (INDCs) alone is estimated to be around US$93.7 billion each year. And getting available funds to the poorest citizens who need it most remains a challenge. 

Our ambitions

We have set ourselves ambitious targets on climate finance. We are focusing on these key issues: 

  • International finance architecture: we seek to ensure that it is shaped by, and responds to, the needs of those countries and people who need it most
     
  • Access to funds: we aim to improve the ability of Least Developed Countries to negotiate and access climate finance
     
  • National delivery of funds: we are working to build the capacity of national governments to absorb and effectively deliver climate finance to the poor through their existing planning and budgeting systems
     
  • Markets for the poor: we want to help ensure that private sector players and markets for energy and carbon service the needs of the poor
     
  • Decentralised fund management: IIED is supporting local institutions to develop their capacity to access and manage decentralised climate finance, and
     
  • Measuring effectiveness: we want to enable governments to track, monitor and evaluate the effectiveness of climate finance.

What we are doing

A summary of some of our key activities

We work at local, private, national and international levels. Some of our key activities are summarised in the figure at the right. Click on the image to expand it.

At international level we are:

  • Engaging with the GCF to input into their design and programming, and
  • Undertaking political economy studies to generate new evidence on how international finance, such as Climate Investment Funds, LDCF and the Adaptation Fund, is getting absorbed within Least Developed Countries, and encouraging cross-country dialogues

At national level we are:

At a local level we are:

  • Supporting the piloting of local adaptation funds, reviewing experiences and supporting local stakeholders. We are also mapping the roles played by public and private stakeholders in financing pro-poor energy access, and fisheries and forestry. We are supporting smallholders in engaging in voluntary carbon markets and energy access, and
  • Generating evidence on public/private roles in financing decentralised energy projects through our work on energy finance.

Our approach

Our theory of change The world's poorest communities are hardest hit by the impacts of climate change. This makes it essential that poor people sit centre stage in the debate about how to finance mitigation and adaptation initiatives.

Achieving pro-poor climate finance requires a bottom-up approach that supports and empowers vulnerable communities. The diagram on the right illustrates our theory of change. Click on the image to expand it.

We use a combination of evidence, capacity building and communication to understand the needs of different groups within society. We believe this type of informed and participative approach is critical to developing a governance framework that can effectively deliver climate finance to the poor and vulnerable.

Related reading

How can Bangladesh's private sector engage with the Green Climate Fund?, Neha Rai, Iftekhar Hossain, Marek Soanes, Virginie Fayolle, Naznin Nasir, Yousuf Mahid (2016), IIED Toolkit

A fair climate deal in Paris means adequate finance to deliver INDCs in LDCs, Neha Rai, Marek Soanes, Andrew Norton, Simon Anderson,Paul Steele, Janna Tenzing and James MacGregor (2015), IIED Briefing

A practical handbook for Green Climate Fund accreditation in Bangladesh, Neha Rai and Marek Soanes (2015), IIED 

Financing inclusive low-carbon resilient development in the least developed countries, Dave Steinbach, Nanki Kaur and Neha Rai (2015), IIED Working Paper

Financing inclusive low-carbon resilient development: role of Central Bank of Bangladesh and Infrastructure Development Company Limited, Neha Rai, Asif Iqbal, Antara Zareen, Tasfiq Mahmood, Maliha Muzammil, Saqib Huq and Noor Elahi (2015), Country Report

Financing inclusive investment in low carbon climate resilient development: the national climate finance landscape in Ethiopia and Rwanda, Nanki Kaur, John Rwirahira, Daniel Fikreyesus, Lidya Tesfaye and Simret Mamuye (2016) IIED Working Paper

Topic guide: a guide to national governance of climate finance, Neha Rai, Nanki Kaur, Samuel Greene, Bowen Wang and Paul Steele (2015), Evidence on Demand series, UK Department for International Development (DFID) 

Supporting local climate adaptation planning and implementation through local governance and decentralised finance provision, Virinder Sharma, Victor Orindi, Ced Hesse, James Pattison and Simon Anderson (2014), Development in Practice, Volume 24

Locally-managed funds: a route to pro-poor development, Diana Mitlin (2013), IIED Briefing Paper

Sharing the load: public and private sector roles in financing pro-poor energy access, Emma Wilson, Neha Rai, Sarah Best (2014), IIED

How climate finance can support sustainable development, Nanki Kaur, Tighe Geoghegan (2013), IIED Briefing paper

Deepening readiness for climate finance: the role of the political economy, Neha Rai (2015), IIED Briefing paper

Development finance and climate finance, achieving zero poverty and zero emissions, Paul Steele (2014), IIED

Contact

Our climate finance team includes experts in climate change, natural resource management, sustainable markets and human settlements. We are keen to introduce new ideas and evidence from others and welcome your feedback and suggestions.

Neha Rai (neha.rai@iied.org), senior researcher, IIED's Climate Change Group

Paul Steele (paul.steele@iied.org), chief economist, Sustainable Markets Group

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