Increasing climate finance to the local level is the best way to improve efforts to tackle climate change. IIED calls on the board of the Green Climate Fund (GCF), meeting this week in South Korea, to make sure vital finance reaches those who need it most.
This week, the board of the GCF will meet to approve US$855 million in climate finance. But most of the proposals on the table will be from international institutions; none will be led by those from the least developed countries (LDCs).
Overall, just four per cent of the US$1.5 billion committed by the GCF will flow directly to institutions in the poorest countries and only one community-specific programme led by a developing country (Namibia) has been approved. Yet we know from our research at IIED that the most effective climate finance is often directed to the local level – through governments and organisations that deliver finance and services to communities using approaches grounded in the local context.
Sadly, the nine proposals on the table this week don't look set to change this trend. Most worrying is the fact that only one is from a national institution (NABARD in India), while the two proposals involving LDCs (Tanzania and Ethiopia) are led by international institutions.
And it seems that the Ethiopian proposal may not be approved. This comes on the heels of the withdrawal of the UNDP's Bangladesh proposal in December and would be another let down for the poorest countries.
But the need for effective local climate finance is more urgent than ever as the United States, currently the largest contributor to the GCF and the only major donor to have set an ambitious target for 30 per cent of its bilateral aid to be directed to local partners, has threatened to cut climate funding.
The GCF should respond by making it easier for LDC institutions to access and manage climate funding, especially locally-focused programmes, by:
- Building local skills and networks. Build on existing in-country expertise and entities accredited to the GCF to form networks of providers able to offer technical assistance grounded in the LDC context, so reducing reliance on international consultants
- Building national capacity to plan, absorb and implement climate finance. The GCF should help countries to upgrade national policies and systems, especially those that allow the least developed countries to channel funding through their own financial mechanisms and enable them to mobilise domestic budgets and private sector capital behind climate action.
- Encouraging mentoring by international institutions. The expertise of international accredited entities should be leveraged to help national and sub-national institutions with little experience or track record in large and risky programme management, to overcome challenges in accessing the most significant streams of funding. This mentoring should lead to local level institutions becoming able to apply for and manage their own finance within a set period, rather than relying on international entities.
- Prioritising ;enhanced direct access' for local level institutions and the pilot projects that promote finance for micro, small and medium enterprises. Despite encouraging financing frameworks designed to promote local community and private sector climate programmes led by national institutions, the GCF has only approved two such programmes.
The GCF should prioritise suitable institutions for accreditation, including local government ministries and local banks, and improve processes to promote the most innovative local public and private sector programmes.
- Finalising the simplified proposal approval process. Discussions on guidelines for simplified approval processes, to circumvent unnecessary burdens placed on community-based initiatives, have been delayed for several board meetings and should be prioritised for a final decision.
As climate finance becomes restricted, it's even more important to ensure that every dollar is spent effectively – and we know that the GCF has itself reflected on the challenges of ensuring more finance is directed at the regional, national and local levels.
We urge the GCF board to act on its concern and urgently implement the recommendations above, ensuring that LDCs will be able to directly access the climate finance they need before national plans to implement the Paris Agreement swing into action.
At the end of 2016 IIED brought together southern partners, public and private financiers and development experts to reflect on challenges of harnessing international and domestic finance for local investment. Our Reflect & Act document summarises the issues and sets out five tasks identified by participants for unlocking local climate finance.