Financing for Development - an unmissable opportunity to back climate compatible development


Financing for Development - an unmissable opportunity to back climate compatible development

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Date: 13th July 2015
Type: Feature
Tags: Addis Ababa, climate finance, finance, Sustainable Development Goals, sustainable development

From 13th to 16th July in Addis Ababa, Ethiopia, governments meet at the Financing for Development conference. It’s part of a long intergovernmental series of meetings to assess whether international and domestic financing for development is adequate, and to encourage greater assistance commitments from industrialised nations. CDKN’s Sam Bickersteth and Ari Huhtala take stock of the agenda.

As the evidence base builds on the relationship between climate change impacts and achieving development progress, CDKN urges delegates to next week’s Financing for Development Conference to consider: ‘How can Financing for Development ensure that development in the poorest and most climate vulnerable countries is climate-compatible?’

We know that climate change is already undermining development – the Intergovernmental Panel on Climate Change demonstrates this and you can read about it in CDKN’s easy-access guides, The IPCC’s Fifth Assessment Report: What’s in it for developing countries?

All development work will need to be readjusted to put climate resilience at its heart: whether in agriculture, cities, water, food or energy. We already know what good climate-resilient investment looks like; CDKN has written extensively on this, in its much-cited guide ‘Tackling exposure’ on bringing climate risk management ‘into the boardroom’ or its guide to ‘What does it take to mainstreaming disaster risk into key sectors?’

Of course, at the Financing for Development conference, climate mitigation and the need for low-carbon development must play just as pivotal a role as climate adaptation in governmental discussions. It would be a damaging, missed opportunity if governments do not commit to reorientating investments into low-emissions development that avoids lock-in to heavy fossil fuel consumption and dangerous levels of future climate change.

At the recent launch of the World Bank report ‘Three steps to decarbonizing development for a zero carbon future’, lead author Stephan Hallegatte argued: “There is a huge consensus. We need to get to zero net emissions [to avoid dangerous climate change in this century] and we know how to get there. We need to do the four things to get to zero emissions and you cannot miss one: zero carbon electricity; fuel shifting in the transport, heating and industrial sectors; energy efficiency in all sectors, including building, transport and agriculture; and managing land use to ensure ecosystems are carbon sinks and not carbon sources.” Hallegatte also stressed the importance of taking a long view beyond the 2030 timeframe of the Sustainable Development Goals.  “We suggest to start with the structural planning now that does what is needed to get to zero emissions -- and not just incremental changes.”

Rich and high-emitting nations should be humbled by the significant contributions to climate mitigation that developing countries have already put on the table. A United Nations inventory of Intended Nationally Determined Contributions (INDCs) toward the global climate talks in Paris this December provides links to the first Least Developed Country contribution – Ethiopia’s – as well as notable national contributions to climate mitigation from Mexico and Morocco. CDKN has been assisting several developing countries in preparation of their INDCs for imminent submission and you can find blogs about their experiences on our INDC page.

A finance package for climate compatible development

What, then, can Financing for Development deliver to ensure climate compatible development in Least Developed Countries? There is a need to create a policy environment that is conducive to blended funding (public and private, a mixture of risk mitigation, grants, loans, equity, etc.) in support of low-carbon, climate-resilient investments. Ethiopia, as a committed country that wants to develop on a climate resilient green economic path, and the host of the conference, is expected to urge further commitments from donor governments, to bolster the considerable domestic revenues that Ethiopia and other LDCs are already ploughing into climate resilient development.

Indeed, we see generous Official Development Assistance commitments as being critical to financing climate compatible development - both directly and indirectly.

There are real hurdles to fast-tracking climate-related development finance. A GIZ-sponsored workshop recently surfaced some of these; they include a lack of capacity in developing countries for setting up appropriate mechanisms to handle climate finance, and competition among ministries and often, lack of a clear mandate for coordination. Countries may also struggle to leap from strategies and concepts to investment-ready, low-carbon, climate-resilient projects.

Participants suggested that the way to break the deadlock and open the pipeline for billions more dollars of effective, climate-compatible development financing was:

  • Capacity building (technical and institutional) for developing countries;
  • Taking advantage of the capacity built for other instruments (“ not reinvent the wheel”);
  • Incentivising dialogue and coordination between Ministries of Finance and of Environment and facilitating among sectors and institutions;
  • Transitioning from international funding channels to direct access by developing countries;
  • Promoting political will for climate compatible development; and
  • Identifying very competitive projects for fast-start financing.

Let us hope that the next week’s deliberations in Addis Ababa inject significant momentum into the efforts of both developed and developing countries to move in this direction.


Image credit: UNICEF

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