Development bank climate funds seek new dollars, as competition heats up

Reuters Foundation, Monday 8 Apr 2019

Ministers from more than 30 developing countries on Monday urged wealthy nations to top up a set of climate funds that channel money to international development banks, in a year when competition for limited donor dollars is set to heat up.

The $8.3-billion Climate Investment Funds (CIF), currently the world's largest multilateral financing instrument, help developing states pursue low-carbon development that protects them better from wilder weather and rising seas.

But after a decade of operation, the funds have less than $1 billion to commit - and are likely to run out of money this year, having received no new contributions since 2014, CIF head Mafalda Duarte told the Thomson Reuters Foundation.

In a ministerial statement, 33 governments - including Bangladesh, Colombia, Egypt, Kenya, Liberia and Ukraine, among others - noted the achievements of 300 CIF-backed projects in 72 countries.

The projects are building 26.5 gigawatts of clean-energy capacity, improving energy access for 8.5 million people, equipping 45 million to cope with the effects of climate change, and managing 36 million hectares of forests more sustainably, the statement said.

"It is our view that we must build on these significant results and maintain CIF's proven business model as a key component of the climate architecture," the ministers said ahead of the spring meetings of the World Bank Group and International Monetary Fund in Washington.

The CIF is not the only major backer of climate action on the hunt for fresh funds this year.

The multi-billion-dollar Green Climate Fund (GCF) has also launched a process to refill its coffers for the first time, set to culminate in a pledging conference in October.

The GCF garnered initial pledges of more than $10 billion in 2014. But U.S. President Donald Trump has refused to deliver two-thirds of Washington's original promise of $3 billion, and foreign exchange fluctuations have reduced available cash by about another $1 billion.

Late last week, the GCF held an initial meeting in Oslo to drum up support for its replenishment, attended by 27 potential contributors. Norway and Germany have already said they would double their initial contributions.

In a video statement to the gathering, U.N. Secretary-General Antonio Guterres said the GCF "needs to grow and play a more decisive role in support of climate action".

"I appeal to nations to show global commitment to providing the climate finance needed under the Paris Agreement,” said the U.N. chief, referring to the 2015 accord to curb global warming.


Joe Thwaites, a climate finance expert with the World Resources Institute in Washington, said today's clutch of international climate funds had emerged over the past couple of decades in response to different needs and gaps in financing.

But with rich governments having a limited amount of cash to put into the various funds, there were fears the money could end up spread too thinly to make a difference, he noted.

"Countries need to think about how allocations are going to best support the Paris Agreement to ramp up climate action," he added.

So far, the funds were not undermining each other's work, he noted, but they must take care not to duplicate efforts in the future, nor to compete aggressively.

The CIF was set up in 2008 as an interim way to help poorer countries get a headstart on tackling climate change.

Its existence is subject to a "sunset clause", meaning its governing body could decide to shut it down or merge it with a newer fund like the GCF.

The CIF, unlike most other global climate funds, operates separately from the U.N. climate change process and gives money only to multilateral development banks to implement projects.

The GCF, in comparison, can allocate funding to approved national-level agencies in poor countries.

Duarte said independent evaluations had demonstrated the value of the CIF's "unique business model", which does not work on a project-by-project basis but takes a wider programmatic approach to a country's needs and how to meet them.

Monday's ministerial statement indicated developing countries regarded the CIF as an "essential means" of tackling the climate crisis - something that requires "all our energy, all our ingenuity, and all our resources", she added in a statement.

WRI's Thwaites said 2019 could be pivotal for the evolution of international climate funds.

"If there is a really ambitious replenishment of the GCF this year, that would be a vote of confidence in the GCF - and at that point, you would maybe see more of a move to some consolidation," he said.

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