TWN Info Service on Climate Change (Aug16/01)
5 August 2016
Third World Network

UNFCCC’s Standing Committee on Finance discuss key assessment of climate finance flows and other matters

New Delhi, 5 Aug (Indrajit Bose) — The 13th meeting of the Standing Committee on Finance (SCF) under the United Nations Framework Convention on Climate Change (UNFCCC), held on 18-20 July 2016 in Bonn, Germany, discussed a host of issues around the 2016 biennial assessment and overview of climate finance flows (BA).

The issue of what is ‘climate finance’ was a major bone of contention in the discussions.   

(At the 17th session of the Conference of the Parties (COP 17) to the United Nations Framework Convention on Climate Change, Parties mandated the SCF to prepare a biennial assessment and overview of climate finance flows. The SCF was established by the COP 16 in Cancun, with the mandate to assist the COP in exercising its functions with respect to the financial mechanism of the Convention in terms of improving United Nations Framework Convention on Climate Change’s coherence and coordination in the delivery of climate financing, rationalization of the financial mechanism, mobilization of financial resources, and measurement, reporting and verification (MRV) of support provided to developing country Parties.)

Besides the 2016 BA, the SCF also discussed the 2016 forum on financial instruments that address the risks of loss and damage associated with the adverse effects of climate change; draft guidance to the operating entities of the financial mechanism of the Convention for COP 22 in Marrakech, Morocco to be held in November this year and coherence and coordination in the delivery of climate finance in relation to financing for forests.

Members of the SCF considered the Forum and the draft guidance in breakout groups and then reported back.

Speaking to TWN, an SCF member from a developing country said, “There were two key takeaways from this meeting. The first is the agreement on the scope of the forum on financial instruments to address loss and damage, which is very close to the hearts of developing countries. This is an area we have been looking into in terms of how we can address loss and damage from the finance perspective. This is a key takeaway we have managed to agree on.”

“The other topic we discussed but which we did not conclude on is the 2016 ‘biennial assessment and overview of climate finance flows’. Considering the complexity of the topic and the magnitude of it, many members from developing countries highlighted the challenges and the difficulty of assessing climate finance in the context of the Convention, where we are looking to see how much financing was provided from developed to developing countries,” said the member.

The member added that the draft report on the BA was comprehensive in that it covered all flows from climate finance, including developed to developing countries and South- South flows as well. “Many developing countries reacted to indicate that the report did not address the objective in mind where we wanted to report to the COP on the size and magnitude of climate finance provided by developed to developing countries. The SCF has agreed to have another review of the report. There will be exchange of views, with a view of adopting a summary report of the next SCF meeting,” said the member.

“We had very forthcoming discussions on the subject. We spoke openly about our expectations. There were views expressed that the report should address the expectation and credibility of the information. The storyline of the report would highlight that there are greater challenges, so it would present a problem to the COP. It is quite challenging when there is an absence of mechanism to MRV the financial support. We need to do something about this and the storyline should speak to that,” said the member further. 

“In the absence of a definition of climate finance, we do not know what to measure and it will be very difficult to get assessment of flows of climate finance,” lamented the member. (See further details below).

2016 Biennial Assessment

During the meeting, the SCF members were presented with two documents. One was the first order draft of the technical report of the 2016 BA and the second was the draft outline of the summary and recommendations of the 2016 BA. Both are work in progress and are expected to be finalized at the next SCF meet.

The first order draft presented to the SCF comprised chapters on methodological issues relating to the MRV of climate finance; overview of current climate finance; assessing the state of climate finance; and summary and review of progress since the last biennial assessment in 2014 (which is also the first assessment done.)

The committee members discussed the two documents and provided their views on the same. Besides the definition of climate finance, there were a number of issues on which the SCF members had in depth discussions, which were based on the first order draft’s chapters as well as the summary.

The discussion assumes significance since COP21 in the decision from Paris (decision 1/CP.21), paragraph 94 (c) requested the Ad Hoc Working Group on the Paris Agreement (APA), when developing modalities, procedure and guidelines, to consider, inter alia, information in the biennial assessments and other reports of the SCF and other relevant bodies under the Convention.

The report discusses the available information on global climate finance and of flows of climate finance from developed to developing countries. It also attempts to assess these two sets of information, and identifies areas where further work is needed.

While the summary and recommendations on the 2016 BA have to be prepared by the SCF, the technical report is prepared by experts under the guidance of the committee, and draws on data and statistics from a range of sources.

Even though not final, some of the key findings of the BA included that:

·         Current reporting by developing countries was inconsistent and not comparable due to a lack of reporting guidelines;

·         Developing countries face additional challenges in preparing financial information for their biennial update reports (BURs), including a lack of capacity to collect information, inadequate institutional arrangements for reporting, or a lack of independent information on climate finance received from non-governmental actors.

·         Practices exist within the UNFCCC to review the transparency and completeness of reporting against international guidelines for developed countries. Methods to verify actual financial support provided against that received and reconciling these figures with reporting on finance provided are not available.

·         Multilateral development banks (MDBs) and the International Development Finance Club (IDFC) members have adopted common principles for tracking mitigation and adaptation finance, in an attempt to harmonise reporting approaches. MDB activity-level data is publicly available through the OECD-DAC (OECD-Development Assistance Committee). There is a lack of transparency and disaggregation of IDFC reporting, which focuses on overall “green” rather than climate finance, and a lack of common guidelines to assist members to consistently classify climate change relevant projects. It also pointed to a lack of systematic data on private climate finance flows.

With respect to the overview of current climate finance flows (2013-14), the summary said that climate finance data are aggregated in two ways in the BA:

·         Global total climate finance, which includes public and private financial resources devoted to addressing climate change globally; and

·         Flows from developed to developing countries aimed at addressing climate change, which includes climate finance reported to the UNFCCC.

“In the 2013-14 period, it is estimated that global finance was in the range of USD 666 to USD 731 billion. If in addition, available estimates of finance for sustainable transport, land use, adaptation, and domestic climate finance are included, the total could be up to USD 990 billion. Climate finance as reported by developed countries to developing countries is in the range of USD 40-80 billion. This was dominated by public flows, which accounted for USD 35-60 billion of the total,” said the summary.

Several committee members said that this range needed clarity and that climate finance flowing from developed to developing countries should be separated from overall climate finance flows.

The summary also highlighted that the main uncertainties associated with flows from developed to developing countries included the attribution of MDB climate finance to developed countries, tracking the project value rather than the climate share for bilateral assistance reported to the DAC, relatively poor tracking of bilateral non-concessional climate finance, and limited data on private climate finance flows from developed to developing countries.

Also in issue that was widely discussed among the SCF members was the statement that only 40 per cent of the climate finance provided by developed countries to developing countries goes to the recipient developing country governments, with questions surrounding where the balance of the 60 per cent goes. (Separate article on this to follow.)

The SCF members noted that a number of areas require further technical discussions.

It was agreed that the SCF members are invited to provide written comments on the first order draft and the outline of the summary and recommendations, including views on possible recommendations by 15 August. The technical team will prepare the final draft of the technical report inter-sessionally.

Following comments received from SCF members by 15 August, the BA co-facilitators, with the support of the Secretariat, will prepare a draft summary and recommendations inter-sessionally and circulate it to the SCF for further consideration.

2016 Forum

The 2016 Forum of the SCF, focusing on financial instruments that address the risks of loss and damage associated with the adverse effects of climate change, will be held on 5-6 September in Manila, Philippines.

The draft programme for the Forum was agreed to in Bonn following comments from SCF members and a breakout session during the meeting.

Reporting back from the breakout discussions on the 2016 Forum, Stephan Kellenberger (Switzerland) said that he had received comments to improve the draft programme to focus on country experiences, financial instruments to be applied at different levels; suitability of financial instruments; how financial instruments address the most vulnerable groups and population and integrated into strategy and plans and National Adaptation Plans (NAPs); enhancing the understanding and roles and functions of public and private actors and how public-private partnerships can use instruments to reduce the risk of loss and damage.

Diann Black-Layne (Antigua and Barbuda) emphasized that the instruments they discuss and the outputs of the meeting should reflect actual case studies that can be used in the context of Small Island Developing States (SIDS) and Least Developed Countries (LDCs). She also underscored the need to go beyond insurance as a popular instrument because a large population would not be able to access it. She also said that it is important for the Paris Agreement to develop a work programme on the issue.

Richard Sherman (South Africa) said that he along with Stephan Kellenberger (Switzerland) had tried to put proper balance on what may constitute loss and damage and what are the financial instruments. “Balance was difficult because people tend to move to insurance, so we are looking at different types of instruments…The focus has to be on case studies that can be replicated and give some kind of direction to the operating entities and to what kind of programmes should be funded in these areas and whether they have had advanced insurance schemes or not,” said Sherman.

The UNFCCC Secretariat also informed SCF members that the Asian Development Bank (ADB) would provide funding of up to 50 participants, and that the Secretariat would provide additional funding to 50 developing country resource persons.

Draft guidance to the operating entities of the financial mechanism

Under this agenda item, the SCF discussed broadly the preparation of core guidance to the operating entities of the financial mechanism, the frequency of guidance, and draft guidance for 2016.

(The Green Climate Fund [GCF] and the Global Environment Facility [GEF] are the two operating entities of the financial mechanism).  

 A compilation and analysis (C&A) table was prepared for the consideration of the SCF.

On the preparation of core guidance, a break-out group discussing the issue proposed that the SCF recommends to COP22 to take note of the progress made in 2016, including the work on the C&A and outreach to other thematic bodies for enhanced transparency and coordination.

The recommendations would also include: noting that the SCF would annually update the C&A and maintain it on the SCF website; invite the operating entities to consider how their reporting can be adjusted to facilitate the updating of the C&A; and noting that the SCF would undertake further work in 2017, with a view to finalizing its recommendations on the draft set of core guidance by COP 23.

On the draft guidance to the operating entities of the financial mechanism, the group reiterated the purpose and need to continue on this issue, including: to allow adequate time for the operating entities to implement the guidance received and demonstrate the results, facilitate the intergovernmental process and simplify the reporting requirements.

For the GCF, the breakout group of the SCF generally agreed that guidance should be provided annually, in light of the early stage of operationalization and in order to provide guidance that is most responsive to any new development.

However, as regards the GEF, some participants in the breakout group proposed that the SCF could prepare thematic areas along which the GEF could focus its annual report, so that guidance can be provided annually but on certain thematic areas. The breakout group could not reach a conclusion on the frequency of guidance to the GEF and proposed to continue its discussion.

Edited by Meena Raman