Vyoma Jha, Centre for Policy Research (CPR)
Countries around the world are establishing arrangements to direct public finance and international investment towards climate change mitigation or adaptation. CPR and ODI have been working with researchers in Colombia, India, Indonesia, the United Kingdom and Zambia to understand how these work. While the economic circumstances, and the policy framework for action on climate change are diverse these countries have one thing in common: they all have multiple institutions involved in directing finance into climate-compatible solutions.
In this context, a crucial question for international institutions seeking to support countries to achieve to climate-compatible development is: how do we engage diverse national stakeholders, and foster better coordination among them? This is a key question for National Designated Authorities that are entrusted with facilitating national engagement with the new Green Climate Fund (GCF). The GCF for its part has the potential to take more sophisticated and effective approaches to engaging with national counterparts. Our research suggests that there is no single, perfect institutional arrangement to mobilise and deliver climate finance. Any efforts to strengthen coordination around climate finance must contend with messy domestic landscapes, and diverse actors.
Emergence of arrangements for ‘docking’ or ‘mainstreaming’ climate finance
In most countries (developed and developing alike), climate change has primarily been the purview of Ministries of Environment. Ministries of Finance are increasingly engaged on this agenda as well. Both have a vital role to play. Beyond the arrangements within the government, a vast range of institutions outside of government play an important role in implementing efforts to respond to climate change: the private sector, civil society organizations. In some cases these arrangements have been created to ‘dock’ international or external climate finance in the national system. In others, they aim to ‘mainstream’ climate considerations into core policy and associated investment decisions and financial frameworks. Finding a way to bring these arrangements together is a key challenge for international institutions, including the Green Climate Fund.
Scale of available finance: an incentive for better coordination
Changes in structure do not necessarily change behaviour: it is the incentives for coordination that matter. The scale of available finance around which an arrangement is structured can be a significant factor in determining whether it supports “mainstreaming” or “docking”. For example, in many cases inter-agency bodies have been created to make decisions around programming relatively small volumes of finance from the Global Environment Facility; but their traction and influence with mainstream investment actors (such as Ministries of Finance, development banks, and the private sector) has been modest. On the other hand, while Ministries of Finance have engaged around the more substantial sums of finance available through the World Bank’s Climate Investment Funds, coordination with other ministries, civil society and other stakeholders has not been a given: it has taken dedicated time, resources, and support.
A new template for broad-based action
Operational coordination may be complex even when driven or mandated at the highest level of government. Therefore, how coordination is led, matters as much as who leads it. Working arrangements that create space for ministries with responsibility for economic and financial decision-making to partner with Ministries with requisite expertise and mandate to address climate change and environmental issues are needed. These institutional arrangements on climate finance must also create opportunities for diverse stakeholders to input into climate change and finance-related decision making.
Strengthening domestic engagement with international finance
Access to international finance may be structured to help empower lead agencies to convene key domestic actors. But taking such action takes time, resources, and dedicated capacity. A sound understanding of the domestic institutional landscape is imperative to avoid further marginalisation of the climate financing processes from domestic climate policy processes and mainstream investment in relevant sectors. Flexibility is essential. Improved coordination may benefit from:
- The availability of adequate funding (whether from domestic or international sources) that creates sufficient incentives for key actors to come together and engage over a reasonable time period
- Proactive leadership of the anchor ministry in efforts to bring ministries of environment, finance, local government and national financial institutions together
- A robust analysis of stakeholders in the national climate response, their interests and the strengths and weaknesses of existing working arrangements, taking account of relative mandates and resourcing
Accountability to both domestic and international stakeholders for active engagement with the range of relevant stakeholders.
The synthesis paper: ‘Getting it together: institutional arrangements for coordination and stakeholder engagement in climate finance’ can be found here.