Who’s ready for climate finance?

Richard Calland (Africa Climate Finance Hub) and Smita Nakhooda (ODI)

Is it a bird or is it a plane? The question of what ‘readiness’ for climate finance involves has attracted a great deal of attention and debate, particularly since the Green Climate Fund is supposed to channel $100 billion a year by 2020 for climate action and policy in developing countries.

Despite various efforts from a number of international bodies such as the UNDP, there is little consensus about the matter. Is it a process or an event? This is a yes or no question: you are either ready or you are not. Either way, how on earth do you measure it (or should you even try to do so)?

There have been inevitable levels of ambivalence from potential recipient countries. They welcome the idea of finance that will put them in a better position to use the funds, given the complexity of accessing climate finance, but they are also wary of more red-tape that will absorb time and effort, and end up looking like ‘conditionality’. If you’re not ‘ready’, you may not be ‘certified’ fit for receiving climate finance.

In an effort both to better understand what climate finance readiness funding might usefully entail and, more importantly, what the needs of potential recipient countries might be, researchers from ODI and the Africa Climate Finance Hub spent a year talking to people in three Southern African countries – Namibia, Tanzania and Zambia. We began this work in partnership with GIZ and with support from the German government.

Because every place has unique socio-economic, political and institutional conditions, our starting premise was that any assessment of country readiness should take the ‘3 Rs’ into account:

  • be RELATIVE to a country’s socioeconomic and geopolitical characteristics;
  • be RESPONSIVE to the country’s particular needs, priorities, and challenges – and therefore flexible;
  • be REASONABLE, factoring in key national issues and constraints, and thus identifying the practical steps that can be taken.

All three countries are seasoned recipients of official development assistance (known as ODA), and acutely attuned to the power-play that can quickly subsume conversations about who gets what, when and how. As one finance ministry official put it: ‘we will invest in getting ready for climate finance, but only if we can see that the investment will be worthwhile’. The subtext is: will readiness finance really benefit potential recipients?

From our fieldwork, we gained a number of insights into how readiness finance might cohere with the other efforts that countries are making to address the challenge of climate change.

We considered in-country processes and institutions responsible and necessary for planning for climate change and programming associated finance. We also stressed the importance of what we term ‘aptitude’ – by which we mean more than just the exhausted notion of ‘capacity’, but rather ‘mindset’ and the institutional convictions that are required to really grapple with the tough politics of climate action and its associated political economy. Finally we looked at systems to access and spend climate finance – the sourcing as well as the receipt of climate finance and whether funds are being spent well, in order to achieve intended climate related objectives.

Countries are struggling to align action that is focused directly at climate change with broader national strategies for economic development. The threat posed by climate change may appear less direct, and is certainly more nuanced, but is no less dangerous for long-term prosperity. Readiness support could help countries make better links between “climate” strategies and their development finance plans. For example, readiness support could help governments improve the quality of the data that they need to understand the nature and trajectory of stresses and changes in key economic sectors and the risks these pose for proposed investments.

We found, as many others have, that countries struggle to co-ordinate efforts across departments and agencies. Institutions to support the realisation of climate policies and strategies are emerging, and usually include some formal space for the representation of the various ministries and stakeholders who will need to be involved in implementation. For example, the proposed National Climate Change and Development Council in Zambia will draw together the ministries of environment, finance, infrastructure/public works, mines, energy and water, the Office of the Vice President with its disaster management unit and, most likely, the Zambian Meteorological department, while also engaging civil society and private sector representatives. Similarly the process for developing the Namibian Climate Policy and Strategy has involved consultation with other units of government through a National Climate Change Committee.

But in practice, coordination between activities and within planning processes has been challenging, often lacking sufficient mandate, capacity or incentives. Our studies found that there may be implicit or explicit competition for access to funding, and enhanced political profile. Readiness finance might be used to enable more effective coordination, but there is a need to better understand these underlying dynamics so that support can be well targeted.

While developing countries are taking important steps to integrate climate change into their economic development strategies, in many countries further work is required to enhance alignment between emergent climate response strategies, and existing investment and finance priorities.

A step forward could be to agree that readiness for climate finance is neither a plane nor a bird. But investments in climate finance readiness efforts can support enabling activities within countries that allow climate finance to be used to realise a ‘paradigm-shift’ towards climate compatible development strategies.

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