3International Climate Finance: spending and resources
Budget
34.The Government has committed to spending at least £5.8 billion between 2016 and 2021 on international climate finance. In the final year of this period, the UK is expected to provide £1.76 billion, marking an uplift of spending from previous years. Evidence from Bond’s Development and Environment Group (DEG) calls for the Government to maintain this level of funding “as the minimum floor” of climate finance from 2021 onwards, and for this funding to be allocated in the upcoming Comprehensive Spending Review.61 In oral evidence to the Committee, Government Ministers would not be drawn on whether this would be a future spending commitment. Harriett Baldwin advised, “we will not be able to tell you that until nearer the time”.62 Claire Perry later added:
we have a commitment now. We have the £5.8 billion that is set out over this Parliament, which is generous, and I believe among the top three donor levels in the world focused on this area. That is very much a conversation for the spending review going forward.63
35.There were several submissions to the inquiry which suggested that climate finance should be drawn, either partly or wholly, from outside the ODA budget to allow the UK to scale up on ambition on climate without diverting money away from other development objectives. The Bond Development and Environment Group pointed out that under the UNFCCC, all climate finance should be ‘new and additional’ “since the challenge of climate change is ‘new and additional’ and makes the challenges of poverty reduction and sustainable development harder”.64 The UK considers its aid spending on climate change to meet this ‘new and additional’ requirement on the basis that it is drawn from a growing aid budget and so is in addition to previous levels of funding.65 The Bond group, however, argued that this is an unsustainable approach due to the scale of the funding demands for addressing climate change. They advocated that “no more than 10% of the aid budget should be allocated for climate finance”, with the rest of the UK’s climate finance contribution drawn from alternative sources.66 To support this, the group suggested that “far more political attention needs to be given to generating new innovative sources of climate finance, such as carbon pricing for shipping and aviation, a financial transaction tax, and an equitable fossil fuel extraction levy (such as the Climate Damages Tax) … “67
36.A number of other organisations also called on the UK to seek sources of climate finance from outside the ODA budget including, ActionAid, CAFOD, WaterAid, WWF and Christian Aid.68 We put this to Clare Shakya, from the International Institute for Environment and Development (IIED), who suggested that the “ideal situation” would be if “the ODA commitment is there and there is an additional allocation for climate finance”. She stressed that this was due to the shortage of climate finance, rather than due to any objection to climate finance being classed as ODA: “the ODA definition is broad enough to include the type of support that is needed for climate finance”.69
37.We asked the Government Ministers whether they had plans to seek ‘new and additional’ sources of climate finance from outside the ODA budget. The DFID Minister responded by pointing to efforts to leverage private finance through ODA spending: “we certainly have ambitions to use the ODA budget… to help particularly DFID-focused countries to crowd in additional financing from a range of other sources”.70 The Minister did not give an indication of whether the UK would consider seeking alternative sources of public finance to support their climate finance contribution.
38.The UK has committed to spending £1.76 billion on climate finance in 2020/21 and we agree that this should become the new annual minimum spend for climate finance from the UK. This funding should be allocated as International Climate Finance in the upcoming comprehensive spending review. At the same time, DFID’s climate related work should not be restrained by the ICF budget which need not be regarded as the sole source of climate finance. In order to scale up efforts on climate beyond what is funded by ICF, the Government should consider the options for additional climate finance from public and private sources.
Staffing and Expertise
39.Several submissions to the inquiry flagged the level of staffing and expertise on climate change within DFID as an area of concern. For example, Christian Aid called for DFID to increase staff capacity in climate change, resilience and agricultural livelihoods, as the impacts of climate change intensify, and drought risks grow.71 In oral evidence to the Committee, Dr Kate Schreckenberg, a Reader of Development Geography at Kings College London, who was the Director of the UK’s £43m Ecosystem Services for Poverty Alleviation (ESPA) Research Programme, described DFID as “severely under-resourced” in terms of staff with forest and natural resource expertise. She said this was the case both in the UK and in country offices, and criticised the amount of work which DFID contracts out to service providers, reducing the level of in-house “day-to-day expertise on the impact of their activities”.72 Andrew Mitchell, Founder and Senior Advisor of Global Canopy, giving evidence as an independent expert alongside Dr Schreckenberg, fully agreed with her assessment:
In my lifetime, I have watched DFID get hollowed out in terms of expertise. Twenty years ago, they had incredible expertise in DFID, paid for. They knew what they were doing. Because of successive cuts that we have had to make for all sorts of reasons, that expertise has been devolved out into highly paid consultancies that are sucking up a great deal of the aid money on the basis that it is more efficient to do it that way.73
40.Dr Schreckenberg advocated that DFID should “rebuild its in-house capacity around forests and landscape management, both in the UK and its country offices”. She suggested that an additional benefit of more in-house capacity would be to “enable DFID to influence multilateral programmes such as the Global Environment Facility, the Green Climate Fund and the Forests Carbon Partnership Facility more effectively”.74 It seems, however, that DFID is going in the opposite direction. Sally Taylor, Head of Climate and Environment at DFID, told us in reference to DFID’s work on forests:
we are increasingly working through partnerships and mobilising others and doing fewer, if you like, projects ourselves. That is partly the difference in terms of the way we are set up, our staffing and so on.75
41.DFID is not the only department that has reduced its in-house climate expertise and capacity. According to Nick Mabey from E3G, who formerly worked in the FCO’s Environment Policy Department, there have been “worrying” cuts to the FCO’s capacity on climate diplomacy. He added, “rebooting our climate diplomatic service and working with others to do that and to increase capacity is necessary to deliver the development agenda”.76
42.Clare Shakya outlined the impact that a reduced number of staff working on climate across different departments is having at the country level:
When you had the Foreign Office, which had a very well-resourced effort on climate, the Department of Energy and Climate Change, which also put people out there, and DFID all working together in country, you saw really intelligent things happening and really strategic investments being made that went with the grain and shifted the politics in that country. Because you do not have the staff, you are not seeing that happen.77
43.When we questioned DFID on the issue of climate capacity and expertise, Minister Baldwin told us that the department is “in the process of looking to increase the number of climate experts”.78 According to the Minister, this is particularly aimed at increasing capacity building at the country level, to support the least developed countries to access climate finance.79 In response to our request, the Government later wrote to us to confirm the numbers of staff who are being hired to work on climate: they will be creating an additional 20 dedicated climate change posts to support a more intensive cross-government effort to address climate change issues affecting Africa.80 The ICAI 2019 performance review of UK aid for low carbon development confirmed that numbers of climate advisers in country teams, having decreased slightly between 2014 and 2016, were now “set to rise”. However, the review expressed concern that such advisers “are not available in all country offices”.81
44.The evidence strongly suggests that DFID’s capacity and expertise on climate has been reduced in recent years - particularly, although not exclusively, in relation to forests and natural resource management - risking detrimental impacts on programming. This situation should be urgently rectified. DFID must have sufficient numbers of staff who are (a) focused on climate programming and (b) have climate expertise, to ensure that International Climate Finance is being spent effectively and where it is most needed. This applies to both DFID head office and in-country posts.
45.We welcome the Government’s commitment to create 20 new dedicated climate change posts. However, it is not clear to what extent these posts will be supported by champions for action on climate change at senior management level. We also note that the criticism around a loss of DFID expertise on forests due to an increased emphasis on working through service providers still seems to stand. DFID should ensure that efforts at efficiency savings do not lead to watered down expertise and ultimately result in ICF being spent less effectively.
Transparency
46.The written submissions raised criticisms about the transparency of ICF spending, both in terms of how it is spent and what impact it is having. The Bond Development and Environment Group said that since climate finance began to be mainstreamed across DFID’s portfolio, it has been become more difficult to track, and they are concerned that “a lot of traditional development spend is just being relabelled as climate finance”. Greater transparency on ICF spending would allow this to be better scrutinised.82 Mott MacDonald agreed that improvements could be made on monitoring, measuring and reporting on climate finance.83 CAFOD emphasised a need to disclose methodologies used for assessing impact as well as the project-level data. They asserted that there is currently “a lack of clarity on how ICF spending decisions are made; how projects are developed and prioritised and how impact is being measured and learning generated”.84 Clare Shakya said that the way climate finance is currently reported, “obfuscates rather than elucidates what is going on”.85
47.Better transparency would not just enable greater public understanding of how the UK’s ICF budget is being spent but would also potentially provide a robust accounting model for other countries spending climate finance. WWF told us that better transparency “would mean greater accountability for public money, and enable others to learn from the UK’s significant experience in delivering climate finance”.86 Clare Shakya from IIED, formerly a senior climate change adviser at DFID, told us that ICF spending is very closely monitored in the department and that “it is shocking to go outside and realise how poor it is” in terms of public transparency.87 The UK is missing an opportunity to lead on this on the global stage:
To be honest, I think the UK system internally is the most robust that exists, and we get no credit for that at all, because it is not how it is reported internationally.88
IIED’s written submission recommends that the UK should use DFID’s ‘DevTracker’ website to transparently report climate finance flows “broken down by component, delivery partner and project details”.89
48.In Chapter 2 we outlined why it is so important that international climate finance is spent as effectively and with as great an impact as possible. It follows, then, that the way in which ICF is being spent, its impact, and the methodology for measuring that impact, should be in the public domain and open to scrutiny. Not only will this ensure that climate finance spending can be held to the highest of standards, it can also help to raise the bar on climate finance reporting in other countries by acting as a model to follow. Improved transparency around ICF spending therefore has the potential to improve climate finance spending globally. The UK should take the opportunity to be a global leader on climate finance accounting and reporting by improving transparency of ICF spending, impact and monitoring methodology. We agree with the International Institute for Environment and Development (IIED) that DFID’s online “DevTracker” system could provide an appropriate platform for greater transparency on International Climate Finance (ICF). The Government should use this platform to report climate finance flows transparently, broken down by component, delivery partner and project details.
65 Ibid.
66 Ibid.
68 ActionAid (CCC0003); Catholic Agency for Overseas Development (CAFOD) (CCC0009); WaterAid (CCC0010); WWF (CCC0012); Christian Aid (CCC0016)
80 Department for International Development; the Department for Business, Energy and Industrial Strategy; and the Department for Environment, Food & Rural Affairs (CCC0037)
88 Ibid
Published: 8 May 2018