Global Britain in demand: UK climate action and international development around COP26 Contents

3Providing sufficient, long-term and reliable funding

We cannot continue with a situation where adaptation is the poor cousin of mitigation.

Rt Hon Alok Sharma MP62

Volume of funding for climate adaptation

34.Globally, adaptation plays “second fiddle” to mitigation in terms of international climate finance.63 Following a threat by low- and middle-income countries to walk out on the negotiations in Copenhagen in 2009, higher income countries pledged to provide “scaled up, new and additional, predictable and adequate funding” to meet “a goal of mobilizing jointly US$100 billion per year by 2020 to address the needs of developing countries” in addressing climate finance through mitigation and adaptation.64 The Paris Agreement committed nations to provide a balance of support to adaptation and mitigation.65

35.The US$100 billion goal has yet to be met.66 The balance between mitigation and adaptation is also unmet as only 25% of climate finance has been invested in adaptation globally in recent years.67 The United Nations Environment Programme (UNEP) suggests that adaptation already costs low- and middle-income countries an estimated US$70 billion per year and that this is set to rise to US$ 140–300 billion in 2030. At COP21 in Paris (2015), the Parties agreed to set US$100 billion per year as the minimum target from 2020 to 2025.68

UK’s response—UK International Climate Finance (UK ICF)

36.We heard that the UK has “a really good story to tell on adaptation”.69 On average, 47% of UK ICF was spent on adaptation in the past four years.70 Furthermore the UK provided 89% of its ICF in grants rather than loans between 2016 and 2019,71 bucking the global trend of an increasing share of loans, rather than grants, in public climate finance between 2013 and 2018.72

37.In September 2019, the Government announced that it would double the amount of UK ICF to £11.6 billion for the period of 2021/22–2025/26.73 The Government referred to UK ODA as a means to increase its impact as a “force for good” in the Integrated Review.74 On 13 July 2021, however, the House of Commons backed the Government’s decision to reduce UK ODA to 0.5% of GNI.75 While UK ICF will be protected from cuts, contributors told us that they were concerned about the consequences of the cuts on climate action. The countries which are most in need of development finance are also most at risk of the impacts of climate change.76 In order to achieve the best possible results for vulnerable groups in terms of climate change and development, the UK should at least match the 0.7% of GNI,77 and in effect “lead, not retreat”.78 A ringfencing of UK ICF amid a cut to UK ODA is considered a mismatch resulting in a less comprehensive response to the climate emergency.79 Indeed, speaking for many contributors to this inquiry, one witness asked:

What is it [climate finance] going to influence if the development finance is not there to address development deficits?80

Access to funds

The difficulty has been access. The money is there and we hear from different Governments, “But we did provide the money.” No, to write a cheque and put it in the World Bank or the GCF is not enough. You have to guarantee access so that we can get ready on time.

H.E. Diann Black-Layne, Lead Negotiator on Climate Change, Alliance of Small Island States81

38.We heard that the process of applying for climate funds remains cumbersome for most LDCs, SIDS and grassroots organisations.82 Only 14% of ICF reached the 46 LDCs and just 2% reached the 39 SIDS between 2016 and 2018.83

39.Our inquiry received many contributions about the largest multilateral climate fund,84 the Green Climate Fund (GCF). Our predecessor Committee previously highlighted the challenges in accessing funding from the GCF,85 and recommended that the Government improve efficiency in GCF decision-making and enable better access to climate finance.86

40.Since then, little has changed. The evidence that we heard includes accounts of the obstacles that must be overcome to access funding, which disadvantage fragile and conflict-affected states, other LDCs and SIDS as well as grassroots organisations.87

41.LDCs and SIDS face difficulties in accessing funding from multilateral organisations such as the GCF. H.E. Diann Black-Layne told us that:

There is a struggle to keep on reminding the green climate fund and others—not the adaptation fund—that this is not development finance.88

42.Gebru Jember, Technical Lead of the Least Developed Countries Initiative for Effective Adaptation and Resilience (LIFE-AR) and former Chair of the LDC Group, spoke of lengthy review processes as well as micromanaging by the GCF Board which delayed the disbursement of funds even further..89 In his words:

They [the Board of the GCF] do not even want to give the GCF secretariat the right to approve small-scale projects. There are a number of projects that are waiting for the board to approve them. […] There are […] resources being kept there, but they are not accessible for local communities in vulnerable countries.90

43.He added that:

when you submit a proposal, it takes two to three years minimum to access the finance. Then you need to revise, because things change. The impact of climate change invariably becomes a bit more severe, and that means the cost for adaptation and mitigation becomes more and more. The initial plan may be for X amount, but when you receive the finance it is underestimated.91

44.Contributors also raised the importance of direct access to multilateral funds for grassroots organisations, LDCs and SIDS.92 To access funding from the GCF, for example, applicants have to become accredited first – a process which the GCF describes as a means to “assess whether they [applicants] are capable of strong financial management and of safeguarding funded projects and programmes”.93 Gebru Jember told us that:

the accreditation of [LDC] institutions […] is becoming a challenge. If a country needs to register for access to large-scale finance, it is not easy. Even small-scale accreditation takes years.94

45.Grassroots organisations equally face significant hurdles in accessing climate funding. Less than 10% of climate finance committed to low- and middle-income countries to combat climate change reaches the local level as funders of climate adaptation tend to prefer “bulk spending through central governments over tailoring and targeting locally, and directly financing local organisations”, according to the British Red Cross.95

46.As a result of bureaucratic procedures and accessing funding through intermediaries, the total amount of money at the disposal of grassroots organisations can be as little as 10–15% of the project value.96 Julius Ng’oma told us that his organisation - the Civil Society Network on Climate Change (CISONECC) – had always accessed resources from the FCDO, DFID and the Scottish Government indirectly through international organisations which reduced the amount available to address climate change locally.97 In his words:

The two or three organisations in between would always require so many things, such as administrative costs and so on and so forth. By the time the resources would get to a network like CISONECC and then to a grassroots organisation, the money is too little to make an impact on the ground.98

47.Eileen Mairena Cunningham called for the full, effective and meaningful incorporation of marginalised groups in the global response to climate change and for direct access by them to funds from the GCF.99 She told us that currently:

The requirements to access a fund are really difficult and it is always done through third parties.100 […] All of this [application] process makes it so difficult for indigenous people to access the funds. We have to go through accredited entities. […] We do not have direct access to these funds; […] we cannot decide how this process should be in our lands and territories.101

UK’s response—access

48.The UK is a top contributor to the four multilateral climate funds including the GCF.102 As such, it has influence on their policies and procedures. The UK was also instrumental in the establishment of the Least Developed Countries Initiative for Effective Adaptation and Resilience (LIFE-AR), whose goal is to channel 70% of climate finance directly to local levels in LDCs.103 Yet, we heard that the UK had only provided funding to LIFE-AR on an annual basis to date, as opposed to the 10-year partnership funding requested by the LDC Group.104

49.According to the FCDO, the UK helped facilitate the introduction of the GCF’s Updated Strategic Plan for 2020–2024, which aims to improve access to funding for LDCs, SIDS and other African countries as well as of a new voting procedure in the GCF.105 It has also facilitated work on a simpler approval process, more direct funding for national, regional and local organisations and on increasing the share of GCF adaptation funding earmarked for LDCs and SIDS from 50% to 69%.106

50.Vel Gnanendran told us that the Government intended to make propositions such as cutting the application process by 100 days as part of a simplified process, at the GCF Board meeting in October 2021.107 He added that:

Hopefully, that will be approved, but it will take some time to be implemented.108

Asked about how long it would take for access to climate finance to get easier, Lord Goldsmith said:

I am not sure that there will ever be a particular endpoint. The GCF is going to have to work continuously on improving the manner in which it relates to the grantee countries.109

51.Access to climate finance remains a significant challenge for LDCs, SIDS and grassroots organisations. For Global Britain to be a credible “force for good”, we urge the Government to use its COP presidency and position as a key donor to the multilateral climate funds to accomplish the following:

Definition of terms & transparency

52.Despite its omnipresence in climate negotiations, there is no officially agreed definition of climate finance.110 In November 2020, the Organisation for Economic Co-operation and Development (OECD) reported that the level of climate finance was US$78.9 billion in 2018.111 Yet, the OECD itself acknowledged that official reporting by higher income countries contains “significant inconsistencies in terms of methodologies, categorisations and definitions adopted across countries”.112

53.In their paper on climate finance, Roberts et al stated that the “US$100 billion per year climate finance promise had deep flaws, making it impossible to now assess whether it has been met.”113 Although the pledge of US$100 billion per year stated that funding would be derived from bilateral, multilateral and alternative sources which could be public or private, it failed to mention clearly what should be counted as climate finance within those categories.114 As a result, high-income countries have been able to decide themselves what they report as climate finance, making comparison and analysis challenging.115

54.We heard that another challenge was the different interpretation of the term ‘new and additional’. At COP15 in Copenhagen (2009), high-income countries agreed to provide new and additional funding “approaching US$30 billion” for 2010–2012 for climate adaptation and mitigation.116 Although reiterated at subsequent COPs in 2010 and 2015, it remains unclear what is meant by ‘new and additional’ and how it should be recorded in statistics on ODA.117

55.In its biennial progress report (December 2020), the Government stated that:

Our funding will be new and in addition to our previous £5.8 billion ICF commitment.118

Many contributors criticised this statement for its interpretation of ‘new and additional’.119 The NGOs that wrote to us would prefer climate finance to be in the form of new and additional financial resources by high-income countries above the commitment to 0.7% ODA. The Government’s broader interpretation of ‘new and additional’ has become contentious since the cuts to UK ODA.120 Bond and Climate Action Network UK told us that this statement poses serious questions of the credibility of the Government as the financial spending commitment for the period of 2021–2025 was evidently in addition to previous commitments.121 They added:

That is so very clearly not what is meant by “new and additional” under the UNFCCC, and the government needs to consider its position and credibility on this issue.122

56.Contributors raised significant concerns around the accuracy of the amount of global international climate finance that is being reported as pledged and disbursed for adaptation by the UK and other donor countries.123 In its report published in January 2021, CARE International wrote that “current official figures for adaptation finance are severely overstated and far too high” with US$2.6 billion out of the US$6.2 billion reported as climate adaptation being over-reported.124 It further stated that “donors commonly report more than the actual costs of the adaptation activities in their projects as adaptation finance”.125

57.In their paper on climate finance, Roberts et al state that funding is “insecure”, unpredictable and based on a “fragmented institutional architecture” which low- and middle-income countries cannot influence sufficiently.126 In their words:

climate funds are funnelled through over 100 channels, very few of which are controlled in meaningful ways by developing nations […]. These include developed countries’ aid and export promotion agencies, private banks, equity funds and corporations, and lending and granting arms of multilateral institutions like the World Bank and regional banks.127

58.Marek Soanes, Researcher in Climate Finance at the IIED, told us in relation to marginalised groups that “It is just impossible to understand where the money is actually hitting their pockets”.128

59.At the Climate and Development Ministerial in March 2021, LDCs and SIDS offered practical solutions to improve access to climate finance.129 According to the IIED, these solutions included establishing a Taskforce on Access to Climate Finance headed by the UK and Fiji, harmonising and simplifying procedures to access directly ICF from multilateral funds and developing a clear and shared functional definition of climate finance that emphasises the importance of experimenting and taking risks to find effective solutions to climate change.130 There has been little progress on access to climate finance as stakeholders disagree on the specifics of the Taskforce, according to a stocktake by civil society organisations in September 2021.131

UK’s response—definition of terms and transparency

60.Although the UK was rated among the better performers in this report, CARE stated that, like other countries, the data provided by the UK lacked clarity and completeness in terms of the recipients and programmes to be funded.132

61.The FCDO told us that the UK reported its ICF at programme level—that is, a more granular level—to the UNFCCC, and provided details such as programme codes.133 It also told us that all its programme documentation is held in the Development Tracker, which listed “details of contracts and funding arrangements, financial data and programme descriptions.”134

62.We believe that the current level of ICF is fundamentally over-reported, reducing the credibility of declarations and scope for achieving climate adaptation and resilience. We are calling for full transparency in the reporting of climate finance to enhance the ability of third parties to track funding from start to finish. To reach the UK-backed goal of channelling 70% of climate finance directly to local communities, we urge the FCDO to report in full transparency how much climate finance is reaching the local level through its main reporting channels—such as the UK’s Development Tracker and the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD)—and to encourage other donors to do the same. Further, the UK Government should host regular meetings between fund-recipient institutions from LDCs and SIDS, bilateral and multilateral donors during its COP presidency to devise a functional definition of climate finance as well as a clearer definition of the term ‘new and additional’ for use by donors. The Government should provide a progress report by 31 March 2022 .

63 Christian Aid (CDC0047)

64 United Nations Framework Convention on Climate Change (UNFCCC), Copenhagen Accord, point 8, 18 December 2009

65 United Nations Framework Convention on Climate Change (UNFCCC), Paris Agreement, Article 9.4, p.15, 12 December 2015

67 Organisation for Economic Co-operation and Development (OECD), Climate Finance Provided and Mobilised by Developed Countries: Aggregate Trends Updated with 2019 Data, p.9, 17 September 2021

69 Q57 [Catherine Pettengell]

70 Foreign, Commonwealth and Development Office (CDC0016)

75 HC Deb, 13 July 2021, Columns 225 - 228 [Commons Chamber]

76 WaterAid (CDC0023)

77 CARE International UK (CDC0029), WaterAid (CDC0023)

78 Chair of the LDC Group Mr Sonam Phuntsho Wangdi. See: Climate Change News, UK aid budget cuts undermine trust ahead of Cop26 summit, experts warn, 25 November 2020

79 Bond and Climate Action Network UK (CAN-UK) (CDC0045), International Institute for Environment and Development (IIED) (CDC0048)

80 Q57 [Marek Soanes]

81 Q17 [Diann Black-Layne]

82 Qq16–18 [Diann Black-Layne], Q43 [Gebru Jember], Q45 [Eileen Mairena Cunningham], Q55 [Marek Soanes]

84 The Green Climate Fund, About Us, accessed 26 October 2021

85 “140. We heard that accessing climate finance through the GCF can be challenging for developing countries” due to the GCF’s “high environmental, social, governance and fiduciary standards”. See: International Development Committee, UK aid for combating climate change (HC 1432), Paragraph 140, 8 May 2019

86 International Development Committee, UK aid for combating climate change (HC 1432), Paragraph 146, 8 May 2019

87 House of Commons, International Development Committee, Oral evidence: Climate change, development and COP26, HC 99, 22 June 2021 and 6 July 2021

88 Q17 [Diann Black-Layne]

89 Q43 [Gebru Jember]

90 Q43 [Gebru Jember]

91 Q41 [Gebru Jember]

92 Q31 [Julius Ng’oma], Q45 [Eileen Mairena Cunningham], Q47 [Gebru Jember]

93 Green Climate Fund, Entity Accreditation, accessed 26 October 2021

94 Q41 [Gebru Jember]

95 British Red Cross (CDC0028)

96 Q41Q44 [Gebru Jember, Questions 41 to 44]

97 Q31 [Julius Ng’oma]

98 Q31 [Julius Ng’oma]

99 Q45 [Eileen Mairena Cunningham]

100 Q45 [Eileen Mairena Cunningham]

101 Q48 [Eileen Mairena Cunningham]

102 Of the estimated £21.4 billion held by the four main multilateral climate funds - the Adaptation Fund, the Climate Investment Funds (CIF), the Global Environment Facility (GEF), and the Green Climate Fund (GCF), the UK is responsible for almost one-eighth of all pledges made by donor countries. Source: International Development Committee calculations (as of 8 October 2021).

103 International Institute for Environment and Development (IIED) (CDC0048)

104 International Institute for Environment and Development (IIED) (CDC0048)

105 Foreign, Commonwealth and Development Office (CDC0016)

106 Foreign, Commonwealth and Development Office (CDC0016)

107 Q109 [Vel Gnanendran]

108 Q109 [Vel Gnanendran]

109 Q109 [Lord Goldsmith]

110 Q17 [Diann Black-Layne], Q41 [Gebru Jember], Q60 [Catherine Pettengell]. In line with the United Nations, we define climate finance in quite broad terms as “the money which needs to be spent on a whole range of activities which will contribute to slowing down climate change and which will help the world to reach the target of limiting global warming to an increase of 1.5°C above pre-industrial levels”. See: UN News, The trillion dollar climate finance challenge (and opportunity), 27 June 2021

113 Roberts, J.T. et al, Rebooting a failed promise of climate finance, Nature Climate Change, Volume 11, p.1, 18 February 2021

114 Roberts, J.T. et al, Rebooting a failed promise of climate finance, Nature Climate Change, Volume 11, p.1, 18 February 2021

115 Roberts, J.T. et al, Rebooting a failed promise of climate finance, Nature Climate Change, Volume 11, p.1, 18 February 2021; Shakya, C. and Smith, B., Trust in climate finance requires meaningful transparency, IIED, January 2021

116 UNFCCC, Report of the Conference of the Parties on its fifteenth session, held in Copenhagen from 7 to 19 December 2009, Addendum, Part Two: Action taken by the Conference of the Parties at its fifteenth session, p.7, 30 March 2010

119 Bond SDG Group, Sightsavers (CDC0007), CARE International UK (CDC0029), Islamic Relief UK (CDC0041), Practical Action (CDC0040), Quakers in Britain (CDC0004), Tearfund (CDC0031), WaterAid (CDC0023)

120 Bond SDG Group, Sightsavers (CDC0007), CARE International UK (CDC0029), Practical Action (CDC0040), Quakers in Britain (CDC0004), Tearfund (CDC0031)

121 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

122 Bond and Climate Action Network UK (CAN-UK) (CDC0045)

123 Q53 [Cat Pettengell], Q54 [Marek Soanes], Q65 [Laurie Lee]. E3G (Third Generation Environmentalism) (CDC0027), Islamic Relief UK (CDC0041), Practical Action (CDC0040)

124 CARE International, Climate adaptation finance: Fact or fiction?, p.4, 21 January 2021. Research covers 112 projects from 2013–2017 in six countries - Ethiopia, Ghana, Nepal, the Philippines, Uganda and Vietnam (see: same source, p.11)

125 CARE International, Climate adaptation finance: Fact or fiction?, p.5, 21 January 2021

126 Roberts, J.T. et al, Rebooting a failed promise of climate finance, Nature Climate Change, Volume 11, p.2, 18 February 2021

127 Roberts, J.T. et al, Rebooting a failed promise of climate finance, Nature Climate Change, Volume 11, p.2, 18 February 2021

128 Q54 [Marek Soanes]

130 International Institute for Environment and Development (IIED) (CDC0048)

131 E3G, 2021 Climate and Development Agenda Stocktake, pp.5–6, 17 September 2021

133 Foreign, Commonwealth and Development Office (CDC0016)

134 Foreign, Commonwealth and Development Office (CDC0016)

Published: 26 October 2021 Site information    Accessibility statement