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How effective is climate finance in the Pacific

“Climate finance cannot be about loans, we cannot give our children the burden of servicing our debts.”

That was the message Oxfam in the Pacific’s Regional Director, Raijeli Nicole delivered at a recent online talanoa focused on ‘Climate Finance Effectiveness in the Pacific: Are we on the right track?’ hosted by the Pacific Islands Forum (PIF) in partnership with the United Nations Development Programme (UNDP) and the UK Government.

For Oxfam, and other participants in the talanoa, the answer to that question is ‘no- we are not on the right track’.

Rich countries will continue to miss a longstanding pledge to provide poor countries with US$100bn a year in climate finance for the next four years according to recently-released Oxfam analysis. Current pledges and announced plans from developed country governments will amount to just US$93bn- US$95bn a year in climate finance by 2025. Furthermore, as Nicole warned during the online discussion, 80% of climate finance resources coming into the Pacific Islands region is in the form of loans, many of them non-concessional.

Of equal concern to the speakers was the fact that finance is difficult to access, supports projects that are not aligned to national development plans and budgets, are supply rather than demand driven, and is not meeting the needs of the most vulnerable and impacted communities.

A sense of urgency pre-COP26

The discussion was timely, given the rapid approach of the UN Climate Change Conference – COP26 – scheduled for Glasgow in November 2021.

Pacific Islands Forum Director General Henry Puna set the scene by conveying the sense of urgency felt by the region. “Pacific Island Countries need adaptation action now and with that comes the need for substantial financial flows. Equally important, the increased financial flow must also be matched with increased access for Pacific Island Countries who bear the brunt of these impacts than other regions.”

Puna cited data from national climate finance assessments conducted in eleven PIF countries that indicate since 2010, just over US$2.2 billion of climate finance has flowed into the Pacific, representing approximately $200 million per year. He contrasted this with the estimated $2 billion in development aid that flows to the region, saying it prompts the questions: “where do the development priorities lie? How can climate priorities be mainstreamed into development? And what needs to change for the region to maximise the effectiveness of climate financing?”

Tuvalu’s Minister for Finance, Seve Paeniu shared his nation’s experience, where he says over US$300 million is required to protect Tuvalu’s foreshore and the people that live on those lands from climate change impacts. Tuvalu has accessed US$36 through the Green Climate Fund (GCF)but Paeniu says this was a lengthy process, taking two years for approval and another year before implementation could begin.

“It has been quite a cumbersome process, there are extensive and multi layered policies and processes that are required to be followed, both in terms of pre-project approval, and during the implementation phase,” he said.

“Oftentimes, donors offer ad hoc and small scale, quick fix type projects, and a large component of climate finance flows is provided through project-based modalities. These are not often integrated within wider sectoral plans and national budget and planning processes. So those modalities contributes to sustainability concerns. Oftentimes, donors prefer to use and adopt their own policies and systems, rather than seeking to strengthen country ownership, a focus on results and effective partnerships,” Paeniu continued.

 Representing the GFC, Regional Manager for Asia Pacific, Diane McFadizen said the climate response is a marathon, not a sprint and agreed that it needs a collaborative approach, across a range of sectors including agriculture, aquaculture and fisheries, the private sector and civil society. “Quite often the projects have been designed with beneficiaries in mind but not necessarily having spoken to beneficiaries and involve them as part of the solution and I think we have to really think about that,” she said.

Reaching the most vulnerable

An Oxfam in the Pacific report, Making climate finance work for women: Voices from Polynesian and Micronesian Communities, examined the entrenched inequalities in two Pacific communities, Tuvalu and Chuuk, and the implications of this on how women in communities are reaping the benefits of climate finance.

The report revealed a huge gap between what women in communities perceive as the impacts of climate finance compared to the policy discourse at the national and the regional level. Entrenched gender inequalities are still creating barriers for women in communities, so they are unable to share any benefits of climate finance. Based on the lived realities of women in communities, the report concludes that women who are facing the realities of climate change impacts on the ground, are not seeing, nor do they feel that they are sharing in the benefits of the ‘millions’ of climate finance received by their countries.

“Climate change sits upon existing inequalities,” Oxfam’s Raijeli Nicole reminded the talanoa participants, while calling for a paradigm shift.

“It needs to be about partnerships, it needs to be about addressing existing inequalities.”

Nicole says as well as co-designing programs with the communities impacted, the notion that these communities are lacking in ‘capacity’ to implement climate finance programs needs to be challenged. She also stressed that participation needs to be an ongoing progress and conversation,  and an expression of active citizenship.

Minister Paeniu urged the international community to repackage climate finance modality to be more programmatic, rather than project based. He said processes needed to be simplified and streamlined across funding instruments, and that there needs to be a special funding window to account for the unique vulnerabilities and capacities for small island developing states.

On the matter of closer integration of climate finance into national sector plans, he said this requires effective public financial management systems and “channelling of climate finance for general budget support, which provides flexibility on usage, and where funds are not tied to specific projects, but can be aligned to achieving national development outcomes as enshrined in a country’s national development strategy.”

Paneiu has also suggested countries should look at the use of sovereign wealth funds or trust funds as another modality for leveraging climate finance, and that private foreign investment be encouraged.

Speakers also identified the opportunity to take learnings from broader aid effectiveness learnings and global moves towards better aid harmonisation, and Green Climate Fund evaluations into funding initiatives into the Pacific.

In calling for simplified systems, Oxfam’s Nicole said this was not a desire to take shortcuts or shirk responsibility. “Accountability is at the heart of what we are. We’re saying, please do not make us jump through all these hoops, and that is what large organisations should do, those who have the capacity to absorb the notion of risk. The thing about loans is that they transfer the risk on to the beneficiary.”

She ended by reflecting that on the eve of COP26, the focus needs to be not only on equitable climate financing, which after all, comes “at the tail end, [when] the damage is done” but also on revving up “nationally determined commitments to reducing those carbon emissions” at the heart of climate change.

Oxfam’s Climate Finance Shadow Report

Oxfam’s Climate Finance Shadow Report 2020 assesses progress towards the $100bn pledge to support developing countries to adapt to the impacts of climate change and reduce their emissions. Based on donor figures for 2017-18, the report revealed that:

  • Of the estimated $59.5bn in public finance reported by developed countries (annual average), climate specific net assistance may be just $19-22.5bn.
  • The net financial value of climate finance to developed countries – the grant equivalent – may be less than half of what is reported by developed countries.
  • Due to over-reporting of climate relevance, bilateral climate finance could be around a third lower than reported.
  • Around 20% of reported public finance was estimated to be grants, compared to 80% reported as loans and other non-grant instruments. Of all reported climate finance, an estimated 40% was non-concessional.
  • Only an estimated 25% of reported public climate finance was for adaptation and 66% was for mitigation.
  • Only an estimated 20.5% of reported finance went to Least Developed Countries (LDCS) and around 3% to Small Island Developing States (SIDS). Most finance to LDCS and nearly half to SIDS was in the form of loans and other non-grant instruments.
  • Reported climate-related development finance was estimated to be 25.5% of bilateral ODA in 2017-18.
  • Only around a third of climate finance projects are estimated to take account of gender equality and too little climate finance is spent at the local level.
  • Consistent and transparent information is not publicly available to estimate the level of private finance mobilised towards the $100bn goal.

“Climate finance cannot be about loans, we cannot give our children the burden of servicing our debts.”

That was the message Oxfam in the Pacific’s Regional Director, Raijeli Nicole delivered at a recent online talanoa focused on ‘Climate Finance Effectiveness in the Pacific: Are we on the right track?’ hosted by the Pacific Islands Forum (PIF) in partnership with the United Nations Development Programme (UNDP) and the UK Government.

For Oxfam, and other participants in the talanoa, the answer to that question is ‘no- we are not on the right track’.

Rich countries will continue to miss a longstanding pledge to provide poor countries with US$100bn a year in climate finance for the next four years according to recently-released Oxfam analysis. Current pledges and announced plans from developed country governments will amount to just US$93bn- US$95bn a year in climate finance by 2025. Furthermore, as Nicole warned during the online discussion, 80% of climate finance resources coming into the Pacific Islands region is in the form of loans, many of them non-concessional.

Of equal concern to the speakers was the fact that finance is difficult to access, supports projects that are not aligned to national development plans and budgets, are supply rather than demand driven, and is not meeting the needs of the most vulnerable and impacted communities.

A sense of urgency pre-COP26

The discussion was timely, given the rapid approach of the UN Climate Change Conference – COP26 – scheduled for Glasgow in November 2021.

Pacific Islands Forum Director General Henry Puna set the scene by conveying the sense of urgency felt by the region. “Pacific Island Countries need adaptation action now and with that comes the need for substantial financial flows. Equally important, the increased financial flow must also be matched with increased access for Pacific Island Countries who bear the brunt of these impacts than other regions.”

Puna cited data from national climate finance assessments conducted in eleven PIF countries that indicate since 2010, just over US$2.2 billion of climate finance has flowed into the Pacific, representing approximately $200 million per year. He contrasted this with the estimated $2 billion in development aid that flows to the region, saying it prompts the questions: “where do the development priorities lie? How can climate priorities be mainstreamed into development? And what needs to change for the region to maximise the effectiveness of climate financing?”

Tuvalu’s Minister for Finance, Seve Paeniu shared his nation’s experience, where he says over US$300 million is required to protect Tuvalu’s foreshore and the people that live on those lands from climate change impacts. Tuvalu has accessed US$36 through the Green Climate Fund (GCF)but Paeniu says this was a lengthy process, taking two years for approval and another year before implementation could begin.

“It has been quite a cumbersome process, there are extensive and multi layered policies and processes that are required to be followed, both in terms of pre-project approval, and during the implementation phase,” he said.

“Oftentimes, donors offer ad hoc and small scale, quick fix type projects, and a large component of climate finance flows is provided through project-based modalities. These are not often integrated within wider sectoral plans and national budget and planning processes. So those modalities contributes to sustainability concerns. Oftentimes, donors prefer to use and adopt their own policies and systems, rather than seeking to strengthen country ownership, a focus on results and effective partnerships,” Paeniu continued.

 Representing the GFC, Regional Manager for Asia Pacific, Diane McFadizen said the climate response is a marathon, not a sprint and agreed that it needs a collaborative approach, across a range of sectors including agriculture, aquaculture and fisheries, the private sector and civil society. “Quite often the projects have been designed with beneficiaries in mind but not necessarily having spoken to beneficiaries and involve them as part of the solution and I think we have to really think about that,” she said.

Reaching the most vulnerable

An Oxfam in the Pacific report, Making climate finance work for women: Voices from Polynesian and Micronesian Communities, examined the entrenched inequalities in two Pacific communities, Tuvalu and Chuuk, and the implications of this on how women in communities are reaping the benefits of climate finance.

The report revealed a huge gap between what women in communities perceive as the impacts of climate finance compared to the policy discourse at the national and the regional level. Entrenched gender inequalities are still creating barriers for women in communities, so they are unable to share any benefits of climate finance. Based on the lived realities of women in communities, the report concludes that women who are facing the realities of climate change impacts on the ground, are not seeing, nor do they feel that they are sharing in the benefits of the ‘millions’ of climate finance received by their countries.

“Climate change sits upon existing inequalities,” Oxfam’s Raijeli Nicole reminded the talanoa participants, while calling for a paradigm shift.

“It needs to be about partnerships, it needs to be about addressing existing inequalities.”

Nicole says as well as co-designing programs with the communities impacted, the notion that these communities are lacking in ‘capacity’ to implement climate finance programs needs to be challenged. She also stressed that participation needs to be an ongoing progress and conversation,  and an expression of active citizenship.

Minister Paeniu urged the international community to repackage climate finance modality to be more programmatic, rather than project based. He said processes needed to be simplified and streamlined across funding instruments, and that there needs to be a special funding window to account for the unique vulnerabilities and capacities for small island developing states.

On the matter of closer integration of climate finance into national sector plans, he said this requires effective public financial management systems and “channelling of climate finance for general budget support, which provides flexibility on usage, and where funds are not tied to specific projects, but can be aligned to achieving national development outcomes as enshrined in a country’s national development strategy.”

Paneiu has also suggested countries should look at the use of sovereign wealth funds or trust funds as another modality for leveraging climate finance, and that private foreign investment be encouraged.

Speakers also identified the opportunity to take learnings from broader aid effectiveness learnings and global moves towards better aid harmonisation, and Green Climate Fund evaluations into funding initiatives into the Pacific.

In calling for simplified systems, Oxfam’s Nicole said this was not a desire to take shortcuts or shirk responsibility. “Accountability is at the heart of what we are. We’re saying, please do not make us jump through all these hoops, and that is what large organisations should do, those who have the capacity to absorb the notion of risk. The thing about loans is that they transfer the risk on to the beneficiary.”

She ended by reflecting that on the eve of COP26, the focus needs to be not only on equitable climate financing, which after all, comes “at the tail end, [when] the damage is done” but also on revving up “nationally determined commitments to reducing those carbon emissions” at the heart of climate change.

Oxfam’s Climate Finance Shadow Report

Oxfam’s Climate Finance Shadow Report 2020 assesses progress towards the $100bn pledge to support developing countries to adapt to the impacts of climate change and reduce their emissions. Based on donor figures for 2017-18, the report revealed that:

  • Of the estimated $59.5bn in public finance reported by developed countries (annual average), climate specific net assistance may be just $19-22.5bn.
  • The net financial value of climate finance to developed countries – the grant equivalent – may be less than half of what is reported by developed countries.
  • Due to over-reporting of climate relevance, bilateral climate finance could be around a third lower than reported.
  • Around 20% of reported public finance was estimated to be grants, compared to 80% reported as loans and other non-grant instruments. Of all reported climate finance, an estimated 40% was non-concessional.
  • Only an estimated 25% of reported public climate finance was for adaptation and 66% was for mitigation.
  • Only an estimated 20.5% of reported finance went to Least Developed Countries (LDCS) and around 3% to Small Island Developing States (SIDS). Most finance to LDCS and nearly half to SIDS was in the form of loans and other non-grant instruments.
  • Reported climate-related development finance was estimated to be 25.5% of bilateral ODA in 2017-18.
  • Only around a third of climate finance projects are estimated to take account of gender equality and too little climate finance is spent at the local level.
  • Consistent and transparent information is not publicly available to estimate the level of private finance mobilised towards the $100bn goal.

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