Financing for the future: Climate finance and the role of ODA Overview & Trends Donor Tracker Webinar, August 6, 2020 Sinéad Dwyer, Raimund Zühr, Zoe Johnson
What is the Donor Tracker? 2
The supports evidence-based advocacy for global development Free, independent website with Donor Profiles featuring analyses of 14 major OECD donors and their ODA flows Data-driven insights on strategic priorities, funding trends, decision making structures, budget process, and key opportunities to engage Covers seven sectors : global health, global health R&D, agriculture, nutrition, education, climate finance, and gender equality Weekly policy updates on policy and financing trends provided by our network of consultants based in donor capitals Regular cross-donor ‘Insights’ on latest trends Partner Perspectives offering viewpoints from others in the global development space 3 www.donortracker.org
Financing for the future: Climate finance and the role of ODA Overview & Trends Donor Tracker Webinar, August 6, 2020 Sinéad Dwyer, Raimund Zühr, Zoe Johnson
Setting the scene - or - how do we get to Paris? 5
The world is off track to meet Paris goals, negatively impacting SDG progress
How much climate finance is needed in LMICs and how are we doing? 7
LMICs need financing to be able to achieve the goals set out in the Paris Agreement Annual global financing required versus annual financing Paris Agreement is the first universal climate change treaty aiming to limit mobilized in 2018, US$ billions global temperatures and support climate change adaptation +629% 3,980 Meeting ambitions of Paris requires substantial investment globally in climate mitigation and climate adaptation Global climate finance is far below levels needed to meet Paris goals Of the limited climate finance mobilized, most is domestically focused meaning more vulnerable countries struggle to access financing required 546 This is a major concern as climate change compounds existing development challenges Global Mobilized financing climate required to finance in meet Paris 2018 Agreement Source: Climate Policy Initiatives, Global Landscape of Climate Finance 2019 8
Donor countries have a responsibility to support climate action in LMICs Donor countries committed to mobilizing US$100 billion a year in new and additional climate finance by 2020 Funds to be mobilized from “ wide variety of sources : public and private, bilateral and multilateral, including alternative sources of finance” Not necessarily all ODA but ODA has an important role to play Beyond the US$100 billion target, financial flows to LMICs, particularly ODA, should be aligned with climate objectives 9
It is not clear if the US$100 billion target by 2020 has been achieved OECD estimates of international climate finance provided and mobilized towards the US$100 billion goal, US$ billions According to the latest OECD estimates, Mobilized private Multilateral public US$71 billion was mobilized in 2017 Export credits Bilateral public +8% 71 62 15 OECD estimates show encouraging progress 59 58 towards US$100 billion target 52 2 17 10 14 2 13 2 3 28 2 19 16 20 16 However, the OECD’s methodology has not 28 27 been universally accepted 26 23 23 2013 2014 2015 2016 2017 10 Source: 2013 to 2017, OECD (2019). 2013 and 2014 mobilized private finance numbers are not directly comparable to 2016 and 2017 due to change in methodology, 2015 number private finance number has been estimated by Donor Tracker based on average of other 4 years. 2020 projections are based on OECD (2016) projections from 2013/14 data and are therefore conservative. They are consistent with a continuation of an 8% growth rate.
Tracking donors’ support for climate action through bilateral ODA 11
OECD Rio markers for climate allow us to track donors' activities in support of climate action Two climate change markers: • Climate change mitigation: activities that reduce or remove greenhouse gases • Climate change adaptation: activities that respond to and anticipate the impacts of climate change Markers have three possible scores: • Principal : Activities that would not have been undertaken or designed in that way except for the explicit objective of climate mitigation or adaptation • Significant : Activities not principally undertaken in pursuit of climate objectives, but which have been explicitly 'formulated or adjusted' in support of climate objectives • Not targeted : Activities that do not include climate action objectives Not all activities are screened against the markers 12
How are donors using bilateral ODA to support climate action? 13
One quarter of donors’ bilateral ODA in 2018 supported climate action DAC donors’ bilateral ODA with a principal and significant focus on Some growth over last decade but far from climate change or adaptation 2009-2018 mainstreaming climate into ODA portfolios Climate change mitigation receives more funding than climate change adaptation ODA principally targeting climate action fell between 2014 and 2018 However, policy commitments take time to translate into reported ODA data Source: OECD aid activities targeting Global Environment Objectives, commitments, 2018 constant prices 14
Donors vary in their principal and significant support for climate action Total funding for climate action, US$ millions, 2018 Share of bilateral ODA targeting climate action, 2018 Japan 9,577 Japan 3% 50% Principal Germany 8,029 Slovenia 10% 36% EU Institutions 5,577 Germany 21% 21% Significant United Kingdom 1,987 Sweden 10% 30% Not targeted Sweden 1,374 Poland 35% 2% Average not France 1,197 Belgium 5% 31% United States 952 Iceland 2% 32% screened Netherlands 884 Netherlands 7% 25% Norway 670 United Kingdom 22% 7% Canada 631 Spain 7% 19% Switzerland 364 EU Institutions 9% 18% Australia 313 Austria 12% 14% Denmark 299 Canada 18% 7% Belgium 281 New Zealand 6% 17% Spain 199 Finland 1% 18% Italy 187 Denmark 6% 13% Korea 182 Norway 14% 4% Finland 111 Switzerland 5% 13% New Zealand 76 France 18% Ireland 73 Ireland 12% Austria 69 Italy 5% 11% 12% Poland 63 Australia 2% 6% Luxembourg 26 Czech Republic 5% 7% Iceland 9 Luxembourg 1% 5% Slovenia 8 Korea 2% 2% Czech Republic 8 Portugal 1% 1% Portugal 5 United States 2% Slovak Republic 0 Slovak Republic 1% Greece 0 Greece Hungary 0 Hungary Source: OECD aid activities targeting Global Environment Objectives, commitments 100%
There are unexplored opportunities for mainstreaming climate into development portfolios DAC donors’ climate related ODA by sector, 2018 DAC donors’ share of climate related ODA by sector, 2018 Environmental protection Climate-related ODA Energy Other Agriculture Bilateral ODA Infrastructure 21% not screened Water and sanitation 24% or targeted for Infrastructure climate markers Other multisector Food aid and commodity assistance Industry, construction & mining Water and 10% Financial services and business support sanitation Other social services Tourism 18% Government & civil society Energy 10% Trade policy Environmental Unspecified protection 16% Humanitarian aid Agriculture Health Education Conflict, peace and security Source: OECD aid activities targeting Global Environment Objectives, commitments 16
Reflections and recommendations 17
The world spends more on fossil fuel subsidies than on climate and ODA combined Annual funding for various purposes , in US$ billions 478 153 71 Mobilized ODA Fossil fuel subsidies Covid-19 - Int. Covid-19 - Global GDP SDG funding international Response Domestic response gap (LMICs) climate finance International response: European Commission, pledges made Sources: between 4 May-27 June. Fiscal measures: IMF, World Economic Outlook; June 2020 update. SDG funding gap: UNCTAD World Investment Report, 2014.
The issue is not lack of funds; the issue is the way we prioritize spending Annual funding for various purposes , in US$ billions 88,000 10,800 2,500 478 150 71 17 Mobilized ODA Fossil fuel subsidies Covid-19 - Int. Covid-19 - Global GDP SDG funding international Response Domestic response gap (LMIC) climate finance International response: European Commission, pledges made Sources: between 4 May-27 June. Fiscal measures: IMF, World Economic Outlook; June 2020 update. SDG funding gap: UNCTAD World Investment Report, 2014.
Recommendations Donors need to urgently scale up ODA funding for activities that principally target climate action . Meaningful mainstreaming of climate action into donors’ entire global development project portfolios is essential. ODA funding flowing to activities directly opposed to the Paris goals should be phased out as soon as possible To improve accountability, more donors should set concrete and ambitious ODA-related funding targets for climate finance, that can be tracked. The COVID-19 crisis must not be allowed to serve as a distraction from the need for more and better climate action 20
Questions? Want to stay engaged? ▪ Visit Donor Tracker at www.donortracker.org ▪ Sign up for our weekly digest & newsletter ▪ Follow us on Twitter: @DonorTracker For further enquiries, contact us: Raimund Zühr (rzuehr@seekdevelopment.org) Sinéad Dwyer (sdwyer@seekdevelopment.org) Cora Lüdemann (cluedemann@seekdevelopment.org) www.seekdevelopment.org
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