Global climate finance architecture
Because of the evolution that climate finance has known since the birth of the concept, the international architecture on climate finance has also evolved, but remains complex. Over the time, the funding channels have multiplied, making the possibilities of funding access by developed countries more numerous, but also complicating the procedures for these countries to access funds.
In parallel to the evolution of the international architecture and its complexity, it is important to note that the system of "monitoring, reporting and verification" of funds remains an essential component. Indeed, equally significant is the way in which these resources are transferred to and accessed by developing countries. The MRV system is put in place to align with the main pillars of global climate finance, namely transparency and accountability. However, the effective implementation of this system faces several obstacles, in particular the lack of access to detailed information for all funds, the absence of a clear and unique definition of what is covered by the "climate finance", etc.
The international architecture of climate finance has several types of channels:
Global climate finance architecture (Source: Climate Funds Update)
Principal channels of global climate finance (Source: Climate Funds Update)
These channels consist on multilateral institutions that bring their funding and know-how to support strong and sustainable investment projects, in favor of several themes, including climate change. These institutions mainly include:
- UNFCCC Financial Mechanisms;
- Kyoto Protocol Mechanisms for carbon finance;
- UN agencies; and
- Multilateral Development Banks.
Multilateral climate funds are a major channel for climate finance flows from national donors to projects in developing countries, often utilized as part of multimillion-dollar country-wide investment programmes administered by multilateral development banks. These institutions play a key role in using international public support to achieve local investment in developing countries. They have also an explicit goal of engaging private sector and leverage its capital for climate-relevant investment. More information on multilateral institutions is available here.
reporting format, or independent verification. More information on bilateral institutions is available here.
These are mainly composed by implementing agencies that administer a significant share of public climate finance. These agencies support work on climate change and integrates various components: investments, technical assistance, research, etc. However, there is limited transparency and consistency in reporting of some bilateral finance for climate change, with countries self-classifying and self-reporting climate-relevant financial flows without a common reporting format, or independent verification . More information on bilateral institutions is available here.
National and regional funds for climate change
The increase in climate change funding opportunities makes it important for countries to consider different channels and tools to attract and leverage different types of climate change investment, including that from private sources. National and regional funds are one of these tools that can be used to meet this challenge.
Thereby, several developing countries have established regional and national channels and funds with a variety of forms and functions, resourced through international finance and/or domestic budget allocations and the domestic private sector.
These funds support countries to directly finance climate change projects and programmes, by collecting, blending and coordinating, as well as strengthening national ownership of climate finance.
More informations is available here