New Study: Climate Finance Funds Miss Mark, Neglect Countries Most Vulnerable to Climate Change

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Holly Shulman, Center for Global Development
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“There is no overlap between the top ten most climate vulnerable countries and the top recipients of Climate Investment Funds and Green Climate Fund adaptation finance.”

Washington – A scant 5.37% of the World Bank-administered $50 billion funds intended to assist with climate adaptation are being sent to the world’s top ten most vulnerable countries to climate change, finds a new study from researchers at the Center for Global Development released today.

The study from the Washington-based think tank assessed the structure, size, and performance of special off-balance-sheet climate financial intermediary funds that are administered by the World Bank, including the Climate Investment Funds (CIF), the Green Climate Fund (GCF), and the Global Environment Facility (GEF), and analyzed whether the resources from these funds are going where they are needed most.

“Our analysis shows that these off balance sheet mechanisms struggle to form a coherent system. And there is significant divergence in performance across the organizations,” said Clemence Landers, a senior policy fellow at the Center for Global Development and a co-author of the study.

Relying on the University of Notre Dame’s Global Adaptation Index, which assesses a country’s vulnerability to climate change and level of readiness to address adaptation needs, the researchers compared the most vulnerable countries to those receiving funding from the financial intermediary funds and found that the most climate vulnerable countries are not the top recipients of adaptation finance. In fact, there is no overlap between the top ten most climate vulnerable countries and the top recipients of CIF and GCF adaptation finance.

Of the top ten most vulnerable countries, only four countries received any funding for climate adaptation from the climate funds housed at the World Bank: Niger (1.5%), Sudan (1.31%), Liberia (1.4%), and Mali (1.16%).

“Neither donors nor recipient countries are satisfied with the current system and for good reason. Both need an efficient system that allocates finance faster and evaluates value for money more consistently,” said Nancy Lee, a senior policy fellow at the Center for Global Development and a co-author of the study. “That also means offering better terms and greater scale for climate finance portfolios, rather than working only transaction by transaction.”

Additional key findings of the study include:

• Only 13.1 percent of the climate funds’ money goes to low income countries, and while the World Bank’s International Development Association (IDA) is an additional funding source for low-income countries’ development priorities, it does not have enough resources to meet both worsening challenges on both poverty and climate.
• Climate financial intermediary funds vary widely in administrative costs. Some ratios of cumulative administrative expenses relative to financial commitments range up to 20 percent, while others are in the low single digits.
• There is no uniform reporting standard across these funds that reports on climate mitigation and adaptation impact per dollar spent, which makes it impossible to assess value for money across these funds. 
• Given the overlapping missions and work of the three climate funds, consolidation of this financing under a single umbrella or into a single mechanism would boost efficiency and stretch donor resources further.

“When faced with global challenges the international community’s reflex is often to create new institutions or funds. Our research shows that there are risks to a fragmented system becoming less than the sum of its parts,” said Landers. “The focus should instead be on consolidating the structures we have, making them bigger, and making them work better.”

To read the full study, Concessional Climate Finance: Is the MDB Architecture Working?, visit https://www.cgdev.org/publication/concessional-climate-finance-mdb-architecture-working.

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