African Development Bank Approves New Climate Change Fund

2 Line Summary: The African Development Bank (AfDB) approved a new fund for climate resilient and low carbon development, called the African Climate Change Fund.

Corporate Takeover

 

Apologies if you saw a rather bizarre early draft of this post – to err is a human, to really foul things up requires a computer.

A Bit more detail: Opening up with just over 5 million Euros from the German Development agency (GIZ), it is hoping to expand into a multi-donor trust fund for climate change in Africa, just as soon as it can find another donor to get involved. The fund will support programs that help countries better receive and manage climate finance, planning for climate resilient development, advocacy at international conferences, choosing and planning climate resilient infrastructure, and other resilience building initiatives. The fund will also aim to help fragile states, food security programs and water management programs.

Programs should last 3 years and are for grants over $250,000 or more. The bank hopes that the fund will be a seed component of the Africa Green Facility, a larger Africa specific fund the bank is hoping to develop.

Context: The African development bank is a major conduit for climate finance for Africa. It helps to implement the World Bank’s Climate Investment Funds, as well as UN Adaptation Fund programs. It also makes major investments into African infrastructure and renewable energy development.

With the Green Climate Fund (GCF, the new UN climate fund ) looking to come online in the next couple of years, the AfDB is likely to play a major role channelling finance from this major climate fund direct to African countries. For its part, the GCF has promised that 50% of its funding will be allocated toward climate adaptation (the rest going to mitigation), prioritising African countries. However, so far the GCF has no real money to play with, and very little climate finance has really been directed toward Africa compared to the larger sums deemed necessary. (About 1bn a year for adaptation compared to the (well over) 10bn needed).

Analysis: According to its foundational blurb, The bank’s reasons for setting up the new fund include the fact that Africa has received too little climate finance so far due to its “lack of readiness and capacity to access international finance” and “cumbersome procedures of some funds”. The glaring omission here is the fact donor countries have also been extremely reticent themselves in offering the cash in the first place.

The AfDB’s other climate change analyses breaks down Africa’s lack of readiness into 6 parts, including a “lack of capacity to meet international standards and fund eligibility requirements”, limited “absorptive capacity” to absorb funds and put them towards weak national development plans, and the difficulty for national agencies in leveraging finance from multiple sources.

The narrative here seeks to shift responsibility away from donors and onto potential recipients themselves, by suggesting that the lack of serious cash is due to their lack of readiness to receive it. Whilst it’s true that African countries can and should take responsibility for their own development (i.e, by sorting out their financial management issues), it has never been and should not be a one sided-affair.

If developing country governments had been given any certainty that large-scale funding would be available, it might have been worth their time diverting scarce resources to preparing to receive it. The funding that has been made available has only been enough for countries to prepare the bare minimum. For example, processes to prepare robust plans for spending climate finance, such as the Least Developed Countries Fund, continue to be grossly underfunded. Had this fund or others like it been given significant resources, governments may also have been able to use the process of developing National Adaptation Plans of Action to embed climate planning into national planning mechanisms, and prepare for the finance needed to ensure comprehensive implementation. Indeed, it’s only in the last few years that the World Bank has tacitly recognised just this, supporting countries to mainstream climate resilient planning through the Pilot Program for Climate Resilience (PPCR), but this program has only been operational for 3 years.

Source: www.climatefundsupdate.org

Climate finance architecture, Source: http://www.climatefundsupdate.org

There is also a concern that this fund represents a proliferation of climate and generalised aid funds, when everybody involved in the aid effectiveness agenda recognises that this is a bad thing. More funding sources means more reporting for under-resourced national government agencies and more meetings to attend for ministers. From the Bank’s perspective, this fund may represent, in their words “a critical opportunity for the Bank to confirm its ability to mobilize, manage and implement climate finance in Africa.” But with only 5 million in the pot and a wide range of serious climate related needs that require significant funding, developing countries themselves may be left wondering what the point is.

 

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