M01_L3_Presentation_Script.pdf

Module 01Climate Finance EssentialsLesson 3Country Readiness to Use Climate Finance

Presentation Script

Climate Finance Essentials

loramatzner

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Lesson 3 – Country Readiness to Use Climate Finance Presentation Script

1. Home

Welcome to Lesson 3 of eCourse for climate finance. Click Next to begin.

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2. Introduction

In this lesson, you will learn about the types of national systems and

capacities needed to effectively use climate finance. You will understand

what support is needed to improve capacity to establish nationally-

appropriate systems to manage climate finance. You will also become

more familiar with the various tools, mechanisms and modalities

available from different development partners in helping countries with

their climate finance readiness.

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3. Tangible activities of readiness

Climate finance readiness is a term used to describe processes at the

regional, national and local levels to prepare for climate finance. For

example, a readiness initiative aims to strengthen climate finance

allocation, enhance resource management and coordinate international

flows.

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4. Understanding climate finance readiness

There may not be a silver bullet to achieving climate-finance readiness,

but the United Nations Development Program (UNDP) has conceptualized

the common elements of readiness and the key national capacities

required to build and strengthen these elements. There are four

components: capacities of countries to plan for, access, deliver and

monitor climate finance, both internationally and domestically, in ways

that are catalytic and fully integrated with national development

priorities.

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5. Reflection Question

Before we continue, take a moment to reflect on your own

understanding of climate finance readiness.

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6. Understanding climate finance readiness

In this lesson, you will review the four main components to readiness -

the capacities of countries to 1) plan for, 2) access, 3) deliver, and 4)

monitor climate finance. You will begin by examining why planning of

climate finance is so critical and what national systems and capacities

could help pull all of these pieces of information together to formulate a

financial plan for effectively using climate finance.

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7. Planning for climate finance readiness

Planning for the supply, management and use of climate finance

resources is a fundamental step in ensuring the effective, efficient and

equitable use of climate finance. Planning also includes assessing climate

finance flows and allowing policymakers to match their priorities with

available resources. In doing so, countries can plan how to integrate

resources and sequence them over time. The overall aim of the planning

component of climate finance readiness is to strengthen financial

planning capacities to ensure integration of climate finance within

national development and budgetary processes.

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7.1. Planning for climate finance readiness

In order to conduct financial planning of climate finance, countries will

first need to arrive at prioritized climate actions in line with overarching

development priorities. Many countries are already achieving this by

preparing green, low-carbon and climate-resilient growth strategies.

Planning to use climate finance effectively draws from strong national

systems and capacities to identify the resources required for the chosen

priority activities and draft the financial plan for managing such flows. A

starting point is to examine existing resources are already being used for

climate change activities. Consider these key questions to help plan for

climate finance.

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The following tools can support the process of identifying the resource

flows required for priority activities and the plan associated with

sequencing such flows. Click on each image for more information.

An investment and financial flows assessment (I&FF) creates a

baseline of existing expenditures at the sectoral scale and maps

this on to priority climate-related activities to identify gaps. I&FFs

are a way to forecast future investment flows needed to reach a

given set of climate goals and priorities.]

A climate public expenditure and institutional review (or CPEIR)

that assesses current on-budget climate finance expenditures

across sectors. CPEIRs have provided insight into the importance

of finance flowing through national budgets and helped raise

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awareness of climate finance as not just an environmental issue,

but in fact one that straddles many sectors of a country's

economy.]

Visit the website: www.climatefinanceoptions.org “.

The World Bank has developed an e-learning course on

Investment Planning towards Low Carbon, Climate Resilient

Development, which gathers experiences from the first years of

the Climate Investment Funds (CIFs) to respond to the needs of

governments and other actors regarding how to prepare and

finance climate change strategies, policies and plans.]


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Another central capacity in the climate finance planning process is

matching supply to demand. This process includes the ability to estimate

costs for priority actions and then match those costs to different sources.

This requires knowledge of the international climate finance flows.

For those domestic projects being funded by public climate finance that is

on budget, such capacities for climate finance readiness might include

directing finance toward climate change activities, but also shifting

funding of existing activities that have detrimental climate impacts (such

as fossil fuel subsidies) to more climate-friendly investments.

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8. Accessing climate finance

Also vital for climate finance readiness is the capacity for countries to be

able to directly access resources from different sources, and then blend

and combine those resources at the national level in order to access a

wider range of financial instruments. There are currently two new access

modalities which have emerged over the years; these are “direct access”

and “enhanced access” to climate finance. We will now briefly introduce

the traditional access modality and learn how this compares to these two

emerging access modalities.

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8.1. Accessing climate finance

Traditional, multilateral access is when eligible countries work through

multilateral implementing entities (UN agencies or Multilateral

Development Banks) which handle strategic and operational

management and implementation of the resources. Activity execution is

then shared at the international and national level. The graphic shown

here visually explains this traditional access mode. Click on each entity to

see expanded definitions of each body. An example of this traditional

access mode is the Global Environment Facility or GEF, where eligible

countries access resources through a GEF Agency. Click on the GEF logo

to learn more.

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Direct

In contrast to the traditional access mode you just learned about, direct

access allows accredited entities from recipient countries to access

financial resources directly from the Fund without passing through an

intermediary institution like an agency. Activity implementation and

execution is then handled at the national level. The Adaptation Fund

pioneered direct access to finance through the use of National

Implementing Entities. Click on the Adaptation Fund logo to learn more.

As you can see, using direct access modalities requires national or sub-

regional entities to have strong fiduciary capacities, safeguard

compliance and implementing and executing capacities in order to

directly access finance.

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Enhanced

Enhanced access mode shifts strategic fund management to the national

domain, with some international fund oversight. The rest of the

implementing and executing responsibilities are fully devolved to the

national level implementing and executing entities. Enhanced access

mode is anticipated as an option for the Green Climate Fund.

Click on the logo to learn more.

You will see that enhanced access will likely require more substantial

financial management capacities, including legal arrangements for

holding funds in trust, and governance systems to oversee allocation and

report on the use of resources.

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8.2. Accessing climate finance

As countries directly access resources from different sources, they then

need to be able to blend and combine those resources at the national

level in order to access a wider range of financial instruments.

Transferring the ability to combine and blend climate finance to the

national level increases recipient country ownership over how finance is

used and in what form. Both combining and blending require specific

financial mechanisms and capacities at the national level.

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Combine

Combining climate finance means bundling different types of finance

within a single project. Resources can be combined through a national

financial mechanism, such as a national development bank, and national

climate fund or a simple trust fund, where resources are allocated

together side by side. An example is The China CDM Fund, which is a

national fund provides grants funded by revenues from CDM projects,

earnings from CDM business operations, and other sources. Click on the

link to learn more

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Blend

Blending climate finance means using one resource to restructure the

terms of another resource. Blending requires different, more complex

financial capacities. Resources must be held on an entity's balance sheet

together, and depending on the nature of the blending, may be

reformulated into different financial instruments (for example lowering

interest rates or extending repayment period of a loan). Banking

capacities are therefore critical. National systems can also be blended to

benefit national capacity to access heightened climate finance. A clear

example is the Development Bank of Southern Africa's management of

the South Africa Green Fund - click the box to learn more.

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8.3. Specific national capacities for accessing finance

Regardless of the mode of accessing finance, or whether combining or

blending resources, effective use of climate finance requires recipient

countries to be able to formulate bankable project and program

proposals. Review the range of national capacities listed here that will

serve countries in accessing climate finance.

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9. Delivering climate finance

The third component to climate finance readiness involves the capacities

to deliver finance and implement and execute activities at the regional,

national or local level. This is a key component of ensuring that climate

finance contributes to effective and transformative actions at the

national level. Delivering climate finance resources requires national

systems that provide financial oversight and management, as well as

execution services such as procurement, contracting or hiring.

Coordination among entities is essential to ensure that project-level

activities are in line with national development planning and strategies at

the macro level. There are two core capacities required for climate

finance to be delivered effectively. Implementation and execution

services. We will now take a look at each capacity and the entities and

systems required for each. Click on each button to learn more.

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Implementation

Implementing entities are responsible for identifying, overseeing and

appraising programs/projects for the provider of finance. They may also

be involved in blending and combining finance. Capacity is also needed

within the public financial management system to deliver resources to

implementing partners, whether line ministries and government agencies

or external contractors, and to ensure that resources are spent on

effective and sustainable mitigation and adaptation measures. A clear

example of an Implementing Entity is the Bangladesh Climate Change

Resilience Fund - click the box to learn more.

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Execution

Executing entities receive funding to undertake programs of work and

may utilize sub-contracting agreements to complete these activities. The

require transparent procurement procedures, reporting and project

management capacities. There is a major emphasis on preparing entities

to undertake either implementation and/or execution roles, particularly

in the context of ensuring capacities of direct access entities.

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9.1. Delivering climate finance

Capacity development is often needed to develop a local talent pool

ready to undertake the work of funded climate projects. One example is

vocational training for professionals like architects, engineers,

contractors, builders, and clean energy installers. Another example is

individual guidance related to project design choices, such as technology

selection or supply chain management. One tactic for capacity

development is utilizing local centers of expertise in the functional areas

where more training is required.

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9.2. Delivering climate finance

With multiple sources of finance, often in multiple forms and some with

national budget implications, coordination systems at the project-level

are essential. Strong coordination minimizes redundancies and ensures

climate finance flows are in line with national strategies for low-carbon

and climate-resilient growth. One approach is to entrust coordination to

a multi-stakeholder steering committee rather than a national level body.

Central to coordination is preventing groups from being marginalized

from climate finance opportunities. A good example is projects that

Reduce Emissions from Deforestation and Land Degradation (REDD)

which involve a large number of stakeholders at the project scale - click

on the box to learn more

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10. Monitoring climate finance

The last important element to effectively using climate finance is

monitoring and evaluating the impact of climate finance on mitigation

and adaptation goals. More climate finance support also becomes readily

available if positive development and climate results can be

demonstrated - as such, capacities and national systems for climate

finance monitoring and evaluation are critical to have in place as part of

readiness preparations to effectively use (and catalyze increased flows of)

climate finance.

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10.1 Monitoring climate finance

Climate finance monitoring and evaluation is needed to understand what

financial resources are flowing where, for what purposes and how

effectively they abate GHG emissions and/or build resilience. Monitoring

and evaluation are critical steps for helping decision-makers come full

circle in a dynamic planning process for utilizing climate finance. As data

on financial flows is collected, decision-makers can shore up weaknesses.

Central to capacities for monitoring and evaluation is a system to record

and calculate results, and using these inputs in evaluation analysis of

climate finance to determine the impacts of the investment on climate,

poverty, national development priorities.

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10.2 Participant Question

That's correct! All of the above are correct!

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10.3. Monitoring climate finance

As part of climate finance readiness preparations, countries can get ready

to monitor financial expenditures on climate change activities flowing

within and outside the national budget. Building database systems and

information-collection processes to record results from climate finance is

vitally important. Also, developing indicators and assessment processes

help countries determine whether climate finance is being used

effectively to meet set-out environmental, economic and social

objectives. With the growing demand to learn more about climate

finance monitoring and evaluation, stay tuned for future e-learning

courses that will specifically explore this topic.

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11. Summary of national capacities required for climate finance readiness

Recapped here are the four components of climate finance readiness.

Applying this framework for climate finance readiness can, in practice,

build on existing institutions and programs to manage resources at the

national level.

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12. Reflection Question

Now, take a moment to reflect on any existing structures countries are

using to pull together all of their climate finance readiness needs. How

does your country handle ongoing climate finance readiness

management?

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13. Challenges and opportunities: national climate funds

Many countries are creating National Climate Funds to help handle

ongoing climate finance readiness management. While national climate

funds can serve the multiple roles for planning, accessing and

implementing climate finance, as well as occupying fiduciary roles, they

are not necessarily the “silver bullet” solution to effective use of climate

finance. Many national climate funds are themselves lacking the

resources and support necessary to manage climate finance. This is an

opportunity for countries to turn to existing institutions that already have

the capacities to carry out the multiple roles a national climate fund

would undertake. The message is that climate finance readiness does not

necessarily require countries to create new organs for effectively using

climate finance.

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14. World Bank climate finance readiness initiatives

The World Bank is playing a significant role in supporting countries with

their climate finance readiness, laying the ground for new climate

financing instruments, mechanisms and approaches to planning,

accessing and managing finance. These ongoing programs shown here

help build pipelines of bankable projects and programs, which support

country readiness to facilitate access to finance and increased impact of

climate finance used effectively. Click on each logo to learn more.

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15. UNDP and partners climate finance readiness initiatives

UNDP has been a leader in the field of climate finance readiness by

working cooperatively with developing countries to build national

capacities for improved planning, accessing, managing, and monitoring of

finance flows. The programs listed here are delivered in partnership with

donors and other UN agencies and improve enabling environments for

public and private climate finance. Click on each logo to learn more.

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16. References and Resources

This is the end of Lesson 2. Visit these links for additional information.

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