Topic Guide: Corruption and Climate Finance

Climate finance is public and/or private funding that is invested in actions to reduce greenhouse gas emissions (such as solar or wind power projects) or support communities to adapt to the effects of climate change (for example, through infrastructure projects like cyclone resistant housing or floodwalls). Within the international climate change negotiations, international financing for low-carbon development and climate adaptation in the global South was originally conceived under the “polluter pays principle” where industrialised nations, which have been the main drivers of climate change, contribute substantially to support developing nations to cope with its effects.

In the Paris Agreement, developed countries pledged to provide US$100 billion per year by 2020 from public and private sources to finance adaptation and mitigation actions in developing countries. Huge sums of money are already flowing, with close to US$42 billion a year spent in developing countries in 2013 and 2014[1]. In addition to international climate finance, national budget allocations also make up a significant portion of the funding available for climate adaptation and mitigation actions, with estimates that some 74 per cent of the US$391 billion global climate finance budget in 2014 was raised and spent in the same country[2].

Given the great scale of the funds involved, and the dire consequences at stake if they are lost to corruption, it is vital to consider and seek to mitigate the risks of corruption in the delivery of climate finance.

A key challenge in monitoring and shoring up the governance of climate finance is the complexity and fragmentation of the global climate finance architecture. Since the establishment of the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, a suite of multilevel governance arrangements have been developed to channel international climate finance[3]:

• The Green Climate Fund (GCF), operational since 2015, is the newest fund under UNFCCC and expected to become the main multilateral financing mechanism to support climate action in developing countries[4].
• The World Bank’s Climate Investment Funds[5] were established in 2008 as a partnership of multilateral development banks to support climate actions in the fields of clean technology, renewable energy, climate resilience and forest conservation.
• The Adaptation Fund[6], formed in 2009 under the UNFCCC’s Kyoto Protocol provides grants to developing countries to build resilience and adapt to climate change.
• The Global Environment Facility (GEF)[7], which was formed as partnership of multilateral agencies in the early 1990s, hosts a number of climate specific funds supporting adaptation and mitigation actions and one fund targeting Least Developed Countries.
• Two international funds have been established specifically to support forest conservation: the UN-REDD Programme and the World Bank’s Forest Carbon Partnership Facility. Regional and country specific funds include the Central African Forest Initiative and the Amazon Fund. These bodies provide funding for the Reducing Emissions from Deforestation and Forest Degradation (REDD+) initiative, which aims to reduce carbon dioxide emissions by financially rewarding forest-rich developing countries for protecting their forests[8].
• A large proportion of climate money is also channelled bilaterally[9]. Currently, the largest funds are the UK’s International Climate Fund (ICF), Germany’s International Climate Initiative (IKI) and Norway’s International Climate and Forest Initiative (NICFI).  

Various entities operate at the national level to channel climate funds and implement projects, including (but not limited to): national climate funds; UN agencies; multilateral development banks; relevant national ministries, such as the environment or energy ministries; local government agencies; and NGOs.

Different funding bodies have distinct requirements for accessing finance and shoring up governance. For example, some global funds, such as the Adaptation Fund, the Green Climate Fund and the Global Environment Facility require implementing entities to be accredited in order to receive finance, while others do not. The diversity of funding mechanisms, the distinct governance standards in place and the lack of clarity over chains of accountability between actors can make it difficult to track results and prevent corruption.