Topic Guide: Corruption and Climate Finance

Developed countries have committed to supporting developing countries to adapt to and mitigate the effects of climate change to the tune of US$100 billion per year by 2020. Under the Kyoto Protocol, it was agreed that climate finance should be “new and additional” to the overseas development aid (ODA) commitments developed nations had already made. In practice, there is much overlap between climate finance and ODA. Developed country governments have been criticised for falling short of their climate finance commitments, and for simply re-packaging development finance as adaptation finance. A study assessing Fast Start Finance contributions (funding generated between 2010 and 2012) found that only 24 per cent was additional to existing aid commitments.[1] Other researchers have questioned the validity of OCED countries’ self-reporting, finding that only US$2.3 billion of the US$10 billion (a mere 23 per cent) of funds that OECD countries had labelled as adaptation finance was actually genuinely adaptation related.[2]

The lack of an internationally agreed-upon definition of what constitutes climate finance remains a significant barrier to the development of a common basis and methodology for tracking, measuring and reporting on climate finance.

To reach the US$100 billion target, much emphasis is being placed on the need to use public finance to leverage increased private climate finance investments. The UK’s climate public-private partnership (CP3) is the largest of such schemes that channels foreign aid money via two commercially run private equity funds.[3] Public-private initiatives bring their own specific transparency and accountability challenges, as commercial confidentiality can result in a limited disclosure of vital information. Furthermore, as equity funds are often domiciled in offshore secret jurisdictions, the possibility to carry out due diligence (including anti-corruption) checks on co-investors may be limited.[4]