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LEDS Finance Resource Guide – Planning and coordinating


Introduction

Mobilizing finance for LEDS and NDCs is a multi-faceted challenge, requiring action from a range of public and private stakeholders. Good planning and coordination, led by national governments is necessary to ensure that actions across the range of areas necessary are effective and complement each other, and do not waste effort or create additional risks and barriers due to lack of coordination. Countries will need the right set of institutions and governance processes and will need to develop and implement strategies that suit their national circumstances. The resources in this section can help countries to consider possible institutional arrangements, strategies and investment plans, and the role of specific institutions such as national climate funds and green investment banks.

Featured introductory resource

Planning for NDC implementation: Reference Manual (finance chapter) (CDKN / Ricardo, 2016, 92 pgs total (finance chapter 10 pgs))

CDKN’s NDC implementation Reference Manual (also included in the overall resources in the Introduction section) was produced to support developing countries in implementing their NDCs. Several of the activities identified in the finance chapter (begins on p.68) are relevant to ‘Planning and coordinating’: see activities 1 (Review current climate finance landscape), 2 (establish institutional arrangements), 5 (assess financing options) and 6 (develop an investment plan).

Online version [navigate to the finance chapter]: Access resource here

PDF to download [Guide and Reference Manual combined]: Access resource here

 

Planning and coordinating – subsections

  • Institutions and governance 
    • Resources to help think about the role of different institutions in LEDS finance and emerging approaches and lessons
  • National finance strategies 
    • Examples of E3G’s work on national finance strategies as a way to define and mobilize the public and private finance needed for LEDS
  • Investment plans 
    • Examples of country investment plans including from the Clean Technology Fund and Sustainable Energy for All initiative
  • National climate funds
    • Resources and country examples about the potential role for, and experiences so far from, national climate funds as an institution to pool, manage and allocate climate finance

 

Institutions and governance

Countries seeking to develop comprehensive approaches to LEDS and NDC finance will need to put in place the right institutional arrangements. Many countries have begun this process and different approaches are emerging. The resources in this subsection and in the related subsections provide insight into the different models emerging and lessons learned so far. 

 

Key resources

After Paris: What is next for Intended Nationally Determined Contributions (INDCs)? (NewClimate Institute, 2016, 6 pgs)

This brief paper outlines at a high level what the Paris Agreement means for Intended Nationally Determined Contributions and what needs to happen at the country level now and in the longer term to implement the Agreement. The paper focuses explicitly on the mitigation part of national contributions and discusses specific steps including several with a specific finance or institutional aspect. Useful as a simple guide to what needs to happen next, which sets the broader context for the development of approaches to financing LEDS and NDCs

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A Guide to National Governance of Climate Finance (DFID/IEED, 2015, 85 pgs)

This guide is intended for DFID advisors working in country but provides a useful general overview of climate finance sources and actions to access them. In particular Section 1.2 (9 pgs) looks at the role of different national actors in climate finance (agencies, national development banks, national climate change funds, etc). Section 1.3 briefly covers planning and budgeting systems.

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Public spending on climate change in Africa: experiences from Ethiopia, Ghana, Tanzania and Uganda – Chapter 11: Lessons for institutional strengthening (ODI, 2016, 147 pgs (Ch 11 – 5 pgs)

Chapter 11 of this report is on lessons learnt from the study countries that can point the way towards institutional pathways for effective climate change finance delivery in Africa. Six cross-cutting lessons were identified from the institutional analysis made in each of the country studies: 1) reforming the institutional framework in response to climate change; 2) establishing clarity over institutional mandates; 3) strengthening the programming of climate change actions; 4) ensuring adequate allocation of human resources; 5) delineating environmental and climate change programmes; and 6) recognising the central role of finance ministries in climate change finance delivery.

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Getting it together: institutional arrangements for coordination and stakeholder engagement in climate finance (ODI, 2014, 28 pgs)

This paper analyzes the arrangements that have emerged in Colombia, India, Indonesia, the United Kingdom (UK) and Zambia to draw lessons on the conditions that facilitate or impede coordination across institutions and actors. Section 2 distils key insights from the literature and theory on institutional coordination for understanding the institutional arrangements that have emerged in the five case study countries. Section 3 analyzes these arrangements and their modalities, seeking to highlight lessons and good practices. Section 4 concludes with core functions of coordinating institutions, and recommendations for both national and international actors seeking to strengthen domestic arrangements for climate finance.

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See also the ‘Institutional Analysis’ section of the Climate Public Expenditure and Institutional Review (CPEIR) Methodological Guidebook. Resource details presented in the ‘Assessing capacity’ subsection in ‘Understanding the Situation‘.

 

Country examples

See the examples of Colombia, India, Indonesia, UK and Zambia in the ODI report above, and supporting country reports: Access resource here

 

National finance strategies

Achieving the necessary scale and pace of sustainable investment needed requires a strong and credible political commitment to build investor confidence in the long-term sustainability of policy frameworks, underpinned by a dynamic and coordinated policy and financing strategy. A National Finance Strategy (NFS) aims to help countries to define their overall climate resilient development objectives and set out potential means to finance them. The focus is on how international and national public finance can be deployed alongside policy initiatives to maximize the ‘crowding-in’ of private capital to deliver climate resilient development aims. [adapted from E3G’s report on an NFS for Chile below]

 

Key resources

Financing Pathways for Low Emissions and Climate Resilient Development: Working Paper on National Financing Pathways (E3G, 2013, 16 pgs)

“National Financing Pathways” are put forward here as a concept that articulates the interdependencies between public, private, and international sources of finance as a means of delivering scaled investment to support implementation of low emission and climate resilient development. Based on discussions with representatives in Chile, Colombia, and Peru, this working paper identifies emerging issues that may influence a NFP and considers different frameworks and tools to develop such pathways.

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Strategic national approaches to climate finance: Report on scoping work in Peru, Chile and Colombia on national climate finance pathways and strategies (E3G, 2014, 44 pgs)

This paper describes the emerging strategic approach of National Financing Pathways and Strategies (NFP) for climate finance. In essence, this refers to the outcome of a process whereby a country determines, defines and mobilizes the financial and other resources necessary for its transition to a low emission and climate resilient development path. The concept is explained in greater detail in Chapter 4, which also sets out E3G’s perspectives on emerging diagnostic tools that may be applied, and core principles that may be relevant for developing countries to consider when developing a NFP.

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Country examples

Considerations for a Climate Finance Strategy in Chile (E3G, 2016, 125 pgs) The Government of Chile has committed to putting an NFS for climate change in place by 2018 and is just at the beginning of considering how to develop it. This report sets out a framework with which Chile could start to develop its own NFS. It offers recommendations for how this approach could be taken forward – including identifying where further research and dialogue with key stakeholders is needed. The analysis is based on scoping work undertaken in Chile during 2012-2014. This has been supplemented during 2015-2016 with further in-depth analysis and stakeholder consultation to understand the challenges and opportunities for Chile as it moves forward to build a climate resilient economy.

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Investment plans

A climate change investment plan is a document that identifies priority investment areas for a country and outlines why these priorities would be good investments from a climate point of view. In addition to providing information about specific investment needs, an investment plan often provides contextual information about the country, its policy framework, and current activities. It may also discuss sources of finance and institutional arrangements.

Around 70 countries so far have developed investment plans for the Climate Investment Funds (CIF), the 9bn USD family of four climate funds managed by the World Bank and other multilateral development banks. These investment plans are required for countries to access the CIF funds, and provide a degree of predictability over the funding streams available to countries. They follow a specific format prescribed by the CIF.

Beyond the CIF, countries can also prepare general climate investment plans to support their efforts to raise climate change investments. An example is provided for Malawi, and for the Investment Prospectuses developed by several African countries for the Sustainable Energy For All initiative (SE4All).

 

Key resources

Clean Technology Fund: Guidelines For Investment Plans (CIF/CTF, 2008, 10 pgs)

The Clean Technology Fund (CTF) investment plan is a “business plan”, developed under the leadership of the government, to assist a county with CTF co-financing in implementing its national development strategies or programs that include low carbon objectives. The investment plan is agreed between, and owned by, the Government and the MDBs. It should be a clearly articulated multi-year proposal that describes the proposed uses of CTF resources, identifying components of the country’s existing strategies and plans that could be co-financed by the CTF. This brief guidance document outlines how to prepare a CTF Investment Plan, including an annotated outline that should be followed.

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Country examples

CIF Country Investment Plans (c. 70 countries)

For countries to access the CIF they must develop an investment plan that targets investments which are in line with, and reinforce, national development priorities. The investment plan is developed through constructive consultations between the country government, multilateral development banks and key stakeholders, including civil society, indigenous peoples and the private sector. Examples of the investment plans approved for implementation are available here:

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Stakeholder Engagement in Preparing Investment Plans for the Climate Investment Funds: Case Studies from Asia (ADB/CIF, 2013, 80 pgs)

This study, which is part of a wider review of CIF experiences in ADB, uses a case study approach to examine how stakeholder engagement was carried out in the preparation of investment plans in Cambodia, Indonesia, Nepal, and the Philippines, with reference to the guidance provided by ADB and CIF in stakeholder participation.

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Malawi’s National Climate Change Investment Plan (Malawi Government, 2013, 152 pgs) [a general climate investment plan]

The primary objective of the National Climate Change Investment Plan (NCCIP) is to increase climate change investments in Malawi. It covers the country profile, climate change governance and policy framework, current portfolio of activities and financing, identifies priority investment areas, outlines the total investment requirement, and discusses institutional arrangements, potential financing sources, and M&E.

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Sustainable Energy for All – Investment Prospectus (three African countries)

An SE4All Investment Prospectus (IP) presents a set of implementable programs and projects, including their investment requirements. IPs for Kenya, Tanzania and Gambia are available here:

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National climate funds

A potentially important mechanism for countries to manage climate finance is a National Climate Fund (NCF). NCFs are nationally driven and nationally owned funds that help countries to collect climate finance from a variety of sources, coordinate them, blend them together and account for them. In this way, countries are in the driving seat and can make informed choices for how to direct resources toward activities that deliver results. NCFs provide a country-driven system that can support climate change goal setting and strategic programming, oversee climate change project approval, measure project implementation and performance, offer policy assurance and financial control of climate change funds, and assist with partnership management on the ground. (adapted from UNDP 2011 NCF report below)

 

Key resources

Blending Climate Finance Through National Climate Funds: A Guidebook for the Design and Establishment of National Funds to Achieve Climate Change Priorities (UNDP, 2011, 56 pages)

The purpose of this guidebook is to assist countries in designing a National Climate Fund. It leverages UNDP’s experience with funds at the global, regional, national, and subnational levels, and shares lessons learned about designing and administering NCFs. It also aims to provide a simple, robust, and transparent

method for meaningful stakeholder engagement throughout the design process. The principle audience for this publication is the decision-maker at the national and subnational levels, as well as domestic and international experts involved in assisting governments in establishing institutions and frameworks to support the management and delivery of climate finance.

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Evaluating the resource mobilisation strategies and sustainability of national climate change funds (Dalberg/CDKN, 2015, 42 pgs)

CDKN commissioned this report from Dalberg to assess the sustainability of NCFs and explore possible approaches to resource mobilization, in response to the mixed experience of NCFs so far. Part One introduces the purpose and structure of the report and its research methodology. Part Two presents an overview of how NCFs fit into the overall climate finance landscape. Part Three describes the primary barriers to resource mobilization and the successes of some NCFs. Parts Four and Five outline a resource mobilization approach for NCFs. The target audience includes existing NCFs, decision makers exploring whether to establish a NCF, and climate policy makers more generally.

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National Climate Funds: Learning from the experience of Asia-Pacific countries (Discussion Paper) (UNDP, 2012, 32 pgs)

This is an analysis of NCFs in the Asia-Pacific region. Section 5 provides a typology of the different types of funds that is helpful for the non-specialist. Annex 1 summarizes the advantages and disadvantages of managing climate finance through the national budget system compared to establishing a NCF; this can provide a starting point for in-country discussions about setting up an NCF.

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Country examples

FONERWA: Rwanda’s National Fund for Climate and Environment

Rwanda’s national climate fund (FONERWA) is seen as one of the most successful national climate funds so far. The fund’s website contains information about the fund and numerous other documents.

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Creation of the National Fund for Climate and Environment – Project Final Report (CIDT, February 2016, 98 pgs)

This final report from the DFID funded project to set up Rwanda’s climate fund describes the background and evolution of the fund, the results and achievements of the project, and lessons learned.

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Green investment banks

A Green Investment Bank (GIB) is a public entity established specifically to facilitate private investment into domestic low carbon, climate resilient infrastructure. Using innovative transaction structures, risk-reduction and transaction-enabling techniques, and local and market expertise, GIBs are channeling private investment, including from institutional investors, into low carbon projects. GIBs are facilitating investment in such areas as commercial and residential energy efficiency retrofits, rooftop solar photovoltaic systems, and municipal-level, energy-efficient street lighting. The creation of a GIB can send a signal to the marketplace and other countries that a country or region is seeking to become a leader in scaling up private low carbon investments. (adapted from OECD policy perspectives on GIBs below)

 

Key resources

Green Investment Banks – OECD Policy Perspectives (OECD, 2015, 20 pgs)

This Policy Perspectives describes the relatively new phenomenon of publicly capitalized green investment banks and examines why they are being created and how they are mobilizing private investment.

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Green Investment Banks: Scaling up Private Investment in Low-carbon, Climate-resilient Infrastructure (OECD, 2016, 117 pgs)

This report provides the first comprehensive study of publicly capitalized green investment banks (GIBs), analyzing the rationales, mandates and financing activities of this relatively new category of public financial institution. Based on the experience of over a dozen GIBs and GIB-like entities, the report provides a non-prescriptive stocktaking of the diverse ways in which these public institutions are catalyzing private investment in low carbon, climate resilient infrastructure and other green sectors, with a spotlight on energy efficiency projects. The report also provides practical information to policymakers on how green investment banks are being set up, capitalized and staffed.

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Green & Resilience Banks: How the Green Investment Bank Model Can Play a Role in Scaling Up Climate Finance in Emerging Markets (NRDC / Coalition for Green Capital / Climate Finance Advisors, 2016, 47 pgs)

This paper, authored by the Coalition For Green Capital, the Natural Resources Defense Council and Climate Finance Advisors, shows how Green Investment Banks are succeeding in countries such as Japan, the United Kingdom, Malaysia, Australia and the United States. Green Investment Banks are specialized public financing authorities set up to persuade private investors to increase and accelerate their investment in renewable energy and energy efficiency. The paper also explores the potential of the Green Investment Bank model in emerging and developing economies.

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Country examples

Greening India’s Financial Market: Investigating Opportunities for a Green Bank in India (NRDC/CEEW/IREDA, 2016, 19 pgs)

This report explores the opportunity for a green bank in India, considers its potential contribution to a number of India’s mitigation objectives, and provides other examples of green banking measures from international contexts.

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