Dubai, United Arab Emirates - Most developing countries have emerged from the global pandemic, COVID19; with high debt, low economic growth and continue to experience very low fiscal space requiring foreign finance to support their economic development, for budget support, and to address the challenges imposed by climate change.
Opening a high-level event on 9 December, 2023 titled “Accessing Climate Finance – Supply and Demand side challenges for Pacific Small Islands Developing States (PSIDS)” during the 28th Conference of the Parties (COP28) in Dubai, Director General of the Secretariat of the Pacific Regional Environment Programme (SPREP) – Sefanaia Nawadra; touched on the special needs of Small Islands Developing States (SIDS), as articulated in the means of implementation under the Paris Agreement and continue to be challenged at consecutive conferences of the parties. He highlighted that “the need for climate financing for small islands developing states, was linked to us not being major contributors to the climate issues we faced; and also recognised the lack of capacity that we have to address the issues of climate change”.
The panel comprised Honourable Puakena Boreham, a member of parliament from Tuvalu; Mr. Tony Sewen, Acting Director General of the Government of Vanuatu- Finance; Dr. Cate Rogers – Assistant Secretary for Australia’s Department of Foreign Affairs and Trade’s Climate Financing and Programming Branch; Ms. Carolina Fuentes – Director, Country Programming for the Green Climate Fund (GCF); and Ms. Filomena Nelson – SPREP’s Climate Change Adaptation Adviser.
The event organised by Ms. Salome Tukuafu of SPREP’s Project Coordination Unit, was conceptualised in response to concerns from the political level particularly around challenges of accessing global climate finance including strenuous eligibility and accessibility criteria as discussed at various regional fora including the 2023 Pacific Forum Economic Minister’s Meeting; and reported widely by both regional and national media. The challenges relating to supply and demand in particular, was highlighted in the report of the Fifth Biennial High-Level Ministerial Dialogue on Climate Finance. Given the call for significant increases to climate finance, the audience were challenged to consider the case of PSIDS and whether increasing quantum was sufficient to address their needs; or if more needed to be done to address issues of access from both the supply and demand side.
Participants shared some of their most critical challenges across the project cycle, from accreditation (a means of direct access that is a key feature of accessing finance via the climate funds established under the financial mechanism of the United Nations Framework Convention for Climate Change), to project identification and preparation, to utilisation of climate finance. They also proposed solutions to these challenges.
From the demand side, both Honourable Boreham and Mr. Sewen provided insights into their countries' experiences with accessing and utilizing climate finance. Key challenges related to direct access were centred around the value of accreditation, particularly as this is not a requirement under bilateral funding and development assistance from other multilateral sources previously accessed by the Pacific. Despite lengthy accreditation processes, Direct Access Entities (DAEs) such as Tuvalu’s Ministry of Finance and Economic Development still face barriers in accessing climate finance due to insufficient capacity to identify bankable projects, prepare funding proposals, and utilize accessed resources.
Honourable Boreham highlighted the positive impact of the GCF Readiness Programme in enhancing her country's absorptive capacity for climate finance, a facet that was not sufficiently considered in the decision to apply for accreditation to the Adaptation Fund.
Mr. Sewen shared Vanuatu's experience in utilising GCF resources, underlining the need for flexibility in GCF's processes and the importance of capacity building for GCF Secretariat staff to understand the unique contexts of PSIDS. The panellists strongly supported GCF's consideration of a proposed regional presence, to be presented as recommendations to its board for approval in 2024.
From the supply side, both Dr. Rogers and Ms. Fuentes shared some of the solutions proposed by their respective suppliers of climate finance, in response to the key challenges raised by PSIDS. Both the Australian Government and GCF highlighted the ongoing issue with capacity constraints in PSIDS, as a key challenge for suppliers operating in the region.
The Australian Government, after extensive consultations, has rejoined the GCF, announcing a $50 million USD contribution to the global fund. Dr. Rogers underscored the significance of Australia’s new development policy, in addressing some of the capacity issues raised by the panel; such as weak public financial management systems, and safeguards. She stressed the importance of assuring accountability of its spending especially to the Australian public; while acknowledging that as a bilateral donor, Australia had more flexibility than global funds to address capacity constraints. She referenced availability of immediate tools from Australia’s development program, such as the efficient mobilisation of technical assistance to backstop capacity as required. Australia’s new development policy aligns with a heightened commitment to Climate Finance, with clear performance targets set to ensure climate objectives in half of Australia's new projects over the next two years. Dr. Rogers stated however, that there is a need to look beyond Official Development Assistance (ODA) and Australia is exploring avenues to unlock private sector investment in renewable energy as an example of opportunities to leverage more climate finance for the region.
Over the past eight years of operations, the GCF has gained invaluable insights, to strengthen its commitment to global solidarity including in its support to the Pacific. Ms. Fuentes shared achievements in approving 23 projects in priority sectors for the Pacific, and mobilizing 949 million USD including 363 million USD in co-financing for the region. Acknowledging challenges discussed by other panellists, Ms. Fuentes outlined measures for the way forward. Notably, a revised Readiness programme, starting in 2024; which has removed annual caps, allowing countries to individually access up to 4 million USD over 2024-2027. The aim is to align Readiness more closely with programming to address capacity challenges and facilitate project submission to both GCF and other donors. Additionally, a new modality allocates up to 1 million USD from the Readiness programme to directly build the capacity of direct access entities (DAEs).
Ms. Filomena Nelson concluded by sharing SPREP’s experience as a regional DAE in accessing climate finance from both bilateral and multilateral sources; as well as bridging the capacity gaps identified by fellow panellists as the most significant constraint to accessing finance from both bilateral and multilateral sources. Ms. Nelson acknowledged the panel’s contributions – both in terms of the challenges raised as well as the solutions proposed. She stressed that climate finance towards capacity building is not enough. While the various capacity building programmes are a welcome investment, there is a need to finance appropriate personnel with-in regional DAEs like SPREP who have strong Pacific experience and understanding of unique contexts, as opposed to short term technical assistance that may not necessarily build long term capacity. Coupled with clearer guidelines from the climate funds in particular, she reiterated the important function that SPREP as a regional DAE undertakes in building of national capacities.
Beyond COP28, the articulation of a New Collective Quantified Goal (NCQG) will be a key feature for negotiations relating to Climate Finance in 2024. While raising the floor above the current $100 billion target is important; the new goal will be of little value to PSIDS if as regional experience has highlighted, they continue to be challenged in accessing their share of re-sources.