09 Jul 2015

By: EBRD Press Office @ebrd

Common principles for tracking finance for adaptation to climate change

The world’s leading development finance institutions have taken an important step forward in tracking more consistently the flows of finance that help countries and people deal with the effects of climate change.

The six large multilateral development banks (MDBs) and the International Development Finance Club (IDFC), a network of national, regional and international development banks, have agreed on a common set of principles to track financial commitments that help countries prepare for and build resilience to the impacts of climate change.

The ability to track systematically the flows of finance that support climate adaptation makes an important contribution to helping societies deal more effectively with the negative effects of climate change

Labelled, the Common Principles for Climate Change Adaptation Finance Tracking, the initiative builds on a similar agreement earlier this year to define and track mitigation finance, the funding aimed at combatting climate change.

By increasing transparency of climate finance flows, the agreement on the two common principles for tracking climate finance will help to build confidence that money is flowing to help deal with this major global challenge.

It is an important signal ahead of this year’s COP21 conference in Paris that aims to deliver a global agreement on climate.

The multilateral banks include the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), the Inter-American Development Bank (IDB) and the World Bank Group.

Adaptation finance has become a significant area of EBRD’s climate finance operations, with 89 adaptation projects signed since 2011, delivering €550 million in adaptation finance and a total investment volume of €2 billion. Our focus is on practical investments that build the climate resilience of critical economic sectors, such as the US$ 75 million investment in the climate-resilient upgrade of Qairokkum hydropower plant in Tajikistan, which will enable the plant to remain productive and safe in the face of increasing climatic variability in the decades ahead.

The document is aimed at achieving a common understanding of what to count as climate adaptation finance. Knowing how the money is flowing is critical for reaching areas of opportunity and need, because what gets measured gets managed.

Last month, the MDBs said that they had delivered US$ 5 billion in financing last year to help developing countries and emerging economies adapt to the challenges of climate change. Similarly, IDFC members reported in their last green finance mapping report a contribution of US$ 15.8 billion to adaptation projects in developing countries in 2013.

Nonetheless, IDFC and MDBs agree that increased support for more climate resilient infrastructure, natural ecosystem and other adaptation measures is urgently needed.

According to the newly agreed common principles document, “the MDBs and IDFC are fully committed to promoting and supporting climate resilient development as an essential element of the sustainability of their investments.” They plan to do this, the document says “by integrating climate resilience and adaption into their investments, operations and initiatives.”

The purpose of the principles is to set out an agreed approach for tracking adaptation finance.  The principles are voluntary and set common definitions and guidelines. The implementation, reporting and quality control are each institution’s responsibility. In addition, IDFC and MDBs have committed to further developing their cooperation in the future and will continue to share practices and knowledge on climate finance.