Part of WRI’s Climate Finance Series WITHIN REACH of WRI’s Climate Finance Series WITHIN REACH STRENGTHENING COUNTRY OWNERSHIP AND ACCOUNTABILITY IN ACCESSING CLIMATE FINANCE LOUISE

WORKING PAPER | November 2013 | 1

Working Paper

Part of WRI’s Climate Finance Series

WITHIN REACH STRENGTHENING COUNTRY OWNERSHIP AND ACCOUNTABILITY IN ACCESSING CLIMATE FINANCE

LOUISE BROWN, CLIFFORD POLYCARP, MARGARET SPEARMAN

CONTENTS1. Introduction............................................................... 5

2. The Ownership and Accountability Framework .......... 6

3. Learning From Practice ........................................... 11

4. Moving Toward Strengthened Ownership

and Accountability....................................................... 19

5. Recommendations to Recipient Countries

and Contributor Countries, and to Funds and

Institutions, Particularly the GCF ................................ 24

Endnotes ..................................................................... 32

Disclaimer: Working Papers contain preliminary research, analysis, findings, and recommendations. They are circulated to stimulate timely discussion and critical feedback and to influence ongoing debate on emerging issues. Most working papers are eventually published in another form and their content may be revised.

EXECUTIVE SUMMARYDeveloping countries are calling for greater ownership of climate finance and a greater voice in climate finance decisions. Decades of evidence with official develop-ment assistance shows that when support is aligned with country development plans and priorities—and funding is delivered through country institutions and fiduciary systems—development efforts can have a greater impact. Recent evidence on climate finance also suggests that appropriate national capacities, institutional arrange-ments, and accountability systems are essential if develop-ing countries are to effectively and transparently deploy finance toward low-carbon, climate-resilient development.

In practice, international climate finance contributors and recipients must find ways to balance the sometimes conflicting goals of country ownership and accountability for results, financial management, and protection against environmental and social harm. This paper identifies the essential elements of country ownership and the types of accountability systems that countries need to manage climate finance (Box 1). It explores how different avenues available to recipients to access climate finance can balance these interests. It offers recommendations to climate finance recipients and contributors—notably the Green Climate Fund (GCF)—on how climate finance can be deployed to support both country ownership and the use of country accountability systems over the long run.

Suggested Citation: Brown, Louise, Clifford Polycarp, and Margaret Spearman. 2013. “Within Reach. Strengthening Country Ownership and Accountability in Accessing Climate Finance.” Working Paper. Washington, DC: World Resources Institute. Available online at wri.org/publication/ownership-and-accountability-in-climate-finance.

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Learning from experience In our analysis of how developing countries are taking ownership of their climate change agenda, we found that most are beginning to develop policies and plans around climate change. At the same time, they are reforming institutional arrangements and strengthening capacity to implement these plans. In many countries, however, the extent to which climate planning is integrated with broader development planning and included in national budgeting processes is limited. Developing countries need to clearly articulate appropriate priorities, through a par-ticipatory process that ensures broad stakeholder support. There is also a need for greater integration between devel-opment and climate planning and budgeting processes.

The majority of international funds and institutions ensure accountability for the use of climate finance through their own policies and procedures. Some insti-tutions are exploring ways to use country systems for accountability, through an accreditation process for national implementing entities (in the cases of the Adap-tation Fund and the Global Environment Facility) or through a review and selective use of country policies and

systems (in the case of the World Bank’s pilot country sys-tems approach). Although international institutions’ stan-dards are viewed by many contributors as generally higher than those of developing countries, our research found that while country systems for accountability vary, finan-cial management systems are reasonably strong in many countries, including some of the least developed countries. Indeed, several developing country financial management systems are as stringent as those of developed nations.

In contrast, systems for managing for results are often poorly developed, and the quality of environmental and social safeguards in developing countries is mixed, with generally better performance on environmental than social safeguards. Thus, while developing countries are making good progress on accountability systems, climate finance contributors should invest in strengthening systems for fiduciary management, managing for results, and safeguarding against environmental and social harm. Development partners could enhance the effectiveness of their support by focusing on supporting developing countries to strengthen their own systems, rather than creating separate systems that result in duplication of effort and an increased administrative burden on coun-tries. Developing countries need to take proactive steps to apply stronger standards of accountability to their own domestic climate finance.

Strengthening ownership and accountability through various access modalitiesThree broad models of balancing ownership and account-ability are in use in the current climate finance landscape. The emphasis on accountability model favors contributor-centered accountability, often at the expense of recipient country ownership. Although there may be some attempt to align funding with national priorities, contributors retain considerable control over how funding is used and which institutions it is channeled through and to. Although this model is currently prevalent, it is neither empowering to recipient countries, nor does it strengthen country accountability systems. This model is appropriate only in countries with very weak accountability systems and little political will to reform them—a relatively rare combination. Post-conflict countries (where country sys-tems may be fragile and unreliable) and countries plagued by high levels of corruption (where there is a high risk of mismanagement of funds) may be appropriate venues for this model.

Country ownership comprises three elements:

Alignment of climate finance with national strategies and priorities;

Decision-making responsibilities vested in national institutions; and

The use of national systems for ensuring accountability in the use of climate finance.

Accountability to manage climate finance well requires systems for:

Managing for and demonstrating the achievement of results;

Ensuring sound financial management and fiduciary practices; and

Providing robust environmental and social safeguards.

Box 1 | Elements of Country Ownership and Accountability

Strengthening Country Ownership and Accountability in Accessing Climate Finance


In the transitional shared ownership and accountabil-ity model, the recipient country has partial ownership of climate finance, but the contributor or an international intermediary retains some control, usually to ensure ade-quate accountability for its effective and responsible use. This model has many variants and many possibilities for how it could be applied in different country contexts. The transitional model is appropriate for a diversity of country contexts, and offers the opportunity to pursue novel ways to strengthen country ownership and systems for account-ability over a realistic time horizon (which will differ from one country to another). It takes a pragmatic approach to managing the trade-offs that may exist in the short term as a result of weaknesses in country systems.

The full recipient country ownership and accountability model represents an “ideal” that recipient and contributor countries should aim to graduate toward as systems for accountability in developing countries are strengthened. In this model, the recipient country has full ownership of climate finance, and the contributor fully entrusts the funding it provides to national institutions and national systems. Decisions on how funding is used are made by national actors, in line with national plans and priorities, within the boundaries of the agreement with the contribu-tor (for example, the contributor may provide funding for a particular sector). Country systems for results manage-ment, fiduciary standards, and environmental and social safeguards are used and the recipient country is fully accountable for results. This model may be most appropri-ate for countries with fairly strong national systems for accountability, or with institutions that can ensure robust accountability mechanisms. Although the contributor relinquishes control of finance to the recipient country, it maintains some leverage through the ability to discontinue funding if conditions are breached.

Recommendations to recipients and contributors, in particular the Green Climate FundRecipient countries can work to achieve greater ownership of and accountability for climate finance by:

Integrating climate change into all aspects of develop-ment planning to ensure that climate-related goals are achievable and contribute to a broader development agenda, and that climate finance accessed from interna-tional sources is aligned with the country’s climate and development goals.

Identifying clear priorities for funding within climate and development strategies to ensure that climate finance is appropriately targeted.

Putting in place appropriate institutional arrange-ments to integrate climate change into development planning and programming and champion action on climate change. Coordinating committees with a man-date to deal with climate change policy issues can bring together key stakeholders and promote coordination among relevant actors.

Involving all relevant stakeholders in the planning, design, implementation, monitoring, and evaluation stages of climate-relevant policies, programs, and proj-ects to ensure that they are ambitious, robustly designed, effectively implemented, and adequately accountable.

Strengthening skills and expertise through targeted training programs for staff of government departments or industry; placement of long-term international advi-sors in government ministries to transfer skills and train local staff; exchange programs with partner institutions in other countries; staff field visits to other countries or regions; and management training for senior staff.

Strengthening country systems for accountability by identifying the gaps in existing systems and working with development partners to agree on steps that each will take toward strengthening and using country systems.

Contributor countries, funds, and institutions can support country ownership and help strengthen country account-ability systems by:

Aligning support with recipient country priorities to maximize its impacts and sustainability. Where coun-try priorities are not clearly spelled out, international partners can play a role in supporting the government to determine its priorities.

Devolving decision making to the country level, as staff based in the headquarters of major bilateral or multi-lateral sources of climate finance are not likely to have a good understanding of the needs and circumstances of a recipient country.

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Using country systems as far as possible, even if they are not perfect. Contributor and recipient country governments can work together to identify how to transition to strengthened country systems. For exam-ple, where there are weaknesses in a country’s systems, countries and their international partners could develop a roadmap and timeline for strengthening those systems, including clear measures to address identified gaps, allowing for a transition to full use of country systems as they are strengthened over time.

Supporting countries in strengthening systems for accountability that will allow them to take greater ownership of climate finance and give contributors the confidence to entrust the recipient country’s institutions with management of international climate finance.

Improving coordination and harmonization to enhance the collective impact of funding from various development partners.

Building flexibility into the design of international funds and institutions to use a subset of a recipient country’s systems where they are strong, and gradually shift to using other systems as they are strengthened. Furthermore, funds and institutions should be flexible in applying rigorous accountability standards as appro-priate to the scale and nature of finance provided.

The GCF can support country ownership and the use of country accountability systems by:

Institutionalizing an approach that ensures that devel-oping country climate plans and priorities are at the core of all its funding activities, and that developing country institutions are empowered in determining how funding is used. For example, by requiring GCF imple-menting entities and the national designated authority to work with national stakeholders and other interna-tional funds and institutions operating in the country to develop a long-term roadmap for the GCF’s engagement with the country in line with national priorities.

Giving countries the flexibility to identify the most appropriate institution (or group of institutions or stakeholders) that will play the role of national desig-nated authority. The GCF should require the national designated authority to operate according to minimum standards of transparency and stakeholder participation.

Putting in place mechanisms to ensure that acceptable standards for transparency and meaningful stake-holder engagement are upheld by the implementing entity in the identification, design, implementation, and monitoring and evaluation of funded activities. This objective could be achieved through requirements around access to information and stakeholder participa-tion in each stage of the project cycle.

Providing access to funding through a wide range of subnational, national, regional, and international institutions—public, private, and civil society—either to directly implement projects and/or to manage and allocate funding to other implementing institu-tions. This access would give developing countries the option to determine the most appropriate means of accessing funds within the context of their needs and planned activities, and taking into account their par-ticular institutional strengths and weaknesses. The GCF could introduce flexibility into its accreditation criteria to ensure adequate standards of accountability while catering to the range of capacities and circumstances of potential implementing or intermediary institutions.

Investing in strengthening country systems for accountability—either through its own funding activi-ties, or through partnerships with other institutions that are better placed to provide this type of support. In countries where accountability systems are weak or in the process of being strengthened, the GCF should make use of approaches discussed in the “transitional model” in Chapter 4 to strengthen ownership without compromising accountability.



1. INTRODUCTION 1.1 The case for country ownership and accountabilityDeveloping countries are increasingly calling for greater ownership of climate finance, and a shift away from a climate finance architecture in which decision making is often dominated by contributor-driven institutions and priorities. Evidence from decades of experience with official development assistance (ODA) shows that align-ing support with country development plans and priorities and delivering funding through country institutions and fiduciary systems leads to more effective development results and contributes to strengthening institutions and systems in recipient countries.1,2 More recent evidence on climate finance effectiveness also suggests that the appropriate capacities, institutional arrangements, and systems for accountability at the national level are crucial for developing countries to effectively and trans-parently deploy finance toward low-carbon, climate- resilient development.3,4

Ownership and accountability are complementary objec-tives that go hand in hand to strengthen the effectiveness of climate finance. Stronger country ownership is more likely to lead to effective and sustained results if coun-tries have strong systems to ensure accountability to their citizens and their funders for the achievement of results and for compliance with fiduciary standards and environ-mental and social safeguards. Empowering developing countries with greater ownership can help reinforce their accountability systems, as they are refined and strength-ened through use. However, there is often a tension between these dual objectives, as contributors of climate finance may be unwilling to empower recipient coun-tries if there are real or perceived weaknesses in country accountability systems. Similarly, developing countries may be hesitant to invest in strengthening their account-ability systems if they lack a sense of ownership of funding received. The challenge to both recipients and contribu-tors of climate finance is to find ways to balance country ownership with accountability under a range of different access modalities, and to strengthen both. Achieving this balance will require mutual trust and respect.

Both contributor and recipient countries are actively seek-ing ways to strengthen recipient country ownership of climate finance, and the past five to ten years have wit-nessed a number of important innovations in this regard. International climate finance mechanisms are looking at

how to design or redesign their operational modalities and institutional and legal arrangements to entrust recipient countries with greater power and responsibility to manage resources. At the same time, recipient countries, with sup-port from their international partners, are making efforts to strengthen their institutions and systems to ensure accountability for the effective use of these resources.

The Green Climate Fund (GCF), recently established under the framework of the United Nations Framework Convention on Climate Change (UNFCCC) with headquar-ters in Korea, is expected to become the biggest institution for climate finance. It aims to “promote the paradigm shift towards low-emission and climate-resilient development pathways” through support that is “country-driven” and guided by principles of transparency and accountability, efficiency and effectiveness.5 The GCF commits to provid-ing a range of access modalities, including “direct access” to funding via national institutions, with a view to enhanc-ing country ownership of projects and programs, as well as giving recipient countries the choice of what access modalities they use. Strengthened access by national insti-tutions will need to be balanced with means to ensure that these institutions have the capacities and systems to use funds in an accountable manner, and to support countries in strengthening systems that are weak. Over the next year or so, the 24-member board of the GCF will develop poli-cies and procedures to accredit various entities to access the fund, which includes defining benchmarks and stan-dards for accreditation.

This working paper explores the concepts of owner-ship and accountability in climate finance, and draws on experiences from development effectiveness and more recent experiences of climate finance to consider options for enhancing ownership and strengthening accountability through various access modalities, including direct access. It then looks at options for balancing ownership and accountability and strengthening both in the GCF. While some of the insights and recommendations in this paper have been noted in previous literature, the need to put them into effect remains. The GCF also has an opportunity to learn from and improve on existing practice.

1.2 Methodology and paper structureThis paper is targeted primarily toward providers of inter-national climate finance, in particular those tasked with designing and operationalizing the GCF. It is also relevant to developing country governments and other decision

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makers around climate finance. It provides analysis and guidance that will support decision makers and practi-tioners of international climate finance in making more informed decisions about the governance and deployment of climate finance.

This paper forms part of WRI’s work around strengthen-ing national institutions for climate finance in developing countries, and has been informed by a wealth of engage-ments with developing country stakeholders and inter-national climate funds and institutions over the past two years. It has been prepared as part of the United Nations Environment Programme (UNEP) National Climate Finance Institutions Support Programme (NCFISP). This initiative, funded by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU), was designed to support 20 developing countries in strengthening their financial management capacity to absorb and manage climate finance, and to gather insights and lessons to inform the design of the GCF. Much of the information about country institutions and systems draws on WRI’s work over the past two years to engage with developing country governments through the NCFISP and other forums (See Annex 1 for a list of workshops and engagements that informed this paper). This paper also draws on other primary and secondary research, includ-ing desk research into climate funds and institutions and country systems, literature and statistics on development effectiveness, and discussions and interviews with climate finance experts in recipient and contributor countries and international funds and institutions.

Chapter 2 discusses the range of institutions that can access international climate finance, and breaks down the concepts of ownership and accountability into their components. In Chapter 3 we look at the extent to which recipient countries are empowered to make investment and programming decisions in a number of climate funds and institutions and how some countries have shown leadership in developing policies and reforming national institutions. We also look at the mechanisms for ensuring accountability used by international funds and institutions and by recipient countries. In Chapter 4 we consider options to move toward strengthened owner-ship and accountability, drawing on experiences of a number of existing efforts that can be categorized into three models. We conclude in Chapter 5 with recommen-dations for countries and international funders, including for the GCF.

2. THE OWNERSHIP AND ACCOUNTABILITY FRAMEWORK In this chapter, we discuss the range of funds and institu-tions through which recipients in developing countries can access international finance for climate change and break down the concepts of “ownership” and “accountability” to identify their constituent elements.

2.1 Access modalities International climate finance is channeled from contributors to recipients in developing countries through a range of institutions or funds. The governing instrument of the GCF distinguishes between “direct access” through subnational, national, and regional institutions and “inter-national access” through United Nations agencies, multi-lateral development banks (MDBs), international financial institutions, and regional institutions. It also mentions direct and indirect access for private sector institutions at national, regional, and international levels. The extent to which access modalities empower recipient countries depends on at least three factors: (1) alignment of invest-ments with country plans and priorities, (2) the extent to which recipient country stakeholders are enabled to make investment decisions, and (3) the use of the recipient country systems (see next section for a more detailed discussion).“Direct access” modalities are increasingly con-sidered options to strengthen country ownership because they tend to be more empowering to recipient countries.

The funds and institutions with the potential to access international climate finance could be classified as sub-national, national, regional, or global either based on their ownership or decision-making control, or based on the geographical scope of their operations. We use the latter to characterize the funds or institutions (see Figure 1). Regional institutions include funds or institutions that operate in the three developing country regions (Africa, Asia and the Pacific, and Latin America and the Carib-bean) or subregions (for example, the West Africa region, or the Amazon Forest region). Within recipient countries, we distinguish between funds and institutions that operate at a national scale, and those that operate subnationally at state or provincial levels, or at the level of districts, cities or towns, or communities.



2.2 Elements of recipient country ownershipAlthough country ownership is broadly recognized as central to climate finance effectiveness, deconstructing its constituent elements is not straightforward. Based on the literature on ODA and climate finance effectiveness and our discussions with experts and practitioners, this paper defines ownership through three elements: alignment with recipient-country strategies, vesting of decision-making authority in recipient countries, and the use of country systems to ensure accountability. Each of these elements is described below.

i. International climate finance is aligned with recipient country strategies and prioritiesAligning international climate finance with national strategies and priorities requires that relevant mitigation and adaptation initiatives are derived from countries’ own climate and development policies and plans. Alignment requires that recipient countries establish and implement their own strategies for low-emission and climate-resilient development, and strengthen policies and institutions to achieve these strategies.6 It also requires that providers

of international climate finance program their support in accordance with recipient country priorities, as articulated in country strategies and policies.

Aligning international climate finance with national strat-egies and priorities is important for a number of reasons. It allows the recipient country to plan strategically for the long term, and identify priorities proactively rather than reactively responding to contributor priorities. It further allows the country to coordinate support from different sources toward a set of clear objectives. Aligning interna-tional climate finance with national strategies also enables countries to embed mitigation and adaptation actions into a broader development agenda. By aligning finance from various contributors toward a common set of goals, countries are able to avoid fragmented and uncoordinated projects and maximize the collective impact of limited funding, thereby increasing the likelihood of sustained positive outcomes. There is wide and growing acceptance that climate finance is more likely to have deep and sus-tained impacts if it contributes toward long-term, low-carbon, climate-resilient development goals rather than short-term projects.7

E.g. World Bank, UNDP, UNEP, German Development Bank (KfW), Brazilian National Development Bank (BNDES), World Wildlife Fund (WWF), Conservation International

E.g. Asian Development Bank (ADB), African Development Bank (AfDB), Inter-American Development Bank (IDB), Development Bank of Latin America (CAF).

E.g. West African Development Bank (BOAD), Development Bank of Southern Africa (DBSA), Secretariat of the Pacific Regional Environment Programme (SPREP), Amazon Fund

E.g. Jordan Planning & International Cooperation Ministry, Bangladesh Climate Change Trust Fund, India National Bank for Agriculture and Rural Development, Guyana REDD+ Investment Fund.

E.g. Provincial and regional agencies

E.g. City governments, community-based organizations and village councils

Figure 1 | Potential Intermediaries and Implementing Entities: Geographical Scope of Operations

LOCAL

NATIONAL

STATE/ PROVINCIAL

SUB-REGIONAL

REGIONAL

GLOBAL

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For low-emission, climate-resilient development strategies to fully reflect national priorities, the strategies should be developed and implemented through a participatory process that engages civil society and the private sector. Stakeholder engagement brings a broad range of expertise into the planning process, while ensuring that the needs and priorities of different sectors of society—including vulnerable and marginalized groups—are considered. An inclusive and transparent process can increase buy-in and broad-based political support for the strategy, and reduce the likelihood that policies will be reversed with changes in government. Some countries, including El Salvador, Ghana, and Guyana, have established multi-stakeholder committees to oversee climate-related development activities.

Aligning climate finance with national priorities can be challenging in countries where climate- and development-related plans are not in place or priorities are not clearly articulated. In such cases, international partners can provide financial and technical support for policy develop-ment, institutional strengthening, and stakeholder engage-ment. Support might be best channeled through govern-ment agencies, civil society organizations, or private sector organizations depending on the country context.

ii. Decision-making responsibilities are vested in recipient country institutions Empowering recipient-country institutions to decide how climate finance will be used allows those institutions to prioritize and allocate financing among programs and activities in line with national strategies. When decision-making responsibility is vested in recipient-country insti-tutions, contributors do not engage in the decision-making process for programming funds. Conditions placed on funding should be limited to those required by the laws of the contributor and to matters arising from shared values agreed ex ante8 and should be linked to national climate and development strategies.9

Decision-making responsibility should be vested in national institutions for several reasons. National entities best understand the local context and priorities, as well as local needs and how to address those needs. National enti-ties are also better positioned to ensure that funding deci-sions are aligned with national priorities, thereby increas-ing the likelihood of success and sustainability. National decision makers may be government or non-governmental actors or a combination of actors. The decision-making process should embody the principles of transparency,

accountability, and participation, engaging all relevant stakeholders and taking into account a range of economic, social, and environmental considerations. Decisions made through a transparent and participatory process are likely to be more robust and sustainable, as they have taken into account a range of perspectives and expert views and are thus likely to be supported by a range of stakeholders.

A recipient country’s international partners may have valuable expertise and experience that can inform decision making, but input from them should be provided on a demand-driven basis. Experience of development effec-tiveness has shown that decision making that is strongly driven by contributor priorities and micro-management of project implementation by contributors leads to less effective development outcomes.10 When national actors are in the driver’s seat and when international advice and assistance is responsive to demand and not perceived as infringing on national sovereignty, it is more likely to be taken on board in the design of projects and programs, leading to more robust decision making.

iii. National systems are used for ensuring accountability in the use of climate finance Systems for accountability provide checks and balances to ensure that the relevant actors are answerable for their commitments or actions (see Box 2). Country systems for accountability include not only the laws, policies, regulations, and procedures that govern the way climate finance is managed, but also the democratic processes by which they are developed and implemented; the institu-tional arrangements and capacity to implement them; the institutions that provide independent oversight and evaluation; and the mechanisms for raising and redressing grievances and, where necessary, applying sanctions.

We considered three types of accountability systems that apply to the management of climate finance:

Systems for monitoring, evaluating, and managing for results;

Systems for fiduciary management, including public financial management and procurement; and

Systems for safeguarding people and the environment, including providing channels for affected parties to raise grievances and seek fair redress.

These elements of accountability are discussed below.



What is accountability?

This paper defines “accountability” as the ability of relevant actors to take responsibility for actions they have taken or commitments they have made; and the ability of oversight actors to hold them to account for these actions or commitments.11

Who is accountable to whom, and for what?

Institutions that manage climate finance—international, regional, national, or subnational—are accountable to multiple parties: the citizens of the recipient country broadly, the intended beneficiaries of the finance in particular, and the contributors of the finance. The institutions are accountable for achieving the intended mitigation and adaptation results, as well as for ensuring that appropriate fiduciary standards and environmental and social safeguards are respected.

How is accountability secured?

Accountability in climate finance is secured through a well-functioning accountability system that comprises (1) a set of rules governing how funding is used and to what end; (2) institutions to implement and enforce the rules; (3) mechanisms for independent oversight and reporting; (4) independent mechanisms for raising and investigating grievances and seeking redress in the event of noncompliance; and (5) mechanisms to apply sanctions to those who are noncompliant.

Box 2 | Defining Accountability in the Context of Climate Finance

The global development community is increasingly recog-nizing that relying on country systems for accountability is important for a number of reasons.12 It enables the recipi-ent country to exercise full control over the use of inter-national climate finance, allowing the country to program funds in line with national strategies and priorities. It can enhance efficiency by avoiding the need to apply a differ-ent set of external standards that may not be easily com-patible with the country’s systems. It gives the country the opportunity to identify weaknesses and creates incentives to strengthen the implementation of systems for account-ability. Strengthening country systems may ultimately reduce inefficiency, lead to more effective outcomes, and reduce reliance on international support. Evidence from experiences with ODA suggests that providing funding in a way that is integrated into countries’ fiduciary systems can strengthen the monitoring, control, and accountability of ODA flows, and can help strengthen the institutions, systems, and capacities needed for accountability in finan-cial management.13 Evidence from different approaches to applying environmental and social safeguards suggests that strengthening country systems includes ensuring that people on the ground—including vulnerable and affected communities—are engaged and involved in the implemen-tation of safeguard systems.14

2.3 Elements of accountability In the context of climate finance, accountability systems include the rules and institutions governing how fund-ing is used, as well as the oversight mechanism to ensure adherence to the rules (see Box 2). International climate and development finance institutions have their own systems for ensuring accountability in the use of funds. They include managing for and demonstrating results, ensuring sound financial management and fiduciary processes, and providing robust environmental and social safeguards. These institutional systems aim to achieve the same accountability objectives as country accountability systems, without relying on countries’ own systems. The three elements of accountability are discussed below.

i. Managing for and demonstrating the achievement of resultsManaging for results involves monitoring and measuring the effectiveness of funded activities within the context of objectives set out in a national low-emissions, climate-resilient development strategy, and revising activities as necessary to achieve these objectives. Managing for results is a process for ensuring that finance is used in a way that

leads to effective climate and development outcomes by emphasizing transparency in the use of funds, tracking and monitoring progress toward goals and objectives, and incorporating lessons learned into the design of projects and programs. It is important for governments to be accountable to their own citizens, not just to contributors, for achieving climate and development results. Thus reporting structures for the use of funds should answer to national entities (such as parliaments and audit institu-tions), not only to contributors.15 Managing for results requires a number of steps:

Identifying objectives and indicators, derived from national climate and development plans and strategies;

Developing a framework for assessing progress toward objectives that is transparent and monitorable;

Collecting relevant and timely information and engaging stakeholders in the process;

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Making information accessible to all relevant stake-holders;

Creating mechanisms to feed information collected back into the development of policies and programs in a transparent and inclusive manner; and

Creating mechanisms to raise and redress grievances.

Managing for results is an objective in its own right— citizens are fully entitled to know how public resources are being used, but it is also a way of establishing powerful incentives that help improve the effectiveness of all public resources in achieving development results.16 Managing for results is a process that should involve a wide range of stakeholders. Civil society has an important role to play in holding governments accountable for the use of public funds.

Monitoring and evaluation (M&E) of results can be costly, and there is an inherent trade-off between time and fund-ing spent on M&E and that spent on project activities. Managing for results should be efficient and lead to effec-tive outcomes, thus there is a need to ensure that M&E systems are cost and time effective and not overly burden-some, while ensuring that they are robust and effective.

ii. Ensuring sound financial management and fiduciary practices All countries have national systems for managing their public finances, which include laws, procedures, systems, and institutions to carry out a range of functions, including:

Budgeting

Accounting

Reporting

Internal auditing

External auditing

Procuring goods and services

Protecting against corruption.

A good public financial management (PFM) system is essential for the implementation of policies and the achievement of developmental objectives by supporting aggregate fiscal discipline, strategic allocation of resources, and efficient service delivery. An open and orderly PFM system is one of the enabling elements for those three levels of budgetary outcomes:

Effective controls of the budget totals and management of fiscal risks contribute to maintaining aggregate fiscal discipline.

Planning and executing the budget in line with gov-ernment priorities contributes to implementation of government’s objectives.

Managing the use of budgeted resources contributes to efficient service delivery and value for money.

iii. Providing robust environmental and social safeguards Environmental and social safeguards comprise the set of rules and institutions—domestic or international— necessary to meet identified social and environmental goals and to ensure that climate investments do not cause unintentional harm to people or ecosystems.17

National safeguard systems take the form of laws, poli-cies, procedures, and institutions designed to ensure that investments meet their environmental and social goals by carrying out the following functions:18

Anticipating potential risks and opportunities associ-ated with a climate investment;

Planning to avoid harm and produce benefits to ecosys-tems and people by addressing social and environmen-tal considerations in the design of a climate investment;

Managing actions by implementing safeguard plans and procedures that will help ensure desired social and environmental goals;

Monitoring processes and outcomes to demonstrate the achievement of goals, make course corrections, and deal with unanticipated impacts; and

Responding to problems and grievances related to the social and/or environmental effects of a climate investment.



Safeguard systems tend, at a minimum, to include policies covering:19

Environmental and social impact assessments and management plans;

Access to information about the investment and its impacts;

Consultations with affected communities;

Commitments to avoid displacement, and restore people’s livelihoods when displacement is unavoidable;

Respect for indigenous peoples’ rights;

Environmental protections against pollution, deforesta-tion, or climate impacts; and

Complaint mechanisms where people can raise con-cerns and seek redress when environmental or social safeguards are not upheld.

3. LEARNING FROM PRACTICE 3.1 Country ownership In this section we discuss the extent to which recipient countries have ownership of climate finance through avenues employed by funds and institutions to channel finance (hereafter “access modalities”). We also discuss the extent to which recipient countries are acting to strengthen ownership by putting in place the policies, plans, and institutional arrangements to drive a low-car-bon climate-resilient development agenda.

i. Approaches to fostering country ownership among international funds and institutionsALIGNING SUPPORT WITH RECIPIENT COUNTRY PLANS AND PRIORITIES Most international climate funds and institutions make some attempt to align their support with the priorities and plans of recipient countries. Some have more specific and practical guidance on how to do this than others. In the Climate Investment Funds (CIFs),20 two major funds implemented by a group of MDBs, the implementing entities within a country are required to work with the national government to develop an “investment plan” that maps out priority areas for support. Projects are then jointly developed by the MDBs and the government in line

with the investment plan. This process provides an oppor-tunity for the government to align the planned investment with its development priorities. In practice, however, the extent to which the government leads the development of an investment plan, and ensures its strategic contribution to the broader development agenda and its alignment with relevant policies, varies significantly among countries.

Furthermore, there is a mixed record of stakeholder engagement in the development of investment plans and projects. Although the MDBs are expected to consult with relevant stakeholders during the joint missions that pre-cede the development of an investment plan, governments and MDBs are not required to include all relevant stake-holders in the design and implementation of projects.21 In a number of cases, civil society stakeholders have been able to engage in the process only once the investment plan has been completed, during the public disclosure period before it goes to the CIF Trust Fund Committee22 for endorsement. A number of proposed projects have met with strong opposition from civil society groups who argue that the projects are not in the national interest.23

Ensuring stronger engagement of all relevant govern-ment and nongovernment stakeholders from the outset and throughout the process would greatly strengthen the extent to which investment plans are shaped by broad stakeholder input. The governing bodies of the CIFs have recognized this weakness; a decision by a joint meeting of the Clean Technology Fund and Strategic Climate Fund Trust Fund Committees in May 2012 agreed to strengthen stakeholder engagement in the investment plan develop-ment process.24

The Adaptation Fund and the Global Environment Facility (GEF) recognize the importance of country ownership and require that projects be aligned with national priorities, and that they be endorsed by the country government. The Adaptation Fund requires every project proposal to include a section explaining how the proposed project is aligned with national or subnational plans or strategies, and the project has to be formally endorsed by the govern-ment of the recipient country to receive funding. Similarly, the GEF requires every project to demonstrate that it is consistent with country priorities and strategies.25

Developing countries note that development partners tend to allocate their funding according to their own priori-ties, rather than the needs and priorities of the recipient country. For example, several countries including Kenya

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noted that a large proportion of the climate finance they have received has been for mitigation, even though they identified adaptation as a national priority.26 Some of the most successful attempts by contributors to align funding with recipient country priorities have been in developing countries that have been proactive in designing national climate change strategies, and identifying their priorities. For example, the first draft of Guyana’s low-carbon devel-opment strategy clearly set out the country’s response to climate change and identified a number of key sectors as priorities for funding. The governments of Norway and Guyana then agreed in 2009 that Norway’s International Climate and Forest Initiative would provide results-based payments for avoided deforestation in support of the low-carbon development strategy. Subsequent revised editions of the strategy spelled out in more detail how Guyana intended to allocate the pledged funding toward specific projects, in line with the broad priorities identi-fied.27 Many development partners maintain much of the decision-making authority at their headquarters, rather than at their country offices or representatives, despite the fact that the latter have far greater understanding of the country context and needs.

A widespread challenge to strengthening alignment with national priorities is the tendency of international cli-mate funds and institutions to focus on their own area of intervention without considering the needs and existing financial support in the country, and without coordinating their support to achieve a more effective collective out-come.28 As a result, climate finance is becoming increas-ingly fragmented, with several small pots of funding for discrete projects that may not contribute to a broader objective. Poor coordination and fragmented support make it difficult for governments to keep track of funding flowing into the country. In Mali, for example, a monitor-ing survey on the Paris Declaration found a 40 percent discrepancy between what contributors said they had committed in ODA and what had been accounted for in the national books.29 An assessment by Kenya recently uncovered considerable inconsistencies between the gov-ernment’s records of climate finance received, the amount reported by the Organisation for Economic Co-operation and Development’s (OECD) Development Assistance Committee as climate-relevant ODA, and the amount reported by developed countries in their “fast start climate finance” pledges.30

ENTRUSTING DECISION-MAKING RESPONSIBILITY TO RECIPIENT COUNTRY INSTITUTIONS It can be hard to distinguish where the real power and responsibility for decision making lies.31 While recipient country governments may have formal authority to determine funding priorities and drive the deployment of climate finance, contributor countries and multilateral intermediaries may have considerable informal power to determine how and where funding is spent and to influ-ence the design of projects and programs. The governance structures of most climate funds and institutions place more power in the hands of contributors than recipient countries—whether formally through their governance structures or informally through influence and control over funds.32 This power dynamic tends to result in access modalities that place greater emphasis on accountability than on country ownership.

In the case of the Adaptation Fund and the GEF, every project must be endorsed by the national government of the country or countries that it affects. This endorsement allows the recipient country government to ensure that the project is consistent with its adaptation and mitigation needs. However, the governing body of the fund retains a degree of authority, as every project must be reviewed and approved by the Adaptation Fund Board or the GEF Council to receive funding. The implementing agency, too, retains a degree of responsibility including, in the case of the GEF, for developing a project and supervising its implementation.33 In other words, the balance of power for project approval is divided among multiple parties, only one of which directly represents the interests most affected by the project.

The Adaptation Fund is the first international climate fund that allows national institutions in developing countries to access funding directly, bypassing traditional intermediar-ies. To be accredited to access finance from the Adaptation Fund, institutions (national and international) must dem-onstrate that they meet a set of strict criteria regarding their financial management and integrity. Direct access is a key innovation of the Adaptation Fund and has been viewed by many as an “experiment” in giving stronger ownership to countries. It has vested greater responsibility for the design, management, and monitoring of projects in national institutions, and has enabled effective dialogue with civil society and local communities in some cases.34



However, even the Adaptation Fund could do more to truly enhance country ownership. The fact that each project must secure funding approval from the Adaptation Fund Board (which is composed of 10 developing coun-try members and 6 developed country members) limits, to some extent, the autonomy of national institutions to manage programmatic funding. Furthermore, the extent to which stakeholders have been involved in the selection of a national implementing entity and design of a project has differed among countries. The Adaptation Fund requires a comprehensive stakeholder consultation as part of the project design process, but guidance on how to carry out this consultation—and who should be consulted— is limited. Some countries have chosen to undertake a participatory approach to identifying the national imple-menting entity and developing and implementing projects. In Senegal, for instance, the national implementing entity facilitated a project management mechanism that includes local authorities and civil society and guarantees commu-nity involvement in the implementation. This participatory approach is thought to have been an important factor in contributing to the project’s success so far.35

ENTRUSTING RECIPIENT COUNTRY SYSTEMS TO ENSURE ACCOUNTABILITY IN THE USE OF FUNDS Among existing climate funds and institutions, experience using country systems is limited. The CIFs and the GEF rely exclusively on the policies and procedures of the international implementing entities that act as finan-cial intermediaries. The Adaptation Fund uses the same approach in its intermediary access modality. In its direct access modality, however, it uses country systems—in par-ticular, it relies on the fiduciary standards of the national implementing entity, which are vetted as part of the accreditation process. The Adaptation Fund does not have requirements for environmental and social safeguards as part of its accreditation process,36 although it does assess the environmental and social impacts of projects during the review of a project proposal. The GEF is exploring a direct access modality that will use a similar approach, but will include both fiduciary and environmental and social safeguards as part of the accreditation process for national institutions. The World Bank is exploring the use of national systems for ensuring environmental and social safeguards through its “country systems approach,” which looks at the quality of recipient country laws and policies for environmental and social safeguards, identifies “gap-filling measures” where there are weaknesses, and uses country systems selectively in place of its own safeguard

policies. The World Bank also uses country systems for financial management in a number of countries where it judges national systems to be strong enough.37

The disinclination to make use of developing country accountability systems is not just a feature of climate finance, but is prevalent in the delivery of ODA, despite commitments made by contributors under the 2005 OECD Paris Declaration on Aid Effectiveness to increase the use of country systems.38 While the extent to which development partners use country systems for account-ability varies considerably among contributor countries and institutions as well as among recipient countries, overall their use remains low.39 The OECD’s 2011 assess-ment of aid effectiveness40 found little evidence that contributors are increasing their use of country systems, while use of contributor systems continues to be prevalent. Furthermore, there is limited, if any, correlation between the quality of a country’s PFM systems and the use of country PFM systems by contributors, and there is little evidence to suggest that contributors are using country systems more where the quality of those systems has improved.41

Budget support—in which funding is channeled directly to a country’s budget and disbursed in accordance with its own systems for financial management—has been used to strengthen country ownership of ODA in several countries. Budget support may be general support for a country’s development strategy, or earmarked for a par-ticular sector. In some cases it may be linked to an agreed set of performance indicators or policy reforms, as in the case of the World Bank’s development policy lending instrument.42 These links may give contributors a certain degree of bargaining power in the policy design process.43 A number of contributor countries and institutions, including the European Union and the World Bank, have provided budget support for climate change outcomes to several countries.44 This approach is intended to provide support in a manner that is fully aligned with country priorities and entirely dependent on country systems and institutions, while also providing incentives for countries to strengthen their planning, budgetary allocation, and PFM systems.

Experience with budget support has been mixed. In many cases it has strengthened PFM systems and improved ser-vice delivery, while reducing transaction costs.45 However, its effectiveness depends on the political and institutional context.46 Furthermore, evidence suggests that the decision

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by contributors to provide funding in the form of budget support is not always determined by the quality of PFM systems in the recipient country. An analysis of the correlation between the quality of country PFM systems and the use of budget support47 found that while there was a slightly higher incidence of budget support in countries with stronger PFM systems, the relationship is weak, indicating that in many cases, the decision to provide ODA in the form of budget support is determined, at least partially, by other factors.

Because developed country decision makers often must report back to their own governments and citizens on the effectiveness of their contributor funding for climate change, they may emphasize accountability over country ownership. In some cases, incentive structures in the deci-sion-making bodies of international institutions do not favor strengthened country ownership, as making greater use of country systems means a reduced role for interna-tional entities in mediating funding. Even where there is a will among contributors and recipients of climate finance to promote strengthened country ownership and account-ability, it is difficult to make changes to the operational modalities of existing funds and institutions to create new access modalities or reform existing ones, because of the complex governance structure and bureaucratic processes of decision making.

ii. Developing country approaches to assuming ownership TAKING OWNERSHIP THROUGH NATIONAL PLANS AND PRIORITIES The majority of developing countries included in this research have laws, policies, and action plans for climate change adaptation and mitigation in place or being developed. In some cases these plans are linked to national development plans. For example, the Philippines developed a National Framework Strategy on Climate Change 2010–22 and an associated Climate Change Action Plan. The government passed a Climate Change Act in 2009 that mandates mainstreaming climate change into government policy formulations, including the Medium-Term Philippines Development Plan (2011–16). Other countries, such as Guyana, are integrating climate change and development planning through the formulation of low-carbon development strategies. In many developing countries however, the linkages between climate change policies and national development plans are not clearly

articulated, which can pose a challenge to improved align-ment of climate finance with national development goals and improved integration of climate considerations into development planning.

Furthermore, in most developing countries, the cost of implementing climate change plans has not been esti-mated or integrated into national budgets, making coun-tries reliant on contributor funding to meet their climate-related goals. In Namibia for example, a National Climate Change Policy was developed in 2011 by the Ministry of Environment and a National Climate Change Strategy and Action Plan is under development. However, the climate change policy is not integrated into the medium-term National Development Plans that are developed by the National Planning Commission, the most recent of which does not explicitly address climate change. Furthermore, there has been little attempt to estimate the cost of imple-menting the climate change policy, and there is no budget-ary allocation associated with it, posing a key challenge to its implementation. A similar situation exists in a number of other developing countries (see Thornton 201148 and Thornton 201049 for a discussion of similar challenges in countries in Africa and Asia).

In countries that do not have climate change or low-carbon development plans and strategies in place, or in which plans are in place but fail to clearly spell out priority areas for funding, it is difficult for funders to align their support with national priorities. Similarly, where climate change planning is not mainstreamed into development planning, plans and policies may be poorly aligned or even contradictory, making it difficult to identify where the real priorities lie. Poor integration of climate change and development planning is, in many cases, a result of limited awareness among key policymakers of the challenge that climate change poses to development, and the importance of responding to climate change.50

ENGAGING RELEVANT STAKEHOLDERS Country ownership requires not only that countries take leadership in climate change planning and policymaking, but that they do so in a participatory manner, effectively engaging all relevant stakeholders in the planning process and throughout the implementation and monitoring and evaluation of activities. In Kenya for example, the govern-ment initiated a 20-month multi-stakeholder process to develop the national climate change action plan that was launched in March 2013. A senior-level task force com-posed of representatives from ministries, civil society, and



the private sector oversaw the process. Multi-stakeholder technical working groups were responsible for each of the eight components of the strategy, with a ninth group in charge of coordination.51

When government departments develop policy without adequate engagement and participation of all stakeholders, it can result in plans and policies that do not account for the full range of economic, social, and environmental considerations, and that are not responsive to the needs of vulnerable communities and society at large. Although many countries are making efforts to engage stakeholders in climate change planning processes, there is no mecha-nism to assess the effectiveness and comprehensiveness of this engagement. In many countries there is much room for improvement in ensuring ongoing, systematic, and unified mechanisms to support the continuous engagement of all stakeholders in planning and policy development and implementation.52 Technical skills and expertise to evaluate options for cli-mate change adaptation and mitigation, develop plans and policies, mobilize finance, and implement plans are limited in many developing countries. It is difficult for countries to take ownership of climate finance if key stakeholders within and outside government lack the knowledge of the issues and the technical or general expertise to engage effectively. The capacity challenge is particularly acute in some of the least developed countries, where it is not uncommon for government departments to rely on only a handful of technical staff to play a multitude of roles. The result of limited capacity is that countries rely heavily on international advisors and consultants, often funded by development partners. When development partners take the lead in determining how climate finance is used, country ownership can be compromised. Moreover, if consultants and advisors do not pass their skills and expertise to national actors, capacity will not be strength-ened. Lack of strong leadership within key institutions—often as a result of limited capacity—is another void that development partners often step in to fill.

STRENGTHENING INSTITUTIONS The diversity of institutions and stakeholders affected by or engaged in responding to climate change creates a challenge for effective coordination. In some cases, overlapping or unclear institutional mandates may result in a lack of clear leadership or conflicting policies around climate change. In many cases, climate change planning and policy development falls within the mandate of an

environment ministry, and is given little attention by min-istries of finance or planning—which tend to have more influence and political clout. This arrangement results in climate change being viewed as an environmental concern, rather than a broader economic and social development issue. Weak coordination can result in policies that do not adequately consider the needs and priorities of all climate-relevant sectors or are poorly aligned with other policies. If institutions responsible for decision making have lim-ited capacity or have a poor track record of transparent, accountable decision making, providers of international finance tend to have little trust in the capacity of national actors to make decisions effectively and in the interests of affected stakeholders.

The majority of countries that took part in the workshops that informed this paper are starting to reform institutional arrangements or put in place institutional coordinating mechanisms to deal with this challenge. El Salvador, for example, recently established a Climate Change Committee that brings together ministries of finance, environment and natural resources, agriculture, public works and foreign affairs, as well as an Inter-Institutional Committee for Climate Finance that brings together 20 ministries and autonomous institutions to coordinate matters related to climate finance. Ghana has established a National Climate Change Committee, which has a working group on finance. It also has a unit on natural resources, environment, and climate change within the Ministry of Finance that is responsible for mainstreaming climate change into the budgeting process. Guyana’s low-carbon development strategy mandated the establishment of a new Office of Climate Change to coordinate national climate change policy, and a Project Management Office to implement priority projects under the strategy, both housed within the Office of the Presi-dent. It also established a multi-stakeholder steering committee with broad oversight over all aspects of climate change policy and low-carbon development. The steering committee includes representatives of all relevant govern-ment agencies, civil society (including indigenous peoples), and the private sector.

Some countries are developing innovative funding mecha-nisms, with new approaches to balancing ownership and accountability. The Guyana REDD+ Investment Fund, for example, is a financial mechanism for its low-carbon development strategy that receives funding from the government of Norway. How funding is used is largely the responsibility of the Guyanese government, which

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determines the funding priorities through its low-carbon development strategy, overseen by a multi-stakeholder steering committee. However, the fund has its own steer-ing committee, which includes Norwegian and Guyanese government representatives and is empowered to approve projects for funding. Brazil’s Amazon Fund, which has received funding from Norway and Germany, puts deci-sion making about how funds are spent fully in the hands of the Brazilian National Development Bank (BNDES), which administers the fund.

3.2 Mechanisms for accountabilityIn this section we discuss the mechanisms and systems that international funds and institutions, as well as recipi-ent countries, have in place to ensure accountability in the use of climate finance.

i. Accountability in international funds and institutionsThe MDBs have various policies and procedures to ensure accountability in the use of funds. Fiduciary policies are designed to ensure that all funded activities are financially sound, covering financial management, procurement, and disbursement. Policies for monitoring and evaluation (M&E) and reporting are used to verify progress toward and achievement of results, provide lessons to inform and improve ongoing and future support, and promote accountability for results. Environmental and social safeguard policies address a range of issues including impacts on natural habitats and biodiversity, indigenous peoples and cultural property, and involuntary resettlement of people affected by projects, among others. On the private sector side, the International Finance Corporation (IFC, the private sector arm of the World Bank) uses a set of “performance standards” on social and environmental sustainability, which defines responsibilities for managing environmental and social risks that IFC’s private sector clients must agree to in order to receive funding. The World Bank has piloted the use of country systems for environmental and social safeguards in 11 countries, using a combination of country systems (with gap-filling measures in some cases) where they are deemed strong enough, and Bank policies where they are not. The World Bank has explored using country systems for fiduciary aspects, including financial management (accounting, financial reporting, auditing) and national competitive bidding procurement. The Adaptation Fund has a set of criteria for financial management and transparency that implementing entities must meet in order to be accredited. In practice, the accreditation procedure has been challenging for many developing country institutions and the amount of funding available from the Adaptation Fund quite small, creating limited incentives for some countries to go through the process of applying for accreditation. The Adaptation Fund has no requirements for environmental and social safeguards as part of its accreditation process, although environmental and social impacts are assessed during

Better alignment of international funds with country priorities is needed. Strengthened communication between governments and their development partners and a concerted effort by the latter to understand and contribute to country pri-orities is needed. Devolving power from headquarters to local offices could be an important step in this regard. Development partners can play an important role in supporting participa-tory decision-making processes. There is also a need for better coordination and coherence between international climate funds and institutions.

Greater decision-making power and responsibility should be placed in the hands of recipient country stakeholders. Progress toward this goal can be achieved through the design or reform of governance structures, as well as operational processes that give recipient governments or institutions greater autonomy in determining how funds are spent, and that institutionalize broad stakeholder engagement in decision making.

Greater use of country systems for accountability by international climate funds and institutions is needed. Use of country systems does not appear to be strongly related to their quality. Development partners should endeavor to use country systems as much as possible, and help strengthen country systems through increased use.

Developing countries need to strengthen participatory planning processes and clearly articulate their priorities. While many developing countries are starting to develop climate policies and plans and to strengthen their institutional capacity to implement them, there is a need for greater integration between development and climate planning and budgeting processes, and for a clear articulation of priorities for funding.

Box 3 | Key Insights On Country Ownership



the project review stage. It is developing a policy to more explicitly address environmental and social risks in its operations.53

The GEF has introduced a minimum set of fiduciary standards that its implementing agencies must meet.54 National institutions applying for direct access under the GEF’s new policy to broaden partnership to national institutions will be assessed against these fiduciary stan-dards during the accreditation process. Until recently, the GEF relied on the safeguard policies of its international implementing agencies, however, it recently developed evaluation criteria on environmental and social safeguards and gender mainstreaming, which will be included as accreditation requirements for national institutions, and will also be applied to (international) implementing agencies.

The Climate Investment Funds do not have an accreditation mechanism. They rely on the fiduciary and safeguard policies and procedures of the MDBs that act as implementing entities.

The reluctance of contributors to use national systems for accountability can result in challenges for recipient countries. The accountability systems applied by inter-national funds and institutions are often poorly aligned with those of developing countries, and inconsistent among contributors, creating an administrative burden and requiring staff and resources that could otherwise be focused on strengthening recipient countries’ own proce-dures and systems. Recipient country administrators can face an enormous burden keeping up with the multitude of complex and dissimilar funder requirements. An over-emphasis on reporting requirements can foster a tendency among funders and recipients to emphasize account-ability to the funder over accountability to the intended beneficiaries of the funding. Furthermore, delays in fund disbursement make it challenging for recipient country governments to implement planned initiatives within the proposed time frame.

Some countries have begun to find innovative ways to address these challenges. Mali, for example, established a national strategy on development assistance, which prompted contributors to develop a common country assistance strategy. Increased contributor coordination has reportedly benefitted the country.

ii. Accountability in recipient countries Country systems for public financial management include budgeting, budget implementation, accounting, reporting, and internal and external audits. While these tools are in place primarily for managing the domestic budget, they are equally applicable to finance (domestic and interna-tional) for climate-change-related initiatives. Several tools assess the quality of countries’ PFM systems. For example, the World Bank’s Country Policy and Institutional Assess-ment (CPIA)55 found that the majority (82 percent) of the Bank’s International Development Association (IDA)-eli-gible countries56 have fairly robust public financial man-agement systems.57 As IDA countries are almost all low-income and lower–middle-income countries and those that lack the creditworthiness to access funds from the World Bank’s International Bank for Reconstruction and Development (IBRD), the IDA sample of countries would be expected to be the weakest of all developing countries. Indeed, the Public Expenditure and Accountability (PEFA) Program’s assessment,58 which includes a wider range of countries, showed that some of the upper-middle-income and emerging-market developing countries scored very well on public financial management systems. South Africa scored an average B+, higher than Switzerland and Norway. Brazil, Thailand, Tunisia, Bhutan, Peru, and Costa Rica all scored between B and B+—on par with a number of developed countries.

The majority of countries included in this study do not have a national system or consistent approach to monitor-ing and evaluation and ensuring accountability for results, either for domestic or international funding for climate change or development more broadly. Instead they rely on project-specific procedures for monitoring and evaluation of results, which are often determined by the project funder. In practice this means that a country can be subject to a plethora of different procedures and mechanisms for monitoring and evaluation, gathering different information and levels of detail for different projects. A number of countries are starting to develop approaches for improved monitoring and evaluation of domestic and international expenditures. For example, Namibia has recently created a Monitoring and Evaluation Department within the National Planning Commission and its most recent Fourth National Development Plan emphasizes the importance of monitoring and evaluation to assess the effectiveness of funding in line with the plan’s objectives.

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When it comes to environmental and social safeguards, several countries included in this study have robust laws and policies around environmental and social impact assessments. In Namibia, for example, the Environmental Management Act 2007 prescribes guidelines for environ-mental impact assessments that stipulate the types of projects that require them, the required process to conduct the assessment, and the actions to be taken depending on its outcome. These guidelines replace former sector-specific guidelines that applied only to projects in sectors with high environmental impact, such as mining. Similarly in Ethiopia, the Environmental Impact Assessment Proc-lamation of 2002 sets out the requirements for strategic environmental assessments and environmental impact assessments. The Environmental Protection Authority is responsible for ensuring that the assessments are completed and for issuing the required environmental clearances for projects.

Although this study has not attempted an in-depth assess-ment of country laws and policies around environmental and social impact assessments, a number of indicators can be used as proxies for the extent to which countries provide protections for ecosystems and people in their national laws and judicial processes. For example, accord-ing to the World Bank’s CPIA scores,59 73 percent of IDA countries had environmental policies and regulations in place, along with systems for environmental impact assessment. Within these countries, there was some attempt to integrate climate risks into plans and proj-ects in vulnerable sectors, although there may be gaps in implementation because of limited capacity. However, there is a need to strengthen public consultation and access to information as well as to strengthen grievance and judicial systems for environmental issues.

In most countries, progress toward social safeguards has been slower. The CPIA measures of security of property rights and quality of the legal and judicial system—impor-tant components of social safeguards against potentially harmful projects—indicates that 60 percent of countries have protection for property rights in law, but capacity and institutions to implement the law may be limited; and the judicial system may be subject to political inter-ference and corruption. In the lower-scoring 40 percent, property rights were not well defined, the judiciary was not independent of the executive and legislature, and courts and judicial systems were not easily accessible to citizens.

It should be noted, however, that the CPIA scores apply to the world’s 78 least developed countries. If we look at the sample of developing countries included in the World Bank’s pilot country systems approach, the assessment of environmental and social safeguards is much stronger. The developing countries selected for the pilot approach include Bhutan, Egypt, Ghana, India, Jamaica, Lao, Tunisia, South Africa, and Brazil. In all cases, the country’s regulatory framework for environmental assessment was found to be equivalent to the World Bank’s policy on environmental assessment (in some cases, gap-filling measures were proposed to achieve equivalence). In several countries, the regulatory framework for other safe-guards including natural habitats, physical and cultural resources, and involuntary resettlement, was found to be equivalent to the World Bank’s policy. In a few countries, the regulatory framework for involuntary resettlement and indigenous peoples were not found to be equivalent to the Bank’s policies, and the Bank thus reverted to its own safeguard policies on these issues. In South Africa and Brazil, the regulatory framework for all the safeguard policies triggered by the proposed project was found to be equivalent to the World Bank’s policies.60

In countries where systems for accountability are weak, it is difficult for providers of international climate finance to rely on country systems. Weaknesses in country account-ability systems are often a result of limited financial and technical resources and limited capacity to strengthen them. Governments may face little pressure or incentive to strengthen these systems in countries where there are broader governance challenges, such as weak rule of law, expansive government powers, and limited accountability to citizens. In other cases, weak systems may remain weak simply though government inefficiency and bureaucratic inertia. Weaknesses in country systems are perpetuated when development partners channel funding through parallel systems and apply their own accountability mechanisms. There may be political reasons that countries are reluctant to strengthen systems for accountability. Developing countries may feel an unwillingness to invest in strengthening their systems for accountability if they lack confidence that their international partners will give them greater ownership of funding, and they may perceive the effort and cost of strengthening national systems as outweighing the benefits. In some cases, they may perceive contributor pressure to strengthen country systems as infringing on national sovereignty.



4. MOVING TOWARD STRENGTHENED OWNERSHIP AND ACCOUNTABILITY4.1 Options for enhancing ownership and accountability through different access modalitiesIn an ideal world, recipient country stakeholders (govern-ments, beneficiaries, and citizens) would be empowered to determine where and how climate finance is used and to rely on strong country systems for accountability. Concurrently, governments and other decision makers would manage and use funding in a way that is transpar-ent, inclusive of stakeholders, and accountable (to citizens, beneficiaries and contributors) for the achievement of results and for ensuring adequate fiduciary standards and environmental and social safeguards. As Chapter 3 described, country systems for accountability are imper-fect, governments are not always transparent and inclusive, and access modalities for international climate finance are not always empowering for recipient countries. Further-more, a lack of trust between contributors and recipients of climate finance can lead to a perpetuation of weak accountability systems and access modalities that disem-power recipients. While the goal of both contributors and recipients should be to simultaneously strengthen country ownership and systems for accountability in recipient countries, in the short term, international climate funds and institutions may face trade-offs and need to strike an acceptable balance between ownership and accountability. In practice, finding this balance may come down to negoti-ations between a recipient country and its climate finance contributors, and may be largely influenced by existing bilateral relationships and trust developed over time.

In this section we discuss three models for access modali-ties for climate finance, which differ in the extent to which they emphasize ownership and accountability. The options are based on the experiences of a number of international and national funds and funding modalities. We discuss the extent to which each of these models promotes effective-ness and legitimacy of climate finance by empowering recipient countries and ensuring accountability, and con-sider the circumstances in which each may be appropriate.

i. Emphasis on accountability over ownership The “accountability over ownership” model emphasizes contributor-centered accountability, often at the expense of recipient country ownership. In this model, inter-national funds and institutions achieve accountability

Country systems for accountability vary, but could be used more. Systems for financial management are reason-ably strong in most developing countries, including some of the least developed countries. In some of the more advanced developing countries, financial management systems are on a par with those of developed nations. Laws and policies for envi-ronmental and social safeguards are in place in the majority of developing countries but the extent to which they are effectively implemented varies.

International funds and institutions should direct their efforts toward supporting developing countries to strengthen their accountability systems. This change would reduce the duplication of effort and the administrative burden caused by applying a separate set of procedures that are not well aligned with country systems. Countries that have gone through the process of having a national implementing entity accredited for the Adaptation Fund report that the learning acquired through this process has been instrumental in building the capacity of institutions for financial management. Some in-ternational climate institutions, including the Adaptation Fund, the GEF, and the World Bank, are exploring ways to use country systems for accountability.

Developing countries need to invest in strengthening their own systems for accountability. Taking proactive steps to apply stronger standards of accountability to their own domestic climate finance would enhance the effectiveness of funding and provide a positive signal to potential funders. It would also place countries in a stronger position with develop-ment partners to insist on the use of country systems.

Box 4 | Key Insights On Country Accountability

through the use of their own policies, procedures, and sys-tems and do not make use of country systems, perceiving them to be less stringent. There may be some attempt to align funding with national priorities, but contributors retain control over how funding is used and which institu-tions it is channeled through and to.

An example is the World Bank and other MDBs’ tradi-tional investment lending approach. Although projects are designed in collaboration with recipient country governments and in the context of the country assistance strategy, the World Bank retains much of the decision-making power over how funding is spent, and applies its own operational policies and procedures to ensure accountability in the use of finance.

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Another example of this model is the GEF’s traditional approach. The GEF attempts to align its funding sup-port with national priorities and requires the national focal point to approve all projects. However, a significant part of the responsibility for the development and imple-mentation oversight of GEF projects lies in the hands of GEF agencies, which are currently MDBs or UN entities (although the GEF is in the process of accrediting national institutions), and all projects must be approved by the GEF Council.61 Despite an equal representation of devel-oping countries on the GEF Council, the GEF governance structure is not necessarily empowering to developing countries because contributor countries continue to have significant influence, particularly on issues related to fund allocation.62, 63 The GEF is reforming its model to place greater emphasis on country ownership, after announcing in 2011 that it would include national entities as partner agencies. A number of institutions in develop-ing countries have submitted applications to be accredited as partner agencies, and the GEF Council is assessing these applications against its accreditation requirements and further determining how its direct access modality will work in practice.

The CIFs also use a funding model that places greater emphasis on accountability than on country ownership. The requirement that country governments, in partner-ship with the MDBs, develop an investment plan that sets out the country context and identifies priority areas for funding provides an important opportunity for develop-ing country governments to ensure that CIFs funding is aligned with national priorities. However, the develop-ment and implementation of projects under an investment

plan take place in accordance with the policies and pro-cedures of the MDBs. The CIFs rely entirely on the MDB policies and procedures for ensuring accountability in the use of funds and do not attempt to use country systems.64

Although this model is prevalent in the current climate finance landscape, it is neither empowering to recipient countries, nor does it support the strengthening of country systems for accountability. Such a model is unlikely to be sustainable or effective in the long term, as developing countries that feel disempowered will increasingly turn to other contributors to support their low-carbon, climate resilient development objectives. A model that emphasizes accountability without attempting to strengthen country ownership is likely to be appropriate only in rare cases of countries in which systems for accountability are very weak and there is little political will to reform them. This may be the case in post-conflict countries, for example, where country systems may be fragile and unreliable, or in countries that are plagued by high levels of corruption, in which there is a high risk of mismanage-ment of funds.

ii. Transitional shared ownership and accountability In the “transitional” model, the recipient country has partial ownership of climate finance, but the contributor or an international intermediary retains some control, usually to ensure adequate accountability for the effective and responsible use of the finance. Funding is aligned with the recipient country’s national priorities as set out in its national climate or development plans. This model is

Figure 2 | Emphasis On Accountability Over Ownership

OWNERSHIP

ACCOUNTABILITY

Recipient Country-centered Contributor-centered



transitional because it represents an attempt to strengthen country ownership despite weaknesses in country systems and institutions, and provides opportunities to transition to using country systems over time, as they are strength-ened. This model has many variants in the current climate finance landscape, and there are many possibilities for how such a transitional model could be applied in different country contexts.

An example of this model is the Guyana REDD+ Invest-ment Fund (GRIF). The GRIF was established as the financial mechanism for Guyana’s Low Carbon Devel-opment Strategy, which identifies priority sectors and projects for funding. Projects are developed by a national implementing entity in collaboration with an international “partner entity.” The division of power between these entities has not been clearly defined; in theory, the role of the partner entity is to ensure that fiduciary, environ-mental, and social safeguards are met, but in practice, these entities have also played a role in determining the scope and implementation arrangements of projects. The GRIF has a steering committee on which the governments of Guyana and Norway (currently the only contributor) have equal voting power and, therefore, shared decision-making responsibility. The steering committee determines whether a proposed project can receive funding. Funding is, by design, aligned with national priorities set out in the Low Carbon Development Strategy, which are determined by the Government of Guyana with limited stakeholder consultation, but the contributor retains some decision-making power through its role on the steering committee. Because of perceived weaknesses in country systems, the GRIF does not use national systems for accountability.

The trustee of the fund is the World Bank, and funding flows through the partner entities (United Nations Devel-opment Programme, Inter-American Development Bank, and World Bank), who apply their policies and procedures to the funding, rather than through national systems.

Another example is the direct access modality in the Adaptation Fund. The Adaptation Fund’s direct access modality places considerable responsibility in the hands of national institutions; the national implementing entity identifies and develops a project proposal and, if approved, implements the project. The national implementing entity does not have complete ownership, however, because the decision of whether or not to fund a project lies with the Adaptation Fund Board. If a proposed project receives funding, accountability lies with the national implementing entity, which uses funds in line with its own fiduciary stan-dards and project implementation procedures, which are assessed as part of the accreditation process. Experiences from the Adaptation Fund show that this accreditation and project implementation process has been instrumental in building the capacity of national institutions to manage climate finance, and in strengthening transparency and stakeholder engagement in the project development, implementation, and monitoring processes.

STRENGTHENING OWNERSHIP AND ACCOUNTABILITY IN THE TRANSITIONAL MODEL The transitional model offers the opportunity to pursue novel ways to strengthen country ownership and systems for accountability over a realistic time horizon (which will differ from one country to another), while taking a prag-matic approach to managing the short-term trade-offs as a

Figure 3 | Transitional Shared Ownership and Accountability

ACCOUNTABILITY

ACCOUNTABILITY


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result of weaknesses in country systems. Several ways that developing country ownership and systems for account-ability could be strengthened using the transitional model are explored below.

Strengthening transparency and stakeholder engagement The transitional model assumes that there is a concerted effort to align funding with recipient country priorities. However, the extent to which these priorities are deter-mined through a transparent, participatory process— and the extent to which stakeholders are engaged in the design and implementation of projects or programs—can vary considerably among countries. In this approach, the contributor and recipient agree on a process for ensuring transparency and meaningful engagement of stakeholders throughout the design, implementation, and M&E of funded activities, in an effort to institutionalize the empowerment of intended beneficiaries and citizens, as well as that of the recipient governments or other institutions.

A phased approach to strengthening ownership and accountability In a phased approach to strengthening and using country systems, the contributor and recipient agree on a timeline and roadmap for strengthening country systems and gradually moving toward using the newly strengthened country systems. This approach could also involve partnerships among international funds or institutions, each with a different area of expertise, and one or more recipient country (government or nongovernment) institution(s). This approach is being explored by a number of national funds including the GRIF, Bangladesh Climate Change Resilience Fund, and the Indonesia Climate Change Trust Fund. The GRIF, for example, is investing in strengthening institutions for improved accountability—including the Guyana Forestry Commission, which oversees the moni-toring, evaluation, and reporting of avoided greenhouse gas emissions and the Guyana Environmental Protection Authority, which oversees environmental impact assess-ments. The government of Guyana is in discussions with the contributor (Norway) and implementing entities to explore how the GRIF can move toward a greater use of country systems in the future.

Selective use of country systems This option would assess a country or institution’s systems for accountability and use them selectively where they are deemed strong enough (or adequate with gap-filling

measures), while relying on the systems of international funds or institutions where country systems are weak. The World Bank’s country systems approach to applying environmental and social safeguards has experimented with this option. In Ghana, for example, the World Bank assessed the equivalence of the country’s systems against five of its safeguard policies that were applicable to an energy development and access project implemented through the pilot country systems approach. The assess-ment found Ghanaian laws and systems to be equivalent, with modest gap-filling measures, for two safeguard policies (environmental assessment and physical cultural resources), but not for the other three, where the Bank used its own safeguard policies in place of country systems.65

A context-specific approach to accountability The diversity of climate-related projects and programs and the many means for financing them suggests that the types of checks and balances needed to ensure adequate accountability may vary across contexts. For example, contributors may want to ensure more rigorous standards of financial and results management in the disbursement of a large, multi-year loan, than in the case of a small, one-off grant. Similarly, the need for strong environmen-tal and social safeguards may be greater for finance that is used for large infrastructure projects than that which is used for capacity-building initiatives. In another example, there may be a need for more regular monitoring and reporting on progress toward the achievement of results and smaller, more regular disbursements of funding for a country or institution that has a poor track record of accountability for results or financial management, environmental and social safeguards, or transparency and stakeholder engagement than for one that has a strong track record in these areas. This approach would take into consideration factors such as the scale of funding, financial instrument used, type of investment, and track record of the recipient country or institution in determining what accountability systems are necessary and what level of rigor the recipient institution needs to demonstrate in order to access funds. The World Bank has applied this method to some extent in its country systems approach, in that it identifies which of its eight safeguard policies are triggered by a proposed project and assesses only the country systems’ equivalence with those that it deems relevant.

A learning-by-doing approachThe experience of the Adaptation Fund has shown that the process of applying for accreditation, implementing



projects, and monitoring and evaluating their progress according to a strong set of standards is in itself an exercise in building the capacity of national institutions and strengthening national systems for accountability. A learning-by-doing approach would define a minimum set of standards that institutions must meet to access international climate finance, recognizing that they will be further strengthened through the learning process that comes with use and experience.

APPLYING THE TRANSITIONAL MODEL A transitional shared ownership and accountability model may be appropriate for a diversity of country contexts, with the design of the particular model depending on the particular strengths and weaknesses in country systems. As Chapter 3 shows, even though the majority of developing countries have fairly robust systems for public financial management, contributors tend to rely on parallel systems. Furthermore, the majority of countries have climate- and development-related plans and policies in place. Many developing countries have weaker systems for results management and environmental and social safeguards. The selective use of country systems may, therefore, be an appropriate model for many countries that have strong systems for some aspects of accountability and weaker systems on others. A phased approach may be particularly appropriate for countries that have some weaknesses in their national systems for accountability, but a strong political will to strengthen these systems. The various approaches described above are not exhaustive, and can be combined in any number of ways depending on the context. Financial and technical support to countries

for strengthening their systems during the transitional period is essential to ensure that this model can be effectively implemented.

iii. Full recipient country ownership and accountability In this model, the recipient country has full ownership of climate finance received, and the contributor fully entrusts the funding it provides to national institutions and national systems. Decisions on how funding is used are made by national actors, in line with national plans and priorities, within the boundaries of the agreement made with the contributor (for example, the contributor may provide funding for a particular sector). Country systems for results management, fiduciary standards, and environ-mental and social safeguards are used and the recipient country is fully accountable for results.

To the authors’ knowledge, there is no existing example in which this model is achieved fully. The closest example may be the Amazon Fund. The Amazon Fund was estab-lished by the Brazilian government to raise funds to prevent deforestation and promote sustainable use of forests. It is managed by the Brazilian National Develop-ment Bank (BNDES), which is responsible for all aspects of project assessment and approval, M&E, and financial management. It has received funding from Norway and Germany through payments made directly to BNDES, linked to reductions in greenhouse gas emissions from reduced deforestation and forest degradation.66 The Amazon Fund’s guidance committee—composed of rep-resentative from federal government, state governments, and civil society—is responsible for setting guidelines for

Figure 4 | Full Recipient Country Ownership and Accountability


OWNERSHIP ACCOUNTABILITY

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funding support and monitoring the results obtained. A technical committee, appointed by the Ministry of Environment, is charged with certifying the emissions count from deforestation of the Amazon Forest. How-ever, decisions on the allocation of funds are made by BNDES, in line with national policies. In practice, neither the guidance committee nor the Ministry of Environment has much authority in determining how funds are used.67 Accountability is exercised through BNDES’ policies and procedures and national laws and regulations.

The Amazon Fund has been able to attract international climate funding because Brazil is an emerging market and an upper-middle-income country with strong account-ability institutions and systems. Further, donors are likely reassured by BNDES’s status as a large bank with invest-ments all over the world and the highest standards of accountability. However, a weakness of the Amazon Fund is that the de facto power of BNDES in determining how funding is allocated results in limited involvement of relevant stakeholders (including government agencies and civil society) in the decision-making process, leaving room for improvement in achieving genuine and full country ownership.

The case of budget support provides another example in which the recipient country has complete, or almost complete, ownership of finance it receives. This funding modality is designed to directly support a country’s development plans—either at the national level or within a particular sector—and relies fully on the country’s own institutions for decision making and systems for account-ability. While this modality has had positive results in strengthening country systems for financial management, the evidence suggests that it delivers better results in contexts with strong institutional capacity and systems for financial management, or where there is a strong political commitment to strengthen them.68 Where systems for accountability are weak, budget support would not repre-sent a “full country ownership and accountability model” as the accountability component would be compromised.

This model represents an ideal that recipient and contributor countries should aim to graduate towards as systems for accountability in developing countries are strengthened. In this model, the provision of funding would be linked to the delivery of agreed outcomes or results (including process outcomes relating to trans-parent, participatory governance and financially, environ-mentally, and socially sound investment), measured

through agreed indicators. By linking funding to a set of performance indicators, this model reduces transaction costs and makes it easier for the private sector to engage in low-carbon activities. It is also a low-risk option, because although the contributor relinquishes control of the allocation, deployment, and monitoring of finance to the recipient country, it maintains leverage through the ability to discontinue funding support if conditions are breached. There is, therefore, a strong incentive for the recipient to ensure that its accountability systems are strong. This model relies on well-established systems for accountability, and strong institutional capacity to implement them and report on results. For countries in which systems for accountability are not well established, or in which institutions have limited capacity to imple-ment the relevant laws and policies, it would be important to strengthen these systems and institutions before this model could be used to best effect.

5. RECOMMENDATIONS TO RECIPIENT COUNTRIES AND CONTRIBUTOR COUNTRIES, AND TO FUNDS AND INSTITUTIONS, PARTICULARLY THE GCFThe experiences of developing countries and their inter-national partners—including contributor countries, funds, and institutions—highlight the many challenges to achiev-ing more effective governance of climate finance, in which developing country stakeholders are empowered to use cli-mate finance effectively and accountably toward their low-carbon, climate-resilient development objectives. The “full recipient country ownership and accountability model” described above represents an ideal that countries and their international partners should strive to work toward, but one which may be a long-term goal for some countries. In the short term, developing countries can take a number of steps to strengthen their capacities, institutions, and systems to use climate finance effectively and accountably; and contributor countries, funds, and institutions can sup-port them in doing so.

The GCF, which is likely to become a significant source of climate finance, has an important role to play in pro-moting a paradigm shift that will put countries onto a low-carbon, climate-resilient development pathway. The GCF’s success will hinge in part on its ability to respond to recipient country needs and priorities, and to put recipient country stakeholders in the driver’s seat in determining how funding is used. The GCF’s impact will also turn on its ability to use and strengthen country accountability



systems while ensuring that funded activities are designed and implemented in a transparent, participatory, and accountable manner. The following sections draw on the experiences discussed in previous chapters to make rec-ommendations to developing country recipients of climate finance; to the countries, funds, and institutions that are sources of finance; and to the GCF.

5.1 Recommendations to recipient countriesIntegrate climate change into all aspects of development planning. Integrating climate change considerations into development planning is important to ensure that policies and programs across sectors are climate resilient and will contribute to the country’s development objectives over the long term. This integration is a precondition to ensuring that climate finance accessed from international sources is effectively aligned with the country’s climate and development goals.

Identify clear priorities. Clearly articulating priority areas for action is the first step toward taking ownership. When countries have clearly articulated priorities that are deter-mined through an objective analysis of options (that takes into account economic, social and environmental consid-erations), they are in a stronger position to engage with international partners, align domestic and international climate finance with priority needs, and develop realistic and achievable roadmaps and targets for implementation.

Put in place appropriate institutional arrangements. Having a strong government entity as a champion for climate change action is important for integrating climate change into development planning and programming. To this end, it is important that the unit responsible for climate change policy is located in a ministry or office of government that has the political authority to ensure that appropriate actions are taken across sectors and at various levels of government (national, regional, and local). Coor-dinating committees with a mandate to deal with climate change policy issues can be effective in bringing together key stakeholders and ensuring that there is awareness and communication across sectors of government and between government and nongovernmental actors. These commit-tees could also coordinate and streamline climate finance accessed from international sources.

Involve relevant stakeholders. Broad stakeholder involve-ment at planning, design, implementation, and M&E stages of climate-relevant policies, programs, and projects

is important to ensure that they are ambitious, robustly designed, effectively implemented, and adequately accountable. It also helps to ensure broad domestic sup-port, build broad-based confidence, and ensure sustain-ability of actions taken, including with climate finance accessed from international sources. This involvement includes support from not only national government stakeholders, but also subnational and local governments, parliamentarians, civil society, communities, state-owned enterprises, and the private sector.

Strengthen skills and expertise. Lack of capacity poses a challenge for the majority of developing countries seek-ing to effectively access and deploy international climate finance. There is no simple or “one-size-fits-all” approach to addressing these capacity gaps. A first step is trying to identify the most critical capacity gaps. Technical skills and expertise can be strengthened through a number of approaches, including targeted training programs for staff of government departments, financial institutions, indus-try, or civil society organizations. Management training can be valuable for strengthening the capacity of senior staff in government and non-government institutions. Long-term international advisors placed in government ministries to transfer skills and train local staff can be more effective in building skills and expertise over the long term than bringing in short-term consultants to fill capacity gaps. Exchange programs with partner institu-tions in other countries, and sending staff on field visits to other countries or regions, can be useful mechanisms to bring in ideas and best practices from elsewhere. Strengthen country systems for accountability. Having strong systems in place to ensure sound financial man-agement, monitor for results, and avoid undue harm to people and ecosystems are critical prerequisites to effectively accessing and deploying finance toward low-carbon, climate-resilient development. A starting point to strengthening country systems is for developing country governments to engage in dialogue with their international partners to identify the gaps in existing systems and agree on steps that each will take toward strengthening country systems. However, strengthening systems for account-ability should be viewed by governments as a development objective in itself, which can also have important benefits for the effective use of domestic finance, and not just as a requirement of international funders.

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5.2 Recommendations to contributor countries, funders, and institutionsAlign support with country priorities. International climate finance is likely to have greater impact and be more sustainable over the long term if it contributes to achievement of a country’s long-term goals. If country priorities are not clear, international partners can play a role in supporting the government to plan and analyze options that can help inform priorities, and in supporting civil society and other stakeholders to engage in this process. To align support with country priorities, inter-national partners need to have a good understanding of the country context and provide support in a manner that is respectful of the perspectives and priorities of recipient country stakeholders.

Devolve decision making to the country level. Staff based in the country offices of bilateral or multilateral sources of climate finance are likely to have a better understanding of the needs and circumstances of recipient countries than those based in headquarters. Thus, devolving deci-sion making away from the headquarters of contributors to country offices or to capable institutions in recipient countries can be a strategic step toward responding more effectively to countries’ needs and priorities, ultimately yielding more sustainable results.

Use country systems as far as possible. Even if they are not perfect, contributors of international climate finance need to make a concerted effort to use recipient country systems as far as possible. A first step is to improve the dialogue with developing country governments to better understand the context and needs, and to build trust. Contributor and recipient country governments can work together to identify how to transition to the use of strengthened country systems, for example, by agreeing on measures to close gaps where there are weaknesses in the country’s systems, or agreeing on a phased approach allowing a transition to country systems over time as they are strengthened.

Support countries in strengthening systems for account-ability. Contributor countries can play an important role in supporting recipients to put in place the accountability systems that will allow them to take greater ownership of climate finance and give contributors the confidence to entrust the recipient’s institutions with managing interna-tional climate finance. Strengthening country systems and institutions can lead to a virtuous cycle where empowered

governments and citizens become champions for low- carbon, climate-resilient development; are able to mobilize domestic and international funding in support of climate objectives; and invest further in strengthening systems and pursuing results. Several international climate funds and institutions are developing rules and procedures for accountability. However, since these are themselves new and untested, the resources invested in this effort could be more effectively directed to strengthening recipient coun-tries’ accountability systems. Support could also come from other development partners because of the broader development benefits of improving national accountability, thus freeing up climate finance for specifically achieving a country’s climate objectives.

Improve coordination and harmonization. International partners can enhance the collective impact of their funding if they work toward a common set of objectives (defined by the country’s stated priorities) and rely on the institutional capacities and systems of the recipient country. Stream-lining climate finance contributions through recipient country institutions and systems helps to ensure comple-mentary and synergistic use of international climate finance and lowers the overall transaction costs for contributors and recipients associated with different processes and standards.69

Build flexibility into the design of international funds and institutions. Given that systems vary in their robustness, both within and among recipient countries, international climate funds and institutions should have the flexibility to use a subset of a recipient country’s systems where they are strong, and gradually shift to using other systems as they are strengthened. Furthermore, funds and institu-tions should be flexible in applying rigorous accountability standards as appropriate to the scale and nature of finance provided. For example, in cases where specific types of funded activities—such as technical assistance or policy support—are unlikely to pose any major risk to people or the environment, it may not be necessary to apply stringent environmental and social safeguards.

5.3 Recommendations to the GCF The GCF needs to develop access modalities that cater to a range of intermediaries and implementing entities operating at various geographic scales, including at the global, regional, subregional, national, provincial, and local levels. It also needs to cater to a range of types of institutions with different political and legal identities,



including public, civil society, and private sector institu-tions operating within a diversity of circumstances. In designing its access modalities, the GCF should be pro-gressive and build on best practices to promote stronger ownership, while ensuring that accountability systems are adequate and commensurate with the level of risk posed by a proposed investment.

The GCF’s governing instrument commits to providing “simplified and improved access to funding, including direct access” and to ensuring that the activities it funds follow a country-driven approach and promote the involvement of relevant stakeholders. Over the course of the next six to twelve months, the board will further define what such access modalities will look like. A decision at a recent GCF Board meeting in Berlin notes that the GCF will “commence as a fund that operates through accredited national, regional, and international intermediaries and implementing entities” providing some early guidance in that direction.70 The board began to define the criteria for accreditation of these intermediaries and implementing entities at its recent meeting in Paris in October 2013, and is expected to adopt a guiding framework for accreditation in 2014.71 Four recommendations to the GCF Board are discussed below.

Align GCF funding with national priorities through multi-year investment strategies The GCF should institutionalize an approach that puts developing-country-owned climate plans and priorities at the center of its funding activities. This approach would require recipient countries, possibly through their the national designated authorities, to work with potential intermediaries and implementing entities (international, regional, national or subnational) as well as other stake-holders, to develop multi-year plans or strategies that provide a blueprint for scaling-up low-carbon, climate-resilient investments. Such an investment strategy should consider the full range of sources of climate finance, including domestic and international, public and private sources, including from the GCF and its Private Sector Facility. The GCF could develop—in consultation with key stakeholders and building on existing practice—guidelines to countries for developing such a strategy. It is important that the GCF create incentives for countries to strengthen and coordinate existing plans and strategies rather than create a parallel planning process.

Devolve program and project decision making to the country levelThe GCF Board could make strategic and policy decisions, leaving specific program and project investment decisions to the intermediaries and implementing entities, particu-larly to accredited entities that are predominantly owned and controlled by recipient countries. International inter-mediaries and implementing entities could also employ financing approaches such as programmatic lending, or financial instruments such as development policy loans, that put greater responsibility for delivering results in the hands of the recipient countries. The GCF governing instrument empowers national designated authorities to recommend programs and projects for the GCF to fund through international intermediaries or implementing entities and the decision establishing the GCF provides for a transparent “no-objection” procedure to be implemented through the national designated authorities to ensure that public and private sector programs or projects are aligned with national priorities. This devolution and vetting pro-cess can play a valuable role in maximizing the impact of GCF investments in a country.

Trust country systems and invest in strengthening themAs the development effectiveness practice has shown, the GCF is likely to be more effective if it relies on country systems to the extent that they meet requisite benchmark accountability standards for results management, financial management, and environmental and social safeguards. However, as the Adaptation Fund and GEF experiences have shown, these standards cannot be so onerous as to severely limit recipient-country institutions operating at various geographical levels from intermediating or accessing the GCF’s resources. Differentiated accreditation requirements—in which the criteria that an entity must meet to directly access GCF funds correspond to the level of risk associated with the proposed investments—could make the GCF accessible to a wide range of institutions, without compromising accountability (see Box 5).

The GCF governing instrument, quite importantly, also provides for strengthening fiduciary systems and environ-mental and social safeguards in recipient countries. The GCF Board will need to determine the extent to which it would like the use the GCF’s resources to strengthen such systems, and the extent to which it could forge part-nerships with other development partners, who have been providing such support to countries for decades. For example, the GCF may itself want to support the

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resilience-building programs, or private sector entities expected to invest in clean energy programs, are fully engaged in all stages of planning and implementation. The GCF should develop minimum benchmark standards for transparency and stakeholder engagement that inter-mediaries and implementing entities aspire to in order to access the GCF. The national designated authorities will also have an important role to play in achieving these goals. A variety of national entities, including a govern-ment agency, another national institution or set of institu-tions, or a committee with representation from a range of government and nongovernment stakeholders, could play the role of a national designated authority for each country. Whatever the structure of the national designated authority, it should strive to be transparent and inclusive and should aim to facilitate multi-stakeholder engagement at the national level. Such transparency and engagement will enhance the legitimacy of the national designated authority as an institution that is responsive to and rep-resentative of the needs and priorities of all stakehold-ers, particularly those most vulnerable to the impacts of climate change or directly affected by proposed activities.

integration of climate outcomes and indicators into exist-ing results management systems, while it may prefer to work with bilateral or multilateral partners to strengthen financial management systems of proposed national inter-mediaries or implementing entities, thus capitalizing on the experience and competencies of existing institutions where appropriate. If an institution applies for access to the GCF but falls short of meeting the requirements, the use of transitional approaches described in Chapter 3 could provide an opportunity for it to gain access to the GCF while strengthening its accountability systems, either with direct support of the GCF or in partnership with another institution.

Promote transparency and participation at all levels Transparency and stakeholder participation are essential elements of country ownership, as they ensure that a set of stakeholders beyond government are included throughout the project cycle of planning, programming, implemen-tation, and monitoring and evaluation. It is particularly important that the beneficiaries or populations likely to be affected by GCF-funded activities, such as communities vulnerable to the impacts of climate change in the case of



If the GCF is to be truly transformational, it needs to incentivize a wide range of subnational, national, regional, and international institutions, whether they are owned by the public, private, or nonprofit sectors to make low-carbon, climate-resilient investments. Moreover, the GCF will be more effective in its impact and reach if it can find ways to capitalize on the capabilities and networks of a wide range of institu-tions. However, not all institutions will have accountability systems of equal caliber to the best among them. In countries where accountability systems are weak relative to the benchmark standards desired by the GCF Board, differentiating accreditation requirements and employ-ing transitional or phased approaches to strengthening accountability systems will provide the space for effectively balance ownership and accountability in access modalities, thus empowering recipient countries, particularly small and less developed ones, to determine the most appropriate means of accessing funds within the context of their needs and planned activities, and taking into account their particular institutional strengths and weaknesses. More importantly, it will also create an incentive for relatively weaker institutions to aspire to match the standards of their peers.

The GCF should include criteria for the full range of accountability sys-tems—fiduciary, environmental and social, and results management—as requirements for accessing funding. However the requirements may be differentiated based on the nature or scale of the investment, or the financial instrument used to facilitate risk-appropriate access to a wide range of intermediaries and implementing entities:

Nature of investment: Apply more stringent and comprehensive requirements for investments that are associated with higher risk of environmental or social harm, such as investments that result in the creation of large physical assets, or lead to major changes in land use or loss of biodiversity; and less stringent or narrower require-ments for those in which the risk is lower. For example, it is unlikely that a capacity-building program or policy development intervention will result in significant risk to people or the environment. Thus, the safeguards required for accessing funding for such an investment may be limited, for example, to stakeholder engagement with the affected community.

Scale of investment: Differentiate between the scale of the in-vestments with requirements that become progressively more strin-gent as the size of funding increases. Differentiation based on scale could be relevant in terms of the results management requirements, where the transactions costs associated with detailed requirements may not be justified based on the scale of the investment.

Type of financial instrument: Apply less stringent require-ments for grants, and more stringent requirements for loans or other financial instruments that require stronger fiduciary practices to minimize the risk of default. Such differentiation would enable a wide range of institutions, both government and nongovernment, that only disburse grants, to be accredited as implementing entities. This may be particularly important for “readiness” activities such as capacity building and institutional strengthening.72

In addition to the differentiation above, the GCF Board could also distinguish between the set of basic requirements that must be met for an entity to be accredited, and additional requirements that are seen as “best practice” requirements that accredited entities aspire to achieve over time. The GCF Board could also employ phased approaches (discussed in Chapter 4), to strengthen the accountability systems of institutions that fall short of meeting the accreditation requirements. For example, it could set milestones for an institution to transition from the use of an intermediary’s systems to country systems as the latter are strengthened, either with support from the GCF or one of its devel-opment partners. In addition, it could develop mechanisms to allow an institution that has weaknesses in some areas to partner with another accredited institution, using the partner’s accountability systems selectively to fill the gaps. Such flexibility in supporting institutions to use and strengthen their accountability systems would enable the GCF to rely on country systems more extensively, even where they are not perfect, and would help countries strengthen them over time.

Box 5 | Differentiated accreditation requirements and transitional approaches

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ANNEX 1: WORKSHOPS AND EVENTS THAT INFORMED THIS PAPER WRI Co-Organized Events:

BANGKOK, SEPTEMBER 2011. Frankfurt School–UNEP Collaborating Center and WRI National Climate Finance Institutions Support Program (NCFISP), Asia-Pacific Regional Workshop.

Countries/institutions represented: Bangladesh Cambodia Indonesia Nepal Philippines Thailand Vietnam

PANAMA, OCTOBER 2011. Frankfurt School–UNEP Collaborating Center and WRI National Climate Finance Institutions Support Program (NCFISP), Latin America—Caribbean Regional Workshop.

Countries/institutions represented: Chile Colombia Dominican Republic Ecuador El Salvador Mexico Peru

DURBAN, DECEMBER 2011. Frankfurt School–UNEP Collaborating Center and WRI National Climate Finance Institutions Support Program (NCFISP), Africa Regional Workshop.

Countries/institutions represented: Benin Botswana Burkina Faso Ghana Mali Morocco Niger South Africa Uganda Zimbabwe

DURBAN, NOVEMBER 2011. Frankfurt School–UNEP Collaborating Center and WRI National Climate Finance Institutions Support Program (NCFISP), Global Dinner.

Countries/institutions represented: Burkina Faso Dominican Republic Ecuador Gambia Indonesia Maldives Nepal Peru

JAKARTA, MARCH 2012. WRI and UNEP Workshop on Improving National Procedures and Systems for Monitoring Climate Finance Received.

Countries/institutions represented: Indonesia Philippines



NAIROBI, NOVEMBER 2012. WRI and UNEP Workshop on Improving National Procedures and Systems for Monitoring Climate Finance Received.

Countries/institutions represented: Benin Ghana Kenya Mali Namibia Sierra Leone Tanzania Zambia

BOGOTA, FEBRUARY 2013. WRI Workshop on Improving National Procedures and Systems for Monitoring Climate Finance Received.

Countries/institutions represented: Chile Colombia Dominican Republic El Salvador Mexico Panama Peru

Other Events/Country Missions: ADDIS ABABA, MARCH 2013. Climate and Development Knowledge Network (CDKN) Workshop on Climate Finance in East Africa.

Countries represented: Ethiopia Kenya Rwanda Tanzania Uganda

COUNTRY MISSION TO NAMIBIA, APRIL 2013. As part of study on climate finance readiness in Namibia by the Overseas Development Institute(ODI), Africa Climate Finance Hub (ACFH), GIZ and WRI, supported by the German Federal Ministry for Economic Cooperation and Development (BMZ).

Country Mission to Indonesia Country Mission to Lao PDR

Other countries consulted through interviews: Guyana Vietnam

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ENDNOTES1. OECD (Organisation for Economic Co-operation and Development),

2011a, “Aid Effectiveness 2005-10: Progress in Implementing the Paris Declaration,” OECD, Paris, available at: http://www.oecd.org/dac/aidef-fectiveness/48742718.pdf.

2. OECD, 2011b, “What Are the Benefits of Using Country Systems? Policy Briefs and Literature Review,” Task Force on Public Financial Management, OECD, Paris.

3. S. Nakhooda, 2012, “The Effectiveness of Climate Finance,” Overseas Development Institute, London.

4. M. Miller, 2012, The Climate Public Expenditure and Institutional Reviews (CPEIRs) in Asia-Pacific Region: What Have We Learnt?” United Nations Development Programme, Bangkok.

5. Governing instrument of the Green Climate Fund6. K. Sierra, 2011, Designing the International Green Climate Fund:

Focusing on Results. Washington DC: Brookings Institution.7. M. Chaum, C. Faris, G. Wagner, B. Buchner, A. Falconer, C. Trabacchi,

J. Brown, and K. Sierra, 2011, “Improving the Effectiveness of Climate Finance: Key Lessons,” Environmental Defense Fund, Climate Policy Initiative, Overseas Development Institute and Brookings Institution.

8. P. de Renzio, L. Whitfield, and I. Bergamaschi, 2008, “Reforming Foreign Aid Practices: What Country Ownership Is and What Donors Can Do to Support It.” The Global Economic Governance Programme, Oxford.

9. OECD, 2005, “The Paris Declaration on Aid Effectiveness.” 10. See for example L. Whitfield, 2009. “Reframing the Aid Debate: Why

aid isn’t working and how it should be changed”. DIIS Working Paper 2009:34, Copenhagen. See also de Renzio et al. 2008

11. See forthcoming World Resources Institute report by F. Daviet, “Holding the Space for Trust: The Role of Accountability in Governance,” for a detailed discussion of accountability in the context of the governance of forests.

12. The Paris Declaration on Aid Effectiveness and subsequent agreements from meetings in Rome, Accra, and Busan emphasize the importance of using strengthened country systems for effective delivery of ODA. See http://www.oecd.org/dac/effectiveness/parisdeclarationandaccraagenda-foraction.htm.

13. OECD 2011b, “What Are the Benefits of Using Country Systems?” 14. G. Larsen and A. Ballesteros 2013.“Striking the Balance: Ownership

and Accountability in Social and Environmental Safeguards,” World Resources Institute, Washington DC.

15. De Renzio et al. 2008,“Reforming Foreign Aid Practices”; Ngaire Woods, 2009, “Making climate financing work: what might climate change experts learn from the experience of development assistance?” in Climate Finance Regulatory and Funding Strategies for Climate Change and Global Development edited by R.B. Stewart, B. Kingsbury and B. Rudyk. New York University Press, New York.

16. OECD 2011a, “Aid effectiveness.”

17. Traditionally, the term “safeguards” has been used to refer to the poli-cies and procedures implemented by international financial institutions (IFIs) to ensure that their investments do not create unintended harm. These traditional safeguard policies were meant to fill gaps where national rules and/or institutions failed to uphold certain principles of human rights and environmental protection. Although some continue to use the term to refer only to those additional policies and procedures implemented by international financial institutions, the term “safeguard systems” is now being used to describe national policies and proce-dures that have the potential to perform this same function. See Larsen and Ballesteros 2013.

18. Adapted from F. Daviet and G. Larsen, 2012, “Safeguarding Forests and People: A Framework for Designing a National System to Implement REDD+ Safeguards,” World Resources Institute, Washington DC.

19. Many recently adopted safeguard policies address a wider range of issues, such as impacts on human rights, labor conditions, climate change, and ecosystem services. See Larsen and Ballesteros, 2013.

20. The Climate Investment Funds (CIFs) comprise the three funds of the Strategic Climate Fund (SCF): the Forest Investment Program (FIP), the Pilot Program for Climate Resilience (PPCR), and the Scaling Up Renewable Energy Program (SREP); as well as the Clean Technology Fund (CTF). The International Bank for Reconstruction and Develop-ment is the trustee and the funds are implemented in pilot countries by multilateral development banks that are active in the country, includ-ing the World Bank, International Finance Corporation (IFC), Inter-American Development Bank, African Development Bank, and Asian Development Bank.

21. For a discussion of CIFs policies and guidance on stakeholder engage-ment, and how they have been applied in practice in a number of Asian countries, see P. Wooster, 2013, Stakeholder Engagement in Preparing Investments Plans for the Climate Investment Funds: Case Studies from Asia, second edition. Manila: Asian Development Bank.

22. The CIFs are governed by Trust Fund Committees for the CTF and the SCF, as well as subcommittees for each of the SCF funds (the FIP, PPCR and SREP).

23. P. Wooster 2013, Stakeholder Engagement. 24. For the decision, see Joint CTF-SCF TFC Meeting May 1-2, 2012

“Approval of Proposals to Enhance Country Coordination Mechanisms, MDB Collaboration, and Stakeholder Engagement in CIF Programs,” available at https://www.climateinvestmentfunds.org/cif/sites/climate-investmentfunds.org/files/Approval_of_Proposals_to_Enhance_Coun-try_Coordination_Mechanisms.pdf. For the background document, See Document CTF-SCF/TFC.8/5, 2012, “ Enhancing Country Coordina-tion Mechanisms, MDB Collaboration, and Stakeholder Engagement” prepared for Joint Meeting of the CTF and SCF Trust Fund Committees, Washington, D.C. May 2012, available at:http://www.climateinvestment-funds.org/cif/sites/climateinvestmentfunds.org/files/CTF_SCF_5_En-hancing_Country_Coordination_Mechanisms_etc_0.pdf.

25. GEF (Global Environment Fund), 2010, “GEF Projects and Program-matic Cycles,” GEF/C.39/Inf. 3, GEF, Washington DC.



26. Personal correspondence with workshop participants. 27. For information on Guyana’s Low Carbon Development Strategy and its

partnership with Norway, see: http://www.lcds.gov.gy/. 28. For example, see N. Thornton, 2011, “Realising the Potential—Making

the Most of Climate Change Finance in Africa, A synthesis report from six country studies; Cameroon, Ghana, Kenya, Morocco, South Africa and Tanzania”, OECD.

29. Personal communication with workshop participants.30. For Kenya, see Government of Kenya, 2012, “Kenya Climate Change

Action Plan. Subcomponent 8: Finance. Final Report and Annexes,” Ministry of Environment and Natural Resources and Ministry of Finance, available at: https://www.kccap.info/index.php?option=com_content&view=article&id=26.

31. A. Ballesteros, S. Nakhooda, J. Werksman, and K. Hulburt, 2010, “Power, Responsibility and Accountability. Re-Thinking the Legitimacy of Institutions for Climate Finance,” World Resources Institute, Washington, DC.

32. See Ballesteros et al. 2010 for a discussion of formal and informal power in international climate finance institutions.

33. GEF, 2003, “Clarifying the Roles and Responsibilities of the GEF Entities,” GEF/C.21/Inf.5, GEF, Washington DC.

34. Adaptation Fund NGO Network, 2012, “Making the Adaptation Fund Work for the Most Vulnerable: Independent Insights from Vulnerable Developing Countries,” Adaptation Fund NGO Network, Bonn.

35. CDKN (Climate and Development Knowledge Network) 2012. http://cdkn.org/resource/cdkn-inside-story-direct-access-to-the-adaptation-fund-lessons-from-accrediting-nies-in-jamaica-and-senegal/

36. Ballesteros et al 2010, “Power, Responsibility and Accountability.”37. World Bank, “Expanding the Use of Country Systems in Bank-Supported

Operations,” available at http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,contentMDK:20266649~menuPK:538163~pagePK:41367~piPK:51533~theSitePK:40941,00.html.

38. The Paris Declaration and Accra Agenda for Action are founded on five core principles that have gained support across the development community: ownership—aid recipients forge their own national development strategies, alignment—donors support these strategies, harmonization—donors streamline their efforts in-country, results—development policies are directed to achieving clear goals and progress toward these goals is monitored, and mutual account-ability—donors and recipients are jointly responsible for achieving these goals.

39. Larsen and Ballesteros (2013) provide a discussion of the use of country systems in the context of environmental and social safeguards.

40. OECD 2011a, “Aid Effectiveness.” 41. OECD 2011a, “Aid Effectiveness.”42. For more information, see the World Bank’s Operational Policy 8.60 on

Development Policy Lending, available at: http://web.worldbank.org/WBSITE/EXTERNAL/PROJECTS/0,,contentMDK:23434821~pagePK:41367~piPK:51533~theSitePK:40941,00.html.

43. See http://www.aideffectiveness.org/Tools-Aid-modalities-Budget-support.html.

44. For example, the European Union, through its Global Climate Change Alliance, has provided climate-relevant budget support to Lesotho, Mauritius, the Seychelles, the Solomon Islands, Guyana, Samoa, Rwanda, and Bhutan. (See http://www.gcca.eu/about-the-gcca/inno-vative-and-effective-approaches/piloting-budget-support-for-climate-change). The World Bank provided a policy loan to Vietnam for the development of its climate change response (see http://www.worldbank.org/en/news/press-release/2012/11/08/world-bank-supports-institu-tional-development-for-vietnam-climate-change-response-program).

45. IDD and Associates, 2006, “Evaluation of General Budget Support: Synthesis Report. Joint Evaluation of General Budget Support 1994-2004. Burkina Faso, Malawi, Mozambique, Nicaragua, Rwanda, Uganda, Vietnam,” Department for International Development, London.

46. See IDD and Associates 2006, “Evaluation of General Budget Support.” Furthermore, a study for the Ministry of Foreign Affairs of the Nether-lands provides a critical review of budget support in where there are weaknesses in governance, “Budget Support: Conditional Results. Review of an Instrument (2000-2011),” Ministry of Foreign Affairs of the Netherlands, The Hague.

47. An analysis of the relationship between the quality of a country’s financial management systems and the use of budget support by con-tributors of ODA reveals a weak but statistically significant correlation (r=0.496, n=55, p<0.01). Data on the quality of PFM systems were taken from the World Bank’s Country Policy and Institutional Assess-ment rankings for 55 countries: World Bank, 2011, Summary Table: 2011 IDA Resource Allocation Index, available at: http://www.world-bank.org/ida/IRAI/2011/IRAI2011Table1.pdf. Data on the use of budget support as a percentage of total ODA received were calculated from tables in the OECD’s aid effectiveness review for the same 55 countries: OECD, 2011, “Aid Effectiveness 2005–10: Progress in Implementing the Paris Declaration,” OECD Publishing, available at: http://www.oecd.org/dac/aideffectiveness/48742718.pdf.

48. N. Thornton 2011, “Realising the Potential.” 49. N. Thornton 2010, “Realising Development Effectiveness—Making the

Most of Climate Change Finance in Asia and the Pacific: A synthesis report from five country studies in Bangladesh, Cambodia, Indonesia, Philippines and Vietnam,”

50. View put forward by several participants in regional workshops in Durban, Nairobi, and Panama.

51. Kenya’s national climate change action plan and information on the process by which it was developed are available at: https://www.kccap.info/.

52. OECD 2011a, “Aid Effectiveness.” 53. The Adaptation Fund has recently issued a call for public comments

on the proposed Environmental and Social Policy. See: https://www.adaptation-fund.org/page/call-public-comments-proposed-environ-mental-and-social-policy .

54. After the GEF’s policy on minimum fiduciary standards was approved in 2007, the existing GEF implementing agencies were required to go through a review by a third party to determine whether they were in compliance. Agencies that did not meet the standards were required to establish and implement monitorable action plans to come into full compliance. See http://www.thegef.org/gef/fiduciary_standards for more information.

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55. The World Bank’s Country Policy and Institutional Assessment (CPIA) looks at how conducive a country’s policy and institutional framework is to fostering poverty reduction, sustainable growth, and the effective use of development assistance. It includes a measure of “quality of budgetary and financial management,” which assesses the extent to which there is: (a) a comprehensive and credible budget, linked to policy priorities; (b) effective financial management systems to ensure that the budget is implemented as intended in a controlled and predict-able way; and (c) timely and accurate accounting and fiscal reporting, including timely audit of public accounts and effective arrangements for follow up. CPIA scores for 2011 are publicly available for 78 countries that are eligible for funding from the International Development Association (IDA), the arm of the World Bank that supports the world’s poorest countries. Scores range from 1 (worst) to 6 (best). These scores are not released for countries that are not eligible for IDA funding.

56. The International Development Association is the institution within the World Bank Group that provides concessional finance to the world’s poorest countries.

57. The assessment showed that 82 percent of countries have explicit development policies and priorities (although there may be limited link-ages of policies to the budget); limited deviation of actual expenditure from the budget; internal controls and general compliance with rules (although there may be some weaknesses in controls and compliance); and regular reporting and auditing and public access to budget docu-ments (but in some cases with long delays in issuance of reports and some (minor) inaccuracies and omissions).

58. The Public Expenditure and Accountability (PEFA) Program’s PFM Performance Measurement Framework assesses whether a country has the tools to deliver three main budgetary outcomes: aggregate fiscal discipline, strategic resource allocation, and efficient use of resources for service delivery. It uses a set of indicators, with scores ranging from D (worst) to A (best), to assess a country’s PFM system against six critical dimensions: credibility of the budget, comprehensiveness and transparency of the budget, the extent to which the budget is policy-based, predictability and control in budget execution, adequacy of accounting, recording and reporting, and arrangements external scrutiny and audit.

59. World Bank, 2011, “Country Policy and Institutional Assessment (CPIA) 2011 Criteria,” Word Bank, Washington DC. Available at: http://www.worldbank.org/ida/papers/CPIAcriteria2011final.pdf

60. In both South Africa and Brazil the policies triggered were environ-mental assessment, natural habitat, physical cultural resources, and involuntary resettlement.

61. GEF, 2007, “GEF Project Cycle,” available at: http://www.thegef.org/gef/sites/thegef.org/files/documents/C.31.7%20GEF%20Project%20Cycle.pdf

62. Ballesteros et al. 2010, “Power, Responsibility and Accountability.” 63. A forthcoming WRI working paper provides a discussion of resource

allocation and guidance for the GCF. 64. ICF International, 2013, “Final Interim Report: Independent Evaluation

of the Climate Investment Funds,” Report prepared for the Evaluation Oversight Committee for the Independent Evaluation of the Climate Investment Funds, available at: http://www.cifevaluation.org/cif_in-term_report.pdf.

65. World Bank, 2006, “Safeguards Diagnostic Review for Piloting the Use of Ghanaian Systems to Address Environmental Safeguard Issues in the Proposed World Bank-Assisted Ghana Energy Development and Access Project (GEDAP). Equivalence and Acceptability Report,” World Bank, Washington DC.

66. See the Amazon Fund’s website for more information: http://www.ama-zonfund.gov.br/FundoAmazonia/fam/site_en/Esquerdo/doacoes/.

67. Roland Widmer and Florence Daviet, personal communication.68. IDD and Associates 2006, “Evaluation of General Budget Support.”69. To this end, a Standing Committee on Finance has been established

within the UN climate change negotiations with the aim of improving coherence and coordination in the delivery of climate change financing, among other things. See http://unfccc.int/cooperation_and_support/financial_mechanism/standing_committee/items/6877.php.

70. Green Climate Fund Board, 2013a, “Decisions of the Board - Third Meeting of the Board 13–15 March 2013,” available at: http://www.gcfund.net/fileadmin/00_customer/documents/pdf/Decisions_of_the_Board_V1_15March2013.pdf.

71. Green Climate Fund Board, 2013b, “Decisions of the Board—Fourth Meeting of the Board, 26–28 June 2013,” available at: http://www.gcfund.net/fileadmin/00_customer/documents/pdf/B-04_17_decisions.pdf.

72. See C. Polycarp, L. Brown, and X. Fu-Bertaux, 2013, “Mobilizing Climate Investment: The Role of Climate Finance In Creating Readiness for Low-Carbon Energy,” World Resources Institute, Washington DC.



ABOUT THE AUTHORSLouise Brown is an Associate working on climate finance in WRI’s Sustainable Finance Team. Contact: [email protected]

Clifford Polycarp is a Senior Associate leading the work on climate finance in WRI’s Sustainable Finance Team. Contact: [email protected]

Margaret Spearman contributed to this working paper in her capacity as an Associate at WRI. Contact: [email protected]

ACKNOWLEDGMENTSThe authors would like to thank the following colleagues at WRI for their valu-able contributions to this paper: Athena Ballesteros, Peter Veit, Dennis Tirpak, Shally Venugopal, Aman Srivastava, Florence Daviet, Samah Elsayed, Roland Widmer, Pieter Terpstra, Emily Schabacker. In addition we would like to thank Arthur Rodrigues for undertaking much of the country research that informed this paper. We would also like to thank the external experts who provided valuable comments and information: Neil Bird, Yasemin Biro, Daniel Morrow, Mikko Ollikainen, Daouda Ndiaye, Carl Wesselink, Chris Brown, Rafael Ranieri, and Charles Mulenga. We would also like to thank Hyacinth Billings, Nick Price, Mary Paden and Jen Lockard for support with editing, design and production.

We would also like to extend a word of thanks to the many people that we consulted in writing this paper, particularly the participants who took part in the workshops listed in Annex 1 and shared their experiences and knowledge. We would also like to thank our partners at UNEP and its Collaborating Centre at the Frankfurt School of Finance and Management with whom we worked closely to carry out several workshops.

Finally, we are grateful to our funders, without whose support this paper would not have been possible. We would like to thank UNEP, who provided financial support through the National Climate Finance Institutions Support Programme, with funding from the German Government’s International Climate Initiative, and in particular Virginia Sonntag-O’Brien who provided support, guidance, and thoughtful discussions throughout the preparation of this paper. We also thank the Australian Agency for International Development (AusAID) for its financial support. In addition, we are grateful to the following institutions, which provided programmatic support for our work on climate finance: the Charles Stewart Mott Foundation, the Rockefeller Brothers Fund, the French Development Agency, and the Netherlands Ministry of Foreign Affairs.

ABOUT THE CLIMATE FINANCE SERIESWRI’s “Climate Finance” series tackles a broad range of issues relevant to public contributors, intermediaries, and recipients of climate finance— that is, financial flows to developing countries to mitigate greenhouse gas emissions and adapt to the impacts of climate change. Series topics include resource allocation, balancing country ownership and accountability in access modalities, mobilizing private investment, financial instruments, adaptation finance, and tracking finance.

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