A development practitioner's guide to technical assistance for climate finance

LONDON — With growing pressure on donors to tackle the looming climate crisis, climate finance flows are set to increase — and with them, the need for technical assistance to help lower-income countries access and use those resources effectively. Climate finance — a broad, complex, and fast-changing ecosystem — involves paying for the internationally agreed changes needed to mitigate and adapt to climate change and is funded by a range of donors. As the sector grows, the breadth and intricacy of the multibillion-dollar financial flows mean that technical assistance is paramount. But what exactly does this look like, and what do development professionals need to know about it? Devex spoke with experts to find out. What is technical assistance for climate finance, and why is it important? There is some disagreement over what exactly counts as technical assistance but broadly speaking it involves external help in overcoming the barriers to accessing and implementing climate finance that lower-income countries often experience. It is widely considered important because accessing finance and developing credible projects “requires a high level of technical capacity that many ... countries with developing economies don't necessarily have,” explained Skylar Bee, a climate finance specialist at the NDC Partnership, an organization that helps lower-income countries meet their climate commitments. “Countries struggle to make the economic case for climate projects, they often don’t have the data ready to be able to clearly articulate the climate rationale and then they lack the technical skills to demonstrate the technical and financial requirements — for example, [the skills] to do a feasibility study that would underpin a well-prepared project proposal,” Bee said. How much is the sector worth? Climate finance is not well defined, and as a result, estimates of its value vary too. The Organisation for Economic Co-operation and Development estimated last year that climate finance “provided and mobilised by developed countries for climate action in developing countries” was $71.2 billion in 2017, up from $58.6 billion in 2016. The Climate Policy Initiative, meanwhile, reported that 2017 climate finance flows were worth a massive $612 billion, up from $455 billion in 2016. The report describes itself as “the most comprehensive overview of global climate-related primary investment” and includes financial activity in the higher-income regions of North America, Europe, and East Asia. When it comes to technical assistance, according to the CPI report about $2 billion of that $612 billion was spent on “Policy and national budget support & capacity building” in 2017. However, Angela Falconer, director of CPI’s climate finance division, cautioned that “the real figure will be much higher” since a lot of technical assistance is embedded within sector-specific spending figures. It is typically funded by bilateral country donors or multilateral climate funds, such as the Green Climate Fund, as well as some nongovernmental organizations, according to Neha Rai, senior researcher in climate finance at the International Institute for Environment and Development. How in-demand is it? “We see a huge number of requests coming in from partner countries for technical assistance for climate finance,” Bee said. The NDC Partnership has received 1,460 finance requests from 64 countries since it became operational in 2017 — “and I would comfortably say that almost every country has given us some kind of technical assistance finance request.” Technical assistance is required “along a spectrum, depending on where a country is in its development process,” added Olivia Coldrey, who works as the energy finance and clean cooking lead at Sustainable Energy for All, an organization working to support energy transition in lower-income countries. The need for it is set to increase as the nationally determined contributions, or NDCs — each nation’s commitments on climate change under the Paris Agreement — are expected to become more ambitious at COP 26, the next annual United Nations climate conference. Coldrey continued: “[For] some countries that are at the beginning stages of revising their NDCs, [technical assistance is] about target setting. Countries that are further along down the path, for example Kenya, Ethiopia … that’s much more about really fine tuning regulatory settings, for example, improving the [power] grid, getting more big renewable energy projects up.” What types of technical assistance are there, and what are the most in-demand areas? Because of the lack of clarity around what constitutes technical assistance, some are reluctant to categorize the different types used for climate finance. But in its analysis of GIZ, one of the world’s largest technical assistance agencies, CPI identified five basic types it has used to successfully mobilize climate finance. Those are policy advice, support for project development and funding applications, provision of data, program coordination, and institutional capacity building. NDC Partnership has also broken down the technical assistance it provides into five buckets, some of which overlap. In the partnership’s experience, the most requested type of technical assistance is strategic support to governments developing climate finance road maps, according to Bee. Once climate change-related adaptation or mitigation projects have been identified by a country, a plan for financing them needs to be developed, looking at how much international finance is needed, what funding sources are most appropriate, and what the money will be spent on. The next most in-demand area for NDC Partnership is a “perennial problem” of climate finance: Governments that are unable to find investors for projects, while international investors cannot find any that appear to be viable investments, according to Bee. Low-income countries often “don’t really have the capacity or right technical skill sets to develop projects that are going to look bankable for an investor,” she said. Technical assistance is used to develop mitigation or adaptation projects — and then get them financed. This is done by assisting preparation of feasibility assessments, project proposals, and other required documents. This category feeds closely into another: program financing and resource mobilization. This is less about the development of projects and more about chasing the finances for it and helping countries to understand which of the myriad climate finance mechanisms might be available. Helping to integrate NDCs into national planning and budgets is another area of technical assistance. “Countries have trouble understanding … what are the climate finance flows they already have in their countries. A lot of countries … are not tagging for climate finance in their public budgets,” Bee said. The work to change that is about “institutionalizing that in the public budget process.” Finally, engaging the private sector is a “huge need” for the countries NDC Partnership works with because public money is insufficient to meet the world’s climate goals, Bee said. Countries want to know how to create an attractive environment for private sector climate investments — for instance, through improving regulations — and how to access private capital markets. What are the challenges of getting climate finance to where it is needed? While technical assistance is generally provided to governments, it is also sometimes available to other actors, such as private sector bodies and nongovernmental organizations. However, there have been concerns over the lack of climate finance reaching communities, and inadequate technical assistance for regional and local actors may play a role. “The problem with climate finance is at the moment it gets stuck at ... the national level, it doesn't penetrate on the ground at the local level and it can be quite challenging to make sure climate finance [gets] to those on the front line of climate impacts,” Rai said. “One of the primary reasons is the perception that systems are not developed at the local level, however if mechanisms are nurtured over time at the local level this can actually allow ... benefits on the ground,” she added. These are all issues felt in Bangladesh, a low-income country particularly vulnerable to climate change. “Local NGOs … they don’t have the capacity to write a project proposal, they don’t have enough capacity to be present at the different negotiation platforms,” said Marjan Nur, research coordinator at the Centre for Climate Change and Environmental Research at BRAC University in Dhaka. Project management costs are another key challenge, according to Nur. His colleagues are developing two Green Climate Fund proposals for which there is a “huge cost involvement, we need a lot of [hired] consultants, we need a lot of documents … which are not possible for a local NGO to prepare.” Developing the proposals — for a coastal forestry resilience project and cleaner machinery for the Bangladeshi garment industry — would not have been possible without a separate grant from GCF. “Our organization doesn't have that much resources [otherwise] to prepare this type of document,” Nur said. The complexity of accessing GCF funds has led Nur to observe “reluctance” in governments trying to access the finance, particularly as officials tend to move around. What makes a successful climate finance technical assistance program? In CPI’s analysis of GIZ programs, it identified several factors that appeared to be critical in ensuring that technical assistance successfully mobilized climate finance. Those included a long-term engagement and solid in-country presence, working with existing institutions, extensive outreach, and joint efforts with financial assistance initiatives. Others said that empowering decision-makers close to communities is one way of bringing money closer to those who need it. Rai cited an approach to technical assistance known as the devolved climate finance mechanism, used by the U.K. government and other donors to connect county- and ward-level administrations, giving local communities increased influence on spending decisions. “Counties and ward level committees [were able] to access finance and make decisions on whether they should be investing in [gender-safe] water points or livestock based range management … The community themselves was making these decisions ... which was not happening in the past,” Rai said. This also highlights the importance of sustained, long-term technical assistance, cited by Coldrey as a key aspect of successful programs. “Where institutions have helped, they’ve been in the country for a while,” she said. Being “close to the customer” is also key to productive capacity building. “The best outcomes I’ve observed … are when the technical advice is provided by people who are really close to the market and understand the customer’s needs,” Coldrey said.