At the launch of the Asia-Pacific Climate Finance Fund, or ACliFF, at the 50th Annual Meeting of the Asian Development Bank, a participant from Bangladesh raised his hand for the question and answer portion.
Only it wasn’t a question.
“I’ll just make a few points for your consideration,” he began.
The man relayed the importance of educating citizens, particularly those in remote areas, about climate change — a crucial but often neglected aspect in the global push to cut greenhouse gas emissions and help vulnerable countries mitigate or adapt to the effects of changing weather patterns. Securing resources for activities meant to educate and raise public awareness on climate change and how to tackle it is a huge challenge, according to the United Nations Framework Convention on Climate Change, which, together with UNESCO, issued new guidelines in January 2017 on effective climate education.
His long response garnered a few snickers among the audience, but his comment highlighted a larger problem with climate funds. Despite their proliferation, climate funds — or at least a number of them — sometimes fall short of understanding the needs on the ground.
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“The difficulty for many countries, particularly in the Pacific, is the difficult application process to obtain the funds, and the release of these funds, or getting approval for projects that need funding,” Mark Brown, finance minister for the Cook Islands, told Devex following the launch session of the new fund.
Just late last year, the Green Climate Fund approved the financing application put forward by the ADB on behalf of the Pacific countries on renewable energy, but Brown said there is a huge difference between approval and disbursement of funds. Sometimes, in the Pacific’s experience, they had to wait two to three years before the money starts coming in, by which time the project has accumulated additional costs due to delays in procurement and tendering process, as an example.
Another difficulty Pacific countries experience is getting climate financing organizations to understand the links between climate finance and their development programs. For example, when developing ports, Pacific countries tend to build higher harbors as a means to safeguard themselves from the increasing sea level rises or increasingly higher incidences of storm surges in the region.
“For us if we don’t do that, the cost in recovery and rehabilitation is much, much higher,” Brown said.
But he said it’s been difficult to get that understanding through climate funding organizations, and they, in the Pacific, end up working on separate application processes, reporting and compliance requirements for just one project.
Much of the needs in the Pacific are also often missed, or as Brown put it “fly under the radar.”
“Speaking from a Pacific perspective, it’s often the case that billions of dollars required to meet the challenges in Asia, overwhelm the millions of dollars required to meet the challenges in the Pacific,” he said. “To give you a specific example of that, the ACliFF, if you happen to look at the acronym up there, it’s missing out the P for Pacific.”
The potential of ACliFF
The new fund is touted by its proponents to be comprehensive and more flexible in terms of the scope of projects viable to receive support under it than the current climate funds in the market, some of which are only focused on climate mitigation activities. The fund can support ADB clients for both climate mitigation and adaptation solutions, said Amy Leung, deputy director general and chief thematic officer of ADB’s Sustainable Development and Climate Change department. Examples of which include energy efficiency savings insurance for climate mitigation projects, and disaster risk insurance for microfinance institutions.
“We are committed to help our clients invest, but very often we notice they are faced with a number of challenges and these challenges are mostly, for example, initial financial risk transaction cost,” Leung said during the panel.
In this regard, one of the major focuses of the fund will be on financial risk management. The fund’s manager will be based at the ADB, and “preference will be given to support projects with ADB participation,” according to a brief detailing how the fund will operate. The fund manager, however, may also work with other entities in developing financial risk management products.
A team of experts led by the fund manager will be in charge of identifying projects to be supported through the fund, selecting the qualified individuals or organizations that would implement the project, and managing the fund’s day-to-day operations.
The activities or products to be supported by the fund need to at least meet one of the criteria set out under ACliFF. It should be able to scale up the adoption of climate technologies in new countries or markets, mobilize private sector climate financing, support investments in climate sensitive sectors such as agriculture, or help improve the resilience of vulnerable and low-income populations in Asia-Pacific.
Germany is now seeking parliamentary approval for an initial $30 million dollars to inject in the fund, and the ADB has committed $1 million, but Mario Sander, ADB executive director for Austria, Germany, Turkey and the United Kingdom, hopes there will be more.
“You cannot aim for anything and not have money in the bank,” he said.
Much of the details about the fund are still underway, but Sander emphasized it is set up broadly, as they don’t want to be narrow and would like to be open to the process as the fund evolves.
“On awareness education, it’s a very important issue about insurance when you have in rural areas lower levels of education, what will they know about what the insurance is?” Sander said, in response to the participant commenting about educating citizens on climate change. “I think it will be a process of learning by doing, rather than us going out and saying, ‘this is it, sign up, it’s great for you, and be educated.’”
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