Accelerating Climate Action through National Climate Funds

While leaders at the 26th United Nations Climate Change Conference (COP26) place special emphasis on increasing ambition and closing the climate finance delivery gap, another vital consideration should be on how exactly that finance will be delivered.

Since 2009 when the initial $100 billion climate finance commitment was made, the international landscape has shifted significantly, with national-level funds becoming an important part of the emerging climate finance architecture. A turning point in climate governance, these funds allow developing countries – many of which are disproportionately at risk to climate consequences – to have a stronger voice in how climate finance decisions are made.

Yet, national climate funds have been underutilized by advanced economies and donors, effectively curtailing a major resource for delivering much-needed climate finance. Part of the hindrance in understanding and incorporating national climate funds has stemmed from a lack of comprehensive, reported data on the features and functions of these vehicles.

Now, a first-of-its-kind interactive National Climate Funds (NCF) Tracker, created by the Boston University Global Development Policy Center, displays the national-level funding vehicles established to mobilize domestic and international climate finance. The NCF Tracker identifies 46 funds across 39 countries and shows how these funds vary by host country, legal design, scope, mobilized finance and the level of success in attracting resources from multilateral climate funds. The interactive also tracks whether NCFs work with multilateral climate funds, such as the Green Climate Fund (GCF) as implementing or executing entities. In all, the NCF Tracker provides the operating context for developing country actions on climate change.

A new policy brief by Rishikesh Ram Bhandary presents findings and implications from the NCF Tracker.

Key findings:

• National climate funds are becoming important building blocks of the international climate finance architecture.
• Funds established as conservation trusts have expanded into climate change and have started to engage directly with the GCF. The longer track record of conservation trusts and their independent legal personalities inspire confidence from fund contributors.
• Short-term grants from donors reduce the ability of national climate funds to engage in transformational programming.
• A lack of consistent data hinders tracking of how domestic expenditures are being made through these funds.

Key policy implications:

• To close the gap in mobilized finance, developed countries need to center their support to national entities.
• Policymakers, donors and fund managers must also consider how to increase country ownership and strengthen national institutions. While the focus on filling the climate finance gap is necessary and well-deserved, how the finance will be channeled is also critical. NCFs are a key part of that conversation.
• NCFs need consistent support from both donors and host country governments. Without sustained engagement, these funds will not be able to play a significant role in climate action.
• NCFs need to shift towards scaling up programming and working with a large range of actors, rather than simply engaging with sectoral ministries, to build capacity.
• Greater transparency and clarity on climate-related public expenditure is needed to help developing countries display their commitment to climate change and identify areas of need.

The NCF Tracker will be regularly updated and expanded to include more information and to widen the range of financing vehicles.

In January 2022, Climate Policy published a journal article by Rishikesh Ram Bhandary on national climate funds.