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ISS and HSF Seminar Report: Towards COP18 - Developing a national architecture that is equipped for global climate finance
Date: 27 November 2012
Venue: , ISS Pretoria Seminar Room, Block C 
, Brooklyn Court 
, 361 Veale Street 
, New Muckleneuk 
, Tshwane (Pretoria)

1. INTRODUCTION

In partnership with the Hanns Seidel Foundation (HSF), the Institute for Security Studies (ISS) through its Conflict Management and Peacebuilding (CMPB) division hosted a half-day seminar under the theme ‘Towards COP18: Developing a national architecture that is equipped for global climate finance`. The seminar brought together researchers, policymakers and practitioners in the field of climate change policy-related work in South Africa.

The aim of the seminar, which was convened during COP18, was to discuss how South Africa is preparing itself for global climate finance. The seminar was also aimed at reflecting on the status of international negotiations to get a better sense of where the country should be in terms of national ‘climate finance readiness`.

Tim Walker from the CMPB division of the ISS chaired the seminar. The speakers were Chantal Naidoo, from the Development Bank of Southern Africa, and Trusha Reddy, an independent political researcher. Deliberations followed the ISS/Chatham House rules and this report highlights discussions that emerged from the seminar.

2. WELCOMING REMARKS

 Tim Walker, Consultant Researcher, ISS

Tim welcomed participants to the seminar. In his opening, Tim observed that climate change is a global problem that requires solutions at the local level, noting that it is for this reason that South Africa is actively establishing its climate finance architecture to receive, manage and disburse global funds that are meant to help communities cope with and adapt to climate change impacts. However, the sufficiency of global climate change finance as well as South Africa`s readiness to accept funds from the Green Climate Fund (GCF), which will channel the bulk of $100 billion in long-term finance to developing countries, are questions that remain unresolved. Tim noted that after two board meetings of the GCF this year, crucial concerns on its operation will be tabled for decision by the multilateral forum. South Africa as such has an opportunity to express its ‘readiness` to receive these funds.

Tim also briefly highlighted the ISS` involvement in climate change finance research and related activities, which began in 2008 with an initial focus on carbon trading in Africa, developing principles and criteria for just and effective governance of climate finance in Africa. This work was done in partnership with the HSF. The immediate importance of the exercise was to inform the African Union position on climate finance ahead of the United Nations Framework Convention on Climate Change (UNFCCC) meetings from a research, evidence-based perspective, to allow African governments and citizens to understand what they need and what to expect from climate finance and also allow perspectives on Africa to come from Africa.

3. PRESENTATIONS

3.1 Leading infrastructure development

Chantal Naidoo, Divisional Executive, Environmental Finance, Development Bank of Southern Africa

Chantal`s presentation centred on South Africa`s national efforts (Green Fund and interim mechanisms) and the extent to which these instruments are sufficient for climate financing.

Chantal underlined some of the principles informing international climate finance, including the common but differentiated responsibilities and respective capabilities as well as the new and additional funds (in addition to Official Development Assistance) and adequate and predictable funding for South Africa. She also spoke about South Africa`s proposed vision for a climate fund, which is to create a long-term financing strategy for South Africa`s green economy transition and climate change programmes. She observed that at the international level, there is a wide landscape of climate / green finance channels available to developing countries that South Africa does have access to. Other sources include bilateral and multilateral support to South Africa. Bilaterally, these amounts range from US$4,2 billion to US$12 billion in terms of committed support from 2007 to 2014, and US$4 billion to US$11.7 billion for multilateral support from 2010 to 2014, including co-financing.

Under the UNFCCC, resources available to developing countries include financial support, technical assistance, capacity building and technology transfer. South Africa should leverage these resources as a ‘total package` and ensure that this total package is directly relevant to domestic needs, i.e. that it bridges gaps within its domestic finance sector. In addition, there is a growing recognition of the role of private finance in contributing towards incremental costs of transitioning to low carbon and resource efficient economy. As such, as a middle-income country, South Africa with more mature capital markets will not receive equal positioning with less developed countries than itself, which will be prioritised in terms of accessing the GCF. It will also be important to engage with pioneering institutional investors (Reg. 28 and CRISA), JSE-SRI, King III, and CDP, crowd-in capital as well as assess the risk and return profile for the private sector when constructing green/climate financing.

At the National level, environmental funds are currently decoupled and these include the Green Fund (with available funds estimated at R800 million), Drylands Fund and Renewable Energy IPP Fund. International funds being facilitated by DEA include the Adaptation Fund, Global Environment Facility, Clean Technology Fund and the Green Climate Fund (which is still emerging, with South Africa as co-chair).

Chantal also noted that one of the key risk factors to these national and international funding mechanisms is that they may not inspire confidence as a ‘family of inter-related funds` that deliver impact and crowd in private sector support. She also spoke at length about South Africa`s National Climate Change White Paper and its genesis. The goal of the White Paper is to build effective and inclusive climate finance architecture for South Africa`s climate change and green economy response. Some of the principles to test in the interim climate finance coordination mechanisms, however, include the integration of existing development priorities with climate response; ownership in terms of response strategies; demand-driven approaches; bridging gaps that exist within the domestic finance sector;
clarity in terms of increased capacity to absorb appropriate and relevant technology transfer; strengthening partnerships in relation to financing, technical assistance, technology and institutions; and leveraging  partnerships in order to effectively crowd in private sector to facilitate ongoing investment. She also underscored some of the top down challenges for translating these principles into reality, such as mobilising the required resources, remaining relevant and appropriate,
achieving cohesion with other climate support measures and remaining engaged with stakeholders in the process.

In closing, Chantal recommended that in order to make climate finance relevant, South Africa should:

  • Develop a climate finance strategy that integrates existing and emerging policy and financing instruments, including the role of market-based instruments.
  • Formalise the ‘plan` into an investment programme.
  • Ensure ‘worlds collide` in terms of encouraging discourse between government and financial regulators, microfinance, public and private and institutional investors.
  • Continue engagement with international and national stakeholders to keep track of and ensure relevant application at the national level of strategies, for instance by ensuring
    alignment of existing national mechanisms to provide cohesion, co-financing and innovations e.g. capital markets (IDC`s Green Bond), and
     learn lessons through Green Fund RFP and similar processes to continually refine the value proposition so as to remain relevant.

3.2 Climate finance: Getting the supply and demand sides right and ready

Trusha Reddy, Independent Political Researcher

Trusha focused her presentation on the supply and demand side of climate change finance from a civil society`s perspective on the issue. She noted that from the supply side, the process was ‘inching forward` in terms of operationalisation of the Green Climate Fund. It is hoped that disbursement of funds will begin in 2014. A number of board meetings were held in 2012 even though they had been characterised by wrangling among stakeholders. The host country is responsible for bringing funding commitments to fruition and South Africa has been identified as possible co-host. While she noted that participation of civil society in the climate finance debate is very minimal at present, she added that it is critical to engage them moving forward as they do offer independent and important voices as well as play critical oversight roles in climate change finance debates and processes. 

At the global level, there is recognition that the world is at a watershed period due to the impact of climate change. As such it is essential that the right systems are put in place and ensure that they are efficient and address transformational needs. In particular, Trusha noted that the demand side of climate finance faces a lot of uncertainties especially politically, for instance on how much to allocate to developing countries or how to adequately ensure their needs will be met. Both the demand and supply side therefore need coherence.

Trusha also detailed at length the importance of making climate finance work for women due to the gendered impact of climate change on women. As such, climate change financing policies and processes should:

  • Ensure that women are engaged in climate policy making and planning though:
  • Inclusion of women in the implementation of the National Climate Change Response Policy, particularly the development of the adaptation plan
  • Enabling women to participate in local level planning such as community planning for adaptation or mitigation projects
  • Building capacity across government departments to better understand climate change and gender
  • Enable simple, free access to information for women
  • Promote gender balance in decision-making forums
  • Enable capacity building of women to improve their access to climate finance
  • Work with communities to better understand their needs from and use of climate finance
  • Create a mechanism for coordination of climate finance
  • Create funds for local communities to facilitate quick, easy access to funding for vulnerable groups

In concluding, Trusha stressed some of the main priorities that may ensure just and effective climate change financing at the national and local level. She recommended that climate policy be based upon the environmental and developmental needs of a country and region, using bottom-up approaches that ensure nested projects at an appropriate scale. In addition, funding must match the specific adaptation needs of affected recipients and this funding should delink public from private sources. Climate change financing processes must also ensure developing countries free and unencumbered access to appropriate renewable energy technologies and other sustainable approaches and inclusive decision-making processes that maintain viable, effective and just outcomes. Furthermore, the livelihoods and rights of indigenous and local communities should also be prioritised and guarantee the integrity of emission reducing projects by implementing safeguards in assessment criteria of projects. This is in addition to making emission reductions count towards national targets.  

Moreover, policy formulation, planning and implementation of programmes should be coordinated as a matter of urgency if competing and conflicting approaches are to be avoided by instilling complementary policies, planning and implementation among public institutions in developing countries. National and sub-national implementing institutions should also be capacitated to ensure upward and downward accountability, which is key to the successful implementation of climate finance.      

4. PLENARY DISCUSSIONS

Discussions that emerged from the plenary noted the following:

  • The National Energy Regulator has been underperforming, with only 75 per cent efficiency in terms of delivering on project funding. This can be attributed to poor prioritisation by officials, e.g. use of such funding for travelling etc. As a result, funding has not trickled down to the projects the Fund is intended for. The National Treasury has traditionally not tracked the use of these funds but is increasingly recognising the need to do so. The government is also aware of the poor impact of current interventions and a working group has been set up at the national level to track these finances, although debates on how best to achieve these are still occurring.
  • Flexibility and access are some of the critical principles informing the design of the Green Fund and these are based on the outcomes of five case studies whose outcomes informed the White Paper. The idea was to have a fund with public and private financing and at the moment development of this process is at a very early stage. Green cities and towns, and natural resource management are some of the windows for funding. Due diligence is followed in approving proposals for project funding with over 500 proposals received so far.
  • The DBSA is currently undergoing internal reorganisation, but coordinating mechanisms do exist for engaging with international and regional partners involved in development financing. Indeed, there are shared platforms in which the DBSA and other regional partners involved in development financing such as the African Development Bank can engage. The DBSA is also exploring opportunities to co-finance projects with such partners.
  • More work in terms of coordination with partners, monitoring and evaluation of finances is still needed. The issue of climate change financing does not necessarily have to be a separate ‘financing` issue. Unfortunately poor negotiations with stakeholders, fragmentation of government departments and competition within the private sector are challenges to a more cohesive and coordinated approach in climate financing in South Africa.
  • Most countries prefer a more democratic process for determining how the GCF is spent since previous funding attempts have failed.
  • Some countries such as the United States prefer the IMF, but other countries are reluctant granted the IMF`s track record on financial policies for developing countries, for instance the failed structural adjustment funds whose negative impacts are still being felt at present, especially by developing countries.
  • Women are still facing many challenges in accessing funds for implementing their projects. Current efforts are focused on creating coherence and better-coordinated responses to gender-related concerns.
  • Government departments are highly fragmented, which is a hindrance to efforts on mainstreaming climate finance in various departments.
  • There is a need to move towards clean energy sources. It is important to also track or map government performance in terms of commitments, plans and strategies for dealing with emissions.

5. CLOSING

In summarising the discussions, Tim noted that the deliberations had raised more questions than answers as there are no tailor-made solutions or ‘one fit` models for climate financing strategies. However, addressing some of the crucial issues that keep recurring, for instance the ‘greening` of development funds and the importance of mainstreaming within government departments, are key to effective climate financing.

In closing, Tim thanked the HSF for its partnership, as well as the speakers and participants for their attendance and contributions to the discussions.

 

This event is made possible through funding from the Hanns Seidel Foundation

Venue:

ISS Pretoria Seminar Room
Block C 

Brooklyn Court 

361 Veale Street 

New Muckleneuk 

Tshwane (Pretoria)
Enquiries:

Mr. Timothy Walker
Email: twalker@issafrica.org
Tel: 012 346 9500
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