Day 2 of the Regional Dialogue on Climate Resilient Growth and Development focused on systems, flows and impacts of Climate Finance. Here are interesting insights from the discussions:
- Shift from traditional economic models: Traditional economic models tend to view growth and the economic impact of extreme events and disasters as a static multiplier, and thus fall short of capturing the complex knock on effects of climate change on the engines of economic growth. Therefore, they may significantly underestimate the long term impacts of climate change on a growing economy. Thus, it is imperative to revise such existing economic models so as to capture the complex interactions between climate and economic drivers..
- Flow of funds: While international and private funds allow countries to fill gaps, the core of their climate financing in most cases is coming from domestic finance. These are the most accessible and timely sources of financing which governments should utilise in a more systematic approach. The financing system for climate change is particularly fragmented, causing a challenge for most countries to mobilise resources where they are needed.
- Systemic and sustainable approach: Most of the existing approaches to mainstreaming climate change remain limited to life cycles of the projects. This leads to an inevitable lack of sustainability, once these projects come to an end. Therefore, such projects require adequate targeted policy thrusts and mainstreaming into governance structures and programmes.
- Funding alignment: There are a set of global climate funds that cater to specific mitigation and adaptation interventions at different levels. The first step towards ensuring proposal acceptance as well as effective access to them is to attain a thorough understanding of the funds’ guidelines- 1. their objectives; 2. the areas of intervention they are designed in; 3. the scope of their support; 4. their expectations from the beneficiaries; and 5. their evaluation processes. Each funding mechanism has different rules, which increases transaction costs of mobilising needed funds.
- Measuring Impact: Panelists highlighted the difficulties in measuring impact of climate investment, particularly for adaptation measures, and the dearth of evidence on effectiveness of investment. They also noted a need to shift to sector wide monitoring and evaluation rather than focusing only on project based monitoring.