JOINT MDB CLIMATE FINANCE TRACKING APPROACHES Mafalda Duarte

JOINT MDB CLIMATE FINANCE TRACKING APPROACHES Mafalda Duarte – Chief Climate Change Specialist, Af. DB Claudio Alatorre – Senior Climate Change Specialist, IDB Joint MDB COP 18 Side-Event Hosted by the African Development Bank Doha, 5 th December 2012, Renaissance Hotel

OUTLINE v Why is Climate Finance Tracking Important? v Some Background… Current Tracking Systems v Joint MDB Adaptation Finance Tracking Approach v 2011 MDB Adaptation Finance Numbers v Joint MDB Mitigation Finance Tracking Approach v 2011 MDB Mitigation Finance Numbers v Next steps

WHY IS CLIMATE FINANCE TRACKING IMPORTANT? v In order to build trust and accountability with regards to climate finance commitments, and to monitor trends and progress in climaterelated investments v For Af. DB it is also important because it will… • support better project design; • allow us to track and report climate finance flows internally and externally; • facilitate the assessment of results from climate investments; • facilitate the mobilization of resources from capital markets.

SOME BACKGROUND… CURRENT TRACKING SYSTEMS v UNFCCC National Communications: Annex II countries report funding activities to developing countries to promote CC mitigation and adaptation. Non-Annex I countries requested to provide information on support received. v OECD “Rio Markers”: mitigation since 1998, adaptation since 2010. Coders have three options: that adaptation/mitigation is a “principal objective”, “significant objective”, or “not targeted to the policy objective” (OECD). v …in which sense do MDBs want to go beyond these efforts? . . .

JOINT MDB CLIMATE FINANCE TRACKING APPROACHES v The joint MDB approaches are work in progress aimed at assisting MDBs and other organizations v Reporting is linked to the MDBs’ financial commitments v All types of resources are eligible for reporting irrespective of origin including both the MDBs’ own resources as well as the MDBs’ managed investments v To prevent double counting, all external resources are clearly separated from the MDBs’ own resources v All types of instruments deployed (debt, equity, guarantees, technical assistance and grants) are included

JOINT MDB CLIMATE FINANCE TRACKING APPROACHES v Classification is made ex-ante project implementation: • The qualification of a project under this methodology does not imply evidence of the eventual delivery of climate change benefits. Inclusion is not a substitute for project-specific ex-post evidence of benefits, and projects seeking to demonstrate such effects must do so through project-specific data. v Classification can be made at the level of project components, subcomponents or activities

JOINT MDB ADAPTATION FINANCE TRACKING APPROACH v The MDB approach for adaptation is based on the following principles 1. It is purpose, context and activity based. A project must fulfill three design process criteria for finance to be reported. It must: o Include a statement of purpose or intent to address or improve climate resilience in order to differentiate between adaptation to current and future climate change and good development; o Set out a context of climate vulnerability (climate data, exposure and sensitivity), considering both the impacts from climate change, as well as climate variability related risks; o Link project activities to the context of climate vulnerability (e. g. , socioeconomic conditions and geographical location), reflecting only direct contributions to climate resilience.

JOINT MDB ADAPTATION FINANCE TRACKING APPROACH 2. It follows a conservative approach: o To incentivize good adaptation projects to speed up transition to resilient communities and systems; o Activities that do not explicitly meet all the above criteria are not included in reporting. 3. Project activities should: o Address current drivers of vulnerability, especially in poorest countries or communities when specifically designed in response to climate risks; o Build resilience to current and future climate risks; o Incorporate climate risks into investments, especially for infrastructure with a long lifespan; o Incorporate management of climate risk into plans, institutions and policies.

EXAMPLES OF APPLICATION OF THE 3 CRITERIA Examples Vulnerability context Specific intent Activity linkage Project example 1: Urban Development Possible changes in the frequency/severity of flash floods and storm surges brought by CV&C Design of project takes into account the anticipated impacts of CV&C Project will help better cope with CV&C through activities such as rehabilitation and upgrade of urban water drainage systems Project aims to increase water productivity in existing irrigated areas to increase resilience to CV&C Project will help better cope with CV&C by introducing water-saving measures such as introduction of crops which are less water intensive and higher value, preservation of soil moisture and fertility CV&C likely to aggravate water scarcity, putting at Project example 2: risk irrigated agriculture – Water Supply an essential source of & Access food security, employment and livelihoods Project example 3: Rural Development Project will help enhance rural Farmer communities likely Project tackles drought livelihood through drought to suffer from CV&C, risk as CV&C could adaptation mechanisms like water through longer dry spells otherwise imperil resources management, and increased variability in livelihood of rural diversification of farm and non-farm monsoon patterns communities livelihoods and climate-risk management tools CV&C: Climate variability and change

MDB ADAPTATION FINANCE, 2011 (USD M) MDB Af. DB ADB EBRD EIB IDB WB TOTAL MDB resources Investments and Policy-based technical instruments assistance 593 585 181 225 13 275 2, 080 224 3, 677 499 External resources Investments and Policy-based technical instruments assistance 2 172 16 65 1 3 85 3 341 • Total MDB adaptation finance in 2011 applying the approach retroactively was USD 4. 5 billion. • Given that the data are for a single year, they should not be used to make any judgments regarding the MDBs’ commitment and engagement in delivering adaptation finance.

JOINT MDB MITIGATION FINANCE TRACKING APPROACH v The MDB approach for mitigation is based on the following principles 1. It is activity-based, namely, it focuses on the type of activity to be executed, and not on its purpose, the origin of the financial resources, or its actual results. 2. Mitigation activities considered in this joint approach are assumed to lead to emission reductions, based on past experience and/or technical analysis. 3. Some activities provide both mitigation and adaptation co-benefits. As a result, the financing for adaptation and mitigation should not be added together to prevent double counting.

MDB MITIGATION FINANCE, 2011 (USD M) MDB Af. DB ADB EBRD EIB IDB IFC WB TOTAL MDB resources Investments and Policy-based technical instruments assistance 859 2, 196 3, 400 2, 487 1, 284 457 1, 664 4, 592 1, 588 16, 482 2, 045 External resources Investments and Policy-based technical instruments assistance 185 224 132 134 3 17 412 3 1, 104 • Total MDB mitigation finance in 2011 applying the approach retroactively was USD 19. 6 billion.

NEXT STEPS v In May 2013 the MDBs will jointly report 2012 figures; v Operationalization of the approach by each MDB; v Evaluation of its application in 2011 to fine-tune the approach and its application; v Engagement with OECD and other institutions dealing with MRV of climate finance; v Support to non-Annex I countries.

JOINT MDB WORKING GROUP FOCAL POINTS v Adaptation • Mafalda Duarte, Af. DB, m. duarte@afdb. org • Charles Rodgers, ADB, crodgers@adb. org • Alfred Grunwaldt, IDB, alfredg@iadb. org • Craig Davies, EBRD, daviesc@ebrd. com • Nancy Saich, EIB, n. saich@eib. org • Vladimir Stenek, IFC, vstenek@ifc. org • Philippe Ambrosi, WB, pambrosi@worldbank. org v Mitigation • Mafalda Duarte, Af. DB, m. duarte@afdb. org • Jiwan Acharya, ADB, jacharya@adb. org • Andreas Biermann, EBRD, biermana@ebrd. org • Matthias Zoellner, EIB, m. zoellner@eib. org • Claudio Alatorre , IDB, calatorre@iadb. org • Lucas Bossard, IFC, lbossard 1@ifc. org • Philippe Ambrosi, WB, pambrosi@worldbank. org