by Lance Hadley
Published: July 22, 2020
The aim of this analysis is to suggest and test an improved method for the valuation of DAC climate-related development financing (CRDF). We compare this new method against the OECD DAC’s climate-related development finance dataset to validate findings.
- Using our new method, the total value of climate-specific finance in 2018 from OECD-DAC bilateral donors was approximately $25 billion – in other words, DAC figures overstate CRDF by 38% or about $16 billion.
- Using our new method, Canada contributed approximately $638M (2.6% of DAC) to climate-specific finance in 2018 – DAC figures overstate Canada’s contribution to CRDF by about 24% or approx. $200 million.
- Using our new method, Canada’s contribution to CRDF is “overstated” by approximately 20% over the period 2012-2018.
- Bilateral Canadian CRDF between 2012-2018 is much more overstated (37%) compared to multilateral Canadian CRDF for the same period (13%).
- All Canadian debt-based CRDF activities between 2012-2018 meet our new criteria, however only 78% of grant-based activities meet our criteria for the same period.
- Canada like other donors reports climate finance contributions to the UNFCCC. This valuation method differs from ours but the broad take-away is the same. We find that approx. 29% of Canada’s “significant-level” climate finance is overstated.
This article complements earlier CIDP work unpacking climate-related development finance.
The OECD DAC’s climate-related development finance dataset
The principle source for climate-related development data is the OECD DAC’s climate-related development finance dataset, which is an enriched subset of the overall DAC creditor reporting system (CRS) projects dataset. The CRDF provider perspective dataset includes:
• Any CRS activities with a climate-mitigation marker;
• Any CRS activities with a climate-adaptation marker; and
• Imputed calculations of donors’ multilateral contributions to the climate space.
While the CRDF dataset is an important tool for identifying climate-related projects, donors’ application of climate markers can be inconsistent between donors and over time. Donor’s may also liberally apply climate markers to larger projects that have very small climate-related components, thereby overstating the value of their climate-related contribution.
We propose a complementary method of identifying climate-specific CRS activities, which leverages delivery channel, purpose code, and descriptive data to improve the relevance of CRDF data for climate-specific analyses.
Proposed new method
The proposed method uses a combination of delivery channel, purpose codes, and keyword analysis to more accurately identify climate-specific projects from the OECD’s climate-related development finance (CRDF) dataset – provider perspective.
The new methodology identifies climate-specific projects if they match ANY of the following criteria:
- Financing channeled through organizations identified as having climate-specific objectives (see full list below);
- Financing with purpose codes that match climate-specific objectives (see full list below);
- Financing with either a title, short description, or long description, which contain any of the following keywords or their translations: “climat”; “eco”; “enviro”; “green”; “sola”; and “SDG13”.
Using this new method, we find that the total value of climate-specific finance from OECD-DAC bilateral donors was approximately $25 billion – about 16B (38%) less than the DAC’s CRDF figure.
- Canada contributed approximately $638M (2.6% of DAC) to climate-specific finance in 2018 – 200M (24%) less than the DAC’s CRDF figure.
- Canada ranks 9th among bilateral DAC donors of climate-specific finance – one place higher than the DAC’s CRDF ranking.
DAC members’ CRDF, DAC marker method and our new method
Canada’s CRDF, DAC marker method and our new method
Method comparison with overall CRDF dataset
We compare the projects identified by the new method against the overall CRDF dataset in order to evaluate the performance of the new method.
- Approximately 52% of climate-related development financing data for all bilateral DAC donors between 2012-2018 meet our criteria.
- Approximately 80% of climate-related development financing data for Canada between 2012-2018 meet our criteria.
Notably, a significant portion of the CRDF data does not meet the criteria of the new method. We consider these project activities to have “overstated” climate objectives, which are not relevant to a valuation of climate-related development financing.
Our results are broadly consistent with the DAC’s separation of climate-related finance into principal and significant level activities, but with important caveats.
- 91% of Canada’s “principal-level climate financing” between 2012-2018 matches our new method. The remaining 9 percent is made up of projects with null descriptions (3%), or the REAGIR project (described in the next table).
- Our new method adds to analytical understanding by further limiting the lower bound catch-all category of “significant-level climate activities”. Only 71% of Canada’s “significant-level climate financing” from 2012-2018, in our view, qualifies as relevant climate-related development finance.
- Canada like other donors is obligated to report climate related development finance to the United Nations Framework Convention on Climate Change (UNFCCC). This reporting adopts a different valuation method. Canada counts 100% of “principal-level climate financing” but only 30% of “significant-level climate finance” in its reporting to UNFCCC (see Statistical Table 7 at https://unfccc.int/documents/208400).
To further validate results we explore the major Canadian activities in the CRDF dataset that did NOT meet our criteria. Note that the projects listed below may indeed include climate-related components that are not picked up by our approach, however, even in these cases, we would question whether the entirety of the investment should count as “climate-related finance” on any level. We believe full counting is not an accurate reflection of the projects’ diverse objectives and overstates Canada’s CRDF.
Examples of projects that do NOT meet our criteria
|Project Description||Year||Project Commitment (2018 Constant USD)|
|Title: Supporting Humanitarian Assistance With The Canadian Foodgrains Bank 2016-2020 / Tbc
Marker: Climate Significant
Project Number: D002531001
Description: This grant represents Canada’s 2016-2021 institutional support for the Canadian Foodgrains Bank’s (CFGB) responses to humanitarian crises around the world. The CFGB uses these funds, along with other donations, to achieve its mandate of reducing hunger and malnutrition in developing countries. Canada’s support to CFGB will help implement food assistance and nutrition interventions to ease the suffering of people in emergency and acute hunger situations worldwide and help communities rebuild their livelihoods. Canada and CFGB have been feeding hungry people, saving lives and restoring livelihoods around the world over thirty years. / TBC
Expected Results: The expected outcomes for this project include: (1) stabilized and increased immediate consumption of food by hunger affected individuals and households; (2) improved dietary quality and nutrition practices and reduction of disease among hunger-affected individuals and households; (3) protected or strengthened productive, sustainable and resilient livelihoods of hunger-affected individuals and households; (4) improvements in national and international public policies that contribute to reducing hunger; and (5) increased awareness and knowledge of Canadian on issues related to global hunger. The expected ultimate outcome is lives saved, suffering alleviated and human dignity maintained in countries experiencing humanitarian crises or acute food insecurity.
|Title: Strengthening Irrigated Agriculture In Mali Project (Reagir)
Project Number: A035436001
Marker: Climate Principal
Description: The Strengthening Irrigated Agriculture in Mali project (REAGIR) aims to sustainably develop irrigated agriculture in Mali to increase food security through increased agricultural production, mainly in the regions of Mopti and Koulikoro. The resources allocated for the REAGIR project make it possible to construct and rehabilitate productive infrastructure, such as irrigated fields, micro dams, warehouses and rural roads; coach and train agricultural producers to support increased productivity and the development of knowledge and tools; and protect and improve sustainable development of natural resources, specifically soil and water. The initiative contributea to the implementation of the German small-scale irrigation program and will be integrated into the implementation of the National Small-Scale Irrigation Program in Mali.
Expected Results: The expected outcomes for this project include: increased production and productivity of the agricultural producers benefiting from the Koulikoro and Mopti intervention regions; improved conditions for the conservation, processing and marketing of agricultural production in the intervention regions.
|Title: Canadian International Food Security Research Fund – Phase 2
Project Number: S065756001
Marker: Climate Significant
Description: The Canadian International Food Security Research Fund (CIFSRF) supports applied research projects that address food security challenges in the developing world. It is jointly funded, coordinated, and implemented in collaboration with the International Development Research Centre (IDRC) and uses the combined expertise of both organizations to maximize the impact of the projects funded. Through investments in applied research, the CIFSRF contributes to the development of more productive, sustainable, and gender-sensitive agricultural techniques for women subsistence farmers, with the ultimate goal of making food sources more secure and accessible, and the food produced more nutritious, for poor households – particularly for women and girls, who face the heaviest burden of chronic hunger and malnutrition in developing countries. One of the objectives of the CIFSRF is to ensure that the results generated by the research funded are used to inform food security policies, programs, and on-the-ground development activities. Partnership is also an important aspect of the CIFSRF. All the research projects funded are jointly conducted by Canadian and developing country-based organizations, such as academic institutions, private sector organizations, civil society organizations, or research institutions. These partnerships harness Canada’s expertise in agriculture and nutritional science and combine it with first-hand knowledge and expertise in developing countries, to maximize the benefit for development activities.
Expected Results: The expected outcomes for this project include: (1) increased use of Canadian knowledge and resources by developing country researchers to address key food security research priorities in developing countries and globally with emphasis on environmental sustainability and equitable participation and benefit of women as farmers, consumers, and entrepreneurs alongside men; (2) increased application and scaling-up of environmentally sustainable food security and nutrition solutions that benefit subsistence farmers (particularly women) and promote the equitable participation of women and men in decision-making in targeted developing countries; and (3) more informed, gender responsive, environmentally sustainable, and better developed public policies and programming related to food security and nutrition in developing countries.
|Title: Multilateral Debt Relief Initiative Payment To IDA
Project Number: 2017050002
Marker: N/A (Imputed Multilateral Share)
Description: The International Monetary Fund, the International Development Association and the African Development Fund have agreed under the Multilateral Debt Relief Initiative (MDRI) to cancel 100 % of eligible debts owed by Heavily Indebted Poor Countries. At the G-8 Summit in Gleneagles in 2005, Canada and other donor countries agreed to fully compensate these institutions for the debts they will cancel on behalf of poor countries, so as not to undermine their ability to provide new financial support to all low-income countries. Canada’s total commitment over the 50-year lifespan of the MDRI is $2.5 billion.
Expected Results: N/A (Imputed Multilateral Share)
|Title: School Feeding And Local Purchases In Haiti
Marker: Climate Significant
Project Number: P002829001/ D004698001
Description: The purpose of this project is to reduce hunger and malnutrition among children and to increase school enrolment rates in Haiti, especially among girls. The project stimulates the local economy in a sustainable manner by purchasing local products from women farmers and entrepreneurs, which would give them more opportunities to contribute to their own economic success and that of their communities. The project’s activities include: (1) offering nutritious meals every day to 180,000 school age children, thus encouraging school attendance and academic success of the recipient children; and (2) offering economic opportunities to women in rural areas by making local purchases.
Expected Results: The expected results for the project include : (1) reducing malnutrition among 180 000 targeted children; (2) increasing the school attendance and academic success of targeted children especially girls; (3) enhancing the economic opportunities of women in rural areas by making local purchases; and (4) building Haiti’s institutional capacity to manage the national school feeding policy.
Bilateral vs. multilateral and grant-based vs. debt instrument comparisons
As noted in earlier CIDP work, the majority of Canada’s climate-related finance is through, or to, multilateral DFIs. Indeed, much of the new funding for Canada’s CAD $2.65 billion to advance international climate change objectives in 2015 is to multilaterals such as the Green Climate Fund (CAD 300M), World Bank (CAD $275M), and IFC (CAD $250M).
Our new method reveals that financing to and through multilaterals is often more relevant to climate objectives than bilateral grant-based activities:
- 87% of Canadian multilateral activities in the Canadian CRDF data between 2012-2018 meet the new method criteria.
- However, only 63% of bilateral Canadian CRDF between 2012-2018 meet the new method criteria
Additionally, using the new method, all debt-based Canadian CRDF data between 2012-2018 met the new method criteria, whereas only 78% of grant-based activities met the criteria for the same period.
Our analysis indicates that the valuation of climate related development finance, based solely on the DAC’s upper and lower bound Rio Markers approach, may systematically overstate donor contribution to climate finance. The degree of over-inflation varies across donors but in general we find it is higher for the DAC as compared to Canada.
Over-inflation tends to be greater in the case of “significant-level” bilateral grant-based investments, compared to multilateral debt-based investments.
The method we propose narrows down the scope of CRDF’s activities especially at the lower-bound “significant-level”, to produce a more relevant and cleaner estimate of donor contribution to climate finance.
Our method estimates approx. 30% of Canada’s “significant-level” climate finance may be overstated. This raises broader questions about the types of activities that comprise Canada’s current and future approach to climate finance. Global Affairs Canada (GAC) is currently engaged in consultations on ‘climate finance 2.0’, which provides an opportunity for civil society, private sector, and other stakeholders to raise these questions directly.
Download the resulting 2012-2018 provider perspective CRDF dataset here, which includes a marker for projects that meet our proposed criteria.
Organizations identified as having climate-specific objectives:
- Global Climate Partnership Fund
- Global Energy Efficiency and Renewable Energy Fund
- Global Environment Facility – Least Developed Countries Fund
- Global Environment Facility – Special Climate Change Fund
- Global Environment Facility Trust Fund
- Global Green Growth Institute
- Green Climate Fund
- Intergovernmental Panel on Climate Change
- International Institute for Environment and Development
- Renewable Energy and Energy Efficiency Partnership
- Strategic Climate Fund
- United Nations Environment Programme
- United Nations Framework Convention on Climate Change
Purpose codes that match climate-specific objectives
- 14015: Water resources conservation (including data collection)
- 14022: Sanitation – large systems
- 14040: River basins development
- 14050: Waste management/disposal
- 21010: Transport policy and administrative management
- 23110: Energy policy and administrative management
- 23181: Energy education/training
- 23182: Energy research
- 23183: Energy conservation and demand-side efficiency
- 23210: Energy generation, renewable sources – multiple technologies
- 23220: Hydro-electric power plants
- 23230: Solar energy for centralised grids
- 23240: Wind energy
- 23250: Marine energy
- 23260: Geothermal energy
- 23270: Biofuel-fired power plants
- 23410: Hybrid energy electric power plants
- 23510: Nuclear energy electric power plants and nuclear safety
- 31130: Agricultural land resources
- 31220: Forestry development
- 31320: Fishery development
- 41010: Environmental policy and administrative management
- 41020: Biosphere protection
- 41030: Bio-diversity
- 41040: Site preservation
- 41081: Environmental education/training
- 41082: Environmental research