Info Service on Climate Change (Oct20/04)
Delhi, 2 Oct (Indrajit Bose) — The 22nd meeting of the UNFCCC’s Standing Committee on Finance (SCF) was held virtually from 28-30 September 2020. TWN took part in the virtual meeting as an observer.
(The SCF’s role is to assist the UNFCCC’s Conference of Parties [COP] in exercising its functions in relation to the Financial Mechanism of the Convention).
The meeting discussed the first order drafts of two key reports under preparation: the ‘Needs Determination Report’ (NDR) and the ‘2020 Biennial Assessment and Overview of Climate Finance Flows’ (BA 2020).
Differences emerged between developing and developed country members over both the reports (further details below). The SCF invited further comments from members on these reports which are to be submitted by 16 October in preparation for the second order drafts of the reports.
The SCF also discussed guidance to the operating entities of the financial mechanism of the Convention, and the SCT’s annual forum, among other matters.
Given the COVID-19 pandemic, it is not clear yet whether the next meeting of the SCF will be physical or virtual or a hybrid model where some members are physically present and others join virtually. Several members preferred a virtual setting if an in-person meeting was not possible. Some developing country members highlighted the difficulties of virtual meetings and that this year should not set any precedence for subsequent years.
Below is a snapshot of some of the interventions on the main issues discussed in the SCF.
Needs Determination Report
(The SCF was requested by the COP in 2018 to prepare, every four years, a report on the determination of the needs of developing countries related to the implementation of the Convention and the Paris Agreement. This current report will be considered at the next COP to be held in Glasgow next year).
Co-facilitators of the agenda item on the NDR, Zaheer Fakir (South Africa) and Mattias Frumerie (Sweden) requested the SCF for guidance on the draft and next steps.
In response, committee members spoke about mandates, whether focusing on methodologies or the needs of developing countries would be more useful and whether a headline number should emerge from the report or not. There were calls to follow the approach of the BA report.
Mohamed Nasr (Egypt) said members must avoid using the NDR to force specific processes or infringe upon the sovereignty of developing counties on how they carry out the assessment of their needs. He also said that having different chapters on methodologies and processes might take them in a direction of the SCF assessing different needs assessment processes, which he said should not be the case.
Nasr also said that the SCF should follow the practice of the BA, where even without an agreed definition of climate finance or the difficulty in differentiating between climate finance and development finance, the SCF agreed to move ahead and provide something around climate finance flows. “We accepted that and we said that was one of the challenges. We were not shying of or scared of putting big numbers there and the same should be done for the NDR,” added Nasr further. He also said that the NDR must inform the world, with the necessary caveats and qualifiers. It should also state the challenges and these would be enhanced in subsequent reports, he added further.
In response to developed country members who called for the harmonizing of methodologies in relation to the determination of the needs, Nasr said that there was no need to do so, as this was not followed for the BA either. He supported the idea of updating information based on the updated nationally determined contributions (NDCs) of developing countries. He called for further discussions on calls for references to “green recovery and COVID” in the report.
Ayman Shasly (Saudi Arabia) said the NDR must give an indication of the numbers, whether it is about “millions, billions, or trillions” He reminded that the report is not about methodologies or challenges, but to come up with numbers. He observed that the current report “spoke to everything but about the determination of the needs”.
Shasly also said that the chapter on challenges, opportunities and gaps must be redone as the key findings were not really relevant. Referring to some of the findings, he said that were not about the assessment of needs, adding that “we are not talking about reshaping how developing countries should operate.”
He said that the context for possible recommendations emerging from the report is the Convention and Paris Agreement. There needs to be clear reference that developing countries are severely impacted by climate change and that they have challenges in addressing poverty eradication and sustainable development, in addition to addressing climate change, he said. Shasly also said that the needs of developing countries were growing manifold, more so in the current COVID-19 situation, which also needs to be taken onboard. He added that it must be highlighted in the recommendations that developed countries must make the financial flows available for developing countries.
Ali Waqas Malik (Pakistan) said the primary objective of the report must be to identify the actual needs of developing countries rather than focus on methodologies. He said the draft focused on qualitative information and methodologies, rather than quantitative information and the actual needs. He also said that there must be balance between qualitative and quantitative information, and that the current draft had very little focus on the adaptation and loss and damage needs of developing countries.
Waqas added that on loss and damage, the report questions the accuracy of data provided by developing countries. He recommended a revision of the draft with a clear message that the lack of methodologies at the national level should not be a barrier to financing. He also said that some statements in the draft were nearly critical of developing countries without explaining the challenges or limitations that are there, nor do they highlight the capacity needs in those areas, and these should be revised.
Liucai Zhu (China) said the report should effectively reflect the needs of developing countries by identifying effective, predictable, quantitative and qualitative information. He also said that there were several data challenges which were also part of developing country needs.
Delphine Eyraud (France) stressed that numbers such as USD 3.6 trillion as a headline number in relation to the needs was misleading, as it did not take into account potential duplications, adding that the report should include several aggregate numbers rather than present one headline number. She suggested capturing the needs expressed by developing countries in their updated or revised NDCs as well as in their green recovery plans. She added further that the report must highlight how the determination of needs is supporting climate ambition.
Gabriela Blatter (Switzerland) called for consistency in the use of terminologies across the report and on how the needs are displayed in the report. She said the term ‘means of implementation’ is a challenge because financial needs sometimes overlap with technology transfer and capacity building needs, “especially if price tags are attached to them”. On the methodologies used for determining the needs, she suggested an approach to harmonize them to help countries assess their needs.
Eva Schreuder (The Netherlands) called for more disaggregated data throughout the report, adding the need for examples and case studies, where needs determination has led to higher level of climate action and ambition.
Ismo Ulvila (European Union) said one of the key findings that was emerging was on data availability, information gaps and limitations and that the SCF must dig deeper into these areas as well as on capacity building needs.
Toru Sugio (Japan) said the quantitative information presented in the report was confusing and misleading as the USD 3.6 trillion number could be double or even triple counting and different reports such as Parties’ national communications, biennial update reports and thematic reports should not be mixed up.
Fiona Gilbert (Australia) said the reality is that only a quarter of the information collected contained quantitative information, which leaves three-fourths of the information containing other types of data, including qualitative information. This needs to be reflected and fleshed out, adding that chapters on methodologies and process would help countries enhance their determination of needs.
Randy Caruso (US) said since there is an agreed outline of the report, the SCF must stick to it and there should be no quibbling about its objective. He said that the credibility of the report would be undermined with a headline number which would result by adding things that were never intended to be added together.
Following the exchange, co-facilitator Frumerie reminded members that the NDR would be a compilation of reports and that the SCF would not be doing any additional analysis or providing any reporting of its own. He also said that there was a need to see how the expectations fit with the mandate.
Co-facilitator Fakir wrapped up the discussions and said there were clear differences in how developed and developing countries view the report. “We need to find a way of bridging the differences. People mentioned sticking to mandate but they are throwing in all kinds of new things. We need to be clear what the mandate is,” said Fakir.
On the next steps, the SCF members were asked to submit additional comments by 16 October and the technical team would incorporate comments and suggestions by SCF members for the second order draft.
Biennial Assessment and Overview of Finance Flows 2020 Report
The 2020 BA, for the first time includes a chapter on Article 2(1)(c) of the Paris Agreement. (Article 2(1)(c) of PA reads: ‘This Agreement, in enhancing the implementation of the Convention, including its objective, aims to strengthen the global response to the threat of climate change, in the context of sustainable development and efforts to eradicate poverty, including by…(c) Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.)
The mandate for this discussion came from a decision of the COP in 2018, which requested the SCF “to map, every four years, as part of its biennial assessment and overview of climate finance flows, the available information relevant to Article 2(1)(c)…”.
During discussions on the first order draft of the BA, SCF members raised several key issues around 2(1)(c), double counting of resources and lack of agreed definition of climate finance among others. Vicky Noens (Belgium) facilitated the discussions.
Mohamed Nasr (Egypt) said that the lack of definition on what is climate finance needs to be highlighted. On Article 2(1)(c), he said that one of the challenges was to ensure no greenwashing is reflected as the private sector may claim something, but the reality may be different, said Nasr. He wanted to know if in such situations, whether the experts preparing the BA highlight challenges related to accounting, greenwashing and double accounting. He also wanted to know if the report was considering financial flows under Article 2(1)(c) different from climate finance or not.
Zaheer Fakir (South Africa) said there are no guidelines or discussion within the UNFCCC process as to what is understood by Article 2(1)(c). What the Article says is basically making finance flows consistent with pathways towards low greenhouse gas emissions and climate resilient development, he said. “My experience of how people interpret this is very varied… In the absence of any form of multilateral discussion on what 2(1)(c) constitutes, how would you reflect it in the BA?” he asked further.
Fakir also wanted to know how double counting is dealt with in the BA. He gave the example of a donor country contributing to the Global Environment Facility (GEF), to South Africa as a bilateral funding and funding MDBs as part of capitalization. “In one project, we had all three parties involved. We had the GEF, we used some of the donor money as co-financing and the entity that we were working with was an MDB and the MDB also used some of the money as co-financing. In this case, the country that provides the funding counts both the GEF and the MDB money and the bilateral money as their climate finance flows. The GEF counts the money from the donor as its own money plus it counts the co-financing it gets from my country, and it counts the MDB money. The MDB counts its own money. In this case, three different entities are counting the same flows as different flows and if you add up, it is triple of what the actual flow is. How does the BA deal with such issues?” he asked further.
Ayman Shasly (Saudi Arabia) also stressed the continuous problem of the lack of definition of climate finance, adding that it should speak to the Convention and that it is any new and additional finance that goes beyond the financing for development.
Ali Waqas Malik (Pakistan) said data under chapter 2 of the report (which relates to the ‘Overview of current climate finance flows in 2017-2018’) should be presented in a quantified manner, and the focus of the chapter should be climate finance flows from developed to developing countries. He also expressed concerns that some developed countries do not provide information on new and additional resources in their biennial reports. “There is a need to highlight gaps resulting from the lack of provision of such information in the next iteration of the report,” said Malik.
Delphine Eyraud (France) said that in the section on climate finance flows from developed to developing countries, it would be useful to include climate finance provided and mobilized by developed countries from a forthcoming report of the Organisation for Economic Co-operation and Development (OECD).
Toru Sugio (Japan) said he was glad that South-South cooperation would be taken up in the report and that he was looking forward to the outcome.
Following further discussions, the SCF agreed to undertake further work on the second order draft and invited comments by SCF members by 16th October. The technical team would them incorporate the comments and suggestions by SCF members.
Guidance to the operating entities
The SCF is mandated to provide to the COP draft guidance to the Green Climate Fund (GCF) and the GEF, operating entities of the Financial Mechanism of the Convention. Since the annual COP is postponed due to the Covid situation, the SCF would not prepare draft guidance for this year.
Following discussions, the SCF agreed that it would share with governments and constituted bodies the annual reports of the GCF and GEF in 2020, when they become available. The SCF will also remind Parties the invitation by the COP to submit to the Secretariat their recommendations on elements to be taken into account in developing the guidance, with the caveat that submissions may be provided either in 2020 and/or 2021.
The SCF will also highlight to Parties and the constituted bodies that no guidance will be provided to the operating entities as there is no COP in 2020. The SCF will also compile submissions prior to its first meeting in 2021, wherein it will discuss how it will prepare draft guidance.
Forum on Nature-Based Solutions
The SCF members discussed the provisional programme of the its forum on ‘Finance for Nature-based Solutions.’
The co-facilitators of the agenda item on the Forum, Mohamed Nasr (Egypt) and Fiona Gilbert (Australia), informed the SCF that over 40 submissions were received from Parties and observers in response to the call for inputs to inform the preparation of the Forum.
In response to the provisional programme, SCF members proposed various suggestions. These included keeping track of UN Summit on Biodiversity, themes for breakout groups, strengthening private sector participation, and including debt swap as a topic of discussion.
A member (Ali Waqas Malik, Pakistan) also said that there were divergent views on the concept of nature-based solutions (NBS) itself, and that there was no agreed definition, and that the term did not exist in either the UNFCCC or the Paris Agreement. He also said he would welcome a discussion on this early on in the forum.
Following the exchange, the SCF called for additional inputs on the programme to be sent by 9th October following which the draft programme would be revised. It was also agreed that virtual consultations would be held on the Forum late October. On the dates and venue of the forum, a decision is likely by mid next year.