GREEN FINANCE: G20 welcomes recommendations to unlock funding for climate transition projects

A group of funds backed by the world’s 20 largest economies aimed at financing climate transition projects needs to be more targeted and operate with greater efficiency to improve the slow pace of disbursements, according to a report from the G20’s sustainable finance working group.

The G20 stated that because climate and environmental funds have different accreditation and programming requirements, current mechanisms present “fragmented and time-consuming” pathways for accessing their resources.

Together, the Green Climate Fund, Climate Investment Funds, Adaptation Fund, and Global Environment Facility have an annual commitment capacity of $4 billion to $5 billion, with disbursements totaling $1.4 billion in 2022.

Their disbursement-to-approval ratio ranges from 76% for the Global Environment Facility to 31% for the Green Climate Fund.

The data is part of an independent review authorized by the G20, which noted that while these funds represent a small volume relative to other public and private sources, they provide concessional resources that are key to supporting an effective climate transition in developing and low-income economies.

The independent review recommended climate funds adopt targeted measures to enhance efficiency, including streamlining accreditation processes, shortening project approval times, and accelerating disbursements.

The recommendations include collaboration to harmonize procedures in support of integration and the reduction of transaction costs, aiming to work as a system.

The review also urged climate funds to proactively support investment platforms built by countries, shifting from a focus of supporting individual projects to country-driven strategies.

“Monitoring of the effective implementation of the report’s recommendations will be conducted over the next G20 presidencies in collaboration with the vertical climate and environmental funds, noting its voluntary nature,” the G20 sustainable finance report said.

Brazil has used its G20 presidency to push for ways to boost financing for developing countries, arguing they are falling behind in the transition to low-carbon economies while increasingly bearing the brunt of the impact of climate change.

The country’s finance track coordinator, Tatiana Rosito, said the recommendations for climate funds, as well as a roadmap for reforming multilateral development banks to boost their lending capacity, were significant outcomes of the gathering of G20 finance ministers, given their connection to the need to mobilize more resources for financing the climate transition.

Brazil’s Environment Minister Marina Silva, speaking alongside Rosito in a press conference at the IMF and World Bank meetings, said the national leaders who will gather at the G20 summit in Rio de Janeiro in November “will be drawing from this groundwork.”

“Even in a geopolitical context of heightened tensions, which could have hindered our ability to reach consensus, it was possible to foster an understanding that the climate issue requires a collective effort and extensive cooperation, regardless of our differences,” Silva said.