Transparency of German climate finance leaves room for improvement

How transparent is German climate finance?
Photo: sciondriver, publ. under CC License BY-NC 2.0 at flickr.com

Climate finance is a growing field of development finance in which Germany has taken on international obligations under the United Nations Framework Convention on Climate Change (UNFCCC). For several years, the www.germanclimatefinance.de website has been following the German government’s reporting on German climate finance and has gained a number of important insights into its transparency.

What constitutes transparency in climate financing?

Under the UNFCCC, industrialized countries have committed to supporting developing countries in mitigation and adaptation in accordance with their common but differentiated responsibilities and respective capabilities. Following Germany’s provision of around two billion euros for mitigation and adaptation in developing countries in 2013, the German chancellor recently pledged to increase the country’s contribution to four billion by 2020. As the volume of funding increases, however, so does the need for critical monitoring of German climate finance by civil society.

This raises a variety of questions: How much money does Germany and other industrialized countries provide, and under what terms? Is the funding provided in the form of grants or loans, and is private climate finance counted toward the total? Which funds can be counted as new and additional? Are existing projects merely relabeled as climate finance, or do climate finance measures even divert funds from other development areas? Do funds for climate protection truly go toward projects that promote low-carbon development? Do the funds actually reach local people faced with having to adapt to climate change? Do REDD+ projects truly contribute to the protection of tropical forests, and do they take the rights of indigenous people and smallholders into account?

Answering these questions requires proper accountability on the part of the government and independent monitoring of developments in climate finance. That, however, requires transparency at several levels of the German government’s reporting. This is especially true for the Federal Ministry for Economic Cooperation and Development (BMZ), which manages more than 90 percent of Germany’s climate finance for developing countries.

A higher standard, but major delays in the publication of project lists

With regard to the volume of funding pledged to developing countries by German climate finance, the BMZ publishes project lists in which the pledges to developing countries are itemized according to specific projects. The information provided in the lists goes well beyond international standards, for example by indicating whether projects are completely or only partially counted toward climate finance. The downside of this is that project lists are only published after a long delay – the lists for 2013, for example, have not yet been released, while the German government has already reported its 2014 pledges internationally.

Furthermore, the BMZ’s reporting to the German public is not coordinated with the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB), which is also responsible for distributing a share of German climate finance. Joint project lists are issued only for reporting under the UNFCCC, while the website of the International Climate Initiative (ICI) publishes project information intended for the general public in a different format.

Lack of public information on climate projects

It’s a different story if you want to study the project contents themselves, however. Brot für die Welt, Germanwatch, the Heinrich Böll Foundation and Oxfam recently published a study titled ”German climate finance – a contribution to poverty reduction and sustainable development?” (in German only). The analyses carried out for the study show that public project descriptions are not available for almost half of the climate projects financed by the BMZ (see Fig. 1). The existing descriptions are not provided by the BMZ itself and are not linked to the project list. They can be found on the websites of the implementing organizations, above all the German Society for International Cooperation (GIZ) and the KfW development bank. While the GIZ has long published descriptions of most projects, the KfW did not launch its transparency portal until the end of 2013 and still provides considerably fewer project descriptions.

Fig. 1: Share of publicly available information on German climate finance projects

This practice, however, is unsatisfactory when evaluating Germany’s contribution to international climate finance with regard to how well the funded projects are designed and whether they truly focus on mitigation and adaptation. The relevance of this is also shown by the analysis. An explicit, climate-related focus could be made out in only 65 percent of the BMZ projects that were counted toward mitigation in the years 2010 to 2012. Information on whether provision was made for the participation of local people and civil society organizations is also lacking. Essential information on development policy criteria required for the local anchoring and long-term success of projects – criteria that should be part of the aim of climate finance – is thus unavailable.

Information on implementation: not to be found

With regard to the quality of German climate finance, one has to go even further. Information on implementation – be it in the form of evaluations, independent reports or project monitoring – is crucial for an independent assessment of the funded projects. The website’s analyses for the REDD+ sector indicate a major deficit here as well. This is partly due to the fact that climate finance and REDD+ in particular are fairly new areas of development finance and many projects have been completed too recently to be included in the regular evaluation cycles. An urgent need for action remains, however, because climate finance provides a broad range of funding that in some cases plays a pioneering role, as is particularly evident in the case of REDD+.

Climate finance requires more transparency

Climate finance wants and needs to contribute increasingly to a paradigm shift and a transformation of economic sectors and societies toward a low-carbon and climate-resilient world. At the same time, it should also address urgent development issues such as overcoming energy poverty and hunger, or at least not hinder progress in these areas. In doing so, errors may be made and approaches promoted that may prove ineffective. Systematic implementation monitoring, more information and a public discourse are essential to limiting the impact of such errors and preventing false development paths from being set in stone. The basic prerequisite is transparency – an area in which the BMZ urgently needs to improve.

Christine Lottje