Further progress on transparency of German climate finance

The German government needs to enhance transparency of climate finance to ensure that it fulfils its international obligations and that the money is spent on effective mitigation and adaptation. Photo: C.Krackhardt, Brot für die Welt

Under the Paris Agreement, Germany made an international commitment to support climate protection and adaptation measures in developing and emerging countries. Transparency is an essential prerequisite for the independent monitoring of international climate finance. While the German government has continued on its course toward more transparency about the payments made, and the first independent reviews of the quality of climate finance are now publicly available, there are still areas where Germany should make improvements.

German reporting channels

The Paris Agreement’s transparency framework includes reporting by industrialized countries on their financial support. Germany has made considerable efforts in recent years to improve transparency and provide more information on the topic. The ministries involved – mainly the Federal Ministry for Economic Cooperation and Development (BMZ) and Federal Ministry for the Environment (BMU) report jointly through two channels as part of their international obligations:

• Every two years in the Biennial Reports to the United Nations Climate Change Secretariat (UNFCCC); the most recent was the Fourth Biennial Report covering the years 2017-2018, published in 2020. All previous reports and the financial totals they contain from 2011 onward can be accessed via the UNFCCC statistics website.
• Every year to the European Union (EU) under the Monitoring Mechanism Regulation (MMR); the most recent report published was for 2019. From September 2021, reporting will take place according to new guidelines aligned with the changed regulations of the Paris Agreement, even though there are still inconsistencies, for example with regard to reporting on climate finance planned for the future.

In addition, the BMZ and BMU report independently to the interested public on the climate finance they have provided. The BMZ offers an aggregated presentation of project lists on its climate finance website, while the BMU uses the website of its International Climate Initiative (IKI).

Reporting is more standardized

Germany has made significant progress in transparency in international reporting. From the beginning, the lists identified the sector (mitigation, adaptation or cross-cutting) to which a project is attributed, whether it has any connection to biodiversity conservation, and whether it is a commitment or disbursement. While in the past contributions were marked only as grants or loans, information is now provided as to whether they are (non-) concessionary loans, equity or direct investments. Interest subsidies to make loans more favorable to the recipient are listed separately, as are the arithmetic grant equivalents of loans. Since 2017, the MMR lists have contained information for each credited project on the ministry providing the funding and the implementing agency. In the reporting to the UNFCCC, however, it is still not clear whether a project’s total funding amount or only part of it is counted as climate finance; the latter applies if mitigation or adaptation are only secondary goals of the project.

Much progress has also been made at the national level in the transparency of climate finance contributions. Nevertheless, the BMZ and BMU still do not have a uniform approach. Instead, each federal ministry has its own reporting with its respective strengths and weaknesses.

• In the BMZ project lists, all projects credited under climate finance can be found for each year. From this, the Rio markers can also be determined, depending on whether 100 or 50 percent of the project is counted as climate finance, making mitigation and adaptation a primary or secondary goal. However, the lists are published as PDFs and thus not editable, which makes it difficult to keep track of the countries in which the projects are located, as they have not been sorted uniformly by country since 2017. In addition, direct links to more detailed information in the project databases of the major implementing entities GIZ and KfW are available for only some of the bilateral cooperation projects, and these are not regularly updated. As a result, the goals and measures of the projects and any current information on the implementation status can only be tracked to a very limited extent.
• The BMU’s IKI website provides an overview of all funded projects, with details on project content and the status of project implementation, as well as external links of the implementing agency. However, projects cannot be linked to the year of their approval and credited toward climate finance accordingly. The list of projects counted toward climate finance for each respective year can only be traced using the MMR lists. The IKI website offers an Excel-based list of its projects according to the criteria of the International Aid Transparency Initiative (IATI) which, in addition to the pledges, also contains information on the annual payments. However, its allocations of projects to individual years are not fully compatible with the MMR lists and information relevant for climate reporting, such as implementing agency or sectoral allocations, is missing.

In addition, the German government makes only limited use of its options in the climate lists to provide further information on issues of quality and anchoring in development cooperation and national priorities. Biodiversity references are identified in the BMZ lists. However, the lists do not provide information on the role of gender issues or human rights protection in their projects, whether they contribute to good governance, or whether poverty reduction is the main or secondary goal of the project. For these, policy markers are also available – either international in the context of the DAC system or the BMZ’s national markers – for poverty reduction and other criteria.

More evaluations of climate-related projects

In addition to its quantity and distribution, the question of the quality and effectiveness of climate finance is of great importance to establish the wise use of climate funds. Evaluations of projects or climate finance in a sector play an important role here. In recent years, an increase in evaluations in the climate sector can be observed. Again, the public accessibility of information to interested experts varies here.

• The GIZ repeatedly carries out central project evaluations for its projects financed by the BMZ, and the related reports are now fully released. They are available via the publication database. KfW also conducts regular project evaluations and publishes the summary reports on its transparency portal. However, for both organizations, the reports are not directly linked to the projects or even the climate finance project lists. This reduces traceability and access to learning about climate finance, because only an explicit review of the published evaluations and cross-checking with climate lists will reveal what counts as climate finance.
• The IKI provides information on measures for monitoring and transparency on its website. It launched a second evaluation cycle covering some 425 projects in May 2017, which was completed at the end of 2019. However, the results are not yet publicly available. The summary report of the first project evaluation cycle has been published.
• Over the past few years, the German Institute for Development Evaluation (DEval) has begun to conduct sector-specific evaluation processes. The first two sectors were adaptation to climate change and REDD+. The evaluations examine the various instruments within a sector as a whole in terms of qualitative issues such as regional distribution, alignment with international framework objectives, and, in some cases, effective implementation in sample programs.

These measures are important steps in reviewing the quality and effectiveness of German climate finance. However, they are used by the German government only to a limited extent for learning and exchange involving civil society. Furthermore, the evaluations have not yet been effectively linked to climate finance reporting, limiting their contribution to transparency and monitoring.

Further improvements in transparency needed

Despite all the progress, German reporting on climate finance is still a patchwork. There is no government information portal that collects and presents information to interested experts in a consistent manner. There is also no systematic reporting to the German parliament or to the specialist public. Our database thus remains the most complete source and consistent presentation of information about German climate finance. However, it cannot and should not replace the government’s obligation to transparency and accountability, and the thing to do is to improve the government’s reporting.

A climate finance portal of the German government should be consistent with international reporting to the UNFCCC and the EU and, based on this, provide more information on the respective projects as well as their implementation and review. The BMZ lists are a good start, as they contain additional relevant information such as the total amount of the projects. However, they should be electronically editable or filterable according to the principles of the Open Data Charter and also include the projects of the IKI and other ministries. Information on other markers, such as gender, human rights and poverty reduction should also be noted in it. In addition, it should be possible to identify the years in which a project has received a commitment, and links to project descriptions should be systematically maintained. The lists could be effectively combined with the project descriptions on the IKI website and the GIZ and KfW implementing entities. GIZ and KfW should publish project descriptions for all projects and the evaluation results of the individual projects should also become part of this. Finally, the German government should seek a regular exchange with civil society, both to discuss climate finance strategy and to tap additional technical expertise in sectoral evaluations.

These measures would significantly improve the German government’s ability to provide information on qualitative issues, which will become increasingly relevant in the medium to long term in the context of reporting to the UNFCCC. Furthermore, they are an important prerequisite for effective and independent monitoring of German climate finance by civil society, which also makes an important contribution to its quality and positive impact.

Christine Lottje