This working paper explores the flows of climate finance within the main international climate funds, to understand how effective they are in getting finance to the local level and what design features enable or prevent local financing.
To be effective, climate and sustainable development interventions must take place at every level. Evidence suggests that this is not happening and that too little finance is reaching local communities. By both reforming how the finance is tracked and the funding architectures, climate and development finance could deliver improved results to those who need it most. The paper recommends that donors and the international funds:
- Identify the baseline of finance that reaches the local level and involves community participatory processes.
- Use the baseline to set an international goal for local finance.
- Earmark flexible, grant-based, programmatic finance for local financing through international funds.
- Revise the international funds policies to increase their willingness to undertake risks, for: supporting innovative financial instruments, to be more flexible on co-financing, and to use more appropriate measurement frameworks that promote local level results.
- Provide tailored capacity-building support to build local institutions’ capabilities in managing climate finance.
- Create national and local level mechanisms for donors, governments, NGO and representatives from communities to oversee the design and distribution of climate finance, ensuring it meets their priorities and achieves sustainable development that is appropriate to a changing climate.
- Ensure national climate and development focal points have adequate capacity, and assistance, to oversee devolved financing and decision making which follow the principles of subsidiarity.