Independent Commission for Aid Impact publishes report on the UK’s International Climate Fund

11 Dec 2014

The Independent Commission for Aid Impact (ICAI) has published a report today on the International Climate Fund (ICF).

The International Climate Fund is a five-year (2011-2016), £3.87 billion fund managed jointly by the Department for International Development, Department of Energy and Climate Change and the Department for Environment, Food and Rural Affairs. It is a central part of the UK’s climate change response. Its goal is to support international poverty reduction by helping developing countries to adapt to the impacts of climate change, take up low-carbon growth and tackle deforestation.

The UK has made a major policy commitment to supporting international action on climate change. It has catalysed positive action, taking a leadership position on the need to shape and deliver an effective international agreement.

The ICF is both a significant contribution to climate finance and a tool for influencing action at the international and national levels. After a challenging start, it has built up significant momentum and is now well placed to deliver on its ambitious objectives. While many of its investments have had long lead times and remained unproven, there is evidence of early impact in a range of areas. It has pioneered new approaches in the measurement of results.

At the country level, it has worked with governments, Civil Society Organisations and some private sector entities to incorporate mitigation and adaptation goals into their development programming. We found good evidence of emerging impact on the ground in our two country visits to Indonesia and Ethiopia. At the national level, the ICF is helping to create incentives for climate action. At the programme level, it is helping poor communities to adopt climate-resilient land management practices and protect against infringements on their land that would result in deforestation or degradation.

As a result of these findings, we have given a rating of Green-Amber. 

Graham Ward, ICAI Chief Commissioner, said: “The ICF has faced several delivery challenges, many of them related to the initial pressure to spend money quickly. It has since made good progress on addressing those challenges. There is still scope to improve the pace of implementation on what are often long-term investments. It is too early to assess overall impact, but trajectory is promising. The ICF has had a positive impact on the international financial system, for example, in the development of the Green Climate Fund and in the operation of the Climate Investment Funds.”

Commissioner Mark Foster, said, “The ICF needs to develop a more detailed private sector strategy, identifying the conditions and strategies needed for attracting different forms of private capital for low-carbon, resilient growth. These might include foreign direct investment, foreign bank lending and institutional investment. This would enable more effective use of public finance in the ICF’s priority countries and thematic areas by amplifying and accelerating capital flows.”

ICAI has made six recommendations to support the International Climate Fund:

Recommendation 1: The ICF should work through a wider range of delivery partners at the international and national levels, with a stronger understanding of their comparative advantages.

Recommendation 2: More flexibility in the allocation of resource and capital expenditure is needed. DECC and Defra would benefit from access to more flexible and direct resource and capital expenditure.

Recommendation 3: The ICF should develop a more differentiated strategy for working with the private sector, focussed on the particular conditions and approaches required to attract different forms of private capital.

Recommendation 4: The ICF should deepen its engagement with developing country governments and national stakeholders, including through greater emphasis on capacity development. This is likely to require greater access to grant and technical assistance resources, including for middle income countries.

Recommendation 5: The ICF should strengthen coherence across multilateral and bilateral delivery channels and programmes and implement a common, country-level planning process and tracking system.

Recommendation 6: The ICF should be more transparent and inclusive, publishing its strategies, activities and progress on an ICF website, in a coordinated reporting format in partnership with other climate finance data providers.