International Climate Finance: UK aid for low-carbon development

The UK’s International Climate Finance shows a convincing approach to promoting low-carbon development and has made a strong commitment to joint international action.

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Published
19 Feb 2019
Assessment
Green - Amber
Lead commissioner
Richard Gledhill
Subjects
Sustainability and climate change
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Approach paper

The UK’s International Climate Finance (ICF) is a portfolio of investments designed to support the eradication of international poverty by helping developing countries manage risk, build resilience to the impacts of climate change, take up low-carbon development at scale and manage natural resources sustainably.

In 2015 the UK government committed to increasing its climate finance by 50%, to at least £5.8 billion over the five years to 2020-21, including at least £1.7 billion in 2020. In addition to being the UK’s primary instrument for funding international action on climate change, the ICF is also an instrument for influencing others to support global action on climate change.

This review assesses the contribution of UK International Climate Finance to promoting low-carbon development in developing countries. This part of the portfolio supports developing countries to shift to a development pathway that minimises emissions while still meeting their developmental goals.

Scope and methodology

In 2014, ICAI conducted a review of the UK’s International Climate Fund which looked at climate change adaptation, low-carbon development, and forestry. This review focuses on low-carbon development to allow for a deeper assessment of performance. Adaptation to climate change is excluded, as it was partially covered by the recent ICAI review on building resilience to natural disasters, and the forestry objective is excluded as it involves a much smaller investment.

We conducted a performance review because of the scale and maturity of the UK’s international climate investments. We cover the period from 2016-17, the start of the current phase of UK International Climate Finance, to 2017-18. The review answers the following questions:

  • Does the UK’s approach to low-carbon development reflect the needs of developing countries and its international commitments to climate finance?
  • How effective is UK International Climate Finance at promoting investment in low-carbon development?
  • How well do UK investments in low-carbon development promote and reflect learning and evidence?

Findings

  • The UK uses its multilateral climate finance strategically to strengthen the climate finance architecture and has been explicit in aligning with the needs of developing countries.
  • The UK has made strategic choices about which multilateral funds and initiatives to support, helping to build a more coherent climate finance architecture.
  • BEIS has a clear strategy for promoting low-carbon development in countries with large or rapidly growing emissions.
  • DFID has a clear strategy for promoting low-carbon development in the energy sector in low-income countries but not in its wider portfolio.
  • The lack of an up-to-date strategy and theory of change for UK ICF as a whole, could allow gaps to emerge within the portfolio in the longer term.
  • The UK has used its position as a major donor to multilateral climate funds and multi-donor initiatives to influence their investment criteria and management processes.
  • There is emerging evidence that UK investments are contributing to transformational change – particularly by building the willingness and capacity of financial markets to take on low-carbon investments.
  • But, a falling away in visibility and external communications around UK ICF may be inhibiting the achievement of its demonstration and influencing objectives.
  • UK International Climate Finance has been a strong champion of a greater results focus in multilateral climate funds and has invested in a range of learning initiatives.
  • The UK has developed innovative KPIs but is not yet making full use of the data generated and lessons from low-carbon development programming are not yet systematically captured and shared.

Recommendations

  1. UK International Climate Finance should refresh its strategy, including a clear approach to promoting low-carbon development and to integrating low-carbon development principles across the UK aid programme.
  2. DFID should adopt a more structured and deliberate approach to integrating low-carbon development across its programming.
  3. UK International Climate Finance should present a clear public narrative about the ambition and value of the UK’s climate investment, to support its demonstration and influencing objectives, as well as to improve visibility and public accountability.

Government response

The government publishes a response to all ICAI reviews. The government response will be available to read online in due course.

International Development Committee

There will be an International Development Committee hearing into this review in due course.