International Climate Finance: UK aid for low-carbon development

Review

This review found that 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. We gave a green-amber score and made three recommendations.

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.