UK’s £11.6bn climate finance commitment at risk as aid resources stretched

29 Feb 2024

• ICAI review finds £11.6 billion target will be challenging to meet, with 55% to be spent in the last two years of the pledge.
• The government “moved the goalposts” by changing the way meeting the target is calculated, and reviewing existing spend to include all eligible ICF. Altogether this amounted to an additional £1.724 billion, of which none was additional to recipient countries.
• However, ICAI found that while pressures on the aid budget mean there will be inevitable trade-offs with non-climate programmes to meet the target, the impact is much less than the media suggested in 2023.
• The watchdog raises concerns about transparency of the changes made in order to meet the target, and the impact of these changes on the most vulnerable countries.
• ICAI also warns that ICF has not championed women and girls through its spending, despite commitments in the International Women and Girls Strategy.

It will be challenging for the UK to meet its commitment to spend £11.6 billion between 2021-22 and 2025-26 to help developing countries adapt and respond to climate change, a report from the aid watchdog finds today (Thursday 29 February).

Ahead of COP15 in 2009, and reaffirmed as part of the Paris Agreement, the UK committed to spend at least £5.8 billion in international climate finance (ICF) in the five years to 2020-21. Once this goal was met, the government doubled this commitment in 2019 to at least £11.6 billion to be delivered over the five years to 2025-26, positioning the UK as an early global leader on the issue. The UK’s 2023 ICF strategy outlined priorities for the funding: clean energy; nature for climate and people; adaptation and resilience; and sustainable cities, infrastructure and transport.

While the UK remains publicly committed to the flagship £11.6 billion target, reaching it now is dependent on several changes to the way the total is calculated and efforts to include all eligible ICF, allowing more aid spending to be counted as ICF while not increasing the amounts which actually reach countries in need.

The rapid review from the Independent Commission for Aid Impact (ICAI) found that 55% of the £11.6 billion is now planned to be spent in the last two years of the commitment, with up to £3.8 billion due in the final year, after the next general election and at least one spending review.

It notes that there have been competing demands on UK aid in recent years. Such demands have included escalating humanitarian crises and conflicts, successive aid budget reductions since 2020 and the rising costs incurred by the Home Office for hosting asylum seekers and refugees in the UK.

However, contrary to media reports in July 2023 that 83% of the aid budget would have to be spent via ICF to meet the £11.6 billion target, it was actually only 35% in May 2023 and was further revised down to 28% through the accounting changes.

While some of them improved accuracy of reporting, or reduced trade-offs with other priorities, changes to the way contributions were calculated with two years left to meet the target “moved the goalposts” in measuring additional climate finance for developing countries, according to the report. The changes saw the UK’s existing climate-related core contributions to multilateral development banks, and a fixed proportion of 30% of humanitarian programmes operating in the 10% of countries most vulnerable to climate change, newly classified as ICF.

Another change included altering the way the government calculates climate finance in funding channelled through the UK’s Development Finance Institution, British International Investment (BII), to reflect the actual proportion addressing climate change, which provided an increased total.

ICAI also found that the government “scrubbed” the existing UK aid portfolio, to identify existing ICF eligible programming, though the exact interventions and time period covered remain unclear.

All of these changes meant that the government counted an extra £1.724 billion towards the target, while countries expecting support from the ICF pledge did not receive any additional money to tackle climate change.

These changes also meant that more of UK aid funding was translated into loans rather than grants, a modality less appropriate for the poorest and most vulnerable countries.

Many stakeholders interviewed for the report noted that the UK’s reputation as a leader on climate action declined in 2023. Media reporting that year referred to leaked documents raising concerns about the UK’s ability to reach the ICF target, after which Minister of State for Development and Africa Andrew Mitchell published a statement reaffirming the £11.6 billion pledge and explaining some of the accounting changes.

Chief Commissioner Dr Tamsyn Barton, who led the review, said:

“With so many pressures on UK aid in the past few years, it is welcome that the government continues to reaffirm its ambitious pledge on climate finance, which is key to helping the most vulnerable countries adapt and respond to global warming.

“But we are concerned that by altering its accounting methods and identifying existing spend as International Climate Finance to include that funding in the total, rather than providing new money, the UK is offering less additional assistance than was originally promised. It may also not be as suited to the needs of the most vulnerable countries at risk from climate change, notably the least developed, conflict-affected and small island developing states.”

ICAI found there was insufficient transparency about all the accounting changes as well as the review of existing aid spend to identify any eligible as ICF, making it difficult to replicate the government’s calculations and hold the UK to account for its climate finance commitments.

ICAI also noted that climate-related crises disproportionately affect women and girls, who can face increased risk of violence, child marriage and school drop-out rates in fragile contexts. The government’s International Women and Girls Strategy pledged to increase the use of the gender marker – the OECD Development Assistance Committee’s reporting tool for tracking the promotion of gender equality through aid. However, the reviewers observed that 48% of ICF programmes do not apply the marker and that there was less attention to gender than needed.

ICAI’s review makes four recommendations on how to improve the UK’s delivery of its ICF commitments:

Recommendation 1: Produce detailed plans to meet the £11.6 billion target
ICF-spending departments should produce a combined detailed internal plan, setting out how much of the remaining spend will be through which channels, (multilateral, bilateral, development capital, research and development), and how the balance between adaptation and mitigation financing will be reached. 

Recommendation 2: Transparency
ICF spending departments should publish an annual report which enables people in the UK and around the world to track whether they are meeting their public commitments on climate finance.

Recommendation 3: Gender
All ICF spending departments should integrate consideration of gender in their programmes, including by identifying gender-specific programming, using the gender marker where it is relevant, and providing disaggregated reporting.

Recommendation 4: Small island developing states and least developed countries
In line with the white paper commitment, ICF should track the delivery of international climate finance to small-island developing states, fragile and conflict-affected states and least developed countries.