True value of climate finance just a third of what rich countries report

Many rich countries are using dishonest and misleading accounting to inflate their climate finance contributions to developing countries by as much as 225%, an Oxfam analysis shows.

The international organisation estimates the “true value” of climate finance provided in 2020 was just $21-24.5 billion (£18.5-21.6 bn) against a reported figure of $68.3billion (£60.4 bn) in public finance. An additional $13.1 billion (£11.6 bn) of private finance was also reported.

Rich countries have committed to ensuring that $100 billion (£88.5 bn) climate finance is available annually. Oxfam said their failure to meet the target was morally indefensible given that sum is itself clearly insufficient to allow developing countries to meet the threat posed by climate change.

Tracy Carty, Senior Policy Adviser and lead report author, said: “Rich countries have already admitted they broke their promise to meet the $100 billion goal, but it is now clear they were concealing the true scale of their failure.

“By counting the wrong things in the wrong way, rich countries are exaggerating their own generosity and depriving people on the frontline of the climate crisis of the life-saving assistance they are entitled to and urgently need.

“Since rich countries committed to the $100 billion goal 13 years ago, the story of climate finance has been one of smoke and mirrors - too many loans, too much debt, too few grants, too little for adaptation, and too much dishonest and misleading accounting. Immediate action is needed to restore trust among developing countries.”

Oxfam’s research found that instruments such as loans are being reported at face value, ignoring repayments and other factors. Too often, projects whose cost is counted as climate finance have less climate-focus than reported, making the net value of support specifically aiming at climate action significantly lower than that reported.

Currently, loans make up more than 70% provision ($48.6 bn) of public climate finance, adding to the debt crisis affecting many developing countries.

Least Developed Countries’ external debt repayments reached $31billion (£27.4bn) in 2020. The latest World Bank/IMF debt sustainability analysis indicates that 40 out of 69 low- income countries are either in, or at high risk of, debt distress.

Senegal, which sits in the bottom third of the world’s most vulnerable countries to climate change, received 85% of its climate finance in form of debt (29% being non-concessional loans), despite being at moderate risk of falling into debt distress and with its debt amounting to 62.4% of its Gross National Income.

Carty said: “By counting loans at face value rich countries are claiming credit for finance they aren’t providing. While countries that are facing worsening droughts, cyclones and flooding due to a climate crisis they did least to cause, are being forced to take out loans to protect themselves. They need more support, not more debt.

“Rich countries appear to be in denial about the critical role of climate finance in ensuring a world that is safe for all. The world is running out of time, and the costs of delays in providing the promised funding can be counted in lives and livelihoods lost, and homes and communities destroyed.

“Climate finance needs are urgent, rising and dwarf the unmet $100bn promise. At the upcoming COP27 climate talks this November, immediate action is needed to improve accounting standards, to rebuild confidence in the delivery of the $100bn commitment, and crucially, to ensure that agreement on a new finance goal for the post-2025 period does not repeat the mistakes of the $100bn goal.”

Ends

Notes to the editor:

• Download a full copy of the report, Climate Finance Short Changed Report 2022: The real value of the $100 billion commitment in 2019-20, here.
• The 2020 reported climate finance totalling $83.3 billion included public finance ($68.3 billion), private finance mobilised ($13.1 billion) and export credits ($1.9 billion) in 2020. Oxfam has assessed the value of finance provided, IE the public finance element. OECD (2022), Climate Finance Provided and Mobilised by Developed Countries in 2016-2020: Insights from Disaggregated Analysis, Climate Finance and the USD 100 Billion Goal, OECD Publishing, Paris, https://doi.org/10.1787/286dae5d-en
• Overreporting of loans is incentivising the use of loans which are dominating climate finance provision. According to the latest assessment by the OECD, loans made up 71% of public climate finance in 2019-20– a significant share of which were non-concessional – while only 26% was provided as grants. OECD (2022), Climate Finance Provided and Mobilised by Developed Countries in 2016-2020: Insights from Disaggregated Analysis, Climate Finance and the USD 100 Billion Goal, OECD Publishing, Paris.
• 40 out of 69 low-income countries were either in or at risk or debt distress. See https://www.worldbank.org/en/programs/debt-toolkit/dsa (accessed 19 September 2022).
• Oxfam’s $21-24.5 billion figure includes the estimated grant equivalent of reported climate finance rather than the face value of loans and other non-grant instruments. It also accounts for overreporting of climate finance where action to combat climate change is one part of a broader development project. For more details please check Oxfam methodology note here.
• Senegal’s debt instrument figures are based on 2013-2018 climate finance reports, according to Oxfam “Climate Finance in West Africa” report, 2022. Please also see OECD. (2021). Climate Change: OECD DAC External Development Finance Statistics – Recipient Perspective. Retrieved 10 August 2022.
• Senegal ranks Senegal is 134th out of 182, or in the bottom 30% in terms of vulnerability according to the ND-GAIN Index.
• USD to GBP conversion as of 17 October exchange rate