1. 27ICCG Think Tank Map: a worldwide observatory on climate think tanks
FINANCIAL TRANFERS TO DEVELOPING
COUNTRIES FOR CLIMATE MITIGATION
AND ADAPTATION: SOME GENERAL
ISSUES
Sabina Potestio, ICCG

2. Financial transfers to developing countries for climate mitigation and
adaptation: some general issues
ICCG Reflection No. 27/July 2014
1
FINANCIAL TRANSFERS TO DEVELOPING
COUNTRIES FOR CLIMATE MITIGATION AND
ADAPTATION: SOME GENERAL ISSUES
Sabina Potestio (ICCG)
Abstract
As the issue of climate finance gains more and more space within the international agenda, new
and pressing debates come to the fore. These concern the sourcing, the governance, the
allocation and the disbursement of funds raised by international multilateral funds to help
vulnerable countries cope with climate change. In particular, the focus of this brief article is the
governance aspect of these debates, which raise many normative and ethical questions.

3. Financial transfers to developing countries for climate mitigation and
adaptation: some general issues
ICCG Reflection No. 27/July 2014
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Introduction
Although there is no official and agreed upon definition of climate finance, the term is used to
indicate those financial resources devoted to addressing climate change globally or as financial
flows to developing countries to assist them in addressing climate change1. Climate finance refers
to local, national or transnational financing, which may be drawn from public, private or alternative
sources2 Compared to other issues, the climate finance one has only recently gained more
attention within the international arena, raising various debates around the sourcing, the
governance, the allocation and the disbursement of funds pooled by numerous international
multilateral funds. The debates around the sourcing of climate funds concern the raising of the
funds (who will pay and how); those around governance are centred on how the funds will be
managed while those on allocation and disbursement concern respectively the allocation of
resources amongst countries and the way in which they are delivered and distributed3. This article
focuses on issues and debates regarding the governance of climate finance (particularly that of
international multilateral funds), which entail many normative and ethical questions.
The governance debates around climate finance
An interesting concept which can be easily applied to climate finance governance and the work
of international climate funds is that of procedural justice, a construct profoundly intertwined with
the idea that a just process is the prerequisite of any legitimate authority4. Hence, procedural
justice in climate finance concerns the decision-making process of the allocation of economic
resources amongst countries that entails principles of justice, equity and fairness. In practice, this
means that all countries (developed and developing countries), civil society, and vulnerable actors
(such as indigenous peoples) should be able to participate throughout the procedures of climate
finance decision-making. In particular, these issues have been raised for international multilateral
funds such as the UNFCCC ones, whose main objective is to provide financial resources to
developing country Parties in transitioning to low-carbon economies and to adapt to climate
change. This objective is founded on the principle of common but differentiated responsibilities
based on the fact that historically the developed country Parties have polluted more and, thus,
they are the main cause of climate change.
Two important concepts linked to the justice principle and which are highly debated in climate
finance governance are transparency and accountability. Transparency may be defined as a
characteristic of governments, companies, organization and individuals that are open in the clear
disclosure of information, rules, plans, processes and actions5. Information, thus, should be published
in a relevant and accessible way and in a timely and accurate manner. This means that it should
be presented in plain and readily comprehensible language and formats appropriate for different
stakeholders and that it should be up-to-date, accurate and complete so as to be available in
sufficient time to permit analysis, evaluation and engagement of relevant stakeholders6.
Accountability can be defined as a set of procedures requiring officials and those who seek them
to follow established rules defining acceptable processes and outcomes, and to demonstrate that
they have followed those procedures7. Various debates around climate finance and, in particular,
around the performance of international multilateral funds, have focused on transparency and
accountability. For instance, while most funds (such as the Adaptation Fund or the Climate
Investment Funds) have made progress in transparently reporting on their activities and making
1 Gupta et al., 2014
2 UNFCCC, 2014
3 Bird et al., 2011
4 Grasso, 2009
5 Transparency and Accountability Initiative, 2014
6 Ibid.
7 Johnston, 2006

4. Financial transfers to developing countries for climate mitigation and
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ICCG Reflection No. 27/July 2014
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operational information publicly accessible, all funds should publish more information, reports and
evaluations in a timely fashion8. Furthermore, funds generally lack clear accountability mechanisms
for decision-making processes. In fact, while funds do provide some space for civil society
observation of board meetings, decisions to keep certain meetings closed or to exclude observers
remain too discretionary.9
As concerns the role of civil society in climate change finance, this plays at least three important
ones:
1. Relay information – translating local level experiences to inform and influence global
decision-making, and global policies and decisions for local implementation10;
2. Ensure accountability, transparency, equity and effectiveness at all levels (global, national,
local) of decision-making and implementation11; and
3. Plan and implement projects and activities to achieve international goals (often at lower
cost and with greater effectiveness than government agencies), while promoting
innovative approaches12.
The importance of civil society engagement is widely acknowledged since it provides international
financial institutions (IFIs) with legitimacy. However, many existing IFIs are criticized for their
“exclusivity” since they leave local communities away from the corridors of power where decisions
concerning their everyday lives are being taken13. Four main problems are being debated
regarding the current and common model of civil society engagement: the definition of civil
society; its top-down structure; the lack of resources for civil society to play their role; and the lack
of redress mechanisms to ensure that their concerns are addressed14. In particular, in the context of
climate finance, the definition of the term “civil society” is still ambiguous since some believe the
private actors or even government bodies should be included while others see this as a
disadvantage. Thus, a clear definition is necessary, given that businesses and communities
compete for the funds.
Another issue debated in the climate finance governance area is the one concerning the
representation of indigenous peoples. Climate change poses direct consequences to indigenous
communities around the world and exacerbates the difficulties that are already faced by these
including political and economic marginalization, human rights violations and discrimination15. For
example, recent debates have focused on the newly established Green Climate Fund (GCF) and
ensuring indigenous peoples’ full and effective participation to its governance procedures;
ensuring social safeguards and a rights-based approach to climate financing, and ensuring a
dedicated funding mechanism for these vulnerable communities. Indigenous peoples have not yet
been recognised as active observers in the GCF although they may participate as normal
observers with limited participation rights16. As concerns the funding mechanism, indigenous
peoples call for direct access funding windows dedicated to them that would allow their
contribution with their knowledge in mitigation and adaptation activities. To conclude, there is a
need for an efficient and clear mechanism for the assessment and compliance with social
safeguards which are still not well aligned with the international standards and obligations set out in
8 Transparency International, 2014
9 Ibid.
10 Sharma, 2010
11 Ibid.
12 Ibid.
13 Ibid.
14 Ibid.
15 UNPFII, 2014
16 Martone and Rubis, 2012

5. Financial transfers to developing countries for climate mitigation and
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ICCG Reflection No. 27/July 2014
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the UN Declaration on the Rights of Indigenous Peoples (UNDRIP)17.
Moreover, within the realm of the governance of climate finance, issues of gender balance are
often been raised by policymakers. The role of women in climate change mitigation and
adaptation activities is, in fact, seen as an important contribution to sustainable and equitable
development. Women are often disproportionately vulnerable to the impacts of climate change, a
fact that, in turn, can exacerbate already existing disparities18. In addition, women in developing
and least developed countries face conspicuous constraints in accessing climate change financial
resources due to inadequate knowledge and capacity constraints. Some multilateral international
funds do have gender balance as one of their objectives but a lot still has to be done. A common
and often debated issue is the fact that many funds prioritize larger projects and programmes
compared to smaller and community-based ones where vulnerable women could be more easily
involved. Mainstreaming gender in climate financing, hence, becomes crucial and this should be
done by maximizing synergies among mitigation, adaptation, poverty eradication, gender equality
and women’s empowerment. To conclude, debates around climate finance governance have
also focused on making the system more responsive to national and local concerns. There is, in
fact, a need for financial institutions to strengthen the subsidiary principle by prioritizing decisions
taken at the national and local level (rather than global). This means that international funds should
take on only those tasks that cannot be performed effectively at a more immediate or local level
and as close to the “citizens” as possible19. This allows for climate finance to be more in line with
local needs.
Conclusion
The various debates and issues discussed here highlight important lessons for international climate
funds, which allocate economic resources for mitigation and adaptation activities amongst the
developing countries. These lessons revolve around the governance of these resources and the
importance of managing them according to fair and just procedures. To be fair and just, as
discussed above, the decision-making process of the allocation of resources should be more
transparent by making information fully available to the public and more accountable by
strengthening its accountability mechanisms such as civil society engagement. In addition, more
attention should be devoted to the representation of those actors who are most vulnerable to
climate change and those for whom many of these decisions are targeted to. Thus, actors such as
women or indigenous people (in developing and least developed countries) should be actively
participating in the decision-making processes concerning the allocation of economic resources
for adaptation and mitigation activities. By strengthening transparency, accountability and
participation, international climate funds and their role in allocating precious resources to combat
climate change become more legitimate and ultimately more just and fair.
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17 Ibid.
18 Habtezion, 2012
19 Sharma 2010

6. Financial transfers to developing countries for climate mitigation and
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