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An integrated finance
framework for
sustainable development
Aaron Atteridge, Stockholm Environment Institute (SEI)
Paul Steele, International Institute for Environment and Development (IIED)
Key climate finance issues
Mobilising resources
Making more effective use of
available resources
Includes issues of how finance
is accounted
(towards ODA targets, towards
climate finance targets, etc)
• Support national visions for social and economic
development and sustainable environmental
custodianship
and sometimes also:
• Support international agendas (e.g. reducing global
warming)
What is finance for sustainable development
and climate change supposed to achieve?
Source: ODI, “Age of Choice”
Existing regime for delivering international public finance
finance
ministry
line
ministries
service
utilities
Bilateral C CC fund C
a b c
Bilateral
cooperation
Bilateral B
Multilateral
cooperation Global vertical
funds DFIs
Social impact
investment
Climate change
funds
CC fund B
Foundations CSOs
Non DAC citizens DAC citizens Private sector
Multilateral B
Challenges
Finance is highly fragmented at the point of delivery Finance is packaged as short term ”projects” Finance often does not connect with the needs of the poorest Allocation decisions on how funds should be used do not always reflect a
country’s or community’s most important priorities – role of fund committees in deciding what is appropriate at national level?
Evaluations of effectiveness are not looking at the quality and longevity of
impact
Encourages thinking of SD and CC as separate rather than integrated components of the development plan/pathway
Challenges
Weak governance and fiduciary risks in recipient countries reduces the willingness among funders to use country systems of planning and budgeting
Concerns over the emphasis on private finance and incoherence
of incentives
Principles of an integrated
sustainable development financing framework
An effective finance framework should:
• Maximise synergies, achieving both development and climate objectives
simultaneously
• Align the allocation of finance closely with national priorities
• Ensure benefits reach poor and vulnerable women and men
• Minimise transaction costs
• Support good governance and financial management
• Evaluate effectiveness against real change and long-term goals
• Facilitate partnerships (as a tool, but not an end in itself)
• Be transparent and accountable, both the funder and country
Moving from this….
finance
ministry
line
ministries
service
utilities
Bilateral C CC fund C
a b c
Bilateral
cooperation
Bilateral B
Multilateral
cooperation Global vertical
funds DFIs
Social impact
investment
Climate change
funds
CC fund B
Foundations CSOs
Non DAC citizens DAC citizens Private sector
Multilateral B
Climate
National budget
A J K B
C D
E F
G H
National development plan
SDGs
DRR
Public
financial
management
Funders
Domestic
finance
Domestic revenue
raising potential
(e.g. tax
collection)
Multilateral
Disaster Risk Reduction
To something like this?
”Mainstreaming into
national priority
setting process
Alignment of International finance with domestic priorities
= coherence, ownership Resources to achieve development and climate outcomes simultaneously
= synergies private finance with public sustainable development objectives
= coherence SDGs and CC with the planning and budgeting of the public sector
= “mainstreaming”
Effective use requires
an“integrated” finance framework