Enhancing India’s Readiness to Climate Finance

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Enhancing India’s readiness to access and deliver international climate finance 4 Development of a climate finance Readiness Framework Chapter 3 highlighted the fact that India has performed well in accessing international climate finance, in both absolute terms and also relative to peer countries. However, even though India received nearly $1 billion in climate finance from bilateral sources in 2012, financial flows are still far below the annual rate of investment that India will need to meet the $38 billion funding gap for the NAPCC. It is therefore critical to understand how India could improve its ability to access and deliver larger volumes of climate finance in the future, especially as new funding streams like the GCF become operational. Armed with this information, policymakers, policy analysts, public agencies, private investors, research institutions, think tanks, and civil society can help drive institutional changes in India that will lead to significant scaling-up of international climate finance and investment. The next three chapters turn to the question of how India could improve its performance in accessing international climate finance. Chapter 4 begins with a theoretical examination of how countries can improve their performance in accessing climate finance. The focus of this chapter is the elaboration of a conceptual ‘readiness framework’ that outlines the functions, institutions, skills and capacities that are required for a country to access and deliver climate finance, along with metrics to evaluate performance in these categories. In later chapters, this framework will be used to assess India’s climate finance readiness and develop recommendations for how the country can improve its readiness going forward. 4.1 What is climate finance readiness? Climate finance ‘readiness’ is a new concept that has emerged in recent years. Readiness has risen on the climate finance policy agenda largely as a result of the GCF, which is expected to deliver unprecedented volumes of climate finance to developing countries in the years ahead. With uncertainty over whether recipient countries will have the absorptive capacity to deal with these volumes, the GCF laid out the following provision in its governing instrument for the early stage of its operations: “The Fund will provide resources for readiness and preparatory activities and technical assistance, such as the preparation of LEDS, NAMAs, NAPs, NAPAs, and for in-country institutional strengthening, including the strengthening of capacities for country coordination to meet fiduciary principles & standards and environmental & social safeguards, in order to enable countries to directly access the Fund.” 32 As the GCF has gradually moved closer to opening for business, more programmes and projects have attempted to prepare developing country governments and national institutions for greater volumes of climate finance 33 - highlighting the increasing importance of readiness in the climate finance policy space. But what exactly is meant by climate finance ‘readiness’? This report takes the definition of readiness from UNDP, who define readiness as: The capacities of countries to plan for, access, deliver, and monitor and report on climate finance, both international and domestic, in ways that are catalytic and fully integrated with national development priorities and achievement of the MDGs. 34 32 GCF governing instrument: http://gcfund.net/fileadmin/00_customer/documents/pdf/GCFgoverning_instrument-120521-block-LY.pdf 33 For example, GIZ has begun a Global GCF Readiness Programme that is providing climate finance support in 25 developing countries. 34 UNDP (2012) Readiness for Transformative Climate Finance Ref: Ricardo-AEA/R/ED59216/Final Report 19
4.2 Readiness Framework overview Enhancing India’s readiness to access and deliver international climate finance One of the main goals of this report is to understand how countries can improve their readiness to access and deliver climate finance. The UNDP definition of readiness provides a good conceptual overview of climate finance readiness, but the next step – translating the concept of readiness into a set of metrics that can be evaluated – is much more difficult. As a first step to evaluating readiness in individual countries, the project team has developed a climate finance Readiness Framework, which frames national climate finance readiness in a way that can be evaluated across a number of important categories. The Framework itself is not entirely new. Rather, it builds heavily on several readiness frameworks that have been developed in recent years, borrowing the strongest elements of each and amalgamating them into a cohesive whole. Importantly though, it adds the next step that has been missing until very recently – the evaluation criteria used to determine a country’s level of climate finance readiness. The following two sections outline the Readiness Framework that will be used for evaluating India’s climate finance readiness in this report. First, the Framework itself is outlined in Section 4.3, with a brief explanation of how the Framework was developed and the models that it was based on. Section 4.4 then outlines how the Readiness Framework can be applied in practice, detailing the evaluation criteria that are used to assess readiness at the national level. 4.3 The climate finance Readiness Framework The climate finance Readiness Framework that has been developed for this report is based on the following three frameworks: UNDP’s Readiness Framework 35 , which highlights four process-oriented components of readiness: financial planning; accessing finance; delivering finance; MRV of financial flows. ODI’s ‘3R’ Framework 36 , which takes a softer approach, outlining three core competencies that a country must exhibit: planning; aptitude; and access. These three competencies must be contextualised within a process that is relative to a country’s socio-economic and geopolitical characteristics, responsive to national needs and challenges, and reasonable in proposing practical solutions. The Nature Conservancy (TNC)’s ‘Functional’ Framework 37 , which outlines four functions of readiness that a country’s institutions must perform: political; strategic; financial; and MRV – all of which are performed by specialised executing agencies The three frameworks highlighted above provide valuable reference points for understanding climate finance readiness. Importantly, they all have substantial overlapping features. For example, all three frameworks recognise the importance of planning and financial management as key components of readiness. Yet they all have slight differences, with the UNDP focusing on financial processes, ODI focusing on capacities and skills, and the TNC focusing on broader institutional functions. Borrowing from the strengths of each of these frameworks, this report proposes a new Readiness Framework – one that can provide a holistic look into the functional, institutional, and capacity-based elements of a country’s readiness. It also allows for a more practical evaluation of readiness capabilities in a given country, drawing on GIZ’s Clif Reflect tool to provide a list of evaluation criteria used to test the framework and to provide recommendations for improving climate finance readiness. Figure 4.1 outlines this new Framework. 35 Vandeweerd, V., Glemarec, Y., & Billet, S. (2012). Readiness for Climate Finance: A framework for understanding what it means to be ready to use climate finance 36 Nakhooda, S., & Watson, C. (2013). Climate Finance Readiness: Understanding readiness to access and use climate finance effectively 37 The Nature Conservancy (2012). Climate finance readiness: lessons learned in developing countries. Ref: Ricardo-AEA/R/ED59216/Final Report 20
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Enhancing India’s Readiness to Climate Finance

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