The World Bank will be able to report on its lending commitments aimed at low-carbon and climate-resilient development in a consistent and transparent manner. This will cover projects financed by the World Bank own resources (IBRD and IDA) as well as a number of external resources, including carbon finance, the Climate Investment Funds, and the Global Environment Facility. The roll out began on July 1, 2012 and applies to newly-approved projects. Retroactive coding for Financial Year 2011 and 2012 activities is underway.
The climate finance tracking system was developed in response to commitments set out in the World Bank Group Strategic Framework for Development and Climate Change in 2008 and in the IDA16 replenishment (pdf). Experience with this system will support global efforts to improve the tracking of climate finance at both the country and international levels. There is already a demand from client countries for assistance to strengthen national systems for climate finance (including monitoring), as part of a broader effort to build institutional readiness for climate change. Multilateral Development Banks (MDBs) – which play a key role in mobilizing and leveraging resources for climate action – are in the process of harmonizing their climate finance tracking systems. MDBs have recently finalized a joint approach for mitigation finance reporting and have just released the Joint MDB Report on Mitigation Finance 2011 (pdf). They are engaged in a parallel effort to develop a joint approach for adaptation finance tracking to be disclosed at the 2012 UN Climate Change Conference in Doha (Qatar) at the end of the year.
The climate finance tracking system follows a conservative approach. For example on adaptation, it is designed to avoid the mislabeling of development activities as ‘adaptation’. Activities will only be recorded as adaptation if they explicitly include climate adaptation reasoning and directly address vulnerability or impact from climate variability and change. The system tracks only direct climate change co-benefits. For example, financing climate-resilient roads in an area impacted by chronic floods, which could increase in frequency/severity due to climate change, provides adaptation co-benefits. Building a road to increase incomes, which in turn increases the adaptive capacity of the residents, has indirect co-benefits, so it will not get recorded as an adaptation activity.
The climate finance tracking system builds on the internationally-recognized Rio Markers on climate change (pdf) developed by the OECD Development Assistance Committee Secretariat to track aid flows that support climate action. The World Bank system tracks co-benefits at the lowest level of financing information available, even considering individual components of the project, thus adding granularity to the Rio Markers. For example, if only $10m of a $100m power project tackles energy efficiency, then only $10 million will be recorded as having mitigation co-benefits.
To facilitate the identification of climate co-benefits, the World Bank has developed an illustrative typology of activities with adaptation or mitigation co-benefits. The typology is illustrative only: for an activity to be considered as providing adaptation/mitigation co-benefits, it must meet the definition and criteria mentioned above.
Adaptation and mitigation co-benefits are tracked independently. Importantly, the same activity can provide both adaptation and mitigation co-benefits and the financing that supports this activity is counted in full both towards adaptation and mitigation. As a result, the financing for adaptation and mitigation should not be added together to prevent double counting.