From pledges to projects to procurement: How to build a digital platform to manage climate finance
Last Earth Day, we asked ourselves a basic question – whether any digital platform to track and manage climate finance existed, and if not – why not?
Since then, we’ve conducted extensive desk research and interviewed climate experts from civil society, government, multilateral institutions and the private sector to test a hypothesis: the technology to track and manage climate finance already exists. But it’s not being deployed and used effectively. Incentives aren’t aligned and structural barriers block data and information sharing.
This post shares what we learned, and what we think it would take to build a digital platform that turns climate finance from high-level pledges into projects that get delivered.
The gap: commitments are multiplying, delivery tools are not
The good news is that new high-level commitments and country platforms are emerging, including the Belém Action Mechanism announced at the last COP. But commitments only matter if they can be translated into something line ministries, private investors, development banks, and citizens and civil society stakeholders can understand, with tools and processes for day-to-day implementation. The wish list needs to translate into a concrete project-centered ‘to do’ list: with a budget, a mandate, a dedicated team, a change management plan, and a feedback and learning mechanism.
Understandably, the primary focus of the conversation is about tracking mitigation efforts and carbon budgets. The climate finance conversation focuses on reporting the headline numbers needed, with the UNFCCC calling for as much as $6 trillion per year. But the data infrastructure around climate finance is not designed to follow money through country systems and project delivery.
Even when the data exists, it rarely connects clearly to impact on the ground. It focuses on monitoring and evaluating countries reaching the UNFCCC carbon targets, and it is challenging to establish a clear link between the total climate finance invested and its ultimate impact at the country level. What’s more, there is no common methodology for tagging and labeling what counts as “climate” finance, and within that, what counts as mitigation, adaptation or other subcategories of climate projects and investment.
Why this matters now: climate finance needs “receipts”
Kristalina Georgieva, IMF chief, famously advised governments to “spend as much as you can, but keep the receipts” during the Covid crisis response.
Climate change outstrips the scale of the pandemic. The logic still applies.
Country mitigation commitments require transitioning the economy over time — meaning governments need to invest in greener energy infrastructure and need to buy a range of goods and services in a fundamentally different way that considers climate impact.
That is where public procurement comes in. It makes up one third of all public spending globally. Tracking climate finance commitments through to the contracts that deliver climate investment projects is one practical way to “keep those receipts”. It also sends a market signal, rewarding suppliers that can meet the climate criteria and perform against them. We won’t meet our climate goals without better data and information on how climate finance is allocated, managed and implemented to inform and optimize climate investment strategy.
Our vision: what a climate finance delivery platform should look like
Our new research suggests that a well-designed digital platform could play a transformational role in meeting climate stakeholders’ needs to mobilize, coordinate, measure and engage the public.
In practical terms, that means project and transaction-level data on financial flows, investment portfolios, project procurement, and locally grounded input from communities and beneficiaries. It means working with existing government systems and data, not trying to replace everything. And it means building capacity and creating value for those who maintain it, so it is sustained over time.
We thought deeply about how to create those incentives and which data would be most valuable to a range of climate stakeholders. Through our research, we identified four core use cases that can help to better align incentives for investing in this data and project management architecture:
- Mobilize and de-risk: Leverage data and information on portfolio investments to price risk more accurately, demonstrate return on investment (ROI) and crowd in further investment
- Report: Make it easier for government to meet reporting obligations for climate finance and targets
- Coordinate and control: Help governments coordinate climate finance funds from various sources and allocate these at the portfolio level
- Engage: Enable public oversight and participation by making project information legible and timely, and creating feedback loops that support accountability
What changes if countries build this?
By grounding our research in the needs and goals of the human users who want better data and information about what happens in countries and communities at the investment project level, we hope to motivate governments and development banks to prioritize developing these digital platforms and building the local capacity to use and maintain them. We believe that countries who invest in a digital platform to publish climate finance data will:
- Give investors a clearer picture of the opportunities and risk profile to attract capital and lower the risk premium on capital where the data demonstrates sound project governance, impact and returns;
- Save time generating reports on donor funds and climate targets through automated tools and enhancements when digital platforms are designed to collect the data needed for global reporting templates;
- Make more efficient use of the funds they have through clearer allocation and better data and feedback loops that provide a clearer picture of project performance and results;
- Build trust with citizens by telling credible stories that demonstrate the value of climate investment projects, and allow communities to both participate in the planning and conduct oversight of projects in their area.
Our business requirements documentation sets out what it would take to build a digital platform that can be tailored to a country’s individual starting points. It draws on the experiences from technical implementers who have worked on digital transformation in public financial management in contexts as diverse as Tanzania, Ukraine and Paraguay. The aim is to be concrete enough to help a government scope its own digital platform requirements, but broad enough to allow for adaptations to individual data and digital landscapes, institutional setups and climate policy priorities.
Now we want to stress test this concept.
Join us to build the “receipts” layer
“Why, sometimes I’ve believed as many as six impossible things before breakfast” – Lewis Caroll, Through the Looking Glass
At OCP, we encourage our team and our partners to be bold and ambitious. In recent years, we’ve seen open contracting champions fare better during the Covid pandemic response, not by fast-tracking procurements or taking shortcuts, but by embracing an entirely different way of buying fast, open and smart using the opportunity of digitalization to reimagine processes and workflows for greater efficiency and effectiveness. We’ve supported Ukraine to build a digital ecosystem for reconstruction management that few thought possible.
Tackling the climate challenge requires us to do things in fundamentally different ways. That means innovation through iteration and risk taking.
We know each country will have its own unique starting point, with specific challenges, and nuances. That’s why we invite diverse voices, including the skeptics, to problem solve along with us because we will need critical feedback and thinking to build a common vision that can persist.
We’ve built on incredible work done by many others in the field and we’re putting forward our draft research and our business requirements for a digital platform to track and manage climate finance as a starting point for iteration and improvement.
We will be sharing this work on the sidelines of the World Bank/IMF Spring meetings, and at upcoming events such as the London and New York climate weeks. We’d love to hear from you at these events or set up a virtual coffee to share this work and get your feedback. Please get in touch!
