The Climate Investment Funds is one of the world’s largest multilateral funds providing concessional climate finance for low- and middle-income countries. Since 2008, it has channeled funds from government donors through thematic programs to more than 362 projects in 81 countries. After participating in CIF governance as an official observer for four years, BIC has several observations on features and trends in CIF’s climate finance that contribute to its ability to add value.
Continuing CIF’s Differentiation and Collaboration: One of the more interesting trends in the past few years has been increased cooperation and collaboration among the Multilateral Climate Funds or “MCFs” (Adaptation Fund, Global Environment Facility, Green Climate Fund, and CIF). For the past two COPs, MCF observers from all four funds have participated in a joint side event to share insights on how to improve their effectiveness.
On a more strategic level, MCFs have worked to build on their programmatic and delivery partner niches. At the GCF, a dedicated funding window for Direct Access Entities has helped enhance country ownership by homegrown organizations in developing countries. At the CIF, its updated thematic programming reflects the sectors of climate action where the multilateral development banks (MDBs) have capacity, such as clean technology and natural climate solutions, so program goals align with institutional means.
Building on Experience: Since the CIF’s initial 10-year mandate was extended indefinitely in 2019, the CIF has worked to update its programs, applying both successes and lessons learned. For example, the Clean Technology Fund is applying its expertise in energy transition to the new Accelerating Coal Transition (ACT) program, including through early-stage investments in the Just Energy Transition Partnerships in Indonesia and South Africa.
On a smaller scale, the Dedicated Grant Mechanism (DGM) for Indigenous Peoples (IPs) and Local Communities (LCs), which pioneered direct access to climate IPs and LCs, is continuing under the Nature People Climate program. Continuing the DGM under NPC enables IPs and LCs to participate in both climate adaptation and mitigation work in their territories and resources.
Improving on experience through specialized funds, planning, and learning: The CIF is adapting to the changing climate and finance realities by drawing from its original programs and focusing them with the goal of transformational impact. Besides ACT, CIF 2.0 includes the Nature People Climate (NPC) Program. This builds on the former Forest Investment Program by applying a more landscape- and people-focused approach. Both changes are welcome for increasing the effectiveness and sustainability of programs. The CIF has also opted to limit the number of NPC projects to allow greater focus and scale of its efforts. NPC also applies nature-based solutions that can achieve both mitigation and adaptation goals, if properly implemented.
Where resources are more limited, as is the case for new programs for Cities and Industry Decarbonization, the CIF emphasizes investment planning as a catalyst for governments’ (and MDBs’) climate action. If implemented, investment plans will still need to attract investments but are a critical first step in promoting more rational and effective programs.
The CIF has also worked to share its experience through its Transformational Change Learning Partnership (TLCP) with the participation of governments, MDBs, and observers. The deliberate emphasis on transformation helps participants appreciate the nature and scale of change needed to effectively address the climate crisis.
Motivating MDBs To Do More, Better: By having MDBs as its sole implementing partners, the CIF has also helped to motivate and build MDBs’ climate expertise, thanks to the CIF’s concessional finance and technical support. In the CIF’s 15+ years, participating MDBs have progressively stepped up their climate commitments and programming. This period has also seen multiple updates, upgrades, and harmonization of environmental and social safeguards. Although the CIF is not directly responsible for this, competition for CIF resources and CIF’s own mandates, such as on gender, have promoted upward harmonization.
Leveraging Finance: The CIF has been effective in bringing other sources of funds, notably from MDBs, to join in supporting its projects. More creatively, it has established a program, the CIF Capital Markets Mechanism (CCMM), to issue bonds backed by future loan repayments, allowing it to finance new projects now rather than waiting for reflows over the next 30 years.
While this and the trends outlined above are welcome, there are important steps the CIF should take to improve its climate and development impacts:
- Prioritize Concessionality for the Poorest: Even as it faces increased competition for donor funds, the CIF shouldn’t abandon offering grants to finance projects in Low-Income Countries (LICs). This may mean prioritizing LICs with governance capacity to use these funds effectively and leaving private sector approaches to the CIF’s middle-income country clients.
- Strengthen inclusion: While the CIF has been mindful in programming to address gender and youth, it has only begun to address other concerns, such as Persons with Disabilities. Addressing the needs of those most vulnerable to climate change should be a principle in building climate resilience. As the World Bank has documented, one billion people, or 15% of the world's population, experience some form of disability, yet climate financing, including from CIF, often fails to address their needs. Similarly, financing in support of Indigenous Peoples needs to be proportional to their role in programs affecting the ecosystem where they live.
- Increase transparency around project outcomes (learn from failures, too): While the CIF does a good job of publicizing its successes, it has not used its strategic directions work to look critically at the projects and programs where results have fallen short. The TLCP can be a vehicle for this, and a culture of learning from failure, as well as success, needs to be reflected in the CIF’s new strategic directions.
- Build the Climate Community: The CIF has some of the leading experts in effective climate action and in integrating climate work with sustainable development. Not all governments have this expertise. For the CIF to be effective, it needs to be better at advocacy and building capacity for addressing the climate crisis. With donors and other partners, this means highlighting the costs of inaction (and benefits of action). With clients, this means recognizing the need for sharing its expertise while also learning from local experience.
While building on the strengths noted above, incorporating these changes can help CIF 2.0 achieve its potential as a catalytic climate fund.