Given the urgency of global financial flows needed to address and mitigate the climate crisis, climate finance needs to hit its mark. As private finance, Chinese investment, and impact investment (which increasingly overlap) focus on climate finance, Accountability Counsel is working to strengthen accountability of these financial flows to ensure that climate solutions achieve environmental goals and respect human rights.
Accountability Counsel’s work has identified climate finance that unintentionally undermines the mission of public and private investors’ climate goals, while also impeding the environmental and human rights of local people.
Our cases and research show that issues such as lack of project information and failure to consult with and include local people in the design of climate-friendly investments that impact them can have disastrous effects. These include projects that:
- are inadvertently set up to facilitate corruption that undermines climate goals,
- fail to conduct social and environmental due diligence holistically enough to capture negative climate and social impacts of investments (e.g. harm to local people who in turn require use of natural resources in a more harmful way than the pre-project status), and
- fail to capture local knowledge about environmental and social harm that will result from project design.
Where climate investments involve development finance institutions, we support communities to use existing accountability tools to raise issues of mismanagement or abuse related to climate finance. These accountability offices help identify where harm prevention and remedy is needed through investigations and dispute resolution. They also point to systems level issues in climate finance that require attention, often through changed policy and practice. Accountability offices are a good governance tool for boards of directors and other leaders at the financial institution to hear directly from communities closest to project impacts.
For private actors and emerging market public entities that are investing in renewable energy and other climate infrastructure without public co-financing, no avenues for independent community feedback currently exist. There is an urgent need to develop strong accountability systems to ensure that climate goals are met without undermining the rights of local communities.
There is an opportunity for public and private investors to better use available data to improve climate finance outcomes. The Accountability Console, our public database of all complaints ever filed with accountability offices, can be used to identify issues as part of standard due diligence. As the database grows, sector specific climate finance data trends will come into focus.
Case Study of Our Strategy In ActionIn our Communities program work, we are supporting communities speaking out about impacts of climate finance that are misused and may contribute to climate change rather than help address it.
In our case in Myanmar, we see top-down climate finance that failed to incorporate the knowledge Indigenous communities who have conserved their ecosystem for generations. As a result, a project meant to protect 1.4 million hectares of biodiverse forests instead risks worsening climate change by setting up a system ripe for illegal logging and deforestation. Indigenous communities are working to redesign this harmful project, financed by United Nations Development Programme (UNDP) Myanmar, through a complaint strategy tied to UNDP’s accountability office. The project is currently suspended as the UNDP’s accountability office responds to this complaint, which Accountability Counsel’s Communities team is supporting Indigenous communities to raise.
The complaint process focuses on non-compliance with UNDP’s own policy, as well as the policy of the Global Environment Facility (GEF), one of the project funders. But for this community-driven complaint process, policy-makers at UNDP, GEF, and other institutions and investors that engage in climate finance would not have been aware of these impacts, which are not unique. These institutions can now act on this information about these unintended climate consequences to prevent misuse and harm, not only with this project, but in all climate investments going forward.