Climate finance is highly complex, flowing through multiple channels and delivered to developing countries in multiple forms. Ensuring transparency and accountability is thus crucial, but challenging.
The accountability system envisioned by Parties to the United Nations Framework Convention on Climate Change (UNFCCC) involves three elements: measurement – defining the scope of financial flows to be tracked and what data to collect; reporting – by donors and, optimally, also recipients; and verification – to confirm the accuracy of the data and ensure that funds are used effectively. Though these are all technical functions, they are grounded in political choices that must be made within the UNFCCC, starting with a clear definition of “climate finance”.
The brief notes that no existing system, as currently set up, adequately meets MRV needs. However, Parties already have reporting obligations, so they are using whatever systems are available – such as the Organisation for Economic Co-operation and Development’s system for tracking official development assistance and the National Communications to the UNFCCC – often in inconsistent and potentially inaccurate ways. Looking ahead, Parties must decide whether to find ways to link and improve those existing systems or whether to build a new, separate MRV system.
Whichever approach the Parties choose, the brief argues, MRV challenges need not be addressed all at once; in fact, while key political questions are resolved, technical improvements to reporting and verification could increase transparency, build trust among Parties, help assess whether climate funds are being used effectively, and provide insights on ways to further improve the system.