With an audience of 350 people, the climate finance webinar was a great success. The event was promoted by the United Nations Environment Programme (UNEP) and was supported by the regional project for Strengthening External Control in the Environmental Area, a partnership between the Federal Court of Accounts (TCU-Brazil), the Latin American and Caribbean Organization of Supreme Audit Institutions (OLACEFS) and the German Cooperation for Sustainable Development, through the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. On this occasion, two members of the CBC/EOS/Fractal Consortium, Linda Murasawa and William Wills, presented a study on Brazil, specifically aimed at Supreme Audit Institutions (SAIs) and commissioned by UNEP and the project, which analyzes subsidies in relation to climate finance. The full event is available in Portuguese, Spanish and English.
Representatives of 15 SAIs – Argentina, Chile, Colombia, Costa Rica, Guatemala, Honduras, Peru, Cape Verde, United States, Germany, Austria, Spain, Holland, Portugal, as well as Brazil – followed the presentation of the work carried out by the Consortium, which aims to map and analyze the sources of financing for climate change mitigation and adaptation actions in Brazil to subsidize the actions of SAIs. The focus of the analysis is to present, in an understandable way, the ecosystem of climate finance mechanisms in Brazil, especially regarding the operation of resources, thus contributing to the work of SAIs in overseeing and suggesting improvements in public policies.
The webinar discussed the sources of climate finance in Brazil, addressing international cooperation initiatives in relation to the climate agenda, public policy commitments to mitigation and adaptation assumed, as well as the financing scenario for these climate policies and projects in the country. In addition, the experiences and opportunities of SAIs to act on the issue were discussed through audits and external control actions. UNEP is contributing to the strengthening of SAIs in Latin America and the Caribbean through two studies: one on the economic accounts of the environment, and the other on climate finance, with Brazil as a case study. This initiative is supported by the project for Strengthening External Control in the Environment Area, a partnership between GIZ, TCU and OLACEFS.
At the opening of the event, Gustavo Máñez, UNEP Climate Change Coordinator for Latin America and the Caribbean, gave a brief speech in which he stressed that it is essential to “integrate climate issues into macroeconomic policy.” He said it is urgent “to green the financial systems, both internationally and nationally.”
Máñez was joined by another experienced voice on climate change mitigation funds. Christian Lauerhass, coordinator of the GIZ cooperation project with the Amazon Fund/BNDES –the largest environmental protection fund in Brazil and, perhaps, “the most audited,” as the German put it– highlighted the oversight role of the courts of accounts, especially the TCU, in the various audits conducted on the Amazon Fund. Lauerhass also highlighted “the importance of governments working with aligned objectives, having solid partners and, above all, trust between the parties.” Trust that, in his opinion, can be built through audit tools such as due diligence and compliance, as well as more technical ones such as blockchain.
On December 8, Brazil presented its new Nationally Determined Contribution (NDC) to the Paris Agreement, in which it reiterated the goal of reducing emissions by 37% by 2025 and 43% by 2030, relative to 2005. In practice, the target for 2030 becomes 1.6 GtCO2e, and no longer 1.2 GtCO2e, which represents a significant increase of 33%.
William Wills of the CBC/EOS/Fractal Consortium referred to the new NDC when presenting the study commissioned by UNEP and the project. However, he noted that, at the Climate Summit, held in April 2021, the Brazilian government announced new goals, such as zero illegal deforestation until 2030 and carbon neutrality until 2050, but did not present specific sectoral targets to achieve these results.
According to Wills, the estimated need for resources to finance the NDC until 2030 is between R$160 billion and R$470 billion. “Achieving carbon neutrality by 2050 will require a radical transformation and a much larger volume of resources,” he said.
In her speech, Linda Murasawa, another member of the CBC/EOS/Fractal Consortium, detailed the points presented by Wills, focusing, however, on the pillars of transparency for climate finance, such as governance, strategy, management of risk, metrics and objectives. The study identified the existence of seven common points that affect the follow up on results in climate finance funds: the presence of multiple actors in the ecosystem (governments, bilateral and multilateral agreements, international and local laws); diversity of financial mechanisms and national and international agents that deal with the issue; different sectors and projects in areas such as forests, energy, transportation, etc.; diversity of regulations; creation of impact and risk models; risk management with climatic variables; and difficulty in demonstrating the effectiveness of the results.
Wills and Murasawa also clarified to the participants what is understood by climate finance, which is local, national or transnational investment of resources, from public, private and alternative sources, aimed at supporting actions to mitigate and adapt to climate change, according to the United Nations Framework Convention on Climate Change (UNFCCC). Its main objectives are to reduce emissions and enhance greenhouse gas (GHG) sinks, as well as reduce vulnerability and maintain and increase the resilience of human and ecological systems to the negative impacts of climate change, as defined by the Standing Committee on Finance (CPF) of the UNFCCC itself.
The sources of these resources come from multilateral institutions, development banks, international funds and private banks, which allocate the amounts to various issues related to climate change, both from the point of view of adaptation and mitigation. Other financial instruments used are donations or grants, concessional loans, green bonds, guarantees, and debt conversion.
Climate finance audit
Following the event, US auditors Marissa Dondoe and Joseph Thompson, both from the US GAO, presented the work carried out in 24 countries by the Working Group on Environmental Auditing: Climate Finance Audit. They said that around half of the SAIs of donor countries reported that their country has goals associated with contributions to climate finance, although there is no consistent and common definition of what this type of finance is. They also highlighted that although many SAIs have conducted audits related to climate finance, most audits are of individual projects or programs. “There are very few audits of general contributions or financial flows,” said Joseph Thompson.
Dondoe and Thompson also cited case studies that have been conducted in Finland, the European Court of Auditors, and Mexico, on audits conducted on climate change mitigation budgets.
To close the event, the floor was given to Hugo Chudyson, Secretary of Agriculture and Environment of the TCU and President of the Special Technical Commission for the Environment (Comtema) of OLACEFS, who thanked the speakers, and commented on the complexity of conducting climate finance audits. “The varied financial arrangements, the multiplicity of actors, the different levels of governance and management, and a certain lack of conceptual standardization on the subject, pose a challenge for the audit work on this issue,” he said. He also
recalled the importance of auditing the application of public resources in funds of this nature, as in any other sector that involves public policies, but that this is more practical when the data on these investments are kept in a transparent manner. “Qualified information is our greatest asset,” he concluded.
Text: Andréa Mesquita / GIZ