The Missing Link Part 2: Making a case for climate finance with cash transfer

 

©Oumou Sow / UNDP Mauritania

Environmental concerns and human’s response to environmental risks and climate change have largely been lacking in the design of social protection policies, as was explored in our previous post “The Missing Link Part 1: Incorporating Climate into Social Protection for the SDGs.” Yet climate change is increasingly a source of vulnerability and risk for people around the world, as it increases the incidence and intensity of natural hazards. Natural disasters affect more than 200 million people a year, impacting the poor disproportionately, and in the last 20 years, the impacts of disaster have affected 4.4 billion people, with 1.3 million lives lost, and over US $2 trillion of economic losses. In addition, since interactions between development and climate risk are intricately connected, the big challenge is to prevent those who escape poverty from falling back into it as well as to integrate climate and development initiatives more holistically in a way that adequately supports the most marginalized populations. With the new opportunities that climate finance is presenting, one potential measure is to tap into climate finance (particularly those directed towards adaptation) to finance social protection systems that integrate environmental dimensions, build resilience, and promote climate change adaptation for vulnerable populations.

There is a dearth of empirical evidence on climate finance in most developing countries.  Where climate finance has so far been examined, it is typically focusing more on mitigation than on adaptation. For instance, global climate finance flows is estimated to be a US $391 billion, but only US $25 billion is going to adaptation. Thus, there appears to be an opportunity to channel part of that climate finance into existing social protection systems (cash transfers or CTs specifically) for building resilience in the most vulnerable communities.  Moreover, making the case for a global redirection of climate finance has always been a welcome trend, not only in light of unfolding development challenges, but even more so given the generally limited domestic climate financing that has persistently hampered resilience and adaptation measures. Cash transfer tools could play a key role for advocacy for more climate adaptation resources and climate justice.

The advantages of integrating climate finance and cash transfers are immense: So far, social policies and cash transfer (conditional or unconditional or both) are considered as extremely costly, but with the range of development finance especially related to climate, developing countries could explore opportunities to strengthen social policy tools like CTs by first mainstreaming environmental sustainability into social policies. Using such financing can also achieve cost-effectiveness and integrate planning across sectors and ministries, but in addition, can help trigger such programs that are ultimately nationally financed and budgeted. This type of integration may not require significant changes and adjustments to the design of adaptive social protection systems (social protection programs that incorporate climate change adaptation), but simply a re-engineering of existing instruments such as CTs through adapting criteria of eligibility using both socio-economic and environmental indicators.

Moreover, blending climate finance into CTs and using these new socio-economic and environmental indicators can address some of the institutional and structural challenges associated with climate finance, such as monitoring, reviewing, and evaluating. More socio-economic indicators derived from CT eligibility qualifications and beneficiary registries, as well as data from different sources and government divisions will provide the necessary information that is currently lacking in efforts to monitor, report, and verify (MRV) climate finance, and in determining the effectiveness and impact of climate finance (i.e. M&E plans and impact assessments).

The UNDP RIO+ Centre is currently working to support integrating climate finance and cash transfer systems. For example, RIO+ has begun work on producing a Methodological guide for channeling climate finance into cash transfer systems to build resilience in the Sahel and the Greater Horn of Africa.  As a follow up to the RIO+ Centre’s publication on Social Protection for Sustainable Development, this methodological guide aims to provide sustainable development practitioners and stakeholders (governments, INGOs, Humanitarians, development partners) with information on the process and tools used to design an Adaptive Cash Transfer (ACT) to foster the resilience of the vulnerable to climate shocks. Specifically, this guide is addressed to professionals working in social protection, climate change and disaster risk reduction who are interested in applying a re-orientation process towards channeling climate finance into cash transfer systems to build resilience against social, economic and environmental shocks. It is also envisaged that among the outcomes of this project, the development of a cash transfer modelling tool whereby policy makers can simulate virtual cash transfer scenarios with various sources and thus derive information about the expected social, environmental and economic impacts at the household level.

Notwithstanding the existing information on social protection interventions and CTs’ impact on poverty reduction and other development goals, methodological approaches that capture and quantify the impact of adaptive social protection (and related conditional cash transfers) on vulnerable communities’ resilience is currently lacking. There is an urgent need for methodological innovations and expansion of evidence based information to articulate and pool additional sources of finance such as environmental and climate finance into current cash transfer systems in regions that are the most vulnerable to climate change such as the Sahel and the Horn of Africa.

 

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Expert Meeting held at the BRICS Policy Center in Botafogo, Rio de Janeiro ©RIO+ Photo

As such, UNDP RIO+ is organizing a two-day technical meeting and workshop on 29-30 August to discuss the expected methodological guide in more depth, gaining insight from experts from Brazil, UNDP Regional Service Centre in Addis Ababa, Africa Risk Capacity, and UNDP Bureau for Policy and Programme Support on social protection and climate finance. The workshop counts on the support the BRICS Policy Center, which also hosted the meetings in their Rio de Janeiro office. Specifically, in an effort to boost South-South cooperation, this technical meeting will share information on cash transfer systems based on Brazil’s experience with social protection. Officials from the Brazilian government as well as from the UNDP country office that have extensive work experience with Bolsa Familia, Bolsa Verde and similar social protection programs will bring productive perspectives on the programs, while the meeting will also provide an opportunity for Brazil to learn of social protection initiatives and projects in the Sahel and Horn of Africa.

The combination of social protection and the use of modern financial instruments to target climate and natural hazards will enable policy makers to establish ante-robust policies and to help break cycles of poverty. Building household resilience to shocks also will help accelerate the implementation and achievement of the Sustainable Development Goals as well as the Nationally Determined Contributions that countries are committing to with the 2015 Paris Climate Agreement and the  Sendai Framework for Disaster Risk Reduction Agenda. Acknowledging the connections between climate change and development is essential in supporting the most vulnerable; connecting the dots between climate resilience and social protection is a first step in preventing millions of individuals from falling through the cracks of development, particularly in a changing climate.

 

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