Oxfam Asia doubles down on questioning multilateral banks' pursuit of private climate finance

For non-governmental organisations that have been fighting to amplify narratives of climate justice at platforms such as the United Nations-led COP summits, the task has been an uphill one, said Sunil Acharya, regional policy and campaigns coordinator for Asia at Oxfam. The aid charity, which sees tackling the unequal impacts of the climate crisis as a key focus, plans to sharpen its campaign messaging this year by having the world recognise that they must do what they can to “make rich polluters pay”. 

For example, a study it launched last week attempts to drive home the point with data. In its analysis widely carried by global media outlets such as The Guardian, it showed that the world’s richest had used up their fair share of the global carbon budget just 10 days into the year and are responsible for more than twice as much carbon pollution each year as the poorest half of humanity. Oxfam has also outlined how the international charity sector is “broken” and outdated, and called for shifting the centre of control away from rich countries with colonial legacies to developing countries. 

Speaking to Eco-Business on the sidelines of a media summit organised by Oxfam in Colombo, Sri Lanka, Acharya said that Oxfam ultimately is concerned that there is still a significant disparity between the world’s climate finance needs and its availablility. Also, providers of climate finance often prioritise investments that do not align with the needs of climate-impacted communities, he stressed.  

“We want to make sure that people are demanding just, equitable and adequate finance. Ultimately, we also want governments to do better,” he said. 

“

Multilateral development banks (MDBs) are now pushing for new forms of instruments such as guarantees…to incentivise the private sector to do more, but we believe that dealing with climate impacts is not a business opportunity. We need to be focused on providing people with the required support for them to build climate resilience. 

Sunil Acharya, regional policy and campaigns coordinator, Asia, Oxfam

Over the years, Oxfam has been pushing for promised climate funds to be based on public grants and not comprising of loans, which would risk increasing debt for vulnerable and poor nations. Across Asia, where the World Bank and the Asian Development Bank (ADB) are large mobilisers of climate-related development finance, Oxfam has been scrutinising their finance portfolios against pledged commitments and calling them out for poor track records. 

“Our biggest ask in relation to climate finance is that they need to be better at reporting,” said Acharya. 

Multilateral development banks (MDBs) need to mobilise between US$60-70 billion a year in private finance for development and climate investments to meet their targets, and guarantees are increasingly seen as a powerful tool to scale up private investment. The approach, however, is one that Oxfam does not agree with, even as observers have pointed out that these development banks are constrained and can only use the funds given by their shareholders.

In this interview, Acharya shares more about Oxfam’s advocacy at the COP29 summit that concluded last November in Baku, Azerbaijan, why he thinks guarantees from MDBs won’t help in closing the climate finance gap, and how he sees his team engaging with these institutions. 

Tell us more about the key issues that Oxfam tracked at the last COP29 summit. 

COP29 was supposed to be one of the biggest COPs when it came to decisions on climate finance, as negotiators agree on how much money to provide to developing countries in terms of a new collective quantified goal (NCQG). The developing countries put forward a proposal of US$1.3 trillion and stated that this primarily should come from public sources and in grants, if not highly-concessional instruments. That was the ask.

There was also a broader conversation around what should count as climate finance, because there have been a lot of disagreement over the years on this topic. The mainstream narrative is that developed countries have fulfilled or exceeded a US$100 billion climate finance goal (set in 2009) in 2022, but Oxfam’s analysis in a climate finance shadow report shows that this is not the case. The true value of this finance is likely between US$28 billion and US$35 billion, when one takes into account the difference between loans at market rate and those with preferential terms, while also considering the overly generous claims about the climate-related significance of the funds provide. Developed countries are overstating what they have done and there is a discrepancy. 

What Oxfam and some developing countries are calling for is additional climate financing above official development assistance for the Global South, as well as certain exclusions to the definition of climate finance. For example, if the money is from carbon markets, Oxfam believes that should not count as climate finance. For now, money mobilised through the private sector in different ways is also largely counted as climate finance, but we want to see the overall role of developed countries, based on their historical obligations to provide the financing through bilateral and multilateral funds, feature more. 

Besides coming to an agreement on the overall NCQG figure [Editor’s note: COP29 ended with a pledge from developed countries to mobilise at least US$300 billion annually], there also needs to be sub-goals. Otherwise, what we have seen is that most of the money goes towards mitigation and not adaptation or emerging needs of loss and damage. There needs to be separately defined goals (for these different needs). At COP29, pledges were made, but they are very tiny compared to what needs to be happening. For example, officials expected US$300 million at least to be committed annually to the UN’s dedicated climate adaptation fund. At the summit, only Germany said it will contribute another US$60 million to the fund, and there has been a lack of pledges against the annual goal. 

Is that the biggest barrier right now – that there are no defined sub-goals? 

Developed countries know that if there are these sub-goals (under the pledges they make), they will have to focus more on grants (rather than loans), because for adaption as well as loss and damage, lending instruments are not going to work. And without sub-goals, organisations or countries can push any instrument that favours them to meet the quantum figure rather than look at what is needed for the countries most vulnerable to climate impacts. I believe that is their intention.

Negotiators from developed countries have also started talking about having a “public finance core” within the mobilisation goal or the NCQG, and then a wider mobilisation goal, in which money mobilised from private finance towards the final figure is counted in a more layered approach. Developing countries don’t see this as a good move because that paves the way for counting everything as climate finance. 

Oxfam also scrutinises the multilateral development banks closely. Why? 

Most international public climate finance is being mobilised through the MDBs. The World Bank and the ADB are the largest mobilisers of climate-related development finance, and they are increasingly looking to expand their role. But Oxfam believes that there are inherent problems with MDBs when it comes to development finance.

We have seen that the investments they have made are not going to the right places. For example, a media investigation last year showed that the World Bank’s climate funding had indirectly gone to upscale luxury hotels in sub-Saharan Africa, acquired by a hospitality fund granted over US$190 million in guarantees by the bank, while nearby fisherfolk communities were in trouble. [The World Bank Group, in its replies, did not deny supporting hotels and the tourism sector as a driver of development, but says it does that as well as enhance the resilience of local communities, and that its units work together to avoid trade-offs.] MDBs are not structured to mobilise money for the real needs that need to be met and they have to work with governments or other intermediaries.

Because MDBs are banks, they focus on loans, which are mostly at market rates. An Oxfam report last year found that between 2019 and 2023, the majority of climate adaptation funding by ADB was allocated as loans (US$10.5 billion), with only US$0.6 billion or 6 per cent provided as grants. The percentage of grants allocated for mitigation is lower. 

MDBs are also pushing for new forms of instruments such as guarantees. There were huge plays on this at COP29 that were characterised as MDBs incentivising the private sector to do more on climate, but we believe that dealing with climate impacts is not a business opportunity. It should not be about making profits. We need to be focused on providing people with the required support for them to build climate resilience. The results of investment in adaptation takes time and for the private sector, the time frame might not work for them or they will be looking at returns, so it is extremely difficult to get the money. Hence holding public money in the form of guarantees through the banks to mobilise direct private sector funding, we don’t think it’s going to work.  

In recent years, there have been broad calls for institutional reform of MDBs. What is Oxfam’s primary ask of the MDBs? 

Our biggest ask in relation to climate finance is that they need to be better at reporting, because whatever they are claiming, we believe the numbers do not add up. For example, the analysis we did on ADB last year also found that the bank overstates its climate finance numbers, with potential over-reporting of 44 per cent on average for the assessed projects, which were 15 of ADB’s largest projects for financial years of 2021 and 2022.

We looked at their allocations and how they count climate finance. Most banks use the Joint MDB Methodology, but ADB also has its own separate methodologies or guidance documents, so we studied the figures against those methodologies. We did the same for World Bank and audited its climate finance portfolio. The Asian Infrastructure Investment Bank (AIIB), another MDB, claims to have fully aligned with Paris Agreement Goals, but our analysis shows that it is way behind that. The conclusion is that these banks need better reporting methodologies and clearer allocation labels for climate finance. 

[Editor’s note: ADB, in an earlier response to media, reaffirmed its figures and stood by its methodologies and commitment to deliver US$100 billion in climate financing by 2030, with $34 billion earmarked for adaptation and resilience. In response to Oxfam’s report, an ADB spokesperson said that the bank stands by its climate adaptation finance numbers and its determination is to fulfil its climate financing goals and recent increase in climate finance commitments in 2023.]

We believe there are opportunities for the MDBs to improve their loan-based portfolios. Our call is for governments to increase their allocations to the lending arms of the MDBs, although that is not going to be enough. At the last ADB annual general meeting (AGM), I recall the Fijian prime minister being very open in sharing how the country was struggling to work with highly concessional loan instruments. He was very vocal about how the Pacific countries found it difficult to even get these loans. 

And then there are other problems – for example, the human rights dimension of the projects backed by MDBs need to be addressed. There are issues such as displacement of people and the lack of transparency that persist. 

How has Oxfam’s engagement with ADB or other multilateral banks been like? Are there conversations happening? 

The banks will say they are improving and trying to do better. That is how they put it to us. But when we ask specific questions, for example, on issues of accountability and their focus on loans for vulnerable developing countries, they do get defensive. At AGMs, they want to showcase that civil society is present, that they are hearing us out. But those are face-saving measures and most of the time, we feel they don’t engage constructively. During a recent AGM, civil society conversations and programmes happened outside of the main event and agenda, which made it difficult for us to engage with the real stakeholders. 

We also have our own capacity issues so we try to work through coalitions and alliances for greater impact.  

However, the scrutiny should not only be on ADB but also on its shareholders. Japan is the biggest contributor to ADB funding and we have seen money coming through for fossil fuels projects. MDBs have been embroiled in controversies in which they were found to fund coal power in the name of climate finance.  We need to expose that there is so-called climate finance going into funding false solutions and not only is it not helpful for vulnerable communities, these communities are being harmed. 

At recent COPs, we see the narrative shifting to something that is more nuanced, where wealthier developing countries such as China and Singapore are also asked to contribute to the climate finance pot. How does Oxfam see this playing out? 

The world has changed a lot since 1992, when the UN Framework Convention on Climate Change (UNFCCC) was created, and since the Paris Agreement. We recognise that. However, we still see that the historical contributions across developed countries are way higher than the rising emissions from emerging economies in the region. The developed countries have also already appropriated the “developing space” and so the right to pursue unbridled development for developing countries are constrained. It would be fine if they are calling for these contribution bases to be expanded, after fulfilling their own responsibilities. But developed countries are hiding behind these calls and shirking their own duties by blaming others.

Oxfam is campaigning on climate’s intersection with colonialism, and is pushing for what it describes as a feminist transition. Can you tell us more about the thinking behind these messages and why you think they are important? 

We have seen a constant model of the extraction of resources from developing countries for the benefit of developed countries. For example, the extraction of minerals and rare earth materials to make solar panels or batteries for Europe or elsewhere is happening at a rapid rate. This trend has not changed and it is problematic because people are being displaced from their homes. They face pollution and other devastating impacts, yet there is no change. 

We have seen examples of maladaptation. For example, solar-powered water pumps are used to extract water from Indian mainlands even though drought is a problem. That does not help the farmers in the long term. We see the climate crisis in the long term as a social justice problem. 

We also believe that carbon market instruments are used in such a way that they represent a form of colonisation, since a corporation in a developed country is allowed to go about their business as usual and then ask communities in developing countries to not touch their forests in exchange for money. It avoids the conversation of how these communities might be dependent on natural resources for their survival. What Oxfam is saying is that the climate crisis is a systemic crisis. Its underlying causes are rooted in the patriarchy or in dominant forms of power. Those that are impacted most would be the vulnerable, such as women and children. And they are being left out as the transition happens. 

Eco-Business conducted the interview at the Oxfam Asia Media Forum in Colombo, Sri Lanka. The trip and related expenses were sponsored by Oxfam.