International environmental financing

One of the goals the international community has set in the various multilateral environmental agreements is to contribute to resolving global environmental problems. However, developing countries often lack the resources necessary to do this. Switzerland supports the implementation of multilateral environmental agreements and measures in favour of the global environment through its environmental financing and by contributing to environmental funds.

To attain the objectives of multilateral environmental agreements in developing and newly industrialised countries, financial resources are needed. The financing mechanisms included specifically for that purpose in the environmental agreements make grants to the developing countries to support them in implementing the agreements. International environmental policy is based on the basic understanding of “commitment in exchange for support”: developing countries have entered into commitments for the benefit of global environmental policy despite the fact that this is not necessarily their main priority and, in exchange, they receive support for the “agreed full incremental costs” of implementing the measures in question. The environmental financing mechanisms form part of the multilateral environmental negotiations and are an important leverage factors – and one of the few – available to the industrialised countries in the context of the negotiations.

The Swiss Federal Office for the Environment (FOEN) is the authority responsible for the financing mechanisms of the environmental Conventions. However, given the important link between this area and development policy, it cooperates with other federal authorities, namely the State Secretariat for Economic Affairs (SECO), the Swiss Agency for Development and Cooperation (SDC), the Federal Finance Administration (FFA) and the Sectoral Foreign Policies Division (SFPD) in the PLAFICO coordination platform, which ensures coherence. Switzerland supports the principle that developing countries should be supported in the implementation of the environmental conventions. It demands fair burden-sharing in this regard and believes that support should be given on a differentiated basis according to individual needs and capacities. Newly industrialised countries that have experienced strong economic growth since the signing of the Rio conventions in 1992 should assume a suitably greater level of responsibility.


Global Environment Facility (GEF) 

The Global Environment Facility (GEF) has 182 member states. It works with international organisations, non-governmental organisations and the private sector, and acts as a financing mechanism, which makes it a key component in implementing the most important conventions and protocols in the area of the environment in developing countries. The GEF is the central financing instrument for implementing the key environmental Conventions and Protocols. It is the only multilateral fund, and covers the areas essential for the global environment.

Since its foundation in 1991 the GEF has funded more than 4500 projects in 165 developing and transitional countries, in its five focal areas: biodiversity, climate change, land degradation, international waters, and chemicals and waste. With funds of USD 16 billion, the GEF has also leveraged co-financing in a ratio of more than 1 to 6 (i.e. about USD 100 billion) from various sources. This illustrates the way the GEF works and the value it adds: GEF projects contribute to improving conditions in the beneficiary countries so that the global environment benefits, as well as mobilising additional funding. The mobilised funds come from national sources in the beneficiary countries, additional funds from multilateral development banks, bilateral donors, and the private sector.

Switzerland is one of the 32 members of the GEF Executive Council. It represents a constituency that includes the Central Asian partner countries Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan, and Azerbaijan. Cooperation within this constituency, which was established in 1999 on Switzerland’s initiative, has intensified over the years. The GEF Executive Council meets twice yearly and decides, in particular, on the strategic orientation and the projects and programmes to be supported using GEF funding.

The seventh GEF Trust Fund replenishing negotiations were completed in June 2018. Switzerland advocates for a robust replenishment of the GEF, both because of the recent coming into force of agreements to protect the global environment (e.g. the Paris Agreement and the Minamata Convention on Mercury), and because the GEF operates efficiently and effectively.

Every four years the GEF Independent Evaluation Office examines the effectiveness of the GEF-funded projects and programmes. The Sixth Comprehensive Evaluation, which was completed in 2017 (OPS6) attested that GEF projects had an outstandingly high success rate, recognisable effectiveness in achieving global environmental targets, and high relevance for the Conventions and the beneficiary countries. For GEF-7 (2019–2022), the goals agreed by the Member States include:

  • Climate change: Reducing greenhouse gas emissions by 1'723 million tonnes CO2 equivalent
  • Biodiversity and desertification: Conserving a total of 226 million hectares of land and sea, contributing to a more sustainable use of 381 million hectares of land and sea, and renaturing 7 million hectares of land
  • Chemicals and waste: Disposal/destruction or avoidance of a total of 108'000 tonnes of toxic chemicals / wastes
  • International waters: More sustainable management of 35 transboundary waters (freshwater and saltwater)

The Green Climate Fund (GCF)

The Green Climate Fund (GCF) is a global fund that was set up in response to climate change and invests in low-emission and climate-resilient development. It takes special account of the needs of developing countries, which are particularly vulnerable to the impact of climate change. Switzerland shares a seat on the GCF Board with Finland, Hungary, Liechtenstein and Monaco.

Mission

The Green Climate Fund was set up by the parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 2010. For the first replenishment period (2020–23), contributions totalling some USD 10 billion have been pledged by over 30 countries. The Fund aims to make a significant and ambitious contribution to global efforts to tackle climate change. The GCF helps developing countries reduce their greenhouse gas emissions and enhance their ability to respond to climate change, taking into account the specific needs of those developing countries that are particularly vulnerable to climate change impacts. The GCF has committed to spending half its funding on climate change adaptation measures.

Priorities and functioning

The GCF finances climate activities in developing countries in the following areas:

  • Transforming power generation and access to clean energy
  • Building sustainable transport systems
  • Supporting climate-compatible cities and industries
  • Protecting forests and promoting sustainable land use
  • Supporting low-emission and climate-resilient agriculture
  • Preserving ecosystems and strengthening ecosystem services
  • Protecting the livelihoods of vulnerable communities

The Fund seeks to strike a balance in the allocation of funding between reducing greenhouse gases (mitigation) and adapting to the impacts of climate change (adaptation). The GCF also actively engages with the private sector to secure additional funds for developing countries.

The GCF's activities are implemented through accredited entities at international, regional, national and sub-national level. Cooperation with national contact offices ensures funding applications are aligned with national strategies and priorities.

Governance

The Green Climate Fund is led by a Board comprising 24 members, drawn equally from developing and industrial countries. The independent Secretariat in Songdo (South Korea), led by the Executive Director, is responsible for day-to-day operations, while the GCF Board makes strategic and funding decisions.

Switzerland and the Green Climate Fund

Switzerland played an instrumental role in the founding of the GCF, particularly in the Fund's design and development phase. It contributed USD 100 million to the first capitalisation in 2015–17. As part of the first replenishment, this contribution was increased to USD 150 million for the 2020–23 period. Switzerland is represented on the GCF Board, in partnership with Finland, Hungary, Liechtenstein and Monaco. Its involvement in the Green Climate Fund is coordinated through the joint PLAFICO platform, run by the Swiss Agency for Development and Cooperation (SDC), the State Secretariat for Economic Affairs (SECO) and the Federal Office for the Environment (FOEN). Switzerland supports the Fund's goals and principles, attaching particular importance to the following priorities:

  • Improving complementarity and coherence with other climate finance institutions
  • Optimising the network of partner organisations for impact-oriented project activities
  • Enhancing private sector engagement to mobilise additional funds
  • Promoting transparent, efficient and inclusive processes, and the effective deployment of funds

Portfolio

At the end of 2020, the GCF Board had pledged some USD 7.3 billion to support 160 projects in more than 100 countries. As a result of these projects, over 1.2 billion tonnes of greenhouse gases will be avoided and more than 400 million people will become more resilient to climate change. All projects are listed on the GCF website.


Climate finance

International climate finance is an essential component of Switzerland’s international climate policy. Switzerland is therefore also closely involved in the international negotiations both within and outside the Convention to develop pragmatic solutions for the various challenges in climate finance, such as the calculation rules, and incentive systems for mobilising private finance.

Switzerland is committed to contributing an appropriate share to international climate finance and the various climate funds.
The two operational units of the UNFCCC’s financing mechanism are the Global Environment Facility (GEF) and the Green Climate Fund (GCF). Switzerland contributes fairly to both of these.

In addition to the GEF and the GCF there are three further climate funds associated with the Climate Convention:

The Least Developed Countries Fund (LDCF) was set up in 2001 as part of the UNFCCC financing mechanism. It was designed to address the special needs of the Least Developed Countries (LDCs), above all the poorest African countries and the tiny island nations, which are particularly badly affected by climate change and its negative consequences. One focus of LDCF funding is on national climate change adaptation programmes.

The Special Climate Change Fund (SCCF) was also established under the Convention in 2001 as part of its financing mechanism. It provides additional funding for UNFCCC climate protection measures in developing and transitional nations. A smaller proportion of the funding goes to programmes that promote technology transfer.

The Adaptation Fund (AF) The Adaptation Fund (AF) was established in 2001 to finance concrete adaptation projects and programmes in developing country Parties to the Kyoto Protocol. The AF will be primarily financed with a share of proceeds from the clean development mechanism (CDM) under the Kyoto Protocol. All project activities in the CDM are subject to a 4% tax, half of which flows into the AF.


Ozone layer depletion fund 

The Multilateral Fund for the Implementation of the Montreal Protocol, which was created in 1990, supports developing countries in the implementation of the Montreal Protocol on Substances that Deplete the Ozone Layer. The aim of this Protocol is to reduce gradually, and ultimately ban, the production and use of the main pollutants that deplete the ozone layer (CFCs, HCFCs, halons, carbon tetrachloride and methyl bromide). Most of these substances have been banned in industrialised countries since 1996. A ban also came into effect in developing countries starting in 2010.

Between 1991 and the end of 2018, the Fund has financed 8195 projects and activities totalling approximately US$3.45 billion in 147 countries. This will reduce the production and consumption of ozone-depleting substances by a total of approximately 490,770 tonnes of CFC-11 equivalents.


Framework credit for global environmental policy

On 5 September 2018, the Swiss Federal Council approved a Dispatch to Parliament on a framework credit of CHF 147.83 million for the global environment. The main component of this framework credit, over a period of four years (2019–2022) is destined for the seventh replenishing of the GEF Trust Fund. As the financing mechanism for the key environmental Conventions, the GEF plays a central role in international environmental policy. Switzerland’s commitment to international environmental policy, which began with CHF 145 million from the “Jubilee Fund” marking the 700th anniversary of the foundation of the Swiss Confederation (fund total CHF 700 million) in 1991, continued at four-year intervals with further allocations of CHF 88.5 million (1998), CHF 125 million (2003), CHF 109.7 million (2007), CHF 148.93 million (2011) and CHF 147.83 million (2015). Switzerland charges the framework credit amounts to its public development aid budget, in accordance with the corresponding rules of the Organisation for Economic Co-operation Development (OECD). Compared with Switzerland’s total development aid payments (2017: CHF 3'049 million), the annual tranches of almost CHF 47 million are relatively modest, given the significance of the global environment. The Federal Council requests Parliament’s approval for a new framework credit for the 2019–2022 period. By continuing its engagement at current levels, Switzerland can safeguard credibility and consistency.


Transparency and financial reporting

Switzerland reports regularly on its contributions to help implement the environmental conventions in developing countries. Greater transparency and more robust calculation methods for quantifying international environmental finance are crucial to ensure transparent, internationally comparable and reliable reports. Switzerland therefore advocates them in international climate and biodiversity negotiations.

In its Report of 10 May 2017 in answer to Parliamentary procedural request 15.3798 dated 2 July 2015, the Federal Council provided information about Switzerland’s current and possible future international climate finance. Based on a weighted consideration of the two criteria “Switzerland’s economic competitiveness” and the “polluter-pays principle”, the Federal Council assumes that Switzerland’s fair share of the industrialised nations’ joint funding target should be USD 450 to 600 million per year. To achieve the Swiss share, the Federal Council plans to use public funds from existing sources as well as a significant proportion of mobilised private sector funding.

There are various outstanding issues in connection with recording and accounting for private sector investments, particularly when it comes to mobilising private climate investments. A serious, scientifically-based review of these issues is needed to further develop the methodology for calculating mobilised private climate finance and build trust between developed and developing countries. Switzerland took a large step in this direction in 2015 by leading a technical working group with members from different countries. The sought-after agreement by donor countries on the specific basic principles and calculation methods constitutes an essential basis for the most recent OECD report on the state of international climate finance and a key element in the on-going negotiations over the implementation of the Paris Agreement. As part of this work and the negotiations, Switzerland is committed to having the same accounting rules apply to all States. These rules should be as comprehensible, credible and easy to implement as possible so that all countries can apply them.

Biodiversity in Switzerland

Summary of Switzerland’s Fifth National Report under the Convention on Biological Diversity. 2014


Mobilizing the private sector

In addition to public finance, private environmental finance also plays a key role. The private sector is deeply committed to various areas of the environment, but in different ways.

Private sector mobilisation, especially in the area of climate, is a core component of the contributions that help developing countries implement the Convention. The private sector already finances measures in developing countries that reduce greenhouse gases and help them adapt to the consequences of climate change. There are many different reasons for private sector involvement. It can be directly profitable, lead to better management of climate risks in companies, or improve their reputation in the eyes of a public that is increasingly aware of climate protection. However, private sector involvement is not always a given. To encourage the private sector to make climate-related investments, appropriate framework conditions are essential.

As for other traditional donor states, private climate finance is also in Switzerland’s interest, which is why it intends to contribute a significant portion of its fair share of the collective finance goal of USD 100 billion through mobilised private funds. In that regard, Switzerland believes it is important to use the limited public funds in order to mobilise additional private funds for climate protection as effectively as possible and without undesirable side effects.

In cooperation with various representatives of the private sector, the Swiss federal government is looking at concrete investment plans, among other sources of information, to investigate the extent to which suitable national framework conditions or new partnership models with the private sector could mobilise a much higher level of funding.

Further information

Contact
Last modification 28.04.2021

Top of page

https://www.bafu.admin.ch/content/bafu/en/home/topics/international-affairs/topics-and-conventions/international-environmental-financing.html