This session shed light on the climate finance and Aid for Trade processes, and how the trade and climate communities could become more mutually supportive. In particular, discussions shared perspectives towards greater synergies between Aid for Trade and Climate Finance for inclusive and sustainable development of developing and least developed countries. While Aid for Trade as an important means to build their trade-related capacity building needs, these countries are the worst affected by climate change and have limited means to adapt and mitigate.
Placing today’s discussion in the context of this week’s Aid for Trade (AFT) Global Review, Rashid S. Kaubab, Executive Director at CUTS International Geneva, recalled that AFT could play a key role in supporting inclusive and sustainable development, especially for developing countries. He also stressed the importance of bringing together the trade and climate communities, as well as exploiting similarities and synergies. In this regard, valuable work to build upon has been undertaken by various institutions and experts (e.g. recently published ‘Greening the World Trade Organization’, by Prof. Raymond Saner). This excellent publication goes beyond “old WTO doctrine” keeping in mind that climate change needs more radical solutions within the WTO regulatory framework as well as some further improvements for the developing and least-developed countries.
Turning Aid for Trade Green?
Discussions started with an exploration of the concept of AFT and how it connects with climate finance. According to Simon Hess, Head of Monitoring and Evaluation at the EIF Executive Secretariat, AFT is already not acting in full isolation. In fact, synergies exist with sectors such as agriculture, and some AFT initiatives have integrated environmental elements. Most are however not yet connecting directly with key international climate change mechanisms in place. Although 93% of least-developed countries (LDCs) have mainstreamed environment in their development objectives, AFT projects targeting environmental goals remain limited.
The EIF’s work nevertheless found that trade diagnostics have increasingly incorporated a climate change element, with notable “win-win” projects in areas such as investing into carbon-sequestration, engaging women and youth in digitalisation etc. It was stressed that LDCs could gain better access to climate finance by aligning their trade and climate policies, for which they need to be supported with knowledge and access to resources.
Are Developing Countries Accessing Climate Finance?
Sharing experiences from developing countries’ access to climate finance, Dr. George Wamukoya, Team Leader at the African Group of Negotiator Experts Support (AGNES), emphasised that although USD100 billions per year were pledged at COP15, this had tended to be diverted from existing official development assistance (ODA). In this context, and given developing countries’ needs, the level of and ease of access to financial assistance remains insufficient, particularly when it comes to funding climate adaptation objectives.
On modalities of access, he warned that countries with less institutional capacities were struggling to design proposals in line with the requirements of existing mechanisms. Increasing capacity and knowledge of local agencies and experts should be made a priority, for developing countries to better take advantage of existing funding opportunities. In addition, collaboration remains key to ensure greater coherence between the trade and climate change agendas.
Ambassador Mere Falemaka, of the Permanent delegation of the Pacific Islands Forum in Geneva, stressed that small developing countries were especially vulnerable to external shocks, including climate ones. In fact, the three most vulnerable countries are in the Pacific. Yet, Pacific states have very limited access to climate finance.
She recalled that the Pacific Aid for Trade Strategy (PAFTS) 2020-2025 focused on five strategic priorities, achieving which is being challenged by lack of funding and some projects not being implemented as a result. According to her, there are opportunities for better synergies between AFT and climate finance, for instance by investing in projects such as quality infrastructure (encouraging sustainable standards) or investing in e-commerce. Ambassador Falemaka also suggested that AFT could be used to support the transition towards greener trade and participate in climate resilience.
A Donors’ Perspective: Finland
Mika Vehnämäki, Senior Advisor for Development Policy, MFA Finland, advocated for ambitious policies leveraging the role of businesses in tackling climate change, including through ODA and A4T. He informed that climate change was a cross-cutting objective in the Finnish development cooperation policy. He also recalled that Finland funded existing multilateral organisations such as the EDRB and the IFC with long-term loans, with 78% of these funds being climate finance.
Towards a Holistic Approach to Capacity Building
Presenting a recent paper by CUTS International Geneva on “Climate Finance and Aid for Trade: Towards a Holistic Approach to Capacity Building” (available at …), Leslie Sajous, former Programem Officer CUTS International Geneva and currently Trade and Environment Consultant at ITC, stressed the importance of implementing the OECD’s five principles on aid effectiveness: ownership, alignment, harmonisation, managing for results and mutual accountability. This would ensure sustainable, fair and coherent use of funds.
The importance of aligning national trade policies with environmental goals was also underscored, while noting that challenges exist in building such synergies. In particular, she stressed that environmental conditionalities for developing countries’ assistance should remain limited, and that any ‘green AFT’ funding should be additional rather than redirected. Also, top-down and paternalistic approaches should be avoided to promote ownership from recipients. Importantly, processes and mechanisms for accessing such funds should be simple and user-friendly.
Key Takeaways
Wrapping up the session, the moderator provided a few takeaways from today’s discussion. These included: (i) given the magnitude of needs, substantially more resources are needed; (ii) accessibility remains a challenge, and capacity-building is an urgent need for developing countries; (iii) AFT has already been incorporating environmental dimensions into its work, but more could be done for climate finance to take into account trade-related concerns; and (iv) a holistic approach would need to be taken at both the national and the multilateral level through enhanced partnerships, more and targeted resources, and building bridges between Aid for Trade and climate finance.