Welcome to our regular roundup of news from the world of aid and development transparency.
Moving toward improved 2X disclosure
2X Global, a membership body working to advance gender lens investing, is developing a new certification process for gender lens investors. It offers a real opportunity for 2X investors, including many development finance institutions (DFIs), to lead the way in investment transparency and demonstrate what impactful funding looks like.
In a new blog, Alex Farley and Gary Forster set out why greater transparency must be integrated into this process. They provide four recommendations for improving the disclosure of 2X investments – so that we can understand their impact on women and girls, and ensure we are making the most effective use of our scarce resources. Our working paper provides more detail on how transparency and accountability should be addressed.
A fair share? Reflections on USAID’s first localization progress report
The United States Agency for International Development (USAID) has just provided a detailed update on its goal to direct 25% of its funding to local actors by 2025. Earlier this year, Publish What You Fund investigated the measurement of this 25% target and concluded that the choice of methodology could determine whether more than US$1.4 billion of additional funding is channelled to local actors each year.
So, Gary Forster and Sally Paxton have been taking a close look at USAID’s progress report and the measures used. They commend USAID for its leadership among donors and for publishing the underlying data. However, they find the definition of ‘local’ is imperfect and the denominator (the eligible funding pot) is too narrow – accounting for only 43% of USAID’s total funding.
Here’s a quick roundup of other news and publications we’ve been reading over the last few weeks, including several studies of what counts as climate finance – all calling for clearer definitions and more transparent reporting.
A new briefing paper from Oxfam finds that high-income countries have not only failed to deliver on their commitment to mobilise US$100 billion in climate finance for low- and middle-income countries, but also – as in previous years – generous accounting practices have allowed them to overstate the level of support they have actually provided. Oxfam estimates the real value of climate finance in 2020 as US$21 – 24.5 billion, compared to the official reported figure of US$83.3 billion. It also highlights that much of the finance has been provided as loans rather than grants, and only US$11.5 billion was provided in 2020 to help adapt to extreme weather. Oxfam calls on high-income countries to provide more finance that is transparent, with genuine accountability mechanisms, and that allows for far more local ownership and responsiveness to the needs of communities it is intended to reach.
The Center for Global Development (CGD) and Breakthrough Institute have examined the World Bank’s climate portfolio at the project level for the period 2000-2022 (covering 2,554 projects) and find that financing is skewed towards mitigation projects. These projects lack estimates of greenhouse gas (GHG) emissions reductions, and there is no standardised reporting on GHG estimates across the portfolio. Further, hundreds of projects tagged climate—many in poorer countries—appear to have little to do with climate change mitigation or adaptation. The authors recommend that the World Bank do more to identify outputs and verify outcomes, and explain why climate projects mitigate emissions (with estimates of GHG reductions) or how they help increase resilience to climate-related events. CGD has also looked into how much climate ODA is new and additional – which is part of the climate finance commitment but lacks an agreed definition. Charles Kenny concludes that donors are stripping aid from development projects to support climate projects. He argues that properly defining, measuring and delivering on additional climate finance should be a priority for this year’s COP.
Meanwhile Reuters and Big Local News have dug into the detail of some of the investments that are claimed to be climate finance. They reviewed 10% of investments reported to the UN and concluded that the system’s lack of transparency made it impossible to tell how much money actually goes to efforts that truly tackle climate change and its impacts. The report highlights US$65 billion of funding which is reported in such a vague way it is not possible to identify what the funding was for, and also identified projects with little or no connection to combatting climate change – such as airports and coal plants.
Development Initiatives has launched the Global Humanitarian Assistance Report 2023. It finds that in 2022, the estimated total humanitarian funding from governments, EU institutions and private donors increased by 27% compared to the previous year – to US$46.9 billion. But this was not enough to meet spiralling humanitarian need. The number of people in need of humanitarian assistance in 2022 grew by a third, to an estimated 406.6 million people. Local actors received just 1.2% of humanitarian funding directly from public donors – despite a target of 25%, for direct and indirect funding, set by signatories of the Grand Bargain agreement.
The Lowy Institute has released the 2023 Southeast Asia Aid Map – which is based on a dataset of over 100,000 projects financed by 97 development partners. It shows that China accounts for almost 20% of all development spending in the region, mostly through non-concessional loans for large infrastructure projects.
Eye on Global Transparency reports on the value of opening up the Global Emerging Markets Risk Database (GEMS) – a private dataset on lending risks in emerging and developing economies compiled by a consortium of DFIs. The story looks into a past deal by the European Investment Bank which gave Dutch investment company ILX access to the data. There are continued calls for GEMS transparency, to help mobilise more private finance in emerging markets.
This Devex story highlights the findings of a recent audit of the European Union’s foreign aid budget – which it says lacks transparency and measuring its impact is sometimes impossible. The European Court of Auditors examined the €79.5 billion Global Europe instrument, and raised concerns about how the funding is allocated to neighbourhood countries, how impact is measured and a lack of regional consultation.
Indiana University’s Global Philanthropy Tracker measures cross-border donations from individuals and organisations in 47 countries. The latest report highlights US$70 billion of philanthropic flows in 2020, which rises to US$841 billion when combined with ODA, remittances, and private capital investments.
ODI has launched the Principled Aid Index 2023, which finds that Sweden is the most ‘principled’ aid spender, topping the rankings for the first time, followed by Ireland and Norway. But higher ranked donors’ scores have declined relative to lower ranked, newer DAC members. Also, wealthy countries’ aid spending became more equitable during Covid-19. This was driven by more social spending to countries in serious financial distress, greater investment in controlling communicable diseases and less aid allocated for geostrategic reasons.
This DevPolicy blog looks at the recent OECD DAC peer review of New Zealand aid. One of the criticisms relates to a lack of transparency, and the review recommends that the Ministry of Foreign Affairs and Trade should dedicate more resources and leadership to improve transparency.
WINGS and the Transparency and Accountability Initiative have produced a practical guide on transparency and accountability for philanthropic organisations.
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