Nations who pledged to fight climate change are sending money to strange places

LONDON – Italy helped a retailer open chocolate and gelato stores across Asia. The United States offered a loan for a coastal hotel expansion in Haiti. Belgium backed the film La Tierra Roja, a love story set in the Argentine rainforest. And Japan is financing a new coal plant in Bangladesh and an airport expansion in Egypt.

Funding for the five projects totalled US$2.6 billion (S$3.5 billion), and all four countries counted their backing as so-called “climate finance” – grants, loans, bonds, equity investments and other contributions meant to help developing nations reduce emissions and adapt to a warming world.

Developed nations have pledged to funnel a combined total of US$100 billion a year towards this goal, which they affirmed during climate talks in Paris in 2015. The funding helped crown Japan and the United States as two of the top five contributors.

Although a coal plant, a hotel, chocolate stores, a movie and an airport expansion do not seem like efforts to combat global warming, nothing prevented the governments that funded them from reporting them as such to the United Nations and counting them toward their giving total.

In doing so, they broke no rules. That is because the pledge came with no official guidelines for what activities count as climate finance. Though some organisations have developed their own standards, the lack of a uniform system of accountability has allowed countries to make up their own. The UN Climate Change secretariat told Reuters it is up to the countries themselves to decide whether to impose uniform standards. Developed nations have resisted doing so.

“This is the wild, wild west of finance,” said Mr Mark Joven, Philippines Department of Finance Undersecretary, who represents the country at the United Nations climate talks. “Essentially, whatever they call climate finance is climate finance.”

The four countries defended their programmes as sound. Japanese officials consider the power and airport projects green because they include cleaner technology or sustainable features. A US official said the hotel project counts because it includes stormwater controls and hurricane protection measures. A Belgian government spokesman defended counting the grant for the rain-forest movie as climate finance because the film touches on deforestation, a driver of climate change. An Italian government official said Italy aims to consider climate in all of its financing but did not elaborate on how the chocolate stores met that goal.

Developed nations reported more than 40,000 direct contributions towards the finance target, totalling more than US$182 billion, from 2015 to 2020, the last year for which data is available. In an effort to understand how that money is being spent, reporters from Reuters and Big Local News, a journalism programme at Stanford University, examined thousands of records that countries submitted to the UN to document contributions.

The system’s lack of transparency made it impossible to tell how much money is going to efforts that truly help reduce global warming and its impact.

Countries are not required to report project details. The descriptions they disclose are often vague or non-existent – so much so that in thousands of cases, they don’t even identify the country where the money went. Even receiving countries listed in the reports sometimes couldn’t say how the money was spent.

“You cannot really follow the money, track the money, track the impact,” said Dr Romain Weikmans, a senior research fellow specialising in climate finance at the Finnish Institute of International Affairs.

The problem is not universal. Some countries, such as the United Kingdom, Canada and the Netherlands, do submit detailed reports, and Reuters tallied tens of billions of dollars in spending from at least 33 countries that aligned with stated climate goals. That included investments in renewable energy and projects that build resilience to natural disasters.

But billions in spending is scarcely documented, including that from top funder Japan, which accounts for nearly one-third of the funding pledged to date. Officials from Japan’s foreign ministry, which oversees its climate finance contributions, declined to describe any of the country’s funding decisions in detail. The country has drawn criticism from activists and other nations for including in its total projects that rely on fossil fuels or otherwise increase emissions. Japanese officials have argued that developing nations need fossil fuel projects that rely on cleaner technology while the world transitions to alternative power sources.

Aiming to follow the money, Reuters and Big Local News asked 27 nations for details on funding they reported to the UN, examined public documents and spoke to NGOs and others involved in reported projects. Reporters also cross-checked UN reports against information recorded by other agencies, such as the Organisation for Economic Co-operation and Development (OECD), a group representing mostly wealthy nations.

The review covered about 10 per cent of the total reports to the UN. It turned up at least US$3 billion spent not on solar panels or wind farms but on coal-fired power, airports, crime-fighting or other programmes that do little or nothing to ease the effects of climate change. Five climate specialists – including university professors, researchers and government officials focused on climate finance – agreed that the projects Reuters identified have little or no direct connection to climate change.

More than US$65 billion was reported so vaguely it is impossible to tell what the money paid for. Some of those records don’t even specify a continent where the money was sent. And more than US$500 million was reported for projects that were later cancelled with no funds paid out. Countries are still claiming that funding towards their climate finance pledges.