At a glance – Evaluation of the International Climate Finance Program

1. Program Overview

Canada's International Climate Finance (ICF) program was established in 2010. Its mandate was to provide $1.2 billion over three years to developing countries. Since then, Canada has committed an additional $2.65 billion for the 2015 to 2021 period in 2015, and another $5.3 billion, in 2021, for the 2021 to 2026 period. 

Parties to the United Nations Framework Convention on Climate Change (UNFCCC) and Paris Agreement have agreed that financial resources should be scaled up and directed towards achieving a balance between adaptation and mitigation. 

Canada's first and second ICF commitments have been delivered in full and delivery of the third is underway.

The current approach to providing $5.3 billion in ICF is focused on four main thematic areas: clean energy transition and coal phase-out, climate-smart agriculture and food systems, nature-based solutions and biodiversity, and climate governance. It also includes the following changes from the second commitment to bring Canada's ICF more in line with developing countries' needs and global best practices: 

• A larger proportion of grants.
• More finance for adaptation.
• Addressing biodiversity loss alongside climate change
• Alignment with Canada's Feminist International Assistance Policy

Canada's ICF program is jointly administered and delivered by Environment and Climate Change Canada (ECCC) and Global Affairs Canada (GAC):

• ECCC leads climate finance negotiations under the UNFCCC and the Paris Agreement, where collective climate finance goals are agreed to.
• ECCC is also the lead department for tracking and reporting on climate finance internationally, including to fulfill transparency requirements under the UNFCCC and the Paris Agreement.
• GAC is the lead department for implementing nearly all the $5.3 billion commitment, with $181 million (or 3 percent of the commitment) being implemented by ECCC.

2. Scope

The International Climate Finance evaluation covers the period from April 2021 to February 2025. The evaluation focuses on the following themes:

• Relevance and alignment
• Design and delivery
• Effectiveness
• Organizational learning

3. Methodology

A variety of sources were used, including:

• File review. About 400 files including work plans, reports, research papers, news releases and evaluation reports on other climate finance programs.
• Data analysis. Approximately 3,969 data points of administrative and financial data. 
• Interviews. 39 interviews with program administrators and officials and implementing partners. 
• Case studies. One case study focusing on results achieved through bilateral programming.
• Literature review. A literature review focused on the developing country's needs for climate finance and global best practices in delivering climate finance programming.

4. Findings

4.1 Relevance and alignment

ECCC's contribution to the ICF program: ECCC makes an important contribution to Canada's International Climate Finance (ICF) program design, delivery, and governance. In doing so, the department brings to bear knowledge, expertise, and experience gained from delivering on its broad climate mandate, both domestically and internationally. Joint delivery of the ICF program by ECCC and GAC continues to be an effective approach, given the department's complementary expertise and capacity.

Alignment with developing countries' needs: ECCC's design and delivery of the International Climate Finance program align with the needs of developing countries for implementing the United Nations Framework Convention on Climate Change and the Paris Agreement. Funded projects support country ownership, build climate governance capacity, and address priority sectors, with most projects meeting multiple needs.

Alignment with global best practices: ECCC's delivery of the International Climate Finance (ICF) program aligns with global best practices for providers of climate finance: supporting country ownership, demonstrating responsiveness to countries' capacity, and adopting innovative project designs as well as flexible disbursement mechanisms. However, alignment could be improved to ensure ICF allocation is inclusive and supports the most vulnerable population groups, and to ensure timely access to funding.

4.2 Design and delivery

Selection of recipients and transfer payment instruments: ECCC's process for selecting funding recipients was inclusive, aligned with the international climate finance policy framework, and leveraged existing expertise and relationships. Selection of a grant or contribution instrument balanced minimizing recipients' administrative burden with appropriate levels of oversight and influence. Increasing flexibility in instrument choice would enhance program delivery efficiency. While useful, the Emerging Priorities Fund's efficiency and impact was constrained by design parameters.

Agreement negotiation and signature: Early recipient selection aimed to ensure timely disbursement of funds. However, challenges were faced due to insufficient capacity and expertise for drafting, negotiating, and signing agreements among program administrators and departmental enablers, causing delays. Addressing these issues required additional resources and coordination with Global Affairs Canada. Eligible expenditures were established as a basis of payment for contribution agreements.

Agreement disbursement and administration: Over the evaluated period, 74 percent of the allocated funds were disbursed, all in line with funding agreement schedules, despite capacity and skill challenges. While ECCC's administrative costs are only 2.6 percent of allocated funding, there are potential options to improve program efficiency, such as selecting large-value projects and potentially considering opting for grant agreements instead of contributions, where consistent with risk assessment, project complexity, and access to climate finance.

4.3 Effectiveness

Performance measurement: ECCC's International Climate Finance program uses a performance measurement framework to track outcomes and indicators, but it does not report on project-level results by population groups. The program does not systematically collect performance data for capacity building projects, which make up a significant portion of the funding. There is a recognized need for improved performance measurement and reporting on immediate and intermediate outcomes to better capture project results and to support ongoing learning.

ECCC climate finance results: ECCC international climate finance disbursement and project implementation are underway, with program-level results expected to accrue over the next few years. The evaluation found evidence of project-level outputs and results, such as the establishment of climate governance communities in West Africa and successful pilot projects in various regions.

Resource use and value for money: Expert literature shows that climate finance allocated to mitigation projects has not yet been effective at reducing greenhouse gas (GHG) emissions in developing countries, raising concerns about the effectiveness of global climate finance. However, the evaluation found that ECCC has improved the cost-effectiveness of its mitigation projects over time, achieving a lower cost per tonne of GHG emissions avoided or reduced compared to the second commitment.

4.4 Organizational learning

Recent changes to program design: Learning from their experience with the delivery of the previous climate finance commitment, administrators made several changes to the program design to improve efficiency These changes have been positively received by recipients, are aligned with global best practices for climate finance, and have no documented downsides. 

Formal governance: The 2021 evaluation recommended that ECCC and GAC ensure a coordinated and coherent approach to climate finance, which led to the establishment of interdepartmental committees to oversee the implementation of Canada's climate finance commitments. These committees, involving various federal departments, have improved strategic management and monitoring of progress.

Coordination: ECCC and GAC have established collaborative ways of working and regular communication channels to implement Canada's third International Climate Finance commitment. Overall, the evaluation found evidence of better work integration and reduced overlap. There are nevertheless opportunities for greater coordination in results reporting, recipient selection, agreement processes, sharing of project insights, and developing a strategic project pipeline to enhance the impact of Canada's public climate finance.

5. Recommendations

Recommendation 1: The Assistant Deputy Minister of the Strategic Policy and International Affairs Branch should review options that could increase efficiency such as re-considering the balance between the use of grants versus contributions, and the selection of larger projects.

Recommendation 2: The Assistant Deputy Minister of Strategic Policy and International Affairs Branch should review the design elements of the Emerging Priorities Fund to ensure that delivery aligns with the purpose to support the achievement of results.

Recommendation 3: The Assistant Deputy Minister of Strategic Policy and International Affairs Branch should improve performance measurement, monitoring and reporting to demonstrate results and impact of investments at the program and project levels.

Recommendation 4: The Assistant Deputy Minister of Strategic Policy and International Affairs Branch should keep working with Global Affairs Canada to better coordinate and manage projects, enhancing the impact of Canada's public climate finance.

6. Management Action Plan

Management Response to Recommendation 1: In agreement. A renewal of the International Climate Finance envelope would allow SPIAB to shift strategically toward larger-scale projects to enhance project capacity, effectiveness, and overall program impact. Grants will be prioritized where risk profiles permit, while contributions will support smaller organizations with proven or strong potential for results, delivering more measurable and sustainable outcomes aligned with ICF program goals.

Action 1: SPIAB will review its approach to funding allocation, reconsidering the balance between grants and contributions

Action 2: SPIAB will collaborate with the Programs, Operations and Regional Affairs Branch to advance the development of standardized grant agreements for application under international climate finance programming.

Management Response to Recommendation 2: In agreement. A renewed Emerging Priorities Fund (EPF) would be informed by the lessons learned under the 2021-26 EPF and aim to integrate 1) a more flexible approval process to allow for quick and responsive decision making by the Minister of Environment and Climate Change; 2) the use of grants (where appropriate) to decrease the timelines required for agreement negotiation; and 3) the use of multi-year funding (where appropriate) to address the limitations of one-year funding agreements under the 2021-26 EPF.

Action 1: SPIAB will review and revise the design elements of the Emerging Priorities Fund.

Management Response to Recommendation 3: In agreement. SPIAB will work with GAC to strengthen the Departments' joint performance measurement approach to improve the relevance, accuracy, consistency, and overall quality of reporting to ensure that outcomes are appropriately and consistently documented and communicated. By supporting internal learning efforts and external strategic communications, the impact and value of ICF programming is reinforced.

Action 1: SPIAB will continue to engage with GAC in a coordinated partnership to implement improved performance measurement approaches.

Management Response to Recommendation 4: In agreement. SPIAB will work with GAC to strengthen the Departments' coordination and governance approach to leverage appropriate expertise, capacity, and financial instruments for project selection and implementation. Renewed inter-Departmental advisory committees would be co-chaired by SPIAB and GAC to discuss strategies, monitor program progress, ensure policy alignment and consider future opportunities. SPIAB and GAC will collaborate in particular towards developing a pipeline approach to project selection and implementation, with the intention to enable some project activities to transition from early-stage support for enabling environments towards larger-scale investment opportunities, including for potential funding through GAC's repayable contributions, Multilateral Development Banks or other public or private climate funds. 

Action 1: SPIAB will continue to collaborate with GAC to select and manage a strategically relevant pipeline of ICF projects.