The UNDP effort in Indonesia to channel Zakat funds to local SDG projects is a good example that could be extended to other countries. Zakat is a 2.5 percent mandatory welfare tax, payable by all eligible Muslims who have earnings above a certain threshold. It is a cash contribution to the poor, which could represent an important source of SDG finance. UNDP partnered with Indonesia’s National Board of Zakat (‘BAZNAS’), the official body that disburses the Islamic contribution in Indonesia, to channel Zakat funds to renewable energy, disaster recovery and local economic development projects in underserved communities. Indonesia is the first country that has tapped into this potential of Zakat. In Bangladesh in January 2012, UNDP signed a memorandum of understanding with the Center for Zakat Management to explore different financing tools with a focus on Zakat, but so far, no specific results have been reported.
5.5 International public finance and private capital tools Climate and green finance Finding 15. UNDP support to climate financing is delivered through a number of tracks and tools, including budget tagging, green bonds and global climate fund projects. However, clear alignment with the goals and targets of the Strategic Plan is weak, including financing for access to energy. UNDP has considerable experience in delivering projects that de-risk and crowd-in financing for investments on climate action. Working in partnership with global climate funds such as the Global Environment Facility (GEF) and the Green Climate Fund (GCF), UNDP has assisted Governments in the design and implementation of projects that aim to reduce commercial risks through blended finance, public finance and regulatory policies. UNDP was among the first of the entities accredited by the GCF. It secured approval from the GCF Board for what was the second GCF-funded project in 2015, the first year of its operation. Since then, UNDP has acted as the GCF implementing partner for 35 projects (with a total value of S$2.4 billion).177 This reflects the comparative advantage arising from the strong country presence and operating systems of UNDP, as well as the organization’s ability to provide technical support for project development and implementation.178 The GCF is mandated to allocate half of its financing commitments (currently $10 billion) to mitigation and half to adaptation, with a strong focus on the most vulnerable countries. UNDP is well placed to build on its current portfolio of managed projects. There may be wider opportunities to build on the portfolio through adaptation projects. As noted in section 5, international adaptation funding is set to double over the UNDP Strategic Plan period to 2025, with donors allocating an additional $20 billion.179 It is likely that a significant share of the new finance will flow through vertical funds such as the Adaptation Fund and the Least Developed Countries Fund (managed by the GEF). According to data compiled by the OECD, UNDP delivered around 2 percent of the $170 billion in ODA commitments between 2010 and 2018 flagged as having climate change adaptation as a significant or principal objective.180 In Benin, it is reported that UNDP is supporting the national GCF-accredited entity (the National Fund for Environment and Climate) with the aim of building a pipeline of bankable projects, a model that has much wider potential.
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As of 30 September 2021, the GCF Board had approved 191 projects, 23 of which have been processed under the simplified approval process aimed at supporting small-scale projects. UNDP Independent Evaluation Office, Evaluation of UNDP support for climate change adaptation, IEO, New York, December 2020. Anyaogu, Isaac, ‘Rich countries publicly commit to raise adaptation finance, privately they dither’, Earth Journalism Network, 8 November 2021, https://earthjournalism.net/stories/cop-26-rich-countries-publicly-commit-to-raise-adaptation-financeprivately-they-dither, accessed 29 March 2022. OECD.Stat, ‘Creditor reporting system’, https://stats.oecd.org/Index.aspx?DataSetCode=crs1, accessed November 2021.
CHAPTER 5. THE UNDP FINANCING TOOLKIT
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