USAID/Bangladesh asked the Climate Economic Analysis for Development, Investment, and Resilience (CEADIR) Activity to conduct a situation analysis on climate finance in Bangladesh. The purpose was to assess the policy environment, institutional arrangements and the government’s capacity to access and implement climate change projects; and explore modalities for achieving a functional institutional arrangement for managing climate finance in Bangladesh.

The assessment consisted of a literature review and key informant interviews with USAID and other donors, implementers, the Government of Bangladesh (GoB), and civil society representatives. CEADIR reviewed government policies, strategies, and plans as well as annual reports and assessment documents related to climate change finance and implementation. CEADIR focused the analysis on three general aspects of the climate-related finance experience: enabling environment, institutional structures and functions, and institutional capacity. CEADIR reviewed government policies, actions, regulations, and strategies and the experience with domestic and external resources for climate finance.

The key enabling environment challenges for climate finance are the need for greater high-level commitment in setting priorities and improving governance, accountability, and transparency. Some of the identified problems included large amounts of unaccounted funding and failure to adhere to mandated processes for project review and implementation monitoring.

CEADIR focused on two main institutional structure issues—coordination of whole-of-government strategic planning and monitoring, reporting, and verification capacity. The delineation of climate finance roles and responsibilities across ministries was not sufficiently clear. However, key informants did not agree on whether the lead coordination role should be taken by Ministry of Environment and Forests (MoEF), Ministry of Finance (MoF), Ministry of Planning (MoP), or a new ministry or commission. There were also concerns on the limited focus of monitoring and reporting on tracking project expenditures rather than identifying implementation issues and results.

Donors have invested significant resources to help the GoB develop and sustain technical and financial capacity related to climate finance. Nevertheless, there were still commonly reported gaps in systems, tools, and skills for greenhouse gas (GHG) emission inventories, vulnerability assessments, adaptation planning, and project preparation that have limited the country’s ability to compete for external finance. The GoB has relied heavily on the staff and consultants of development partners in designing or analyzing projects, preparing reports, and developing strategies rather than sustainable government capacity development.

Despite a wide range of views on how to strengthen Bangladesh’s climate finance system, there was general agreement on four priorities:

1. Demonstrating greater political will by elevating climate changes issues in the development agenda and using the authority and convening power of government;

2. Strengthening political and technical leadership on climate change to make better policy, regulatory, investment, and implementation decisions;

3. Increasing coordination and collaboration of public sector institutions for cohesive and harmonized action; and

4. Improving the accountability and transparency of GoB processes and systems for full compliance with international standards for financial management, reporting, and verification.