Sida’s Climate Mitigation Finance: a Portfolio Evaluation

Summary

Historically, Sweden has been one of only seven countries to provide its ‘fair share’ of climate finance and is poised to continue doing so until 2025 (UNFCCC 2022). What this means on the project portfolio level of development finance actors, however, is often understudied. This portfolio analysis shows that in the case of the Swedish International Development Agency (Sida), climate mitigation related projects mainly encompass renewable energy (RE) and energy efficiency (EE) projects in least developed countries (LDCs) in Sub-Saharan Africa. Sida’s focus on LDCs, energy access and grant-based finance are in line with its mandate to reduce poverty, but at the same time this limits the overall immediate emission reduction potential of the portfolio.
Thus, assessing the transformational potential (according to Larson et al. 2023), Sida’s projects score only ‘medium’ on average. Projects score well regarding the time aspect, aiming at swift implementation of mitigation projects in this ‘critical decade’, as all but two projects end before 2030. The dimension of relevance received the lowest overall score, due to commonly broad project descriptions and focus on interventions with ambivalent emission mitigation potential, e.g. clean cooking projects. Information dissemination and market-based interventions targeted at the private sector are among the most common strategies employed by the projects. Some projects overlap considerably, working in the same location, targeting the same sector and/or employing similar strategies.

To maximize its impact in reducing GHG emissions, Sida should (1) develop a dedicated climate strategy and consider broadening its focus in terms of sector and region to include more projects in emerging economies and in other sectors beyond energy (and clean cooking) such as transport or land use; (2) projects with high transformational and emission reduction potential should be supported by increasing funding volumes and replicating projects designs considering local contexts; (3) all projects with a clear climate mitigation focus should include an ex-ante and ex-post estimation of avoided emissions or removals in tonnes of carbon dioxide-equivalent (t CO2e) per year.