International development assistance can play an important role in mobilizing additional public and private climate finance for keeping global warming below 2 degrees and helping developing countries in their efforts to adapt to climate change.
The existing literature focuses on the role of international financial assistance instruments, such as debt and equity that can directly mobilize additional public and private investment. Few studies look at the role of technical assistance and how such assistance may help mobilize investment for climate change.
This paper aims to provide some first insights on the topic by analyzing five technical assistance programs of one of the largest technical assistance agencies worldwide, the German ‘Gesellschaft fuer Internationale Zusammenarbeit (GIZ).
How technical assistance mobilizes finance: direct and indirect mobilization
Technical assistance agencies use their initial financing to develop programs that attract direct co-financing (from donors, developing country governments or the private sector). Technical assistance also indirectly mobilizes finance, by supporting the creation of policy environments and markets that are conducive to climate-resilient and low-carbon investment, for instance, by building capacity and institutions and proving there is money to be made in new markets by demonstrating alternative approaches. Such technical assistance activities help address knowledge, policy / regulatory, risk and viability gaps that prevent low-carbon and climate-resilient investments.
The indirect mobilization effect of technical assistance is difficult to quantify due to the long-term nature of the effects and its interactions with other key drivers, but in-depth case studies can track the ways in which such assistance has contributed to increased finance and contribute to the development of refined methodologies.
Five types of technical assistance that have mobilized finance
From our analysis of GIZ programs, we identify five types of technical assistance that have mobilized finance: policy advice, support for project development and for funding applications, provision of data, program coordination, and institutional capacity-building.
The following factors were critical in ensuring that those activities successfully mobilized finance: GIZ’s long-term engagement and solid in-country presence, its work with existing institutions, extensive outreach, and joint efforts with financial assistance initiatives.
Technical assistance providers could consider several additional entry points to target the mobilization of private finance more directly, including supporting private project developers to advance project concepts, start-up businesses, and ‘aggregator’ organizations that work directly with multiple businesses such as traders, cooperatives or lenders.
Quantifying finance mobilized: insights from a review of five GIZ programs
In-depth case studies are currently the only way to estimate the mobilization effect of technical assistance. Our review of five case studies, for which we conducted more than 50 expert interviews, confirmed that GIZ’s technical assistance has mobilized additional finance. Across four programs we have identified a total of €37-233 million in public finance and up to €412 million in private finance mobilized by the GIZ-managed €43 million of technical assistance funding – that is €0.9-15 of finance directly or indirectly mobilized for every €1 managed by GIZ in the four programs. But the amount mobilized is highly uncertain and further methodological developments are needed to reduce the uncertainty regarding the scale.
The uncertainty is due to the often-substantial time lag between technical assistance interventions and actual mobilization of finance, and the interaction of these interventions with many other factors and actors.
Our case study results indicate that some technical assistance activities might be as valuable as financial assistance in mobilizing finance, but further methodological development and empirical work are needed to examine further specific cases as uncertainty levels can be high particularly with regard to indirect mobilization.
Nonetheless, assessing indirect mobilization is useful for organizations and funds looking to identify ways to mobilize resources through technical assistance and maximize the effectiveness of their programs.
For international reporting however, technical assistance providers should focus on the more certain numbers for direct mobilization of finance from private and domestic public sources.
Given the difficulties involved in measuring the mobilization effect of technical assistance ex-post, technical assistance providers may wish to assess mobilization only where it is a major goal of the project. To measure indirect mobilization, it is crucial to measure outputs carefully and quantitatively over the project lifetime so mobilized finance can be traced back to the outputs.