This is part two of a three-part series on post-truth accounting. You can find part one here, part two here, and part three here.

In a time of deceit, telling the truth is a revolutionary act

George Orwell

Last week I put forward the idea of ‘post-truth accounting:’ a way of measuring the world in which numbers become a means of fulfilling political and emotional needs rather than reflecting objective reality. 

This goes beyond the usual, ‘lies, damn lies, and statistics.’ Politicians have always cherry-picked certain numbers and ignored others, but for post-truth accountants, there is no cover-up and no shame because numbers are no longer respected as reflections of a shared reality. Quantity itself becomes entirely political – and therein lies the danger.

The climate finance files

Last week I laid out a definition of post-truth accounting and its three core techniques – win big, claim without shame, and bank words rather than deeds – by looking at Trump’s accounting of climate and the border wall. But that’s Trump, right? I was hardly stretching myself.

This piece goes deeper by revealing how post-truth accounting is undermining global climate finance, as practised by the world’s top governments and institutions. I am again indebted to the wonderful Climate Finance Files, a forensic data analysis by the One Campaign and Google that offers us the most accurate publicly-available picture of the state of climate finance. 

In a previous piece, I highlighted the report’s key message that the world’s most climate vulnerable only receive 6.5% of the funding they need. Today, I want to go beyond the headline stats themselves – shocking as they are – and look at the underlying system behind them. How is climate finance accounted for by big donors?

The answer, sadly, is that it fits all my criteria for post-truth accounting. 

Rule one: win big. Donors inflate their funding figures by some $115bn

When a donor country funds a project, they decide how to account for it: as a climate project, or something else (biodiversity, development etc). This is a genuine example of the subjectivity of accountancy itself. We can only hope they discharge it creditably.

Unfortunately, that’s not the case for climate spending. The CFF found that fully 20% of all climate spending in the OECD’s database 2013-21 – $115bn – is over-inflated by counting methodologies. This is because they (mis-)use the ‘Rio Markers’ taxonomy of 1998, such that all projects with any (self-defined) climate component, even a very small one, are automatically considered 100% climate spending. Way to round up!

This over-inflation has become the norm. For projects with a ‘central’ climate focus, only 4 of the 26 large donors measured the share of climate impact on a case-by-case basis. The vast majority simply applied the 100% tag. For those with a ‘partial’ focus, only 6 measured specifically: others apply 30%, 40%, 50% or even 100%. A CFF deep-dive into 22 specific projects found these differences resulted in equivalent spending being inflated by 20-50% from one donor to another. That’s a heck of a rounding error.

Rule two: claim without shame. Rich countries have some peculiar ideas about what counts as climate finance

So rich countries like to round up on their climate projects. But what even counts as a climate project in the first place? Here, the CFF is well supplemented by a fantastic Reuters investigation into the mislabelling of programs. They range from the audacious to the downright bizarre. 

Japan is the world’s single biggest bilateral climate funder, extending $58.5bn between 2015-20; but it has spent $9bn of this ‘climate finance’ on fossil fuel projects. This included $2.4bn for the 1,200MW Ultra Super Critical Coal Fired Power Project (what a name!) in Bangladesh, which by the Japanese government’s own measure will produce 6.8m tonnes CO2e each year.

Japan also lent $776m for three airport expansions, including $167m to help Egypt expand the Borg El Arab airport to “meet growing demand for air transportation,” equivalent to a 50% increase in its emissions. 

The Italian government made a (for-profit) equity investment of $4.7m into luxury ice-cream and chocolate brand Venchi to help it open new stores across Asia. Apparently, this counted as climate finance, though they didn’t bother explaining why. Similarly, it funded the restoration of a historic Cuban convent, bought laptops for Afghani policemen, and even spent a few thousand dollars sterilising stray dogs in Kosovo – all in the name of climate.

The EU marked tens of millions in grants for counter-terrorism and organised crime – including cybercrime and the mislabelling of pharmaceuticals – as climate finance. Over the pond, the US lent nearly $20m to develop a Marriot luxury hotel in Haiti, including upgrading the rooftop restaurant and adding an infinity pool. Marriot International Inc. reported $20.77bn in revenues in 2022, more than 40% of the world’s economies by GDP.

“Essentially, whatever [donors] call climate finance is climate finance,” a climate negotiator from the Philippines told investigators. Another Bangladeshi negotiator admitted he didn’t know what projects donors were funding in his own country. “If it is not disclosed properly, how could we?”

Rule three: bank words, not deeds. Only $1 in $3 climate dollars ever arrives

Here is where the rubber hits the road. The topline figure from the CFF is remarkable: 2/3 of reported climate finance is promised, but never arrives. That’s around $340 billion, or the combined GDP of the world’s 65 poorest nations.

The money may never arrive, but fear not: lenders still chalk it up as climate finance in the accounts they submit to the OECD and UNFCC. Remember: we are talking about the richest countries in the world. Germany (the world’s 3rd largest economy) reported $64bn of climate finance to the OECD, but blithely reports it only disbursed $34 billion. France (7th in the world) only spent 43% of the money it accounted for as climate finance in its reporting – a shortfall of $22bn. 

A part of this is counting projects that are never actually completed. To stay with France, Reuter’s research shows that they claimed nearly half a billion dollars in lending for environmental initiatives, a metro upgrade, and port refurbishments. When each of these projects was subsequently canceled, France (with a Gallic shrug, one imagines) made no adjustments to its accounting. 

Just like Trump, the world’s richest governments seem happy to bank their promises. That may be good politics in the short run, but it makes for terrible environmental policy. As the authors of the CFF point out, “tracking commitments is a peculiar choice. Intentions are probably not the best way to address climate change.” 

Is reform enough?

The CFF makes a number of technical recommendations to improve the state of climate accounting: independent audits; implementing transparency commitments agreed at COP24; standardising reporting through the Enhanced Transparency Framework review; and updating the IMF’s Debt Sustainability Assessments and SDR eligibility to factor in climate risk.

These are obvious wins that should be implemented as soon as possible. What they don’t say explicitly is how important their own work is. Without activist accountancy and quality journalism, this reality would never come to light. The CFF authors nearly gave up on the project because climate finance is such a thorny thicket. We must prioritise protecting the access, funding and personal security of the people who do this work.  

The other uncomfortable truth is that as important as proper scrutiny is, we need to address post-truth at the root. That means understanding what drives it in the first place; a far more complicated matter which I will take up next week, in the final article of this series.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.