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The hidden threat of climate fraud

How the spectre of corruption haunts the climate crisis.

By Zoë Grünewald

In Bangladesh’s Barguna district, a government-built cyclone shelter was supposed to protect the local fishing community from dangerous rising sea levels and heavy rainfall. As much of the land mass of Bangladesh is less than 12m above sea level, millions of people are increasingly vulnerable to the effects of climate change. In 2020, a devastating monsoon left one quarter of the country under water, 1.3 million homes damaged and hundreds dead.

Many of the climate adaptation projects in Bangladesh are designed to be dual-use, meaning embankments can act as roads when not in use, or cyclone shelters can double as schools or community centres. In this case, research by Transparency International – an international organisation dedicated to the global fight against corruption – revealed the engineer responsible for building the shelter had persuaded the authorities that there was a madrasah (a religious school) nearby, which the cyclone shelter could house when not being used for its intended purpose. In reality, there was no madrasah, and, instead, the engineer built the shelter next to his own house – because doing so was more convenient – leaving many of the locals cut off from it by a river.

Iftekhar Zaman, the executive director of Transparency International Bangladesh, had been monitoring this case for a while. When Zaman’s team investigated the progress of the project, it was clear the engineer had lied about the school: “He managed to get some youngsters dressed up as students to come around the shelter, but they couldn’t enter the so-called madrasah because everything was shut down.” When Zaman interviewed the community, the locals despaired – they were left with an empty, unusable shelter when there were plenty of schools nearby that could have benefitted from it.

Unfortunately, this case is not unusual. In reality, corruption in climate financing efforts is an all too common occurrence across the globe. U4, a team of anti-corruption advisers at the Chr. Michelsen Institute (CMI) in Norway, says that although “financial losses from corruption are notoriously difficult to determine”, some estimates show that in the water sector alone, it may be that as much as 15 per cent of climate funds are lost to corruption. As U4 points out, this has serious consequences, reducing the effectiveness of climate programmes, increasing the rate of damaging activities, such as deforestation or pollution, and increasing the influence of corporate interests. Transparency International has drawn attention to the various forms of corruption evident in climate financing, including governments making laws under the influence of fossil fuel companies, forests and biodiversity lost to illegal logging, and failed infrastructure projects like coastal defences or emergency shelters, where contracts are given to those who have prior ties to the government.

For many experts, much of the challenge of addressing corruption in climate financing is a result of how difficult it is to identify. This is in part due to the insidious nature of behind the-scenes corruption, but also that it takes years, and a natural disaster, to realise the full extent of the abuse. Brice Böhmer, head of regional projects at Transparency International, also points out that many climate aid projects take place where oversight is difficult – often in poorer, more isolated areas. Böhmer explains that because much of the science behind climate change projects “is quite technical and starts to be complicated quite quickly”, often the importance of a project can be lost in translation when trying to provide local citizens with oversight.

As Böhmer says, there is a strong correlation between states that are highly vulnerable to climate change and those that are high on Transparency International’s Corruption Perceptions Index. U4 substantiates this claim, stating that “the largest recipients of climate-related ODA [official development assistance] are notorious for having significant systemic corruption”. Some of this can be explained by the rich resources of those countries, which are in high demand due to their rarity, but Böhmer also says that some of it is just “bad luck”, resulting in high-importance projects being left in the wrong hands.

Mushtaq Khan is a professor at SOAS University of London and the executive director of the Anti-Corruption Evidence (SOAS-ACE) research consortium. Khan is concerned that there is a political refusal to address climate corruption on the world stage for fear of harming the greater cause. “The media is always looking for evidence of taxpayers’ money being wasted,” he tells Spotlight. “So, if the development agencies themselves start talking about corruption in these projects, there is a risk of destroying the public’s appetite to pay taxes [to fund these investments].” Böhmer agrees: “I think it’s important to recognise that and to be very careful in the way we present that so it doesn’t appear like a reason for not investing… because I think that would be much more harmful.”

Of course, for some, exposing corruption is also a dangerous game. Whistle-blowers in the US have faced prosecution, and in parts of Latin America, those who have tried to fight corrupt forces have faced violence and threats to their life.

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Traditionally, anti-corruption policy has focused on the role of international oversight, with global organisations such as the World Bank and the United Nations Development Programme overseeing the financing of international climate aid projects. In a recent article, Dana Schran, a project manager in the Transparency International Secretariat, called for more international oversight of climate financing: “[It] is needed in the form of a governance body that will oversee and ensure robust common international accounting, including detailed rules rather than general principles to avoid fraud.”

Increasingly, however, climate anticorruption is taking on a new approach. Khan’s view is that it is time for anti-corruption policy to encourage effective horizontal, peer-driven monitoring based on real incentives. Having analysed corruption eradication throughout history, Khan’s team believes that to successfully deal with corruption, projects need to have more immediate built-in incentives for locally powerful citizens, so that they too care about the success of the project.

This is where the design of dual-use climate projects, such as the one in Barguna, should prove themselves. When the design was such that the community benefitted immediately (when embankments that served as roads were built where they were useful, or cyclone shelters serving as schools were usefully located) powerful groups in the community engaged in monitoring and corruption fell dramatically. Khan says “the more effectively climate change projects provide immediate benefits – particularly to groups with the capacity to play an effective monitoring role – the more likely they are to take an interest in the quality of construction and monitor progress on an ongoing basis”.

The key, Khan says, is to trigger the immediate interest of locally powerful citizens, not in corruption (that they may otherwise engage in) but in getting the construction done properly. Monitoring by locally important people based on real interests “is much more effective than formal monitoring by citizens’ groups when their immediate interests are not clear”. This is where the shelter in Barguna failed – as the location and design was not appropriate for the dual-use it promised (right next to the engineer’s house and nowhere near a local school), the locally empowered individuals could not take an interest in the project.

Luca Tacconi, professor of environmental governance at the Crawford School of Public Policy, also believes that the traditional approach to anti-corruption has been inadequate. He says that using a one-size-fits-all method, such as is often seen in blanket global governance approaches, assumes the same tweaks can be made to the behaviour of all individuals, regardless of country of origin. Instead, Tacconi believes anti-corruption policy needs to be tailored to the individual needs of each state. “Each country is very specific in terms of needs. We need to understand: what are the corruption processes that take place in that country, and what are the best anti-corruption policies that can be implemented given [the socioeconomic] situation of the country?” From there, countries then need support to change their own corrupt practices.

In the case of Bangladesh, encouraging dual-purpose climate projects has this exact intention. If government and law enforcement cannot ensure the eradication of corruption in these projects, then perhaps local elites can. “We need to support civil society to actually push for change in a country,” says Tacconi. “We need to help civil society.”

So, do international organisations still have a role to play? Tacconi says that global institutions are still important, as they collate global efforts and funding: “They can take a longer-term perspective on funding and addressing problems.” But, as Khan explains, international agreements and governments need to work out “innovative and entrepreneurial enterprising solutions which are effective in developing countries because they use existing interests and capabilities. They have to understand the game that is being played and then intervene in it continuously to break up corruption and encourage enterprise. Formal monitoring and ticking boxes do not work in these dynamic environments.”

If governments are serious about addressing climate change, then they must acknowledge how corruption is hampering global efforts. Both Böhmer and Khan believe that governments should start by putting corruption eradication on the table at global climate events, such as the UN Climate Change Conference. Once this has happened, work can begin to establish the best methods to bring corruption to an end once and for all.

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