Investors are paying more and more attention to the co-benefits of climate finance. Financing activities aimed at
emission mitigation must not only result in the reduction of greenhouse gas emissions, the enhancement of
mitigation, adaptive capacity and adaptation strategies, but should also produce additional outcomes on other
environmental, social or economic aspects of sustainable development. The Clean Development Mechanism
(CDM) was created precisely to cover these two aspects: firstly, to achieve cost-effective mitigation of greenhouse
gases and secondly, to assist developing countries in achieving sustainable development based on their national
development priorities and strategies.
However, complying with the second objective turned out to be problematic. Registered projects appeared that
had no proven sustainable development benefits, or even perceived negative impacts. Consequently, critique
was raised that the current set-up is weak due to the lack of clear and transparent sustainable development
criteria in many host countries, and whether the intended sustainable development benefits are actually
achieved in the absence of standards or monitoring, reporting and verification procedures,.
To strengthen the current system for assessing the impact of sustainable development within CDM projects,
even the High-Level Panel on the CDM Policy Dialogue recommended introducing monitoring, reporting and
verification schemes for measuring the outcomes. The accent was to enhance safeguards against the risk of
negative impact and to support host countries with capacity-building and sharing examples of best practice.
The issue was raised to the highest political level when the CMP to the Kyoto Protocol in Durban requested the
CDM Executive Board to develop voluntary measures with the aim of highlighting CDM projects’ co-benefits,
while preserving the right of host parties to determine their sustainable development criteria. This decision
instigated the UNFCCC Secretariats development of the voluntary Sustainable Development Tool, which was
approved by the CDM Executive Board in late 2012.
A robust assessment of the impact of sustainable development in CDM projects is important to ensure the social
and ecological integrity of the mechanism and compliance with the objectives of sustainable development as
stated in the Kyoto Protocol. Research and best practice experience into how sustainable development issues
are integrated into mitigation actions through the CDM Sustainable Development Tool and other respective standards
can help inform the development of Nationally Appropriate Mitigation Actions and future mechanisms on
sustainable development assessment methods.
As sustainable development is a complex multilayer process covering environmental as well as social and
economic aspects that can be affected both positively and negatively, there is a variety of possibilities of how to
assess the impact an intervention may have. The high number of approaches analysed by this study reflects
this.
The contractors assessed the Sustainable Development Tool against international standards for sustainability
assessment by comparing it with other mechanisms such as voluntary carbon offset schemes as well as emerging
policy frameworks.