Green Climate Fund: 3 key tasks for 2018

In the past three years, the Green Climate Fund (GCF) has made significant progress in terms of supporting low-carbon and climate resilient development in developing countries. Following the adoption of its business model framework and the launch of an initial resource mobilization process which yielded around USD 10 billion from 43 national and subnational donors, the Fund has become fully operational. Along with its portfolio of already 54 approved projects and programmes, the Fund has set up a range of mechanisms and processes to help fulfil the ambitious objective of promoting a paradigm shift in those countries particularly vulnerable to the adverse effects of climate change. This includes a comprehensive Readiness and Preparatory Support Programme, a Project Preparation Facility and dedicated support for the preparation of National Adaptation Plans. As a "continuously learning institution" the Fund has already generated some valuable lessons learned and experiences that will inform a revision of its modalities and processes to become a better institution.

All this the GCF has done under an enormous political pressure fuelled by the high hopes that have been raised by stakeholders from the moment of the Fund's creation. It is therefore fair to say that the GCF has achieved a lot in recent years, in some cases in record time, in an effort to live up to these expectations; and it surely isn’t presumptuous to say that the progress made by the GCF was an essential piece of the puzzle for the crafting and adoption of the Paris Agreement. But of course, there are also areas for improvement.

With 2018 as a crucial year for international climate policy, the GCF will need to continue playing its role in building up the positive political momentum needed to deliver a good outcome at COP24. This also means that the Fund will need to work on some of the gaps and challenges that have manifested throughout the first phase of operationalization.

Three aspects are particularly important:

1) Setting the bar and increasing the quality of funding proposals

So far, a great majority of the projects and programmes that have been presented to the GCF Board for approval are not necessarily "transformational" in a way of doing things differently than how they have been done before. Many of them are solid, well designed proposals that nevertheless represent what Multilateral Development Banks, UN institutions, bilateral agencies and other climate funds have been funding for years.

While this is not a bad thing per se, the GCF has to increase its effort in 2018 to sharpen its demand profile and setting the bar in terms of what it wants to see in a good proposal and which types of projects it wants to support. First steps have already been taken by the Board in this regard that need to be further pursued. These include:

  • Defining concrete programming priorities will not only help the accredited entities in their efforts to design a GCF project that satisfies the high standards that have been set, but will ultimately also help the Board in their decision making;
  • An earlier involvement of the Board during the project cycle will allow to make necessary adjustments to project concepts and provide accredited entities with crucial feedback for improvements;
  • Setting indicative minimum benchmarks of in terms of what funding proposals need to achieve will help to make requirements quantifiable, comparable and decision making more transparent;
  • Further increasing transparency of the project pipeline (including concept notes) and allowing and incorporating third party feedback, e.g. from stakeholders on the ground will further increase the quality of proposals.

Besides these processes that are already ongoing to some extent, the Fund has to resolve other important issues, such as the continuous debate regarding the fine line between adaptation and development; aspects around co-financing and conditions for the Funds financial instruments, especially regarding the level of concessionality; and providing a clearer direction on which technologies the GCF wants to support and which not (e.g. large hydro etc.).

With the development of appropriate guidance the Board will contribute to strengthen the project portfolio of the Fund and aid the GCF to become the game changer it wants to be.     

2) Promoting direct access

When looking at the current project portfolio it becomes apparent that until now mainly UN-institutions and regional development banks have access to GCF resources. In total, 74% of the approved projects are implemented by international institutions. The picture becomes even clearer when the corresponding funding volumes of the proposals are taken into account: Approximately 87% of the financial means pass through these institutions. This fact is not necessarily surprising. It is normal that the international institutions, due to their experience, struggle less to master the complicated GCF accreditation process in a short period of time and to develop projects which correspond to the Fund’s high standards. But considering the project pipeline, which will be presented to the GCF Board presumably in 2018, this trend is consistent: among the 51 projects for 2018 only 10 (19,6%) shall be implemented by national institutions (requesting about 15,4% of the overall amount in 2018).

Therefore, the GCF still has huge backlog demands if it strives for a project portfolio which is well-adjusted with regard to partner organisations. And it should. Consequently, it is crucial to thoroughly analyse the reasons for the delays regarding direct access for developing countries and to discuss the adequate countermeasures (e.g. a concerted prioritisation of national institutions, a reservation of financial means for direct access or the creation of a mentoring programme in order to foster the cooperation between national and international institutions). By these means, the number of corresponding projects could be elevated. For setting transformative impulses in the GCF’s partner countries, besides the setting of national institutions and capacities, mainly the countries’ ownership concerning the conceptual design and execution of a project is needed. Only by the inclusion of all relevant actors in the countries – from the most affected people and communities all the way to the responsible ministries – transformative projects can be developed, which encompass in a sustainable manner the desired change (in GCF terminology “paradigm shift”). This “paradigm shift” cannot be realized with projects which only reflect the “business as usual” and undermine the added value of the GCF compared to other finance mechanisms.

3) Solving administrative and financial issues

Besides these rather operational aspects, the Fund will need to address some of the more administrative financial issues.

The selection of a permanent trustee to administer the GCF Trust Fund has been a prolonged and unnecessarily politicized process that will need to find a conclusion in 2018. In terms of being a game changer, the GCF will be well-advised requesting its trustee to manage GCF resources in a way that is not only compatible with the mandate of the Fund but that is also in line with the global objectives set out by the Paris Agreement.

Furthermore, a process has to be initiated to organize the GCF's first formal replenishment. As the initial resource mobilization period comes to an end in 2018, the Fund needs to secure new and additional resources to continue its good work beyond 2018 and be able to plan its activities with adequate time notice. Last but not least, this is also politically a very important issue that is crucial for the political momentum in the forefront of COP24.