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The writer is the UN Climate Change High-Level Champion for COP27 and the facilitator for the Green Climate Fund’s second replenishment
If developing countries are to deliver on their Paris Agreement goals, adequate funds will be the catalyst. Finance has been at the heart of recent climate negotiations — without it, these economies will not be able to mitigate the impacts of environmental disasters, nor increase their resilience against such crises.
The Green Climate Fund, a centrepiece of the climate finance landscape, is undergoing replenishment this year. Country contributions will determine how much funding GCF has available over the coming four years. As stressed during last year’s COP27 climate summit, an ambitious replenishment of the GCF could contribute to building trust between developed and developing countries to address the climate emergency.
GCF was created via the UN Framework Convention on Climate Change in 2010, to finance developing countries’ response to the climate crisis. Its governance structure represents a balance between contributor and beneficiary countries. Its focus is on providing adaptation funding, particularly to small island developing states and the least developed economies, including many African countries.
GCF approved its first projects ahead of the signing of the Paris Agreement in 2015, and has since built an investment portfolio of $12.8bn across 129 countries. It is funded on a four-year cycle, with $10bn committed for 2020-2023. Developed country contributors provide most of these funds, which are allocated to climate projects in developing countries.
Three elements make the fund unique in its ability to tackle climate change. The first is partnership. The GCF has a small organisational structure but an outsized reach, which is delivered by working with over 200 partners. Its collaborators range from multilateral development banks and UN bodies to smaller, locally-led organisations.
The fund is also distinct in its flexibility. It provides a range of grants, concessional debt, equity investment and guarantees, tailored to the needs of each project. A grant might support small-scale action to preserve fresh water supplies in an island state, while a multi-country programme to promote renewable energy might depend on long-term, concessional loans or equity provided by the GCF that will pave the way for other investors to join at a lower risk level.
The fund also increases the capacity of developing countries to engage effectively with financial institutions. The GCF’s “readiness” programme provides funding and technical assistance for developing countries at the country-level. This has proven vital for longer-term climate planning and for developing large funding proposals, such as a $432,000 readiness grant to Liberia that laid the groundwork for a $11.4mn hydrometeorological infrastructure project, which will increase the country’s resilience against climate change.
The GCF had a challenging start, facing criticism that its funding mechanisms were too slow and complex. Ongoing reforms and increased efficiency are disproving this claim. Over 80 per cent of GCF’s portfolio is being implemented, and more than $3.5bn has been disbursed to projects.
In 2018, it took a median time of 18 months to move a project from proposal review to first disbursement; in 2022, the median was 7 months. The time between GCF board approval and implementation has also been reduced, with some projects moving from board endorsement to the transfer of funds in five weeks.
Globally, now is not the easiest time to garner new finance, but so far the prognosis is good. In recent weeks, I’ve had many positive conversations with current and potential contributors.
Germany has made an early pledge of €2bn, a 33 per cent increase on its previous contribution, while Canada has pledged C$450mn ($332mn), a 50 per cent increase on last time. Current contributors such as Austria, Czechia and Monaco have made pledges too. Other potential funders look poised to follow their lead, particularly at the UN Climate Ambition Summit in September.
One big question is whether the pool of contributors can be broadened. Expanding the base of contributors to include less developed countries will boost the GCF potential.
The appointment of a new executive director, Mafalda Duarte, has signalled the board’s commitment to continuing reform apace. If the GCF can deliver more good news at its pledging conference on October 5 in Germany, a strong, timely signal will be sent ahead of the COP28 summit later this year. Now, more than ever, we need to demonstrate the strength of global commitment to tackling the climate emergency.
