Green Climate Fund (GCF)

Outlook on the 13th GCF Board Meeting: Closing policy gaps to ramp up finance delivery

Photo: L. Schalatek, This image is licensed under Creative Commons License.

When the Board meets from June 28-30 in Songdo, South Korea, for its 13th Board meeting the 24-member body will focus on working towards closing Fund structural and policy gaps in order to ramp up finance delivery to developing countries.  But don’t expect quick one-step fixes.  Rather, the Songdo meeting is expected to deliver a number of additional stepping stones for building a solid path that allows the GCF to fulfill its ambitious mission of supporting the paradigm shift in its partner countries toward low-carbon and climate-resilient development, including by serving as a financial cornerstone for the implementation of the Paris Agreement. For the first time, the proceedings will be made available through live stream.

Most of the issues the Board will focus on at the upcoming Songdo meeting can be clustered into a couple of core themes that will determine the long-term success of the GCF.

Consolidating the GCF Partner Network

In Songdo, the Board has been asked to decide about the accreditation applications of five additional entities (four of them national). Expect some controversy. It wouldn’t be the first Board meeting with contentious accreditation proposals, as civil society fought against bringing large private-sector fossil-fuel supporting financiers Deutsche Bank, HSBC and Credit Agricole into the GCF implementation partner network.  The Board will consider the accreditation of the Export-Import Bank of Korea, the first export credit agency (ECA) to seek access to GCF funding, with a heavy history in coal financing. Some Board members question whether ECAs are appropriate partners for the Fund (and some developed country representatives might have a hard time explaining to their public at home why their GCF contribution should support the exports of other contributing countries). Direct access regional and national development banks from West-Africa, the Caribbean and Mongolia will likely face little to no objection. Lastly, the proposed accreditation of GIZ as the third German entity could raise some eyebrows, especially since GIZ’ focus on technical assistance is seen by some observers as bringing limited additional value to the pool of implementing entities.

While essentially the consideration of accreditation proposals so far has followed – with some tweaking – a first-come-first-serve approach, the intransparency of the application pipeline does not support balance, nor a targeted prioritization of both public and private direct access entities. More discussion about and some decision on an accreditation strategy for the GCF as an important corollary to the Fund’s approved overall strategic plan is expected at the 13th meeting. The Board will have to tackle questions of how many accredited entities the GCF can deal with. Which number is enough? Should they cap the number of international access partners, while encouraging further applications for direct access entities? For many national, regional and sub-national applicants going through a tough accreditation procedure, while time-consuming, can also serve an important capacity and institution-building process for developing country partners and an important requirement for plans to devolve funding decision-making in the future to the national level, for example under an Enhanced Direct Access (EDA) approach.  A strategy could also look for gaps in terms of coverage (regional, expertise, instruments) to be filled by expanding the GCF partner network in a controlled way further.

Project Pipeline: A clear need to strengthen direct access

So far, the GCF Secretariat has received 41 proposals (31 public, 10 private) worth US$ 6.6 billion and asking for US$2.4 billion in GCF support, but not all of them can be approved by year’s end. Of these, 24 funding proposals are considered somewhat likely to be presented to the Board for decision within the next year, with another 17 proposals deemed less advanced. Strikingly, though, of the 24 proposals asking for US$ 1.4 billion in GCF support for a cumulative total project volume of US$ 4.1 billion only two are proposals from direct access entities (just 8.3 % of the more advanced project proposals in the GCF pipeline). Among the 17 less advanced funding proposals, seven are from direct access entities.

More help is clearly needed through GCF readiness support funding, which targets project pipeline development as one of its priority areas, in order to address the lack of capacity among direct access entities to submit quality proposals.  A new project preparation facility whose operational procedures the Board hopes to define further in Songdo can also support developing countries in getting better proposals into the pipeline.  In Songdo, the Board will also discuss simplifying processes for approval of micro- and small-scale low-risk funding proposals to make accessing GCF financing easier by for example modifying the template for project proposals or lowering the threshold for required feasibility studies. This comes at the request of Board representatives from the most vulnerable states who fear that they will be left out because of severe capacity constraints in their countries.

Project proposals under review

Eight public sector proposals asking for GCF funding support of US$207.6 million (90% of it in form of grants) and with a total cost of US$ 320 million are up for approval by the Board in Songdo. All eight are presented by international public organizations.  Among the eight are five adaptation projects, addressing large-scale ecosystem-based adaptation in Gambia (UNEP); supporting climate resilience for the Aral Sea Basin in Tajikstan and Uzbekisan (World Bank); strengthening the resilience of small-holder farmers in conflict-ridden dry zones in Sri Lanka (UNDP); piloting a country project in Mali for a Sub-Saharan Africa hydromet weather-data gathering program (World Bank); or focusing on coastal adaptation in Tuvalu (UNDP).  Two mitigation projects propose the development of energy savings insurance for SME energy efficiency investments (IDB) and the de-risking and scaling up of investment in energy-efficient building retrofits in Armenia (UNDP). Lastly, one crosscutting proposal addresses both mitigation and adaptation priority areas by aiming to improve the resilience of vulnerable coastal communities in Vietnam (UNDP).

Besides the detailed project proposals, the GCF Secretariat in has also made the evaluation of the eight project proposals by the Technical Advisory Panel (TAP) against the GCF’s investment criteria public.  The TAP is showing some doubts in its assessment about approving all eight projects at this time, at least not without some adjustments, questioning in particular some of the proposed projects’ ability to have a wider paradigm-shifting impact in the countries and regions where they are to be implemented.

The full article is available at the Heinrich-Böll-Foundation website.

Liane Schalatek, Heinrich-Böll-Foundation North America