Message to the Green Climate Fund board: step up finance access for the most vulnerable

Earlier this year, the Green Climate Fund (GCF) released new guidelines to help vulnerable countries enhance their direct access to international climate finance. Ahead of the GCF board meeting next week, we set out why the fund needs to go further – and how.

Sejal Patel is researcher in IIED'S Shaping Sustainable Markets group, and Marek Soanes is researcher in IIED's Climate Change group

Group of people sitting outside in a semi-circle looking at someone presenting

The Green Climate Fund should place greater focus on locally led adaptation that empowers local people, communities and enterprises to lead their own climate solutions (Photo: Nkumi Mtimgwa/CIFOR via FlickrCC BY-NC-ND 2.0)

The GCF’s Enhanced Direct Access (EDA) modality seeks to boost climate finance access for Direct Access Entities (DAE) – sub-national, national, or regional public or private entities.

Through the EDA’s devolved approach, community-based organisations, local governments and micro, small and medium enterprises – including grassroots organisations and local women’s unions – can contribute to financial decision-making and input into the origination, design, review, appraisal and implementation of climate projects and programmes.

This approach empowers local people, communities and enterprises to take the lead in deploying climate solutions that will work in their context.

Refocusing priorities

Climate change is a complex crisis, and top-down financing approaches have long been failing the most vulnerable.

In the face of wholly inadequate global efforts, the least developed countries (LDCs) have taken leadership, taking stock of what is working (PDF), and building a vision (PDF) and strategy (PDF) to redefine the global response. Notably, the LDCs call for at least 70% of climate finance flows to support local action by 2030. The EDA modality, with its focus on devolution, could be a critical channel to support this call.

Responding to the LDC call, the Global Commission on Adaptation’s (GCA) Locally Led Action Track has developed a set of eight principles to guide the adaptation community as they move to programmes, funding and practices that increasingly empower local actors.

Over 40 organisations have endorsed these principles, including the Adaptation Fund, the Climate Investment Funds, as well as donor governments, multilateral organisations, academic institutions and developing country NGOs and CSOs. But the GCF is notably absent from the list.

Later this month, a high-profile dialogue held by the UK government as host of this year's UN climate talks (COP26) will include access to finance on its agenda. Here again, we can expect to see further calls for local actors to be central to decision-making processes.

As the GCF is accountable to and functions under the guidance of the COP, building strong political alignment now paves the way for parties to call for stronger EDA focus from the GCF in the lead up to and at the November session.

As demand for locally led adaptation grows why isn’t the GCF placing greater focus on the EDA modality?

Falling short

Despite its potential, the EDA modality has a poor track record.

According to the GCF’s 7th report to the UNFCCC (PDF) back in July 2018, 17 concept notes – providing basic information about a project or programme seeking funding – had been submitted.

But at the time of writing, the GCF has only supported two EDA projects, amounting to USD $30million: a community-based natural resource management project in Namibia, approved in 2016, and a disaster resilience project in Antigua and Barbuda, Dominica and Grenada, approved in 2018. Both projects provide valuable lessons for delivering climate finance to support locally led solutions.

Recognising the substantial barriers for DAEs to access finance, the GCF undertook a consultation and revised how the EDA modality operates. Its updated guidelines (PDF) published in January were a step in the right direction. But the fund needs to go further.

Recommendations to the board

Improve access to EDA

  • Help build capacity of accredited and potential DAEs, so they can access EDA: only DAEs accredited for the grant-award function or other allocation mechanisms, such as on-lending and/or blending functions, are eligible.

    This is a significant barrier for the LDCs and limits national and local institutions, such as local government ministries and agencies, who could easily qualify but do not yet have a proven record on delivering climate programmes.
     
  • Take more risks in providing finance: target institutions that have not historically received GCF resources; scale-up promising initiatives from the Adaptation Fund and be more willing to invest in adaptation governance approaches that do not pre-define sub-projects and outputs at the time of funding.

    The GCF could request that accredited Multilateral Implementing Entities (MIEs) help nurture the relevant national and sub-national approaches.
     
  • Provide dedicated resources for EDA concept development: ensure national institutions that could manage EDA programmes have sufficient resources to develop concept notes that empower local people and their communities to be involved in the origination and co-design of an EDA programme.  

Strengthen the EDA mechanism  

  • Line up with the principles for locally led adaptation: developed over a two-year stakeholder engagement process, these principles are informed by years of research, action, and on-the-ground experiences. EDA already embraces many of these principles; it should seek to line up with the rest.
     
  • Increase the timeframe of funding provided to an EDA project to tranches of at least 10 years and focus on building the institutional capabilities of local actors and of the EDA facility.
     
  • Support EDA facilities to experiment and test effective governance arrangements: The space to experiment and learn from doing is fundamental to agile working and for developing farsighted architecture for an effective climate response.  

Learn from existing initiatives  

  • Support different types of financing and governance facilities: there are many existing financing mechanisms that the EDA could support such as decentralisation frameworks, local enterprise business development aggregators, and local and rural social movement funds.

    The guidelines should further clarify if the EDA can support on-budget finance through developing countries' decentralisation frameworks.

Ahead of next week’s meeting, we urge the GCF to take these recommendations on board. The EDA modality holds the potential to meet growing demands for more local adaptation financing – but it is currently ineffective. The fund should use the EDA modality’s pilot phase to really experiment and work through the many access and implementation barriers.

With thanks to Ritu Bharadwaj and Clare Shakya for their contributions to this blog.

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