Setting up the Green Climate Fund: Watch This Space

The Green Climate Fund is ready to get going, thanks to a successful meeting held in South Korea recently, but there is still some work to do, and there are still no firm pledges [PDF] from developed countries in spite of recent progress.

Neha Rai's picture Barry Smith's picture
Insight by 
Neha Rai
Barry Smith
11 July 2014
A drought in East Africa: the Green Climate Fund will help developing countries mitigate and adapt against climate change (Photo: Wikipedia Creative Commons)

A drought in East Africa: the Green Climate Fund will help developing countries mitigate and adapt against climate change (Photo: copyright Oxfam East Africa)

The Green Climate Fund (GCF), established in 2010 by the UN Framework Convention on Climate Change (UNFCCC), is a financial mechanism by which developed countries will fund climate change adaptation and mitigation activities in developing countries. At a recent meeting, the fund's board established eight essential requirements.

The 7th Board meeting was generally regarded as being the most important in the GCF's short history. Agreement on the eight essential requirements paved the way to proceed with funding. Until now, the undecided details about the workings of the fund meant developed countries could avoid pledging money. By establishing the fund's business model, the meeting in Songdo has made it politically difficult for developed nations not to step up to the mark. The planned timeline for the fund's operation would almost certainly have been thwarted without progress on the outstanding essential requirements, and an indicative schedule for developed countries to start depositing money into the fund.

Main outcomes of the meeting

Criteria for investing in the fund

In South Korea board members established that projects for investment should be selected for their sustainable development potential rather than commercial viability. Developing countries pushed for this, arguing that selecting projects principally for their commercial viability is counterproductive: after all, countries would not approach the GCF if they had access to mainstream finance.

But how to tackle the thorny issue of how to assess a country's financing needs? The initial proposal was to assess recipient needs based on income levels. In the end, the board members agreed that recipient needs should be based on economic and social development of the countries.

The treatment of funding proposals was also subject to intense deliberation. Board members from developed countries called for a comparative assessment of proposals to make sure innovative proposals get selected, based on 'scoring' and 'weighting' of proposals. Ultimately, this system was not accepted but a system for assessing proposals will be developed over time, based on an underlying principle of encouraging competition between comparable countries.

Who will disburse funds?

Some industrialised nations supported a "fast-track" system through agencies such as Multilateral Development Banks, and private sector organisations that adhere to the 'Equator Principles'. But this decision was dropped as developing country board members insisted that money should not just flow through large multilateral institutions, but that their countries should have direct access through national and sub-national bodies that will be entrusted to disburse funding.

Broader stakeholder involvement for LDCs

Board members from Least Developed Countries (LDCs) argued for more room for consultation with stakeholders during the proposal approval process. For example, National Designated Authorities (NDA) have been set up, but right now their role is limited to expressing a "no objection" in the early stages of the process, whereas they could be helping to ensure that proposals are consistent with relevant national strategies and plans.

Measuring results

Recipient countries can attract funds if they show better results of their climate responsive actions. But deciding how to measure these results posed a challenge for the board. Discussions led to agreement on an 'initial logic model' for measuring results. A clear message from the delegates was to keep the indicators simple and flexible to evolve over time. The need to measure gender-based results was also an important point raised during the various rounds of deliberation. 

Watch this space

Country-ownership, readiness and preparatory support, and taking a gender-sensitive approach, still need to be resolved but have been pushed to the next board meeting. It is important that they do not slip off the agenda.

Crucially, despite the decision to start putting money into the fund, a more recent meeting in Oslo at the beginning of July to mobilise resources did not result in any firm pledges. This was in spite strong calls from developing countries and civil society. Instead, developed countries have deferred pledging until the UN Secretary General's Climate Summit in September. But a decision on the scale of the resources and the ambition of the fund remains critical. The longer developed countries dodge pledging, the less credible the GCF will appear in the eyes of the people it is trying to help.

Neha Rai is a researcher and Barry Smith is a policy research consultant with the climate change group.