A year after its inaugural meeting, the Board of the Green Climate Fund (GCF) left its fifth meeting in Paris earlier this month with a collective sense of urgency. The GCF is expected to become the main vehicle for disbursing climate finance to developing nations, so the decisions made at this most recent meeting significantly impact the future of climate change mitigation and adaptation. Encouragingly, Board members stepped up to the important task before them, making progress across several key issues. Their decisions made it clear: The GCF’s inception phase (referred to officially as "the interim period") is over—the focus now is on funding it and launching its operations.
Charting a Path to Funding
Criteria to fulfill to mobilize resources for the Green Climate Fund
- Initial structure for the Fund and its secretariat, its administrative policies, best-practice fiduciary principles and standards, and environmental and social safeguards
- Financial risk management and investment framework
- Initial results areas, core performance indicators, and results management framework
- Procedures for accrediting national, regional and international entities that will implement activities for the Fund or intermediate finance to such entities
- Policies and procedures for the initial allocation of Fund resources, including results-based approaches;
- Initial proposal approval process, including criteria for program and project funding
- Initial modalities for the operation of the Fund’s mitigation and adaptation windows, and the Private Sector Facility
- Terms of reference of the Fund’s independent units on evaluation, integrity, and grievance redress Board members closed a long-standing debate on what was to come first—an agreement on the form of the Fund or a pledge of financial resources for it. The resolve of the Board Co-Chairs to foster a debate on these issues early in the meeting proved instrumental in helping to reach a common understanding on how to swiftly operationalize the Fund. They agreed to a set of essential criteria for receiving, managing, programming, and disbursing its financial resources (see sidebar), thus clearing the path for securing financial contributions to the Fund. This agreement translated to an equally ambitious and urgent tone on the rest of the issues that followed.
Actually securing the finances the Fund needs now hinges on making progress across the criteria the Board has laid out. The broad aspiration is for the Board to complete this work at its next two meetings in February and May of 2014. With sufficient progress, the Board can hopefully inspire countries to come forward with ambitious financial pledges to the Fund at the UN’s World Leaders’ Climate Summit, taking place in September 2014.
Milestones Reached in Paris
Giving itself a head-start, the Board made good progress on the first five criteria during the Paris meeting. Some of the most important decisions include:
- Agreement on initial focus areas for the Fund—such as low-emissions energy and transportation to guide its early investments—as well as a framework for monitoring its progress in these areas;
- Guiding the Secretariat on developing procedures to accredit national, regional and international entities, who will be responsible for implementing activities using the Fund’s money or intermediating resources to other entities to do so;
- Establishing committees and panels to deal with strategic issues, such as financial risk associated with different types of financial inputs and instruments (e.g. grants and concessional loans), and on ways to strengthen its engagements with the private sector;
- Tasking the Secretariat to develop a system for allocating the Fund’s resources, including for readiness and preparatory activities such as investment planning and strengthening in-country institutional capacities; and
- Approving the Secretariat’s initial structure and budget.
Getting the Job Done
The task ahead of GCF Board members and the Secretariat is a challenging one. Paris set the stage for an ambitious path, but the truly fundamental work still lies ahead. Reaching this goal will require striking an appropriate balance between speed of finance delivery and ensuring its effective use. In the end, the ultimate measure of success will be whether the GCF can prompt a wide range of actors to invest in low-carbon and climate-resilient economic development. This outcome is extremely important to ensure that people and businesses in developing nations get the tools they need to transform their lives and livelihoods by both mitigating climate change and adapting to its impacts.
This post was co-written with Malaya Zumel, the climate finance senior adviser at the Ministry of Finance of the Netherlands on secondment with WRI’s Finance team. She attended the GCF meeting in her official capacity with the Dutch government. However, this piece was co-written in her personal capacity and does not reflect the views of the Netherlands or the Danish-Dutch seat in the GCF Board.