If you had an initial $10 billion in capital to fight climate change and boost resilience, how would you decide how to spend it? This is one of the key questions facing the Green Climate Fund Board at its ninth meeting in Songdo, South Korea this week.
So far, 27 countries have pledged $10.2 billion to the Green Climate Fund, which is expected to become the main vehicle for securing and distributing climate finance. With key funds committed, it’s now time to move the conversation away from politics to action.
How Should the Fund Invest its $10.2 Billion?
At this meeting, the Board will decide on an investment framework that will serve as the Fund’s guide in deploying its money. In designing these tools, the Fund needs to think about how its activities will champion ambition and get to scale to bring global emissions down significantly.
As an illustrative example, restoring some of the more than 2 billion hectares of degraded land worldwide has huge potential to reduce greenhouse gas emissions while increasing prosperity and enhancing climate resilience in some of the world’s poorest regions. The Bonn Challenge has already secured pledges from governments and other partners to restore some 50 million hectares of degraded land by 2020, while research shows that restoring 500 million hectares of lost or degraded forests and agricultural land by 2030 could help store about 2-4 billion tonnes of CO2e per year by 2030. Niger farmers have already restored 5 million hectares of degraded land since 1985, a process that has helped one million farmers boost their climate resilience and increase crop yields, while storing more greenhouse gas emissions. These are the kind of success stories that the Green Climate Fund could help to scale up.
In designing its investment framework, the Board has to balance two issues:
What principles and tools can guide the Fund’s investments away from business-as-usual financing and toward ambitious, innovative and transformational activities that add up to more than the sum of their parts, like the landscape restoration opportunity described above?
How can the Board craft a rigorous and ambitious set of investment guidelines that’s straightforward and sharply outlined to allow a wide range of potential partners – with differing levels of capacity – to design robust, high-impact proposals?
Ensuring rigor and transparency in the principles the Fund uses to select the projects it funds will be crucial. It will avoid a first-come, first-served approach and will instead incentivize the most ambitious and transformational proposals.
Empowering a Diversity of Partners to Extend the Fund’s Reach
In deploying its resources, the Fund will work through a wide range of institutions to implement projects and programs. In order to access funding, these institutions will go through a rigorous process of “accreditation,” designed to ensure that they are capable of strong financial management and of safeguarding the Fund’s investments against any unforeseen environmental or social harm. At this meeting, the Board will consider the first set of applicant institutions, which represent a range of national, regional and international entities in the public and private sectors. Having the right set of institutions accredited to deploy its resources, including strong national and sub-national institutions (such as development banks, government funds and ministries, local private sector actors, and civil society organizations), will enable the Fund to engage effectively at the country level and to respond to the most pressing needs and the most promising opportunities.
These are just a couple of the key issues to be decided at this meeting. With the $10.2 billion initial resources, the Green Climate Fund is ready for business. However the Board needs to ensure that haste doesn’t result in low ambition. The quality of the projects is of utmost importance. It is time to move past the more political discussions, and toward the hard work of weaving the fabric of the Fund.