5 Do’s and Don’ts for the Green Climate Fund
This week is pivotal for the future of climate finance and international climate action.
Officials meeting in Songdo, Korea have had two days of intense discussions on the Green Climate Fund (GCF), which will become the main vehicle for securing and delivering money to help developing nations mitigate and adapt to climate change. The Board of the GCF is expected to complete the Fund’s operational design this week, the last step before countries can begin pledging significant resources to it. At the mid-point of the meeting, they are yet to make any substantive decisions.
The decisions made this week also have implications for international climate action. Making the GCF operational will help to unlock progress on climate finance in the international climate negotiations, a key step in establishing the global climate agreement that is set to be finalized at COP 21 in 2015. A lack of progress on the GCF may have a domino effect on the international climate process and deny developing countries much-needed resources to tackle climate change.
Here are 5 do’s and don’ts to help Green Climate Fund members create policies that can mobilize the level of finance needed to address the greatest challenge of our time.
1. Investment/Funding Criteria
Do: The Board must establish a robust set of funding criteria to attract the most ambitious proposals. In particular, there must be criteria that clearly draw links with the results the Fund seeks to achieve.
Don’t: The GCF’s value can’t only be captured by the entities who will channel the Fund’s resources. Instead, funding must also benefit other entities in the funding value chain between the Fund and projects on the ground. This arrangement will help break down the barriers that prevent investments from moving forward.
2. Financial Risk Management
Do: The Board must create a Fund with a higher appetite for financial risk than other public and private financiers and investors. This will provide actors with a positive incentive for making ambitious, climate-resilient investments.
Don’t: The Fund should not assume or seek to manage financial risks that it can pass on to the entities who will be channeling the Fund’s resources, as well as to those executing the programs and projects. In some cases, these entities can manage such risks in a more cost-effective manner.
Do: The Board must create a system for accrediting entities that will channel the Fund’s resources through the broadest possible set of institutions. At the same time, the Board should maintain the highest standards appropriate to the riskiness of the activities that these entities undertake.
Don’t: The Board must ensure that the process for accrediting entities is not delayed much further. It should set in motion a process for immediately accrediting the most competent entities to channel its resources—including those from developing countries—as well as accelerate its support to those entities that need support to ready itself to access and channel the Fund’s resources most effectively and responsibly.
4. Results Management Framework
Do: The Board should approve an ambitious set of results for the Fund that it will achieve for its initial phase of operation. These results should build on country priorities, and be replicable and scalable.
Don’t: The Board should not get bogged down with developing a detailed system for monitoring and evaluating its results, but develop such a system over time after learning from experience.
5. Approval Process
Do: The Board should establish a proposal-approval process that balances the need for top-down, strategically identified proposals and bottom-up opportunities. Incorporating competitive processes will encourage innovation.
Don’t: The Board should not substitute its judgment in approving proposals with the use of formulaic scoring, but rather use such decision-support tools to aid it in its decision-making.
Scientists say we only have a short window of time to limit global temperature rise to 2 degrees C and prevent some of the most disastrous impacts of climate change. The Green Climate Fund thus presents a unique opportunity to build momentum for climate action before the critical COP 21 meeting in Paris in 2015.
As they head into the final two days of the meeting, it’s time for Board members to roll up their sleeves and start making decisions to get the job done. By successfully completing its work in Songdo, the Fund will move one step closer to mobilizing enough financial resources to overcome the climate change challenge.