Readiness Support under Green Climate Fund (GCF)

About Green Climate Fund

Climate change is the defining challenge of our time. The human impact on our planet is unprecedented. Long-term changes in the earth’s climate system are significant. The Green Climate Fund was established with a mission to advance the goal of keeping the temperature increase on our home planet below 2 degrees Celsius.

The Fund is a unique global initiative to respond to climate change by investing into low-emission and climate-resilient development. GCF was established by 194 governments to limit or reduce greenhouse gas emissions in developing countries, and to help adapt vulnerable societies to the unavoidable impacts of climate change. Given the urgency and seriousness of the challenge, the Fund is mandated to make an ambitious contribution to the united global response to climate change.

The Green Climate Fund is a main financial entity of UNFCCC

The Green Climate Fund is a main operating entity under the financial mechanism of the United Nations Framework Convention on Climate Change (UNFCCC). It was given the mandate to make ‘an ambitious contribution to the global efforts towards attaining the goals set by the international community to combat climate change’1. The Conference of the Parties to the UNFCCC established GCF to make a significant shift towards low emission and climate resilient development pathways in developing countries and help achieve the goal of keeping a global temperature rise under 2 degrees Celsius.

GCF is the only stand-alone multilateral financing entity whose sole mandate is to serve the Convention and which aims to deliver equal amounts of funding to adaptation and mitigation. GCF’s key features include its:

  1. Balanced governance structure that ensures consensus-based decisions between 12 developing and 12 developed countries;
  2. Ability to engage directly with both the public and private sector in transformational climate-sensitive investments;
  3. Target at least 50 percent of its adaptation funding to the most vulnerable countries, including SIDS, LDCs and African States.
  4. Capacity to bear significant climate-related risk, allowing it to leverage and crowd-in additional financing;
  5. Wide range of financial products, enabling it to match project needs;
  6. Singular mandate to serve the implementation of the goals set by the international community to address climate change.

The Green Climate Fund offers a full toolkit of financial instruments to deliver on its mandate, including concessional senior and subordinated loans, equity, guarantees and grants, where needed. These financial tools allow the Fund to tailor its financial support to the project needs of public, private and nongovernmental entities. This is particularly useful for those developing countries in which climate action requires the full flexibility of financial instruments and counterpart risk-taking, beyond fiscally-constrained central governments.

GCF is open for business: first countries receive readiness funding

bulleted – More than 120 developing countries have established their national designated authority (NDA) or focal point for GCF. They are chosen by Governments to act as the core interface between a developing country and the Fund. NDAs provide broad strategic oversight of GCF’s activities in a country and serve as point of communication with the Fund.

The Fund’s allocation framework provides for adequate levels of readiness funding to developing countries on an ongoing basis. This stream of funding is designed and implemented based on the choices made by the NDA. GCF’s first grant agreement for readiness was signed with Mali in April. Close to 60 readiness proposals and related grant agreements are currently being progressed by the Fund. At least 50 percent of the readiness funding will be delivered to particularly vulnerable countries, including small-island developing States (SIDS), least developed countries (LDCs) and African States.

GCF ACCREDITATION – The Fund has a unique feature whereby its financing is deployed through a network of well-established institutions. Such entities may be international, regional, national or subnational; public, private or non-governmental. Countries may access the Fund through multiple entities simultaneously. This network of entities, which is growing fast, includes already more than 50 applicants which operate in more than 100 developing countries. Applications for accreditation continue on an ongoing basis through the Fund’s online accreditation system.

FUNDING PROPOSALS – The Fund finances low-emission and climate-resilient projects and programmes developed by the public and private sector that contribute towards achieving at least one of its eight thematic areas. It aims to balance its allocation between adaptation and mitigation over time, and will allocate significant resources to the private sector.

The Fund has already started receiving and giving feedback about voluntary concept notes/ project ideas. Accredited entities and NDAs can submit funding proposals to GCF at any time, using the funding proposal template available on the Fund’s website. Among other, the funding proposal must articulate how the investment will fulfill the six investment criteria of the Green Climate Fund. To ensure-country ownership, the Fund’s Board will only consider funding proposals that are supported by a letter of no-objection from the NDA.

GCF mobilizes resources on an ongoing basis

The Green Climate Fund has received US$ 10 billion equivalent in pledges in 2014. A total of 33 governments have made a pledge to the Fund to date, including 8 representing developing countries. The objective is for all pledges to be converted into contribution agreements within one year, so by COP21 all 2014 pledges should be signed into contributions.

The pledges received to date are just the beginning of GCF resource mobilization, and it is essential that new and additional resources continue to be pledged to the Fund. GCF’s initial resource mobilization period is 2015-2018, and the Fund accepts new pledges on an ongoing basis. Scale is essential for GCF to deliver on its ambitious mandate — this can include resources from public sources as well as from private, philanthropic and potential alternative sources.

GCF formally reached effectiveness in May 2015 by signing more than US$ 5 billion equivalent (50% of pledges) into contributions that will be paid over the period of 2015-2018. This means the Fund can begin to allocate resources to projects in developing countries, and the Fund’s Board will consider some initial projects later this year, ahead of the 21st Conference of the Parties.

The Green Climate Fund is a key indicator for new climate finance resources - making them visible and possible to track

The forthcoming 21st Conference of the Parties to the UNFCCC provides an opportunity to agree on new and additional climate finance. The level of new climate finance that should be channeled through GCF over time is to be commensurate to the level of ambition required to address mitigation and adaptation in the long run. The Green Climate Fund can serve as a key indicator that will make climate-dedicated financial commitments visible and possible to track in the Paris Agreement. The Fund establishes a transparent reporting system for new and additional climate finance that is needed to build confidence among Parties.