Green Climate Fund

Green Climate Fund

Summary

The Green Climate Fund (GCF), established in 2010, is part of the financial mechanism of the UN Framework Convention on Climate Change (UNFCCC) and serves in the same function for the Paris Agreement. It aims to make an ambitious contribution for the implementation of the Paris Agreement and its mitigation and adaptation goals by supporting the paradigm shift in developing countries towards low-carbon and climate-resilient development pathways. The GCF is currently the world’s largest dedicated multilateral climate fund and the main multilateral financing mechanism to support developing countries in achieving a reduction of their greenhouse gas emissions and an enhancement of their ability to respond to climate change.

Basic Description

Name of the Fund Green Climate Fund (GCF)
Official Fund Website http://www.greenclimate.fund
Date Created
Date fund proposed: December 2009.
The decision to establish the GCF was made in December 2010.
Date fund made operational: The GCF became fully operational in November 2015 with its first project/programme funding decisions, after having achieved financial “effectiveness” in May 2015 after the conversion of more than 50% of funding pledges received during its 2014 Initial Resource Mobilisation (IRM) efforts.
Proposed Life of Fund The termination of the Fund is not set but would be required to be approved by the COP based on a recommendation of the Board.
Objectives The GCF contributes to the achievement of the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC).

In the context of sustainable development, the Fund seeks to promote the paradigm shift towards low-emission and climate-resilient development pathways by providing support to developing countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change, taking into account the needs of those developing countries particularly vulnerable to the adverse effects of climate change.

The Fund strives to maximise the impact of its funding for adaptation and mitigation, and seek a balance between the two, while promoting environmental, social, economic and development co-benefits and taking a gender-sensitive approach.

Financial inputs and fund size During the Initial Resource Mobilisation (IRM) period, the cumulative pledged funding amounts to approximately USD 10.3 billion. A total of 45 countries, 3 regions and 1 city have contributed to this pledge.

As of October 2020, the cumulative pledges for GCF’s First Replenishment (GCF-1) period amount to approximately USD 10 billion. A total of 30 countries and 1 region have contributed to this replenishment.

The complete list of contributors for GCF IRM and GCF-1 is reported in the annual Status of Pledges and Contributions.

Financial inputs to the GCF Trust Fund are received in the form of grants, loans or capital contributions.

The contributions are eligible to be classified as official development assistance (ODA).

Activities Supported The GCF finances activities to both enable and support adaptation, mitigation (including REDD+), technology development and transfer, capacity-building and the preparation of national reports.
Countries are also supported in the pursuit of project-based and programmatic approaches in accordance with strategies and plans (such as low-emission development strategies, Nationally Appropriate Mitigation Actions, National Adaptation Programmes of Action, National Adaptation Plans and others).

The GCF’s main impact areas are:

  • Low-emission energy access and power generation
  • Low-emission transport
  • Energy efficient buildings, cities and industries
  • Sustainable land use and forest management
  • Enhanced livelihoods of the most vulnerable people, communities, and regions
  • Increase health and well-being, and food and water security
  • Resilient infrastructure
  • Resilient ecosystems.

Administrating Organization

Secretariat or Administrative Unit The GCF is a legally independent institution with a fully independent secretariat headed by an Executive Secretary. The Secretariat, located in Songdo South Korea, began its work in December 2013. The Secretariat is composed of around 220 staff members and a number of consultants regularly support the staff.

The Secretariat is in charge of executing the day-to-day operations of the Fund and is accountable to the Board. It is divided into several divisions and offices that report to the Office of Executive Director. The Divisions and Offices comprise:

  • Office of the Executive Director
  • Office of Risk Management and Compliance
  • Office of Portfolio Management
  • Division of Country Programming
  • Division of Mitigation and Adaptation
  • Division of Private Sector Facility
  • Division of External Affairs
  • Office of the Internal Auditor
  • Division of Support Services
  • Office of Human Resources
  • Office of Governance Affairs
  • Office of the General Counsel.

An organigram overview of the GCF is available at: https://www.greenclimate.fund/sites

Trustee The World Bank served as the interim trustee of the GCF until 2018, when a GCF Board decision confirmed the World Bank as the GCF Trustee for a renewable four-year period (2019-2023).

Fund Finance and Access Modalities

Conditions and Eligibility Requirements All developing country Parties to the UNFCCC are eligible to receive resources from the GCF. Being an ODA-eligible country is not set out as a mandatory requirement to access the Fund.

The GCF aims for a balanced allocation between mitigation and adaptation in grant equivalent terms, with a floor of 50% of the adaptation allocation ring-fenced for particularly vulnerable countries, namely Least Developed Countries (LDCs), Small Developing Island States (SIDS) and African countries.

Accessing the Fund
Access Modalities – The GCF allows for both direct access and international access through accredited entities. The accredited entities are the central actors of GCF’s funding proposal cycle. They are in charge of presenting funding applications to the GCF and overseeing, supervising, managing and monitoring the overall implementation of GCF-approved projects and programmes.

Recipient countries can submit funding proposal through their National Designated Authorities (NDAs). Some recipient countries can receive GCF funding via direct access through accredited sub-national, national and regional implementing entities.

GCF funds can also be accessed through multilateral implementing entities, such as accredited multilateral development banks and UN agencies. In addition, a private sector facility also allows direct and indirect financing by the GCF for private sector activities.

Entities that are not accredited by the Fund may still submit funding proposals through an Accredited Entity to obtain resources for climate change projects and programmes.

All funding proposals are required to secure the approval from the NDAs in the countries where they are to be implemented via a no-objection letter to ensure that proposed projects and programmes are aligned with national climate policies.

As described on the GCF website, “the accredited entities develop funding proposals, in close consultation with National Designated Authorities (NDA) or focal points, based on the differing climate finance needs of individual developing countries. The accredited entities can also respond to Requests for Proposals issued by GCF to fill current gaps in climate financing. In issuing some Requests for Proposals, GCF may accept proposals from entities it has not yet accredited. However, non-accredited entities will have to team-up with accredited entities when formally submitting funding proposals to GCF. Entities that submit proposals through the Requests for Proposals can be prioritised when applying for accreditation”.

The GCF’s funding proposal cycle comprises the following steps:

  1. Concept note: the accredited entity may (optional) submit a concept note to the GCF Secretariat in order to ensure that the proposal matches the Fund’s objectives and mandate.
  2. Funding Proposal: the accredited entity submits a Funding Proposal (FP) to GCF. The FP includes an Impact Assessment and a no-objection letter signed by the NDA. Once submitted, the FP is subject to a review process.
  3. Assessment: following the initial completeness check, the GCF Secretariat proceeds to a more detailed assessment of the FP. Once the FP has passed this review stage, the Independent Technical Advisory Panel (ITAP) – an independent technical advisory body made up of six international experts – assesses the FP against the six GCF investment criteria and can add conditions and recommendations to the FP.
  4. Board approval: the GCF Secretariat submits the FP to the GCF Board, which considers the proposal and can decide whether to approve the funding, approve the funding with the conditions and recommendations that modifications are made to the funding proposal or reject the funding proposal.
  5. Legal: following GCF Board approval of a funding proposal, the GCF Secretariat negotiates with the accredited entity in order to sign a Funded Activity Agreement laying the groundwork for the implementation phase of the project or programme.
Financial Instruments – The GCF’s financial instruments include grants, contingent grants, concessional loans, equity, guarantees and results-based finance.
Accreditation process – There are two types of GCF Accredited Entities based on access modalities: Direct Access Entities and International Access Entities.

Direct Access Entities are sub-national, national or regional organisations that need to be nominated by developing country National Designated Authorities (NDAs) or focal points. Organisations nominated to become Direct Access Entities may be eligible to receive GCF readiness support.

International Access Entities can include United Nations agencies, multilateral development banks, international financial institutions and regional institutions. International Access Entities do not need to be nominated by developing country NDAs / focal points.

Under the GCF’s “fit-for-purpose” multi-stage accreditation approach, an applicant entity’s policies and procedures, track record, and demonstrated capacity to undertake projects or programmes of different financial instruments and environmental and social risk categories are assessed against the standards of the Green Climate Fund. The result of the accreditation process, with a review by the Secretariat and an independent Accreditation Panel, will specify the project or programme activity size; fiduciary functions, which will shape how it operates using the Fund’s resources (grants, loans, equity, and guarantees); and the highest category of environmental and social risk of its intended projects. Entities seeking accreditation to access GCF resources will also be assessed against the Fund’s Gender Policy, as well as other GCF policies and standards. Assessed applicant entities need to be approved by the GCF Board.

Fast-track accreditation is possible for entities that have been already accredited at the Adaptation Fund, the GEF and as part of the European Union Development Collaboration (EU-DEVCO). The accreditation process, because of high transparency, fiduciary and safeguard standards that have been set by the Board can be lengthy, and there is a considerable backlog of applicant entities in the accreditation pipeline. Readiness support is available to support the accreditation of direct access entities.

Accreditation is valid for five years, with the Accredited Entity requested to seek re-accreditation. An Accredited Entity can also request to upgrade its accreditation (for scale, risk category or financial complexity) at any time.

Overview of implementing entities – Accredited entities with access to the Fund can be international (e.g. the World Bank), regional (e.g. the Secretariat of the Pacific Regional Environment Programme) or national (e.g. a country’s environment ministry). They will access the Fund through international access (multilateral implementing entities) or direct access (regional or national implementing entities). The entities that are not accredited have the option of partnering with an institution that is already credited.

The GCF has a vast and diverse list of implementation partners with more than 100 accredited entities, with more than half direct access entities. The list of currently accredited institutions is available at: https://www.greenclimate.fund/about/partners/ae

Nature of recipient country involvement – National ownership is central to the GCF approach. As described on the GCF website, the Fund “recognizes the need to ensure that developing country partners exercise ownership of climate change funding and integrate it within their own national action plans”.
Developing countries have to appoint a National Designated Authority (NDA) or focal point that acts as the interface between the government and GCF. All GCF project/programme activities need to receive the approval of the NDA/focal point through a formal no-objection letter before being deployed within a country. The country-driven approach adopted by GCF aims to ensure that the Fund’s activities are guided by national priorities, such as those expressed in national planning documents. In addition, the GCF encourages recipient countries to develop GCF country programmes to list a country’s funding priorities for the GCF. These are then sought to be matched with the funding ideas submitted by Accredited Entities in their Entity Work Programmes.
Allocation criteria – The GCF’s allocation framework aims for a 50:50 balance between mitigation and adaptation investments over time in grant equivalent terms. Additionally, it intends to reserve 50% of the adaptation allocation to particularly vulnerable countries, including LDCs, SIDS, and African States.

The GCF does not require co-financing, although it strongly encourages it. As such, the GCF can cover 100% of the cost of a project. However, during the assessment of the potential efficiency and effectiveness of a project proposal, the GCF does consider the amount of co-financing available.

Safeguards, Gender and Indigenous Peoples
Safeguards – The GCF uses the Performance Standards of the International Finance Corporation (IFC) as its interim Environmental and Social Safeguards (ESS), although it has formally begun the process to develop its own ESS. The GCF’s Environmental and Social Management System (ESMS) also includes a formal Environment and Social Policy which sets out the commitment of the GCF to “integrate environmental and social issues into its decision-making and outcomes, and establishes the principles, requirements, and responsibilities to deliver on these commitments”. Through this policy, GCF requires that all GCF-supported activities commit to:

  • Enhance equitable access to development benefits
  • Give due consideration to vulnerable populations, groups, and individuals, local communities, Indigenous Peoples, and other marginalised groups of people and individuals that are affected or potentially affected by GCF- financed activities.

The Environmental and Social Impact Assessments (ESIA) of proposed GCF projects and the Environmental and Social Management Framework (ESMF) of proposed GCF programmes are made publicly available 30 days prior to the GCF Board meeting at which they are considered for medium-risk proposals (Category B) and 120 days for high-risk proposals (Category A).

Gender – The GCF has had a formal Gender Policy and a multi-year Gender Action Plan since 2015, and updated it in 2019. The GCF was the first climate finance mechanism to “mainstream gender perspectives from the outset of its operations as an essential decision-making element for the deployment of its resources”. In practice, GCF makes gender expertise a criterion for the accreditation of its implementation partners and provides guidance to accredited entities for submitting funding proposals with the mandatory gender documentation required during the project cycle. The accredited entities need to provide an initial gender and social assessment as well as a gender and social inclusion action plan at the project preparation stage.
All required project/programme specific gender assessment and gender action plan documents are available at: https://www.greenclimate.fund/projects/gender#gender-action-in-practice
Indigenous Peoples – The GCF has a formal Indigenous Peoples Policy, which recognises that “Indigenous Peoples often have identities and aspirations that are distinct from mainstream groups in national societies and are disadvantaged by traditional models of mitigation, adaptation and development”. The Policy, which is human-rights-based and recognises the right of Indigenous Peoples to free, prior and informed consent (FPIC) for all projects/programmes affecting them or their territories, aims to assist GCF in incorporating considerations related to Indigenous Peoples into its decision-making. The Policy allows GCF to “anticipate and avoid any adverse impacts its activities may have on Indigenous Peoples’ rights, interests and well-being, and when avoidance is not possible to minimise, mitigate and/or compensate appropriately and equitably for such impacts, in a consistent way and to improve outcomes over time”. The GCF has also decided to set up an Indigenous Peoples Advisory Group.

Fund Governance

Decision Making Structure European Commission – The Fund functions under the guidance of and is accountable to the UNFCCC Conference of Parties (COP). The Board is charged with the governance and oversight of the Fund’s management and ensures the accountability to the COP by (a) receiving guidance from the COP (matters related to policies, programme priorities and eligibility criteria), (b) taking appropriate action in response to the guidance received and (c) submitting annual reports to the COP for its consideration and receive further guidance.

GCF Board
The GCF Board of 24 members is comprised of an equal number of representatives from developed and developing countries selected by the UNFCCC regional constituencies. It includes: three members and three alternate members form the Asia-Pacific States, three members and three alternate members from the African States, three members and three alternate members from the Latin American and the Caribbean States, one member and one alternate member from the Small Island Developing States, one member and one alternate member from the least developed country Parties, one member from the developing country Parties not included in the regional groups and constituencies above, and one alternate member to rotate between developing country Parties not included in the groups and constituencies listed above.

The Board meets three times a year and decisions are made generally by consensus (with voting possible for project/programme proposals when no consensus can be achieved). Members of the Board serves a three-year term and two Co-Chairs of the Board are elected by Board members to serve a period of one-year, with one from a developing country Party and one from a developed country Party.

The list of current Board members is available at: https://www.greenclimate.fund/boardroom

Accreditation Panel
The Accreditation Panel is an independent technical panel that provides the GCF Board with: technical advice on the results of the in-depth assessment and review of individual applications for accreditation, expertise in good-practice fiduciary principles and standards, expertise in Environmental and Social Safeguards, expertise in international and recognised good practices in accreditation procedures and systems, and expert policy advice on developing countries’ special circumstances.
The Panel constitutes an independent technical advisory body of the Fund and reports and is accountable to the Board. The Panel is composed of six senior experts, evenly balanced by representation from developed and developing countries.

Independent Technical Advisory Panel (ITAP)
The ITAP is an independent technical advisory body responsible for assessing the funding proposals against the six GCF investment criteria. Its composition includes five international experts from developing countries and five international experts from developed countries; in addition, the ITAP relies on a roster of external experts.

Accountability Mechanisms GCF Accredited Entities are in charge of monitoring and evaluating the projects/programmes they implement and of reporting their activities to GCF through an annual self-assessment report. In addition, GCF reviews the accreditation of a given entity mid-term through its five year accreditation period and at the end of its accreditation period and measures the performance of project implementation based on regular reporting by the accredited entity against the Fund’s results areas and Results Management Framework. All GCF assessments follow the Fund’s Monitoring and Accountability Framework for adaptation and mitigation, which highlights an oversight role for NDAs and local stakeholders through participatory monitoring approaches.

The GCF has also established several mechanisms to ensure accountability and to evaluate the performance of its activities, in order to “ensure the application of safeguards as well as internationally accepted standards”.

Evaluation
The Independent Evaluation Unit (IEU) ensures GCF is accountable and in line with its mandate to be a “learning institution” constantly works to improve its procedures and policies. It operates independently of the GCF Secretariat and its head is selected by, and reports to, the GCF Board. The evaluations conducted by the IEU are available at: https://ieu.greenclimate.fund/

Integrity
The Independent Integrity Unit (IIU) ensures all GCF staff, external stakeholders, implementing entities and intermediaries related to GCF adhere to the highest standards of integrity. The IIU is responsible for investigating allegations of fraud, corruption, misconduct and other prohibited practices. The Unit reports directly to the GCF Board. For further details, see the IIU website.

Redress Mechanism
The Independent Redress Mechanism (IRM) “responds to complaints by people who feel they have been adversely affected by GCF projects or programmes failing to implement GCF operational policies or procedures”. The IRM also evaluates requests for reconsideration of funding proposals that have been denied by the GCF Board. For further information visit the IRM website.

Participation of Observers and Stakeholders Stakeholders are defined in the GCF Governing Instrument as private sector actors, civil society organisations, vulnerable groups, women and Indigenous Peoples.

The GCF Board is mandated to grant accredited observers access to its meetings. International organisations, private sector organisations and civil society organisations can become accredited observer organisations to the GCF; they also have to register to observe each Board meeting.

Four observers are able to participate in Board meetings as active observers and speak on behalf of their constituencies, although they will not be able to vote: two representatives from accredited civil society organisations (one each from developed and developing countries) and two from accredited private sector organisations (also one each from developed and developing countries).

The list of current observers is available at: https://www.greenclimate.fund/about/partners/observers

The Board’s Guidelines relating to the observer participation, accreditation of observer organisations and participation of active observers provides detailed information related to observer participation and the accreditation of observer organisations as well as the selection and participation of active observers.

Transparency and Information Disclosure The GCF information disclosure policy outlines the information that is made available to the public either as a routine matter or upon request. The policy is available at: https://www.greenclimate.fund/document/information-disclosure-policy

GCF Board meetings are streamed live and video recordings for recent Board meeting are available at: https://www.greenclimate.fund/boardroom/meetings

In addition, most Board documents (with few exceptions) are made publicly available three weeks before Board meetings and can be found at: https://www.greenclimate.fund/boardroom/documents

The combined pledges and contributions made to the Fund are reported and frequently updated in the Status of Pledges and Contributions available on GCF website.

Details about individual funded projects are available in the Project portfolio.

Other Issues Raised The GCF, its operational procedures, processes, policies and decisions are described in further detail in a dedicated briefing (CFF11) as part of the Climate Finance Fundamentals Series (available in English, French and Spanish).