Partnerships with Multilateral Development Banks – as seen from the Green Climate Fund
The Green Climate Fund (GCF) is a global fund created to support the efforts of developing countries to respond to the challenge of climate change. GCF helps developing countries limit or reduce their greenhouse gas (GHG) emissions and adapt to climate change.
It seeks to promote low-emission and climate-resilient development, taking into account the needs of nations that are particularly vulnerable to climate change impacts. GCF aims to catalyze a flow of climate finance to invest in low-emission and climate-resilient development, driving a paradigm shift in the global response to climate change.
It was set up by the 194 countries who are parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 2010, as part of the Convention’s financial mechanism. It aims to deliver equal amounts of funding to mitigation and adaptation, while being guided by the Convention’s principles and provisions. When the Paris Agreement was reached in 2015, the Green Climate Fund was given an important role in serving the agreement and supporting the goal of keeping climate change well below 2 degrees Celsius. The Fund’s investments can be in the form of grants, loans, equity or guarantees.
In deploying its resources, the GCF works through a wide range of institutions to finance projects and programmes. To access funding, these institutions will go through a process of “accreditation,” designed to assess whether they are capable of strong financial management and of safeguarding funded projects and programmes against any unforeseen environmental or social harm. All multilateral development banks (MDBs) are accredited to the GCF and have signed Accreditation Master Agreements (AMA).
GCF have committed USD 5.6 billion to 124 projects so far, of which 38 projects with the MDBs. 85% of requested funding from GCF is from international access entities. EBRD has requested 12% of the Fund’s resources to 6 projects, IBRD 8.4% to 9 projects and ADB 5.4% to 10 projects.
Some Issues for Discussion:
- Most MDBs have set ambitious targets for climate change investments. How can the partnership with GCF be an effective instrument to achieve the planned increases in climate related investments?
- The climate finance landscape is evolving and there is a need to for GCF and MDBs to ensure complementarity and coherence with other financial institutions so that climate finance is delivered effectively. What are the main challenges and opportunities to ensure better complementarity and coherence?
- GCF has been criticized for cumbersome and time-consuming project approval procedures. Based on your MDB experience, what is the potential for streamlining and expediting GCF’s operational cycles?
- With GCF’s emphasis on transformational and catalytic change, how can this be linked to MDBs’ investments in climate projects?
- How can GCF ensure that it is not “crowding out” finance where other institutions, e.g. MDBs, may be better placed to invest?