Green Climate Fund clears way for $2.5 bln funding challenge

The Green Climate Fund made progress in closing administrative and policy gaps at a meeting in South Korea last week, and now faces the uphill task of allocating $2.5 billion this year for projects to tackle climate change, experts said.

The 24-member board of the fund, which aims to become a major channel for tens of billions of dollars to help poorer nations develop cleanly and adjust to more extreme weather and rising seas, approved 13 new agencies to carry out projects.

It also agreed to raise the number of staff at the fund’s over-stretched secretariat to 140 by the end of 2017, up from 56 now, and it adopted a strategic plan.

“The board has reached agreement this week on key decisions that help us deliver against our target of approving $2.5 billion in 2016,” said Ewen McDonald, a co-chair from Australia.

That aspirational goal amounts to around a quarter of the fund’s current resources of $10.3 billion.

The board has three further meetings this year, beginning in late June, where it will need to step up the pace of approving new projects.

It is important that we are getting the money out, but I am not quite sure whether reaching the ‘2.5’ deadline on the dot is important.

Liane Schalatek of the Heinrich Böll Foundation North America

The Green Climate Fund (GCF), set up by the UN climate change negotiations, has so far allocated just $168 million to eight projects, in a decision made before December’s Paris climate summit.

Another 22 proposals for private and public-sector projects are now in the fund’s pipeline. They will ask for $1.5 billion from the fund, to back activities worth more than $5 billion.

They include efforts to improve energy efficiency, strengthen disaster risk management and boost agricultural resilience in Latin America, Africa and Asia-Pacific, as well as to help small island developing states adapt to climate change.

Karen Orenstein, a climate finance expert with Friends of the Earth US, said the fund now faces a tough test of “whether it can balance the need to get money out the door quickly with the need to finance high-quality, environmentally sound projects that truly improve the lives of people in developing countries, especially the poor and the vulnerable”.

The fund is tasked with supporting developing nations to get ready to handle larger amounts of climate finance, but also needs to spend its resources fairly quickly if it is to go back to donors and ask for more in 2018, as planned.

That has led observers to worry it could favour projects led by international agencies, which are used to implementing big programmes, over smaller ones put forward by national-level organisations.

“It would seem a no-brainer that scarce public resources should be directed toward those most in need, not giant banks,” said Orenstein.

New partners

This week, the board approved as project partners Morocco’s Agency for Agricultural Development, Ethiopia’s finance ministry, Kenya’s National Environment Management Authority, the Development Bank of Southern Africa and Argentina’s Unit for Rural Change (UCAR).

But it also signed up banking giants HSBC and Crédit Agricole, as well as several multilateral development banks and UN agencies. That brings the number of organisations that can apply for funds to 33.

Civil society groups had lobbied against adding the two private-sector banks, arguing they have track records of putting money into fossil fuels and being implicated in financial scandals.

In response, the board agreed to review how far its partners are moving their entire portfolios towards low-carbon and climate-resilient investment.

“I think this is a major signal to the private sector that the GCF welcomes working with (them), but it is not allowing itself to be used as a public relations tool, (and) really wants them to be a serious partner in shifting the way they are doing business,” said Liane Schalatek of the Heinrich Böll Foundation North America, who was at the board meeting.

Observers welcomed a decision to webcast board meetings - something they have been calling for since the fund began operations in 2013.

“This will help level the playing field for the many stakeholders in developing countries who cannot afford to fly all over the world to attend GCF meetings,” said Orenstein.

Of the three remaining meetings this year, October’s will be in Ecuador and December’s in Samoa.

With some of the fund’s outstanding policy issues resolved, the board will now turn its attention to looking at and approving projects - a task that may become easier as the secretariat gains more staff to process proposals.

The fund also has to find a new executive director in the coming months as its current head, Héla Cheikhrouhou, will leave when her initial term ends in September.

Experts warned against piling too much political pressure on the GCF to meet its $2.5 billion spending goal this year.

“It is important that we are getting the money out, but I am not quite sure whether reaching the ‘2.5’ deadline on the dot is important,” said Schalatek. “I think what you need to see is that there is a trend towards that.”

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