Enabling access to the Green Climate Fund: Sharing country lessons from South Asia

April 18, 2019

Executive summary

The Green Climate Fund (GCF) is a financing mechanism under the United Nations Framework Convention on Climate Change (UNFCCC).

Established in 2011, it aims to make a significant and ambitious contribution towards internationally agreed goals to combat climate change. The flow of international climate finance to developing countries, particularly via the GCF, is projected to increase significantly as industrialised countries meet their commitments under the UNFCCC.

This paper provides insights and lessons from South Asia on accessing GCF finance in terms of establishing the necessary institutional mechanisms and capabilities for developing funding proposals and managing the disbursement of funds. It is based on a series of interviews and the proceedings of a 2018 workshop with GCF-related government officials in the region, and illustrated with examples from the Action on Climate Today (ACT) programme. The paper presents a ‘demand-side’ country perspective on the challenges faced and some of the strategies countries have employed to overcome them.

It synthesises this learning into a framework for strengthening access to the GCF, looking at systemic approaches and strategies that governments, funders and practitioners can use.
The paper organises the learning on strengthening access to the GCF into four sets of challenges, and corresponding strategies to overcome these. First, it explores entry-points at the global level related to improving the GCF’s own processes and structures.

The GCF had a turbulent year in 2018, in terms of the availability of funds and challenges in approving proposals. However, South Asian countries can themselves help strengthen the Fund, including through a collective diplomatic effort to lobby for a successful replenishment process in 2019, signalling that the GCF is a key component of national climate strategies. Countries can also promote the evolution of innovative financing models in the GCF, including through co-financing and contributions from non-governmental resources, such as philanthropic actors, private and public pension funds, insurance and other institutional investors.

Second, there are opportunities to enhance access to the GCF by strengthening national institutional capabilities. The language and procedures of the GCF are still relatively new to developing countries and accessing the fund is resource-intensive.

National Designated Authorities (NDAs) also perceive a rush to submit proposals, often relying on International Access Entities (IAEs) and external consultants, without sufficient focus on building long-term institutional capabilities and linking to strategic priorities.

The paper presents examples from across South Asia of how governments have been addressing these challenges, with more focus on strategic prioritisation of project concept notes and selecting Direct Access Entities (DAEs) based on their thematic expertise. ACT has supported the Governments of Pakistan and Afghanistan to embed capabilities to access the GCF within Climate Finance Units (CFUs), which are also responsible for managing all climate funds, as well as mainstreaming climate change into public budgets.

For example, with ACT’s capacity support, the CFU in Pakistan has been able to leverage around $180 million from the GCF.

Third, the paper presents potential strategies to overcome the challenge of ensuring funding from the GCF is part of a more systemic effort by national governments to finance action on climate change.

GCF finance is designed to cover the additional investment required to make a project viable, and therefore to leverage additional public and private finance. Developing countries are familiar with grant-based facilities and basic co-financing arrangements but have struggled to engage with the other GCF instruments such as concessional loans, guarantees and equity. The paper presents examples of ACT’s support to national and subnational governments to understand the role of the GCF within a much wider spectrum of public and private finance required for adaptation.

Lastly, there are some specific challenges to address related to the design of GCF projects.
The project approval process is lengthy and resource-intensive for developing countries, and requires meeting six investment criteria, including demonstrating that the project will lead to a paradigm shift. Such transformational change, as well as making the economic case for projects, is considered conceptually and practically more difficult for adaptation projects. The paper outlines some examples of how ACT has provided technical assistance to a number of national and sub-national governments in a manner that improves their longterm capabilities to manage these project design challenges.

In Odisha, ACT supported the state government to secure India’s first GCF project by co-developing the project with the Water Resource Department, with officials providing the concept, necessary data and information and co-drafting the actual document.

As a result, there was a high degree of ownership by the government, and it has been able to apply the same skills for other climate funds.

With the aim of further improving future GCF access, the paper concludes with a set of recommendations for the GCF, national actors and agencies providing technical assistance support.

GCF-oriented recommendations

• The GCF Secretariat needs to clarify and adhere to timetables for accreditation and project approval processes.

• The GCF should release more evidence-based guidance of good practice in challenging areas for project preparation.

• The GCF Board and Secretariat should seek to increase the number of approved direct access projects.

• The GCF Secretariat should strengthen its country engagement processes.

• The GCF should host fora with NDAs to discuss innovative financing for the Fund and its projects.

Country actor-oriented recommendations

• South Asian NDAs, climate change focal points and national stakeholders must lobby donor countries to boost the GCF replenishment process in 2019.

• NDAs need to link GCF accreditation and access more strategically to national climate and development policies, situating GCF resources within wider climate financing frameworks and sources.

• NDAs should help widen awareness of the GCF, especially reaching down-scale and to the private sector.

• To expand non-grant-based finance, NDAs and the GCF should assess national barriers to investment, separating those that are generic from those specific to climate change actions.
Technical assistance-oriented recommendations • Greater support is required to build institutional capabilities to access GCF financing, particularly in helping Accredited Entities (AEs) meet required fiduciary and safeguards standards.

• There is expressed demand for technical assistance on the challenges of proposal development.

• Technical assistance needs to go beyond individual projects to supporting regional knowledge management and learning, including peer-to-peer networks.

Click links to download the LEARNING PAPER and POLICY BRIEF.

Note: This summary is re-posted from ReliefWeb.