Eco Highlights Green Climate Fund Challenges Ahead of Board Meeting

Where all the money is going to come from in order for developing countries to carry out climate change mitigation and adaptation projects that contribute to keeping global mean annual temperature rise below 2ºC has been a persistent sticking point in the long running UN Framework Convention on Climate Change (UNFCCC) treaty negotiations.

GCF funding infographic

In 2010, during the 10th UNFCCC climate conference (COP-10) in Cancun, the Green Climate Fund (GCF) emerged. Funded by voluntary donations from UNFCCC national governments, GCF aims to raise $100 billion per year by 2020 to help launch climate change mitigation and adaptation projects in developing countries worldwide.

Having raised some $2.5 billion and with its operating structure still developing, GCF is making progress, but a long road lies ahead. Global and far-reaching in scope and purpose, the organization’s climate project funding process is prone to being unwieldy, as well as too costly.

Green Climate Fund: On the road to becoming fully operational

Key questions and issues facing the GCF executive board and secretariat are set to be resolved further at its next executive board meeting, which is slated to take place March 8-10 at its headquarters in Incheon, South Korea. In advance of the meeting sustainable energy and climate project funding specialist Eco has published key findings from a recent survey regarding what is, and what isn’t, working when it comes to GCF project development.

It took less than a year for GCF to advance from initially organizing its resources to being able to make funding decisions, GCF highlights. Meeting for the eleventh time in Zambia in November, GCF’s 24-member governing board approved the first round of project investments, a total of eight with disbursements to date totaling some $500 million.


GCF Adaptation Funding

The milestone marked the final stage in GCF’s evolution to a fully operational fund, which put it in a position to report to  UNFCCC member nations at the Paris climate talks this past December.

However, early research results have revealed that the costs of navigating GCF’s climate project funding process are too high for many developing countries. That’s particularly the case for smaller scale, locally owned and operated projects that align precisely with the UN’s sustainable development principles and goals.

GCF insights

The GCF executive board will discuss this and other key issues related to the policies and procedures it needs to become fully operational during its 12th board meeting. Among the latter, the board intends to consider proposals from entities seeking to obtain GCF project development accreditation.

Entitled GCF Insight, the key findings from Eco’s recent survey highlight the challenges the executive board and secretariat face, as well as early indications regarding what’s proving successful in realizing the organization’s primary goals.

Eco surveyed the range of key GCF stakeholders in producing its report, including Nationally Designated Authorities (NDAs), Accredited Entities, Implementing Entities, Project Developers and others.

  • Examining the composition of GCF project proposals, Eco found more than half (52%) relate to climate change adaptation. Nearly half (48%) focus on mitigation. These results are consistent with those from a March survey released by the GCF Secretariat.
  • The most active category of GCF climate adaptation projects under development are those that aim to improve the livelihoods of people and communities (30%). Climate adaptation projects in the Infrastructure and Built Environment category were fewest (17%).

Most projects proposed to GCF originate from government planning meetings, followed by project identification workshops. Given the limited resources and capacity of many developing nation governments to reach out broadly across their national population, it stands to reason that access to GCF funding will be limited to project developers with well established political connections.

  • Eco found that carrying out an “open call for project ideas” was considered the most effective approach to identifying GCF projects, however. One-third of survey respondents deemed it “very effective.”
  • In contrast, GCF project identification via government planning meetings was deemed the least effective. More than 1 in 5 respondents considered government planning meetings the least effective means of project identification despite the fact that it is the most prevalent mechanism in use.

Overcoming organizational, project proposal inertia

GCF Climate Funding

Overcoming procedural inertia is another challenge, according to Eco. Most respondents reported the number of GCF projects under development remained the same.

Developing GCF project funding proposals was found to take an average 21 person-months with a median of 1.5 person-years over a five month period. Most were developed by teams of three full-time and three part-time staff.

  • The most challenging aspects of developing a GCF funding proposal were financing/cost information, supporting documents, detailed project/program description, and expected performance against investment criteria.

The majority of respondents reported they spent less than $150,000 to develop GCF funding proposals. Furthermore, more than 8 in 10 (82%) said they employed third-party consultants to develop funding proposals. That highlights the lack of resources and capacity of participating national governments.

  • Nearly 4 in 10 respondents cited improving the availability of resources as the top means of improving the process of identifying worthy GCF projects and completing funding proposals. “Political Commitment” followed, cited by 35 percent, given the need to coordinate the process across government ministries and departments.

Two-thirds of respondents (65%) reported having received a signed “No Objection” letter from UNFCCC NDAs within two months from submitting project proposals. Better yet, one-quarter (25%) said they received one in two weeks or less. On the other end of the scale, more than 17 percent reported it took more than 5 months to receive the signed no-objection letter.

  • When it comes to ways of improving the GCF project proposal process, respondents cited improving their capacity to prepare GCF projects at the top. They noted that just a few organizations were able to generate or prepare GCF Concept Notes, and that there is GCF’s objectives and processes aren’t sufficiently known or understood.

For more on Eco’s GCF Insights, check out the report, which is can be downloaded for free via the Chislehurst, U.K.-based consultancy’s website.

*Image credits: GCF; Eco; Duke University UN Climate Change Practicum

Andrew Burger
Andrew Burger
A product of the New York City public school system, Andrew Burger went on to study geology at the University of Colorado, Boulder, work in the wholesale money and capital markets for a major Japanese bank and earn an MBA in finance.

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