Along with the Global Environment Facility (GEF), the Green Climate Fund (GCF or the Fund hereafter) serves as an operating entity under the United Nations Framework Convention on Climate Change (UNFCCC) financial mechanism. The GCF became fully operational in 2015 and has thus far disbursed US $147.7 million (as of April 2018) in funds for 76 projects and US $10.8 million (as of November 2017) via the Readiness Programme.
The Fund has faced criticism in these early years. Critics argue that there is a lack of transparency with respect to the approval process, including proposal reviews and Board decisions, and that the GCF narrowly defines climate change adaptation. Given the GCF’s mandate to specifically support climate mitigation and adaptation, proposals perceived by the Fund to target development have not been funded. Critics have also noted the apparent contradiction in the distribution of funding modalities in the GCF’s current portfolio. Like the Adaptation Fund, a key attribute of the GCF is the emphasis on country ownership; thus, the Fund has a direct access modality. However, to date, 75% of the GCF’s portfolio is funded through the international access modality.
In a new paper published in Climate Policy, we discuss the GCF funding process within the context of Africa. In addition to the general concerns noted above, concerns specific to Africa have been raised. Critics note that a limited number African countries are benefitting from the GCF funding. Further, there is concern regarding the size of projects that have been approved for the African continent. The GCF funds projects in four size categories: 1) micro (less than USD 10 million), 2) small (USD 10 – 50 million), 3) medium (USD 50 – 250 million), and 4) large (greater than USD 250 million). The majority of African projects approved for funding are small, whereas the majority of funded projects in the GCF portfolio as a whole are medium-sized. While we recognise that micro- and small-scale projects demonstrate utility in determining the potential to scale up mitigation and adaptation efforts (e.g., strategies and technologies), critics argue that small projects are inefficient, with high transaction costs and outcomes that are limited in scope or scale.
Our paper addresses both challenges to and opportunities for accessing GCF funds. The challenges we identify centre on the Fund’s Readiness and Preparatory Support Programme, Africa’s GCF portfolio relative to GCF portfolio and investments to date, and access modality.
With respect to readiness support, we identify two challenges. First, if we compare regional-level proposal and funding approvals (relative to proposal submitted and total funding requested) across Africa, Asia Pacific, Eastern Europe, and Latin America and the Caribbean (LAC), the percentages of approvals for Africa are lower than those of other regions. This creates a gap between funding needs and access (a challenge, we note, that is not specific to Africa nor the GCF), with implications for obtaining direct access to the Fund since readiness support is intended to promote country ownership. Further, the majority of readiness support funding disbursed to Africa has been allocated to national stakeholder engagement, with little funding allocated to Direct Access Entity (DAE) development, private sector engagement, or resource mobilisation. This, again, has implications for country ownership and may limit progress towards the realisation of direct access.
We reveal a third challenge with respect to GCF investments and both thematic bias and a lack of diversity in Africa’s portfolio. While the GCF strives to equally support both mitigation and adaptation, currently the majority (43%) of the GCF portfolio targets mitigation, with nearly equal support for the adaptation and cross-cutting targets. However, the majority (61%) of Africa’s portfolio targets adaptation. This difference may be a function of Africa primarily submitting adaptation-focused proposals, or a lack of GCF approval of mitigation-focused proposals from African countries. Either way, if the GCF continues to invest more heavily in mitigation, and adaptation continues to be the primary target for Africa, then Africa may have to compete for a smaller pool of funds. In addition, Africa’s portfolio primarily addresses only three GCF result (impact) areas: energy, livelihoods, and health. However, other GCF result areas and investment priorities such land use, agriculture, and forestry (i.e., the Agriculture, Forestry and Other Land Use [AFOLU] sector) have either not been targeted in proposal development or, if addressed in proposals, the proposals were not approved. Thus, opportunities to support mitigation in Africa (in addition to adaptation) and capitalise on one of the Fund’s investment priorities are currently being missed.
Finally, over 60% of Africa’s GCF-funded projects and programmes are managed by International Access Entities (IAEs). This management structure poses several challenges with respect to programme and project costs, development, and implementation. Management fees associated with IAEs are generally higher than those of direct access entities (DAEs). Thus, if IAEs and DAEs are equally efficient in their operations, IAEs are less cost-effective. Second, lack of direct access and national capacity (e.g., institutional and technical) promote reliance on IAEs and development of programme and project proposals that align with the expertise of IAEs. This creates a situation in which a country may have to compromise on its needs or priorities as a means of gaining access to the Fund. Third, geographical disconnects between IAE headquarters and national institutions may delay project implementation depending on the level of in-country engagement on the part of the IAE. In addition to these challenges, reliance on IAEs runs contradictory to the principle of country ownership as discussed above.
There are, however, opportunities for enhancing Africa’s engagement with the GCF. For example, by capitalising on the nexus between mitigation and adaptation, as well as synergies between Nationally Determined Contributions (NDCs) and GCF investment priorities as a means of developing more competitive proposals that address national priorities and needs and support international commitments. Obtaining direct access to the GCF (which, as we note, poses its own challenges) will address the challenges presented by relying on IAEs. With respect to obtaining direct access, we see opportunities for leveraging existing knowledge and resources such as country-to-country knowledge sharing regarding the DAE accreditation process, existing climate finance and capacity building programmes, existing internal (national) institutions with international finance experience, and lessons learned from other international financial mechanisms such as the GEF. Finally, we share the opinion that engaging with the private sector is key to addressing climate change. Africa serves as a place of untapped potential for private sector engagement, not only for climate finance purposes, but also for opportunities such as developing business practices that align with low-carbon development, facilitating technology transfer relevant to mitigation and adaptation, and engaging in research that informs climate risk management and resilience building.
As we note in our paper, the GCF is generally perceived in Africa as a welcome addition to the climate finance landscape. Despite the challenges, there are opportunities to leverage existing resources and capitalise on linkages between mitigation and adaptation, to promote both greater and direct engagement with the GCF and diversify Africa’s GCF portfolio. Such engagement and diversification has the potential to broaden the scope and increase the scale of climate mitigation and adaptation efforts, thereby amplifying the positive outcomes of such efforts.
About the Authors
William Fonta is Senior Researcher at the West African Science Service Centre on Climate Change and Adapted Land Use; and student at The Earth Institute Center for Environmental Sustainability Executive Education Program,Columbia University.
Elias Ayuk is Director of the United Nations University Institute for Natural Resources in Africa.
Tiff van Huysen is an Instructor at The Earth Institute Center for Environmental Sustainability Executive Education Program at Columbia University.