Green Climate Fund ready to help developing nations fight climate change

by Héla Cheikhrouhou | Green Climate Fund
Friday, 5 June 2015 12:30 GMT

Farhan, who has been displaced by floods, rests as his mother Azeema sews a traditional bedspread to earn money in a relief camp at Kakar village in Pakistan's Sindh province, Oct. 7, 2010. REUTERS/Akhtar Soomro

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Climate finance commitments to date are a good start but only a fraction of what's needed to achieve the world's climate change objective

Once again, climate negotiators have gathered in Bonn to discuss the fate of the Universal Climate Agreement (UCA). The spiritual grandchild of the Earth Summit Rio agreement of 23 years ago, the UCA is the world's best chance to limit global temperature increase to 2 degrees Celsius.

The universal hope is that it will be adopted at the global climate meeting in Paris in December. The UCA is important because it will record different countries' commitments to reduce their CO2 emissions, and this time around, developing countries will also make commitments to reduce their emissions - and they are looking for how to fund the actions they will need to take.

How much money is needed by developing countries? Estimates are around $450 billion per year from 2020 on - $350 billion for reduced emissions and $100 billion for adapting to the impacts of climate change. 

Some of this money will of course come from inside the countries themselves. But to reach their emission reduction targets a significant fraction will also need to come from developed countries in the form of official climate finance.

These numbers may sound overwhelming, but should be compared to net inflows of debt and equity into developing countries which are estimated to be above $1.2 trillion per year. 

In 2010 in Cancun, the global community responded to developing countries' financing needs by creating the Green Climate Fund.

The Fund groups 196 sovereign states that are Parties to the United Nations Framework Convention on Climate Change (UNFCCC), and is the only multilateral financing institution in the world whose sole mission is to serve the UNFCCC's climate objective. Its purpose is to promote a radical paradigm shift towards low emission and climate-resilient investments in developing countries.

How is the Fund expected to do this? By providing developing countries with direct financing for climate investments and by leveraging other financing, including private investors and financial markets.

Funding will be concessional, and one of the Fund's greatest innovations is its risk-bearing capacity, allowing it to bear more risk and thus leverage other less risky financing, notably from the private sector. 


A lot of work has been done since the Fund's inauguration in Songdo, in the Republic of South Korea, in December 2013. It is now open for business and has a growing network of more than 120 developing country focal points engaged with the Fund.

Developing countries are central in the funding process and the Fund's own Board is structured to ensure a balanced representation from developed and developing countries. 

In the year since its launch the Fund has already secured $10 billion equivalent in financial pledges from 33 countries, including from developing countries. It is continuing to raise money on an ongoing basis.

A significant portion of its pledges have already been converted into usable resources: last month, the signature of Japan's contribution marked a turning point, as the Fund became effective with more than 50 percent of total pledges converted into usable resources. The Fund is ready to start investing in climate-sensitive projects and programmes.

How will the Fund operate? Through a network of accredited partners, trusted entities that will work on its behalf during the project cycle. These may include local institutions in the countries themselves, regional entities, private banks and funds, NGOs and international organizations.

The Fund's accredited partners will deploy its resources through a variety of financial instruments (concessional loans, subordinated debt, equity, guarantees and grants) and monitor project impacts. The process to build the network of partner entities is ongoing, with applications received from all over the world and some institutions already accredited. 

To accelerate private sector investment in low-emission, climate-resilient activities, the Fund's Private Sector Facility will work hand in hand with international businesses, capital markets and the local private sector in developing countries.

Its risk bearing capacity will enable the Fund to support private investments in, for example, energy efficiency, forest protection and reforestation, deployment of climate-related insurance products, adaptive agricultural methods in the face of desertification, and similar.

At the Paris meeting, the world expects the Conference of the Parties to take some important decisions concerning climate finance. Total official commitments to date are a good start but only a fraction of what is needed to achieve the world's climate change objective.

In order to succeed, countries must agree to put in place predictable, long term flows of official climate finance up to and beyond 2020, including quantities significantly larger than initial pledges made to the Fund to date.

Héla Cheikhrouhou is the Executive Director of the Green Climate Fund.