The Green Climate Fund (GCF) is a

fund Fund may refer to: * Funding is the act of providing resources, usually in form of money, or other values such as effort or time, for a project, a person, a business, or any other private or public institution ** The process of soliciting and gathe ...

for climate finance that was established within the framework of the

United Nations Framework Convention on Climate Change The United Nations Framework Convention on Climate Change (UNFCCC) is the UN process for negotiating an agreement to limit dangerous climate change. It is an international treaty among countries to combat "dangerous human interference with th ...

(UNFCCC). Considered the world's largest fund of its kind, GCF's objective is to assist

developing countries A developing country is a sovereign state with a less-developed Secondary sector of the economy, industrial base and a lower Human Development Index (HDI) relative to developed countries. However, this definition is not universally agreed upon. ...

with

climate change adaptation Climate change adaptation is the process of adjusting to the effects of climate change, both current and anticipated.IPCC, 2022Annex II: Glossary

mitigation Mitigation is the reduction of something harmful that has occurred or the reduction of its harmful effects. It may refer to measures taken to reduce the harmful effects of hazards that remain ''in potentia'', or to manage harmful incidents that ...

activities. The GCF is an operating entity of the financial mechanism of the UNFCCC. It is based in Songdo, Incheon, South Korea. It is governed by a Board of 24 members and supported by a Secretariat. Mafalda Duarte, a Portuguese development economist, is the Fund's Executive Director. The Green Climate Fund supports projects and other activities in developing countries using ''thematic funding windows''. It is intended that the Green Climate Fund be the centrepiece of efforts to raise climate finance under the UNFCCC. There are four other, smaller multilateral climate funds for paying out money in climate finance which are coordinated by the UNFCCC. These include the Adaptation Fund (AF), the Least Developed Countries Fund (LDCF), the Special Climate Change Fund (SCCF) and the

Global Environment Facility The Global Environment Facility (GEF) is a multilateral environmental fund that provides grants and blended finance for projects related to biodiversity, climate change, international waters, land degradation, persistent organic pollutants (P ...

(GEF). The GCF is the largest of these five funds. As of Dec 2023, the GCF had a portfolio of 13.5 billion USD (51.9 billion USD including co-financing). The process of designing the GCF has raised several issues. These include ongoing questions on how funds will be raised, the role of the private sector, the level of "country ownership" of resources, and the transparency of the Board itself. Also, this additional international climate institution might further fragment taxpayer's money that is put towards

climate action Climate action (or climate change action) refers to a range of activities, mechanisms, policy instruments, and so forth that aim at reducing the severity of human-induced climate change and its impacts. "More climate action" is a central demand o ...

. The Fund's former director Héla Cheikhrouhou has complained in 2016 that the Fund is backing too many "business-as-usual types of investment proposals". This view is echoed by a number of civil society organizations. In 2023, the Executive Director announced a series of reforms aimed at making the Fund more efficient and positioned to deliver greater impact.

History

Wealthier, industrialized countries have been the countries responsible for most greenhouse gas emissions. As a consequence, it has been argued that these countries are morally responsible to pay for a lion's share of the cost of climate mitigation worldwide, including costs of the transition of less developed and

least developed countries The least developed countries (LDCs) are developing countries listed by the United Nations that exhibit the lowest indicators of socioeconomic development. The concept of LDCs originated in the late 1960s and the first group of LDCs was listed b ...

. A number of civil society groups determined that the United States and the European Union are morally responsible for at least 54% of the cost of mitigating climate change-driven disaster damage in the

Global South Global North and Global South are terms that denote a method of grouping countries based on their defining characteristics with regard to socioeconomics and politics. According to UN Trade and Development (UNCTAD), the Global South broadly com ...

. Others have argued that wealthier countries should help finance the transition of less developed and least developed countries because the former can more realistically afford the substantial investment now urgently needed for the transition. The Copenhagen Accord, established during the

2009 United Nations Climate Change Conference The 2009 United Nations Climate Change Conference, commonly known as the Copenhagen Summit, was held at the Bella Center in Copenhagen, Denmark, between 7 and 18 December. The conference included the 15th session of the Conference of the Partie ...

( COP-15) in Copenhagen mentioned the "Copenhagen Green Climate Fund". The fund was formally established during the

2010 United Nations Climate Change Conference The 2010 United Nations Climate Change Conference was held in Cancún, Mexico, from 29 November to 10 December 2010. The conference is officially referred to as the 16th session of the Conference of the Parties to the United Nations Framework ...

in Cancun as a fund within the UNFCCC framework. Its governing instrument was adopted at the

2011 United Nations Climate Change Conference The 2011 United Nations Climate Change Conference (COP17) was held in Durban, South Africa, from 28 November to 11 December 2011 to establish a new treaty to limit carbon emissions. A treaty was not established, but the conference agreed to est ...

(COP 17) in

Durban, South Africa Durban ( ; , from meaning "bay, lagoon") is the third-most populous city in South Africa, after Johannesburg and Cape Town, and the largest city in the province of KwaZulu-Natal. Situated on the east coast of South Africa, on the Natal Bay o ...

Procedures

During COP-16 in Cancun, the matter of governing the GCF was entrusted to the newly founded Green Climate Fund Board, and the

World Bank The World Bank is an international financial institution that provides loans and Grant (money), grants to the governments of Least developed countries, low- and Developing country, middle-income countries for the purposes of economic development ...

was chosen as the temporary trustee. To develop a design for the functioning of the GCF, the "Transitional Committee for the Green Climate Fund" was established in Cancun too. The committee met four times throughout the year 2011, and submitted a report to the 17th COP in Durban, South Africa. Based on this report, the COP decided that the "GCF would become an operating entity of the financial mechanism" of the UNFCCC, and that on COP-18 in 2012, the necessary rules should be adopted to ensure that the GCF "is accountable to and functions under the guidance of the COP". Researchers at the

Overseas Development Institute ODI Global (formerly Overseas Development Institute) is a global affairs think tank, founded in 1960. Its mission is "to inspire people to act on injustice and inequality through collaborative research and ideas that matter for people and the ...

state that without this last minute agreement on a governing instrument for the GCF, the "African COP" would have been considered a failure. Furthermore, the GCF Board was tasked with developing rules and procedures for the disbursement of funds, ensuring that these should be consistent with the national objectives of the countries where projects and programmes will be taking place. The GCF Board was also charged with establishing an independent secretariat and the permanent trustee of the GCF. The fund partners with 84 organizations that include

commercial Commercial may refer to: * (adjective for) commerce, a system of voluntary exchange of products and services ** (adjective for) trade, the trading of something of economic value such as goods, services, information or money * a dose of advertising ...

and development banks, state agencies and

civil society Civil society can be understood as the "third sector" of society, distinct from government and business, and including the family and the private sphere.climate finance. As of 2022, there are five multilateral climate funds coordinated by the UNFCCC. These are the Green Climate Fund (GCF), the Adaptation Fund (AF), the Least Developed Countries Fund (LDCF), the Special Climate Change Fund (SCCF) and the

(GEF). The GCF is the largest of these five funds.

Sources of finance

Countries agreed to mobilise $100 billion a year by 2020 in climate finance, some of which has been mobilised through the GCF. Uncertainty over where this money would come from led to the creation of a High Level Advisory Group on Climate Financing (AGF) by UN Secretary-General

Ban Ki-moon Ban Ki-moon (born 13 June 1944) is a South Korean politician and diplomat who served as the eighth secretary-general of the United Nations between 2007 and 2016. Prior to his appointment as secretary-general, Ban was the South Korean minister ...

in February 2010. There is no formal connection between AGF and GCF, although its report is one source for debates on "resource mobilisation" for the GCF, an item that will be discussed at the GCF October 2013 Board meeting. Disputes also remain as to whether the funding target will be based on public sources, or whether "leveraged" private finance will be counted towards the total. As of February 2020, a total of US$10.3 billion was pledged and US$8.24 billion confirmed, as part of the Initial Resource Mobilization (IRM) period.Green Climate Fund
''Status of Pledges''. Retrieved 22 March 2020 As of Dec 2023, the GCF had a portfolio of 13.5 billion USD (51.9 billion USD including co-financing). The lack of pledged funds and potential reliance on the private sector is controversial and has been criticized by developing countries. U.S. President Obama committed the US to contributing US$3 billion to the fund. In January 2017, in his final three days in office, Obama initiated the transfer of a second $500m installment to the fund, leaving $2 billion owing. Former U.S. President

Donald Trump Donald John Trump (born June 14, 1946) is an American politician, media personality, and businessman who is the 47th president of the United States. A member of the Republican Party (United States), Republican Party, he served as the 45 ...

in his announcement of U.S. withdrawal from the Paris Agreement on 1 June 2017, also criticized the Green Climate Fund, calling it a scheme to redistribute wealth from rich to poor countries.

Beneficiary countries

Issues

The process of designing the GCF has raised several issues. These include ongoing questions on how funds will be raised, the role of the private sector, the level of "country ownership" of resources, and the transparency of the Board itself. In addition, questions have been raised about the need for yet another new international climate institution which may further fragment public dollars that are put toward mitigation and adaptation annually. The Fund's initial investments have met with mixed responses. But in at least one case it also drew praise for involving local communities in the formulation of an adaptation project, and for incorporating consumer protection into a plan for off-grid solar energy.

Role of the private sector

One of the most controversial aspects of the GCF concerns the creation of the Fund's Private Sector Facility (PSF). Many of the developed countries represented on the GCF board advocate a PSF that appeals to capital markets, in particular the pension funds and other institutional investors that control trillions of dollars that pass through Wall Street and other financial centers. They hope that the Fund will ultimately use a broad range of financial instruments. However, several developing countries and non-governmental organizations have suggested that the PSF should focus on "pro-poor climate finance" that addresses the difficulties faced by micro-, small-, and medium-sized enterprises in developing countries. This emphasis on encouraging the domestic private sector is also written into the GCF's Governing Instrument, its founding document.

Additionality of funds

The Cancun agreements clearly specify that the funds provided to the developing countries as climate finance, including through the GCF, should be "new" and "additional" to existing development aid. The condition of funds having to be new means that pledges should come on top of those made in previous years. As far as additionality is concerned, there is no strict definition of this term, which has already led to serious problems in evaluating the additionality of emission reductions through CDM projects, leading to counter-productivity, and even

fraud In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...

. While climate finance usually only counts pledges from developed countries, the US$10.3 billion pledged to the GCF also includes some (relatively small) contributions from developing countries.

Failure to ban fossil fuel funding and business as usual

At its board meeting in South Korea held in March 2015, the GCF refused an explicit ban on fossil fuel projects, effectively allowing for the funding of coal plants. Japan, China, and Saudi Arabia opposed the ban. The Fund's former director Héla Cheikhrouhou has complained that the Fund is backing too many "business-as-usual types of investment proposals", a view echoed by a number of civil society organizations.

Balance between mitigation and adaptation

The Fund is also pledged to offer "balanced" support to adaptation and mitigation, although there is some concern amongst developing countries that inadequate adaptation financing will be offered, in particular if the fund is reliant on "leveraging" private sector finance. While GCF governing instrument stresses on the need for equal funding towards adaptation and mitigation, there is no universal measure of adaptation, which makes access to GCF funding extremely cumbersome.

References

External links

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List of accredited entities
{{Climate change Climate change finance Funding bodies United Nations Framework Convention on Climate Change Organizations established in 2010 2010 establishments in South Korea Organizations based in Incheon Funds