Climate finance in a post-Covid-19 world

The Covid-19 pandemic has occupied the centre of our collective attention since the beginning of 2020, straining healthcare systems, economies, and governments as countries around the world have martialled their resources to respond. And in its wake there have been strong calls to leverage this transformative moment and invest in a more resilient future, propelling forward a green Covid-19 recovery that not only battles back the current public health crisis, but also rises to the other generation-defining challenge before us: climate change.

There are few forums where this debate is more important than at the GCF, which is set to have its 26th board meeting (B.26) online on 18-21 August 2020. As the largest dedicated climate fund in the world, the GCF is uniquely positioned to channel critical resources to developing countries as they pursue low-carbon climate resilient development. With infections on the rise across much of the Global South, these resources are more important than ever, as developing countries become some of the hardest-hit by Covid-19 and often lack the financial resources necessary to mobilize effective recovery measures.

At the same time, transitioning the activities of the board online from a physical meeting is no small feat. For the GCF, country ownership and context sensitivity is critical and there are real concerns about the ability of developing country board members to participate, as well as outstanding questions about how observers, including representatives from research organizations, civil society, indigenous peoples’ groups and the private sector, will be able to meaningfully engage.

Striking this delicate balance will be the central challenge of B.26. As the GCF’s first-ever online board meeting, it is necessary that three key milestones are achieved for the meeting to be considered a success.

Three key milestones for a successful 26th meeting of the Green Climate Fund Board

Milestone 1 – keep the fund operational

A straightforward, but important, first milestone for B.26 will be to clearly demonstrate that the fund is operational and able to rise to the challenges presented by the pandemic. Because developing countries are particularly vulnerable to climate change, and face acute challenges in responding to the pandemic, it is essential that the GCF positions itself as a key player in a green Covid-19 recovery and a strong supporter of developing countries who need the Fund to deliver most. Likewise, the GCF is only as strong as its partnerships and a successful board meeting will send a strong signal to other institutions that the GCF remains effective and open for business at a time when funding is scarce and badly needed.

In practice, this will mean reviewing reports from across the secretariat and board that identify how the current situation has impacted their activities and budgets while planning ambitiously for the future. In particular, a wide variety of projects under implementation are expected to experience challenges or delays and the Fund should be clear about its intention to facilitate continued work in those situations.

Another key element of an operational fund is a functioning board meeting, where representatives from developing countries are able to engage, substantive discussions about the fund’s operations are conducted and satisfactorily resolved, and robust participation from observers is assured throughout. Importantly, there will almost certainly be technical challenges, as any webinar participant or online conference attendee will know. These challenges should be viewed as an opportunity to learn and improve functionality for the future, rather than as insurmountable obstacles to the board’s progress.

Milestone 2 – approve project financing and accredit new entities

Second, an essential element of the GCF’s business is approving new funding proposals and accrediting new entities (GCF terminology for partner organizations who apply for and implement projects). In a moment where sustainable investment in vulnerable communities is of critical importance, the GCF has an important role to play, providing badly needed resources and facilitate a climate-compatible recovery.

In addition to reviewing three applications for accreditation, the board will be discussing 12 full funding proposals (FPs) and three projects under the simplified approval process (SAP; Table 1). If the full pipeline is approved, this would entail more than US$879 million in GCF funds for climate action in developing countries and catalyse an additional US$1.15b in co-financing. Projects to be considered range from a US$1.01 billion private sector project implemented by the European Bank for Reconstruction and Development to reduce emissions in the industrial, agribusiness and mining sectors to a US$5 million blended finance project in Fiji for an agro-photovoltaic installation.

Milestone 3 – advance key policy issues

In order to assure the full and effective functioning of the GCF, the board must also continue to make progress on key policy issues, particularly those related to the strategic direction of the fund. The GCF’s first replenishment period (GCF-1) will allocate US$9.9 billion from 2020–2023. In order to facilitate this, the Fund will need to set clear strategic priorities for the remainder of GCF-1, including agreeing on a new updated strategic plan, updated accreditation framework, integrated results management framework and investment framework.

All of these items were included in the Workplan for the Board 2020–2023 (B.24/04) in an effort to close key policy gaps and were intended to be finalized by B.26. While two were on the agenda for B.25, not one of them has been agreed or been scheduled for discussion on the provisional agenda for B.26. Instead, the only policy item currently slated for discussion at B.26 is policy guidelines on programmatic approach.

While it is necessary to advance this item as well, it is critical that the GCF board makes progress on the key policy frameworks mentioned above, aiming to finalize them at the latest by the end of 2020. These frameworks will be essential for guiding the fund through the remainder of GCF-1 and setting the direction of the fund for the next four years. A lack of clear strategies and frameworks to guide the GCF’s programming and support potential project applicants means less financing, delivered less quickly and less effectively, for developing countries that most need the GCF’s support.

A failure to substantively advance these discussions, with a view to concluding them at B.27, would be a significant blow to the credibility of the fund and have long-term consequences for its position as the gold-standard for ambitious, effective, and equitable climate finance. The GCF must take this opportunity to fulfil its role as a critical piece of the multilateral architecture for climate finance, in a moment where sustainable, climate-resilient investments will be essential for a global green recovery.