Green Climate Fund chief outlines strategic priorities

MADRID — The Green Climate Fund is entering a pivotal period that will test its ability to uphold a commitment from high-income countries to low-income countries: that they will have support in their efforts to tackle climate change. With the Paris Agreement poised to enter its first critical year of implementation — and with carbon emissions and global temperatures continuing to rise — GCF occupies a central role in supporting national climate action plans. The fund secured a $9.7 billion replenishment in October and is now looking ahead to the adoption of a new strategic plan, expected to be approved by GCF’s board in March. “We are making a mockery of the climate emergency when we take three years to clear a climate project.” --— Yannick Glemarec, executive director, GCF At the United Nations climate conference in Madrid, which came to a disappointing close on Sunday, GCF was in the spotlight, as the fund’s leaders, partners, and external observers weighed in on how to maximize the impact of a key piece of climate finance architecture as it moves into this new phase. “I think there are three key challenges in climate finance,” Yannick Glemarec, GCF’s executive director, told Devex. “One is that we keep investing in the wrong assets. Two is that there is an investment gap for the right assets. Three is that even if you bridge the investment gap for the right assets, you have to make sure that you do not increase the vulnerability of some groups,” he said. GCF is often associated with big ambitions in the climate finance front — catalyzing transformational impact, changing paradigms, and delivering on the promise of the Paris Agreement. In its first decade, the fund struggled to meet those lofty expectations and is now working to refine its approach to issues like risk management, direct access to funding, and blended finance. At the same time, GCF’s $10 billion funding pool pales in comparison to the trillions of dollars of investment needed to set developing countries on low-carbon development pathways and to support countries that must adapt to climate change impacts. “One of the key challenges is: How can I use this money in a highly, highly catalytic manner to help … developing countries scale up and realize their ambitions?” Glemarec said. In some cases, GCF has been its own worst enemy. The fund has pioneered a “direct access” funding model that is supposed to allow organizations in low-income countries to implement their own projects, instead of having to rely on international intermediaries. However, the accreditation process has grown increasingly arduous, currently averaging about 500 days, according to Jyotsna Puri, head of GCF’s Independent Evaluation Unit, who presented her evaluation findings in Madrid. The median number of days it took for organizations to access their first dollar of GCF funding was 1,126, Puri said. “We are making a mockery of the climate emergency when we take three years to clear a climate project,” Glemarec said at a high-level session about the fund. GCF is taking a number of steps to ease the burden for direct-access entities. The fund used to conduct its project approval and financial approval processes sequentially; now it has begun doing them in parallel so that disbursement can happen sooner. “When I started my career, we could have avoided catastrophic climate change simply by scaling up mitigation efforts. Those days are over.” --— Yannick Glemarec, executive director, GCF Glemarec also told Devex that GCF is planning to put more information online. That will include general guidance about the sectors it funds, but also real-time information about individual project proposals so that organizations can track their funding applications’ progress through GCF’s internal decision-making structure. “We are trying to bridge the information asymmetry among different players. Some players understand much better than others how to do something and have better access to information. What we would like to do is we would like to put all the information online,” Glemarec said. While GCF’s board will ultimately determine the direction the fund takes over the next four years, Glemarec said he expects it will look closely at the question of how to take limited resources and use them to unlock larger pools of funding. He spoke about a “paradox at the heart of climate finance,” which is that there are trillions of dollars of capital sitting in negative interest bonds, trillions of dollars of potential climate-related investments in developing countries, and few efforts to bridge the two. Development finance leaders have long recognized that disconnect, and institutions like the World Bank — under the slogan “billions to trillions” — have looked for ways to use their own funding to leverage private capital for development investments. Glemarec said that one of GCF’s advantages is that the fund is “capital agnostic,” which gives him a broad suite of financial tools to bring to bear on different challenges. One way he hopes GCF can have outsized impact is by shifting the risk profile of climate-related investments in low-income countries. For example, GCF could award a grant aimed at simplifying the approval process to obtain a license for a new wind farm or solar plant, or to help a government with structuring a power-purchase agreement, Glemarec said. GCF is also able to provide first-loss equity, risk guarantees, or concessional finance, he added. “The beauty of working on [mitigating risk] and subsidizing reward is that you can give a fighting chance to these projects — and not at the expense of the taxpayer,” he said. While applying these models for carbon mitigation projects — like renewable energy — has a fairly well-proven track record, much less work has gone into using them to scale up climate change adaptation investments, Glemarec said. “When I started my career, we could have avoided catastrophic climate change simply by scaling up mitigation efforts. Those days are over. Today we have to scale up both adaptation and mitigation efforts,” Glemarec said. “I would suspect that one of our directions … in the coming years will be how to be increasingly catalytic in adaptation to make sure that we can protect people immediately,” he added. At a high-level session on the Green Climate Fund during the COP, Glemarec praised a plan by the government of Grenada to turn its capital city of St. George’s into the Carribean region’s first climate-resilient city. Simon Stiell — Grenada’s minister for climate resilience and the environment — said that the effort involves assembling development partners including the GCF, World Bank, and International Monetary Fund around a common vision and drawing on the various tools that each of them has at its disposal. “It is through this partnering approach, working with those other partners who have this spectrum of skill sets and capacities, together with government’s commitment to this — with the skin that we are putting in the game — [that can] make this a reality,” Stiell said.