Climate Finance

Opening up financial pathways

The sixth review of the operating entities of the Financial Mechanism, a process mandated every four years under the Convention, will occur at COP 23. The COP will discuss and act on the recommendations of the Standing Committee on Finance (SCF) on whether the Global Environment Facility (GEF) and the Green Climate Fund (GCF) have been responsive to COP guidance in order to fulfill their function as the financial channels which support implementation of the Convention and the NDCs of developing countries under the Paris Agreement. The SCF in its report to the COP will analyze the predictability, accessibility, timeliness and speed of the delivery of financial resources, transparency of the funds’ decision-making process, and country ownership of the process and programs. In addition to reviewing the mitigation and adaptation results achieved, the SCF also looks at capacity building, and for the first time at gender-sensitive financing approaches, and how social and environmental safeguards are being respected.

Key asks from the COP to the GCF over the past few years are to simplify the proposal review process, ensure faster disbursement of funding of approved projects, continue scaling-up readiness and preparatory support to make it easier to access funding, and, in particular, to speed up its accreditation of “direct access entities,” through which developing countries can access GCF funds without having to rely on multilateral development banks or UN agencies, which would simplify access to GCF resources.

Although the GCF has now accredited 32 direct access entities and 27 multilateral entities, most finance (US USD2.65 billion to 54 funded projects to date) continues to be directed to multilateral entities, particularly MDBs and UN agencies. Thus, while the GCF is making progress – it was created only six years ago at COP 17 in Durban and approved its first projects merely two years ago – and while there has been significant ramping up of its approved funding, very little of that money (just a little over US USD100 million) has gone out the door by COP 23. Expect COP guidance in Bonn to demand that the GCF Board and Secretariat further increase their efforts so that direct access entities are ready not only for accreditation but also to bring forward bankable projects, not just for micro and small projects for which they currently typically do, and to eventually graduate up to more complicated levels of project implementation.

A Roadmap to reach USD 100 billion by 2020

Just before Marrakech last year, a group of developed countries, led by the UK and Australia, did indeed publish a “roadmap” to achieve the goal as requested in the decision. The OECD report estimated that USD41 billion on average had been provided by developed countries in 2013-2014, that USD62 billion had already been mobilized, and that the USD100 billion annual average by 2020 – perhaps even more -- was achievable by leveraging private funds.

The OECD roadmap, however, was received with widespread skepticism by developing countries and international civil society which challenged its questionable accounting. An Oxfam report, for instance, estimated that the net climate-specific assistance for 2013-2014 was only about USD11 to USD21 billion per year, 50-75 percent less than the roadmap claimed. Only an estimated USD4 to USD8 billion was earmarked for adaptation, far from the balance between mitigation and adaptation called for in the Paris Agreement.

The COP 22 decision on long-term climate finance ignored the roadmap, reiterated the Paris Agreement language on balance, and merely, and weakly, welcomed “the progress by developed country Parties towards reaching the goal of jointly mobilizing USD 100 billion annually by 2020.”