Green Climate Fund

Organizational profile: The Green Climate Fund (GCF) is the world’s largest dedicated fund helping developing countries reduce their greenhouse gas emissions and enhance their ability to respond to climate change. It was set up by the United Nations Framework Convention on Climate Change (UNFCCC) in 2010. Since the approval of the first project funding in 2015, GCF has made rapid strides in building a portfolio of more than 100 projects. GCF invests in adaptation and mitigation activities in developing countries, managing a project portfolio that is implemented by its partner organisations, known as Accredited Entities. To achieve maximum impact, GCF seeks to catalyse funds, multiplying the effect of its initial financing by opening markets to new investments.

GCF aims for a 50:50 balance between mitigation and adaptation investments over time. Climate change mitigation interventions seek to reduce the release of greenhouse gas emissions, or to increase the capacity of carbon sinks. These may include projects and programmes that improve the efficiency of buildings and appliances, the adoption of cleaner sources of energy such as solar and wind, the introduction of more efficient and sustainable transportation, or the improved use of land and reforestation. The adaptation result areas for GCF-funded projects are: i) Most vulnerable people and communities, ii) health and well-being, and food and water security, iii) Infrastructure and built environment, and iv) ecosystems and ecosystem services. Certain GCF projects and programmes provide actions that may both reduce the amount of greenhouse gas emissions and allow vulnerable communities and populations to adapt to climate change. For instance, a forest management project may provide the climate mitigation benefit of increasing a forest's carbon sink capacity, while providing surrounding communities with a more stable water supply and additional livelihoods.

Beginning October 2017, GCF has started to pilot REDD+ results-based payments, consistent with the Warsaw Framework for REDD+ and other REDD+ decisions under the United Nations Framework Convention on Climate Change (UNFCCC). Creating and sustaining an enabling environment for REDD+ can involve forest governance reform, land use rights clarification and reform, and removal or creation of subsidies. GCF efforts towards meeting the potential from forest activities will need to be context specific.

Financing instrument: Loans, Grants, Guarantees, Equity, Results-based Payments

Project scale: Micro projects < 10 million; small projects: 10-50 million; medium projects: 50-250 million; large projects: > 250 millions

Applicable geographical regions/country groups: Global

Eligibility Criteria: GCF does not implement projects directly itself, but through partnerships with Accredited Entities. Accredited Entities comprise the core of GCF’s funding proposal cycle. They are responsible for presenting funding applications to GCF, and then overseeing, supervising, managing and monitoring the overall GCF-approved projects and programmes.

Accredited Entities develop funding proposals, in close consultation with National Designated Agencies (NDA) or focal points, based on the differing climate finance needs of individual developing countries. Accredited Entities can also respond to Requests for Proposals issued by GCF to fill current gaps in climate financing. In issuing some Requests for Proposals, GCF may accept proposals from entities it has not yet accredited. However, non-accredited entities will have to team-up with Accredited Entities when formally submitting funding proposals to GCF. Entities that submit proposals through the Requests for Proposals can be prioritized when applying for accreditation. The list of GCF Accredited Entities is available at the GCF website.

GCF's set of financial policies consist of investment policies and financial risk management policies, and comprise the overall investment guiding principles from a financial point of view.

- Paradigm shift- GCF will finance projects and programmes that demonstrate the maximum potential for a paradigm shift towards low-carbon and climate-resilient sustainable development, in accordance with its agreed results areas and consistent with a country-driven approach.

- Grant-equivalent accounting- Funding received and extended by GCF will be accounted for in grant-equivalent terms based on a standard methodology, to be developed by the Fund based on best international practices, to provide an accurate comparison of funding amounts between financial instruments.

- Minimum concessional funding- GCF will provide the minimum concessional funding necessary to make a project or programme viable. Concessional funding is understood as funding with below-market terms and conditions.

- Blending- Financing provided by GCF to intermediaries may be used by the latter to blend with their own financial resources in order to increase the level of concessionality of the financing they extend to projects and programmes.

- Crowding out- GCF will not “crowd out” potential financing from other public and private sources.

- Revenues- Only revenue-generating activities that are intrinsically sound from a financial point of view will be supported through loans by the Fund.

Application guidelines:  Step-by-step

1. Submit a concept note (optional)

- A concept note is a document which provides basic information about a project or programme. It allows Accredited Entities a chance to seek feedback from the GCF Secretariat about whether their proposal matches the Fund's objectives and mandate. The Accredited Entity must inform the NDA or focal point about its submission of a concept note to GCF.

2. Submit Funding Proposal to GCF Secretariat

- It is standard practice for Accredited Entities to submit funding proposals to GCF. In some cases, however, GCF may issue a Request for Proposals allowing submission by entities that are not yet accredited to GCF. In these cases, the accreditation application of the entity will be considered alongside the funding proposal. Once submitted, Funding Proposals are subject to a review process, starting with an initial assessment of the submitted proposal and the technical specifications alongside the documents that need to accompany it. At this stage, the GCF Secretariat may contact the Accredited Entity to discuss the proposal and seek to strengthen the application in advance of further, more detailed review.

3. GCF Secretariat assessment

- Following the initial completeness check, the GCF Secretariat undertakes a more detailed assessment of the project proposal, including assessing how it matches GCF investment criteria.

4. GCF Board decision

- The GCF Secretariat submits a funding proposal package to the GCF Board. This consists of the funding proposal, documents which are required to support the proposal, a no objection letter signed by the NDA, and the GCF Secretariat and ITAP assessments.

GCF recognizes developing countries may face capacity constraints in developing climate finance proposals. That is why they provide financial and technical assistance support for the preparation of project and programme funding proposals through the Project Preparation Facility (PPF). Funding available is up to $US1.5 million for each application to the PPF, commensurate to the funding proposal being developed and to the activities included in the PPF application. The Project Preparation Facility is especially designed to support Direct Access Entities for projects in the micro and small-sized category. However, all Accredited Entities are eligible to apply.