The Green Climate Fund has recently released the GCF-1 Progress Report. So why is this significant?
The GCF-1 Progress Report is significant for several reasons. First of all, it provides insight on the organisational growth of the GCF over the last four years, covering the time of the GCF’s first replenishment (GCF-1). Over these years, we’ve seen the GCF’s approach alter, from one that simply channels climate finance, to one that incentivises increased volumes of finance, finance that comes from both private and public sources.
At the time of writing, the GCF manages 216 projects that are worth around USD 12 billion. If we include co-financing, that number rises to a total of USD 42.8 billion managed by the GCF (as of 2022). So what does the GCF-1 Progress Report tell us about the current state of the GCF?
- There have been several positive advances in the strategic development of the GCF over this period.
- A number of key milestones have been reached, such as the mobilisation of USD 42.8 billion.
- There are still areas to improve, such as ‘clarifying operational priorities’ and developing a ‘strategic approach to partnership’.
- The report does not include what could be argued as ‘the whole picture’, so insight from independent sources is also needed to paint a clear picture.
Key insights from GCF-1
Inside the report, it reveals multiple key insights that highlight the progress of GCF-1 in comparison to earlier periods:
- The GCF is spearheading four operational areas: accelerating innovation through investment in startups and new climate solutions; Developing integrated climate strategies with a focus on readiness; De-risking projects to crowd-in finance from risk-averse public and private organisations; Greening the financial sector.
- GCF-1 has seen the organisation increase access to climate finance in several ways, such as streamlining the funding process through programming guidance and assessment tools that help ease the application process, and enhancing direct access through de-centralised grants of up to USD 25 million and increasing the share of programming channelled via direct access entities.
- We can see a more proactive approach to programming support, as the GCF began giving direct support to project design and structuring.
- There’s been a direct emphasis on catalysing private sector interest and support, as part of the need to diversify the financial flows being received.
- Another focus has been capacity building and country ownership, with the GCF improving the capabilities of their Readiness Programme and their Project Preparation Facility (PPF).
GCF-1 progression
Alongside the recording of strategic progress, the Report also highlights some key milestones that the GCF has reached:
- The total value of approved projects over this time period was USD 25 billion, representing 88 projects. That value has grown to USD 42.8 billion, with most of that funding originating from co-financing sources.
- GCF-1 saw the GCF portfolio more than double in size since the previous period.
- In 2022, 87% of total projects had reached the implementation stage.
- To date, 63 MtCO2e of reduced emissions has been delivered by GCF projects, benefitting 57 million people directly and indirectly.
One particular point of interest is the catalysing of the private sector, an area with massive funding potential. While there are several challenges involved in mobilising the private sector, which we’ve explored in one of our past GCF insight reports, the GCF have seen positive progress. In 2022, their Private Sector Facility (PSF) portfolio had grown by USD 530 million, encompassing six funding proposals and just over a third of the total 11.4 billion making up the GCF portfolio at the time.
However, there are still obstacles for the private sector when it comes to Fund access. Smaller private organisations often are unable to see returns on investment within projects, especially if said project is based in a new or unproven market, or within areas not typically popular for investment. Similarly, said areas often suffer from a lack of effective governance or climate planning, alongside a lack of universal metrics for defining success. A role we may see the GCF increasingly pivot towards in the future is the remediation of these issues to attract more private investment.
Project focus: Vanuatu community-based climate resilience project (VCCRP)
In the GCF-1 Progress Report, it features several projects approved in 2022. One of particular interest is FP184 Vanuatu community-based climate resilience project (VCCRP). We’re proud to see this project included, as a team of E Co. consultants were instrumental within the design phase of FP184.