B.35 Data Outlook: Funding proposals for Board’s consideration

Intro

The thirty-fifth meeting of the GCF Board (B.35) will take place from March 13 to 16 in Songdo, South Korea. This will be my second Board meeting since joining the IEU. Having learned a great deal from observing B.34, I look forward to deepening my understanding of the Board’s approach to decision-making. It is also a critical year as the Fund enters into replenishment and works towards updating the strategy for the next strategic period.

The IEU tries to ensure the GCF is accountable and effective. Its mandate includes informing the Board’s decision-making and identifying and disseminating lessons learned. The IEU will present the final reports of three evaluations at B.35: African States Evaluation, Direct Access Synthesis, and the Second Performance Review. The latter, referred to as the SPR, is a major multi-year evaluation of the overall performance of the GCF during GCF’s first replenishment period (GCF-1). During recent months I have had the opportunity to participate in key informant interviews, focus group discussions, deliberations and consultations on the evidence, findings, and recommendations of these reports.

In February, the Secretariat released a document that presents the funding proposals due for consideration at B.35 and describes the ensuing GCF portfolio if these proposals are accepted. This blog briefly summarizes the proposals’ key information, their effect on the GCF portfolio, and how much they reflect the relevant IEU recommendations from recent evaluations.

What is to be considered at B.35      

During B.35, seven new projects will be presented for the Board’s approval, totalling USD 587.7 million in funding requests for the GCF and USD 1.67 billion in co-financing.

Table 1: Funding proposals under consideration at B.35

FP Number	Project Name	Country/Countries	Thematic Window	GCF Funding (in USD million)
FP199	Public-Social-Private Partnerships for Ecologically Sound Agriculture and Resilient Livelihood in Northern Tonle Sap Basin (PEARL)	Cambodia	Adaptation	36.2
FP200	Scaling up the Implementation of the Lao PDR Emission Reductions Programme through improved governance and sustainable forest landscape management (Project 2)	Lao People's Democratic Republic	Cross-cutting	35.2
FP201	Adapting Philippine Agriculture to Climate Change (APA)	Philippines	Cross-cutting	26.3
FP202	Upscaling Ecosystem Based Climate Resilience of Vulnerable Rural Communities in the Valles Macro-region of the Plurinational State of Bolivia (RECEM-Valles)	Bolivia (Plurinational state of)	Adaptation	33.3
FP203	Heritage Colombia (HECO): Maximizing the Contributions of Sustainably Managed Landscapes in Colombia for Achievement of Climate Goals	Colombia	Cross-cutting	43.0
FP204	Sustainable Renewables Risk Mitigation Initiative (SRMI) Facility (Phase 2 Resilience focus) [SRMI-Resilience]	Ethiopia, Guinea-Bissau, Indonesia, Kyrgyzstan, Mongolia, Seychelles, Somalia, Tajikistan, Tunisia	Cross-cutting	160.0
FP205	Infrastructure Climate Resilient Fund (ICRF)	Benin, Cameroon, Chad, Côte d’Ivoire, Democratic Republic of the Congo (the), Djibouti, Gabon, Gambia (the), Ghana, Guinea, Kenya, Mali, Mauritania, Namibia, Nigeria, Rwanda, Sierra Leone, Togo, Zambia	Adaptation	253.8
			Total GCF funding requested	587.7

Source: GCF/B.35/02

The GCF’s Governing Instrument identifies least developed countries (LDCs), small island developing states (SIDS) and African states as countries particularly vulnerable to climate change impacts. Accordingly, vulnerable countries receive special policy attention, such as the aim to allocate a minimum of 50 per cent of adaptation funding towards these countries. This emphasis on vulnerable countries is important in reviewing the countries targeted in B.35’s funding proposals. In the B.35 group of funding proposals, four either wholly or partly target the LDCs, SIDS and/or African States, totalling USD 406.3 million. This amount accounts for 69 per cent of the total funding requested for B.35 from the GCF. This is the largest percentage seen since B.32 in April 2022, when funding proposals targeting vulnerable countries was 15 per cent.[1] In the previous two groups, the figure was 47 per cent for B.33[2] and 43 per cent for B.34.[3]

One recommendation from the IEU’s 2021 evaluation of the private sector stated that the “GCF Board and Secretariat should expand the focus on financial instruments and GCF support specifically to enable private sector investment in adaptation, particularly in SIDS and LDCs.”[4] How has the current group of funding proposals fared against this recommendation? Six of the seven submitted proposals are for the public sector, requesting GCF funding of USD 334.0 million (57 per cent), with one private sector proposal requesting GCF funding of USD 253.8 million (43 per cent). While public sector proposals still outweigh those for the private sector, amongst private sector proposals, adaptation features heavily. Namely, FP205: Infrastructure Climate Resilient Fund (ICRF) is the one private sector proposal in this group and falls within the adaptation theme, and several of the countries targeted in this projects are LDCs. Hopefully, the GCF will soon be able to build on this in the future and increase its overall ratio of private sector proposals.

Regarding financial instruments, grants will represent instrument for B.35, at USD 265.7 million (45 per cent), followed by equity at USD 240 million (41 per cent), loans at USD 69 million (12 per cent) and guarantees at USD 13 million (2 per cent).

The GCF’s  Updated Strategic Plan (USP) for 2020 to 2023 stipulates “using minimum allocation floors as appropriate in allocating resources for adaptation”[5] and in the portfolio targets. The Fund's investment framework further specifies a 50:50 target balanced portfolio of adaptation and mitigation over time. It is significant that in the B.35 group of funding proposals adaptation is poised to receive the largest share of GCF requested funds, although it is important to note this group of funding proposals only shows a potential snippet, and not the entire GCF funding portfolio. Adaptation projects account for a proposed allocation of USD 470.0 million (80 per cent) and mitigation a proposed USD 117.8 million (20 per cent). By comparison, in the previous four groups of funding proposals, mitigation accounted for the largest share of requested funds.[6]

Overall, the expected impact potential is the abatement of 110.3 million tonnes of carbon dioxide equivalent MtCO2eq emissions and reach of 246.8 million (direct and indirect) beneficiaries, based on the estimations of AEs.

Portfolio Projections with all B.35 projects

If the Board approves all seven proposals in Table 1., the total GCF portfolio would comprise 216 projects and programmes with total GCF funding of USD 12 billion and a total value of USD 45 billion in co-financing. This would bring the GCF portfolio of approved projects to a total expected abatement of 2.5 GtCO2eq greenhouse gas emissions, reaching 912.7 million direct and indirect beneficiaries based on the estimations of Accredited Entities (AEs). I should note that these are estimates from the funding proposals submitted by the AEs. The actual results would have to be assessed independently later.

With regards to financial instruments, the largest portion of the entire projected GCF portfolio would be financed by grants totalling USD 5 billion (42 per cent). The remainder would include loans totalling USD 4.9 billion (41 per cent), equity totalling USD 1.2 billion (10 per cent), results-based payments totalling USD 496.7 million (4 per cent) and guarantees totalling USD 361.5 million (3 per cent).

Figure 1: Projected GCF funding amount by financial instrument (in USD)

Source: GCF/B.35/02

The GCF Governing Instrument states that the Board will aim for a geographic balance in funding allocation. Figure 2. presents the projected regional distribution of GCF funding if all funding proposals from Table 1 were to be approved at B.35. Distributiong amongsts the regions have remained relatively consistwnt when compared with portfolio projections in the Secretariat’s funding proposal overview documents for B.34 and B.33.

Figure 2: Projected Regional distribution of GCF funding (in USD)

Source: GCF/B.35/02

Reaching a balance in adaptation and mitigation

One SPR finding in regards to the Fund's likelihood in delivering the Updated Strategic Plan states the GCF is “[u]nlikey to meet the adaptation allocation, although the adaptation pipeline is strong.”[7] The adaptation pipeline’s increasing strength can be observed in the projected portfolio after B.35. For thematic areas, in nominal terms USD 7.2 billion (60 per cent) would be allocated for mitigation and USD 4.8 billion (40 per cent) for adaptation. Significantly, in grant equivalent terms, it will reach a balance: USD 3.7 billion (50 per cent) will be allocated for mitigation and USD 3.8 billion (50 per cent) for adaptation. In the two previous funding proposal overviews, leading up to B.34 and B.35, the projected portfolio was close to achieving a balance, reaching 51 per cent for mitigation and 49 per cent for adaptation. Reaching a 50:50 balance in grant equivalent and nominal terms has been a long-stated GCF goal. While nominal figures still differ at 60 per cent for mitigation versus 40 per cent for adaptation, reaching a balance in grant equivalent terms is worth noting for B.35 and deserve celebrating if achieved.

Focusing on adaptation in Africa

The IEU recently released an evaluation of the GCF’s investments in the African States. One of the report’s findings was that the GCF portfolio in Africa is currently skewed towards mitigation.[8] This is despite the GCF’s aim to balance adaptation and mitigation and calls from African states to shift funding towards adaptation. While the Board’s remit covers a range of considerations, including mitigation and energy access, one of the reasons it emphasizes adaptation in African states is climate change’s disproportionate impact on people living in Africa. According to the IEU’s African states evaluation, this group of countries has the highest share of people adversely affected by climate change, particularly from extreme heat.[9]

When I read this finding, I thought about the on-the-ground consequences of such extreme weather. In a previous role, I researched the origins and causes of the South Sudanese civil war. I discovered desertification was causing groups of people to search for new areas for their cattle to graze. This led to conflict with other groups in the areas they moved to. Admittedly, climate change – or, specifically, extreme heat – may be just one of several factors driving a civil war that has uprooted and taken far too many lives. But for me, it is a concrete example of the “real-life” consequences of changes in an environment where people live. The on-the-ground effects of climate change, the real people being displaced or experiencing food insecurity, starkly remind me why more adaptation and stronger resilience are needed in Africa and beyond.

With its 50:50 balance between adaptation and mitigation in grant equivalent terms, the outlook for the current portfolio is positive. Hopefully, it will not be long before this balance is achieved in nominal terms. This would align with allocation policies and frameworks in GCF key documents, such as the Governing Instrument and Investment Framework.  The GCF aims to maintain a 50:50 balance of adaptation and mitigation funding over time, which aligns with a key recommendation in the IEU’s African states evaluation requesting the GCF “to consider focusing more on addressing adaptation needs in the African states.”[10] Fulfilling this recommendation could also address the SPR’s finding regarding the unlikelihood of reaching adaptation allocation goals.

As previously mentioned, this is a significant year for the GCF as it enters into a new replenishment cycle and plans for a new strategy period. This blog looks at a small selection of aspects within the current funding proposals and projected portfolio and how these compare with relevant findings and recommendations from recent IEU evaluations, focusing mainly on adaptation. But adaptation is just one of many matters the Board needs to consider when formulating the new strategy. One point in the SPR’s first recommendation illustrates the breadth of aspects the Board considers. It states:

The update to the USP should clarify the vision for GCF-2, making critical choices, including those related to the intended ambition and role of the GCF globally; programming priorities such as with respect to sectors, geographies and resourcing; how trade-offs between long-term and short-term priorities will be handled (e.g., between urgency and capacity needs, between catalysing and financing roles, and among possible in-country roles); and the extent to which the GCF will work through its partners or take a more direct and strategic role.

As it enters its thirteenth year, the GCF has a raft of issues to consider and quickly decide. As the largest multi-lateral climate fund, the GCF has a lot at stake to ensure it maximizes its impact in fighting climate change. 2023 may well be a year of trade-offs and hard, critical Board decisions that need implementation across the GCF ecosystem. Time will tell.  What is encouraging for me is having met the people working at or with GCF: a diverse group of individuals from different countries and backgrounds with a formidable array of expertise. They collaborate closely to fulfil the GCF’s mandate of supporting developing countries moving towards low emission and climate resilient development pathways. I wish the Board, Secretariat, and Independent Units a productive meeting.

[1] Green Climate Fund (2022). Meeting of the Board GCF/B.32/02: Consideration of funding proposals

[2] Green Climate Fund (2022). Meeting of the Board GCF/B.33/02: Consideration of funding proposals

[3] Green Climate Fund (2022). Meeting of the Board GCF/B.33/02/Rev.01: Consideration of funding proposals

[4] Independent Evaluation Unit (2021). Independent evaluation of the Green Climate Fund's approach to the private sector. Evaluation Report No. 10, (September). Songdo, South Korea: Independent Evaluation Unit, Green Climate Fund.

[5] Green Climate Fund (2020). Updated Strategic Plan for the Green Climate Fund 2020-2023

[6] For B.33 the share for mitigation is 56% and 44% for adaptation; for B.32 the share for mitigation is 80% and 20% for adaptation; for B.31 the share for mitigation is 51% and 49% for adaptation.

[7] Independent Evaluation Unit (2023). Second Performance Review of the Green Climate Fund. Evaluation report No. 13 (February). Songdo, South Korea: Independent Evaluation Unit, Green Climate Fund

[8] Independent Evaluation Unit (2023). Independent Evaluation of the Relevance and Effectiveness of the Green Climate Fund's Investments in the African States. Evaluation report No. 14 (February). Songdo, South Korea: Independent Evaluation Unit, Green Climate Fund

[9] Ibid.

[10] Ibid.

 

Disclaimer: This guest blog was originally published by the author. The views expressed in this guest blog are the author's own and do not necessarily reflect the views of the Independent Evaluation Unit of the Green Climate Fund.