But with the United States cutting its contribution, its partners have had to make up the difference – just one of the topics tackled at the Paris conference last week.
The Vicissitudes of Multilateral Funding
Formalized in 2010 at COP 16 in Cancun, Mexico, the Green Climate Fund came into operation four years later, with an initial capitalization of $10.3 billion of pledges for the period 2015-2018.
Fluctuations in exchange rates and the United States’ decision to slash its contribution by some $2 billion caused the amount to plummet. But partners such as Britain, France and Germany have just about made up for the loss, bringing the total to just under $10 billion.
Attached to the United Nations Framework Convention on Climate Change (UNFCCC), the Fund’s objective is to provide financing to developing countries to combat the effects of climate change, while promoting the transition to low-carbon and resilient development. Governed by a 24-member Board, comprised equally of developed and developing countries, it provides access to international financing via accredited entities, such as Agence française de développement (AFD).
As the only multilateral fund dedicated to helping countries adapt to climate change, the GCF has already allocated $5 billion for 111 projects in 97 developing countries, from low carbon and renewable energy systems to climate risk management for food security.
On the heels of the Climate Fund meeting in Paris on 24 and 25 October, we look back at the year’s highlights of this unique international financing entity.
Reducing Emissions and Improving Resilience
Financial assistance for dedicated climate investments is still limited, despite a growing need for governments to develop and implement national strategies to reduce CO2 emissions and strengthen resilience to the effects of climate change.
This is why AFD has launched the "Transforming Financial Systems for Climate" program for 17 countries, 16 of which are African. For this ambitious program to transform local financial systems, AFD obtained in 2018 €240 million from the GCF. This is the second largest contribution from the Fund since its creation.
By targeting low-cost lines of credit for climate investments and providing technical assistance to local financial institutions, the program aims to contribute to the transformation of the strategies and practices of financial stakeholders. Creating significant leverage in the private sector, this will promote the emergence of a more sustainable socio-economic system.
The initial financial transfers are expected to be made within a few months. The impact will go beyond the scope of climate action alone.
A major partnership for the climate
On 26 June 2019, the International Development Finance Club (IDFC), a network of 26 national and regional development banks, and the Green Climate Fund signed a partnership agreement to work side by side to combat climate change.
This partnership promotes joint initiatives such as implementing the Paris Agreement, mobilizing the private sector, sharing knowledge on climate finance and overseeing the work of financial institutions on climate issues.
The two institutions are already well acquainted: 12 IDFC members are accredited to the Green Climate Fund, and IDFC members have raised nearly $850 million from the Fund for 12 projects since its creation.
A decisive recapitalization for the future
Donor pledges to the Climate Fund – and the evolving political landscape – will determine the scope and ambition of efforts to cope with climate change in developing countries. It will reveal who is ready to engage in collective investment and entrust the necessary resources to multilateral funds.
European and Asian countries have promised to make up for the sudden $2 billion shortfall resulting from US President Donald Trump’s decision to cancel the pledge of his predecessor, Barack Obama. Japan, France, Britain, Germany and Norway are among those to have doubled their contributions, bringing the GCF total to $9.8 billion.
The fund accounts for a fraction of the $100 billion evoked by rich nations at the 2009 UN climate summit in Copenhagen to help developing countries deal with climate change, including both loans and grants, public funds and private.