Green Climate Fund

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Content Objectives and structure Key design elements Resources allocation Initial results management framework Investment framework Access and country ownership Project approval process Readiness support Private Sector Facility

Objectives and structure

Green Climate Fund (GCF) - History Milestones 2009-2014: 2009: Copenhagen Accord, COP 15: "Copenhagen Green Climate Fund” mentioned 2010: GCF formally established by COP 16 in Cancun 2011: GCF Governing Instrument adopted in Durban, during COP 17: “The Fund will be designated as an operating entity of the financial mechanism of the convention […] and will be accountable to and function under the guidance of the COP.” 2012: Decision for Songdo, Republic of Korea, as the host for GCF Secretariat 2013: Hela Cheikhrouhou selected by the Board to become the Fund's Executive Director 2013-2014: Decisions to make the GCF operational during various GCF board meetings Source: GCF 2014 Climate Funds Update

Objectives and structure 0.25 0.50 Green Climate Fund (GCF) aims to promote a “paradigm shift towards low-emission and climate-resilient development pathways by providing support to developing countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change.” (GCF) More details on the GCF: The Green Climate Fund was designated as an operating entity of the financial mechanism of the UNFCCC. It was created in 2010 at COP-16 in Cancun. The Fund will contribute to the achievement of the ultimate objective of the UNFCCC. The Fund will play a key role in channeling new, additional, adequate and predictable financial resources to developing countries and will catalyze climate finance, both public and private, and at the international and national levels. The Fund will pursue a country-driven approach and promote and strengthen engagement at the country level through effective involvement of relevant institutions and stakeholders. The Fund will strive to maximize the impact of its funding for adaptation and mitigation, and seek a balance between the two, while promoting environmental, social, economic and development co-benefits and taking a gender-sensitive approach. The Fund will provide simplified and improved access to funding, including direct access, basing its activities on a country-driven approach and will encourage the involvement of relevant stakeholders, including vulnerable groups and addressing gender aspects. The Fund is governed and supervised by a Board that will have full responsibility for funding decisions and that receives the guidance of the COP. The Fund established the Secretariat. The Fund has the Trustee with administrative competence to manage the financial assets of the Fund. The Fund is located in Songdo, South Korea The World Bank is the Fund’s Interim Trustee Source: GCF Governing Instrument (http://gcfund.net/fileadmin/00_customer/documents/pdf/GCF-governing_instrument-120521-block-LY.pdf) For further information see: http://www.gcfund.org/ US$ 9 MILLION* * allocated for administrative functions. Resource mobilisation process is underway. Source: GCF 2014 Climate Funds Update

Why is it different? 1. Scale and Impact 2. Governance 3. Access 4. Allocation Make a significant and ambitious contribution to global efforts to combat climate change Promote a paradigm shift and help developing countries transform their economies and put them on a low emission and climate-resilient pathway Country -driven and in line with countries priorities Expected to become the main global fund for climate finance Board comprised of an equal number of members from developed countries and developing countries Dedicated seats for SIDS and LDCs Recipient countries will be able to utilize direct access or access through international and regional intermediaries and implementing entities accredited by the Fund Minimum floor for adaptation financing to SIDS, LDCs The allocation of resources will be balanced between adaptation and mitigation activities The allocation of resources will be based on results Source: Xing Fu-Bertaux, GIZ 2014 GCF 2014

Resource mobilization underway! Current status update Confirmed the completion of eight essential requirements to receive, manage and disburse finance (as listed in Annex XXII of the decision B.05/17): Structure, fiduciary principles, environmental and social safeguards Investment and financial risk management framework Initial results areas and results management framework Procedures for accrediting implementing entities and intermediaries Policies and procedures for the allocation of Fund resources Proposal approval process, including criteria for programme and project funding Initial modalities for the operation of the Fund’s mitigation and adaptation windows and the Private Sector Facility Three accountability mechanisms Resource mobilization underway! Source: GCF decision B.05/17

Key design elements

Initial results management framework Key design elements Resources allocation Initial results management framework Investment framework Access and country ownership Project approval process Readiness support Private Sector Facility Source: GCF 2014

Resources allocation

Resources allocation 50:50 balance between mitigation and adaptation over time; a floor of 50% of the adaptation allocation for particularly vulnerable countries, including least developed countries (LDCs), small island developed States (SIDS) and African States; geographic balance and a reasonable and a reasonable and fair allocation across a broad range of countries, while maximizing the scale and transformational impact of the mitigation and adaptation activities of the Fund; maximize engagement with the private sector, incl. through a significant allocation to the Private Sector Facility; sufficient resources should be provided for readiness and preparatory support; all allocation parameters should be determined in grant equivalents; …to be reviewed no later than 2 years from the start of allocation of resources. Source: GCF decision B.06/06

Initial results management framework

Initial results areas Mitigation Afforestation / REDD+ Energy efficiency of buildings and appliances; Sustainable forest management to support mitigation and adaptation including afforestation and reduction of forest degradation; Energy efficiency of industrial processes; Low-emission transport; REDD+ implementation; Low-emission energy access; Small-, medium- and large-scale low- emission power generation; Cross-cutting Design and planning of cities to support mitigation and adaptation; Adaptation Sustainable land use management to support mitigation and adaptation; Adaptation activities to reduce climate- related vulnerabilities; Readiness and capacity building for adaptation and mitigation activities; Selected flagship activities cutting across adaptation result areas; Supporting the coordination of public goods such as “knowledge hubs”. Scaling up of effective community-based adaptation (CBA) actions; Source: GCF decision B. 05/03

Initial results management framework Levels of logic model Performance measured at the paradigm shift and impact levels refers to the aggregate project/programme-based results of the Fund Inputs, activities, and outputs will be defined for each project/programme on a case-by-case basis Results management framework should take a gender-sensitive approach and that the results should be disaggregated by gender if relevant Further decision will be taken at the next Board meeting regarding: approach to gender, indicators on mitigation and adaptation, methodologies, data sources, frequency, and responsibilities for reporting logic model for REDD+ Paradigm shift Fund level impacts Project / programme outcomes Project / programme outputs Activities Inputs Source: GCF decision B. 07/04 See GCF decision B. 05/03, Annex II for more performance indicators

Initial results management framework (mitigation) Levels of logic model Paradigm shift Shift to low-emission sustainable development pathways Reduced emissions: through increased low-emission energy access and generation through increased access to low-emission transport from buildings, cities, industries and appliances from land use, deforestation, forest degradation, sustainable forest management and conservation Fund level impacts Strengthened institutional and regulatory systems for low-emission planning and development Increased number of large low-emission power suppliers Lower energy intensity of buildings, cities and industries Increased use of low-carbon transport Improved management of land or forest areas Project / programme outcomes Source: GCF decision B. 07/04 See GCF decision B. 05/03, Annex II for more performance indicators

Initial results management framework (adaptation) Levels of logic model Paradigm shift Increased climate-resilient sustainable development Increased resilience and enhanced livelihoods of the most vulnerable people, communities, and regions Increased resilience of health, and food and water security Increased resilience of infrastructure and the built environment Improved resilience of ecosystems and ecosystem services Fund level impacts Strengthened institutional and regulatory systems for climate-responsive planning and development Increased use of climate information in decision-making Strengthened adaptive capacity and reduced exposure to climate risks Strengthened awareness of climate threats and risk reductions Project / programme outcomes Source: GCF decision B. 07/04 See GCF decision B. 05/03, Annex II for more performance indicators

Investment framework

Investment guidelines Investment framework Investment policies Portfolio targets Investment guidelines Covers all grants, concessional loans and other financial instruments extended by the Fund Covers initial allocation parameters and targets in line with resources allocation Covers assessment criteria and sub- criteria Portfolio targets are as per the Resource Allocation (see slide 11 above) Source: GCF decision B.07/06, Annex XIV

Investment policies Funding projects and programmes demonstrating maximum potential for a paradigm shift towards low-carbon and climate-resilient sustainable development, consistent with initial results areas and management framework and country-driven approach Accounted for in grant-equivalent terms based on a standard methodology Minimum concessional funding (i.e. a grant-equivalent subsidy element) necessary to make a project or programme viable. Intermediaries may blend the financing received with their own resources in order to increase the level of concessionality of the financing No “crowding out” of potential financing from other public and private sources Only revenue-generating activities that are intrinsically sound from a financial point of view will be supported through loans Source: GCF decision B.07/06, Annex XIV

Investment guidelines Initial investment guidelines will be activity-based and will be composed of the following criteria: Impact potential Paradigm shift potential Sustainable development potential Needs of the recipient Country ownership Efficiency and effectiveness Impact potential - potential of the programme/project to contribute to the achievement of the Fund’s objectives and result areas Paradigm shift potential - degree to which the proposed activity can catalyse impact beyond a one-off project or programme investment Sustainable development potential - environmental co-benefits, social co-benefits, economic co-benefits, gender- sensitive development impact Needs of the recipient - vulnerability and financing needs of the beneficiary country and population Country ownership - beneficiary country ownership of and capacity to implement a funded project or programme (policies, climate strategies and institutions) Efficiency and effectiveness - economic and, if appropriate, financial soundness of the programme/project See more details on criteria and sub-criteria in Table 2 of the GCF Investment Framework: http://gcfund.net/fileadmin/00_customer/documents/MOB201406- 7th/GCF_B07_06_Investment_Framework140509__fin_20140509.pdf Source: GCF decision B.07/06, Annex XIV

Access and country ownership

Access and country ownership National Designated Authority (NDA) Designated institution with the mandate to officially communicate with the Fund. Countries must decide what arrangements work best for them. Need to involve the Ministry of Finance as countries can also take loans from the GCF with implications for sovereign debt Focal Point Designated individual or an office in the national government that has the mandate to officially communicate with the Fund. Countries may nominate a Focal point instead of an NDA. This may be interim arrangement for countries who wish to take time to agree the optimal NDA arrangement. Implementing Entities (IE) Countries can work through multiple entities (international, regional, national) The NDA nominates or endorses the IE, through which a country will access the GCF. IE must be accredited by the GCF The Board is developing further guidance; arrangements are initial and may evolve There is no hard deadline to nominate an NDA or Focal point (the sooner the better) 43 initial NDA or focal point designations as of August 2014 Source: GCF/B.06/07 Update on the Green Climate Fund’s Readiness and Preparatory Support Programme, July 2014 http://www.gcfund.org/readiness/designations.html (accessed 08.08.2014)

Role of National Designated Authority Acts as the focal point for the Fund communication Recommends to the Board funding proposals in the context of national climate change strategies and plans, including through consultation processes Facilitates the communication of nominations of entities to the Fund Seeks to ensure consistency of funding proposals from national, subnational, regional and international intermediaries and implementing entities with national plans and strategies Implement the no‐objection procedure Can develop a strategic country work program on a periodic basis, that identifies priorities for the GCF and preferred implementing entities (optional) Source: GCF Decision B.04/05 GCF Decision B.07/03 Update on the Green Climate Fund’s Readiness and Preparatory Support Programme, July 2014

Accreditation process for national, regional and international implementing entities – fit-to-purpose approach Stage I: No-objection and readiness - determining whether applicant entities show sufficient preparedness and institutional capabilities to progress to stage II in the accreditation process of the Fund Stage II: Accreditation review and decision - assessing whether applicant entities meet the Fund’s applicable initial basic fiduciary standards and applicable initial specialized fiduciary standards; and have the capacity to manage relevant environmental and social risks in line with the Fund’s interim ESS and scaled risk-based approach. - making a decision on whether the applicant entity can be granted accreditation and move on to stage III for final validation and legal arrangements Stage III: Final arrangements - concluding the process through the validation and finalization of formal arrangements between the applicant entity Full accreditation cycle should be completed within six months and reviewed after five years Source: GCF decision B07/02, Annex I

Fiduciary standards, environmental and social safeguards Fiduciary principles and standards Basic fiduciary standards related to: (a) Key administrative and financial capacities (b) Transparency and accountability Specialized fiduciary standards related to: (a) Project management (b) Grant award and / or funding allocation mechanisms (c) On-lending and / or blending Environmental and social safeguards (ESS) On an interim basis, the Performance Standards of the International Finance Corporations will be adopted. ESS will be completes within a period of 3 years after the Fund becomes operational IFC Performance Standards: Assessment and management of environmental and social risk and impacts Labor and working conditions Resource efficiency and pollution prevention Community health, safety and security Land acquisition and involuntary resettlement Biodiversity conservation and sustainable management of living natural resources Indigenous people Cultural heritage Source: GCF decision B07/02, Annexes I, II

Project approval process

Project approval process Preparation and Submission of Funding Proposal Country / Regional Work Program (optional)* Generation of Funding Proposals Concept Development (optional) Analysis and recommendations to the Board Board Decision Submission of country work programs Compilation of country work programs Call for funding proposals or spontaneous funding proposal submissions Concept note submission Feedback on the concept No-objection Funding proposal submission to the Secretariat Analysis and recommendation to the Board Board decision: Approval Conditional approval Rejection 1 month 12-14 months 3 months NDA / Focal point Secretariat Secretariat IE / EE / Inter-mediary Secretariat NDA / Focal point IE / Inter-mediary Secretariat Board NDA / Focal point Technical advisory panel Secretariat Source: GCF decision B 07/03 * not a part of the initial proposal approval process

Readiness support

Readiness and preparatory support by the GCF Four initial activities: Readiness is a strategic priority: it should help to maximize effectiveness and reduce risks It reduces possibilities that funding is not well suited to country needs, increasing the likelihood of effectiveness US$ 30 million were provided by Germany and Korea for early readiness efforts Detailed work programme is being developed and to be approved by the Board Source: Update on the Green Climate Fund’s Readiness and Preparatory Support Programme, July 2014

Readiness and preparatory support by the GCF 43 NDA or focal point designations submitted in August 2014  countries may request readiness support to strengthen these arrangements Reflected in the investment framework: “Sufficient support for readiness and preparatory activities” Reflected in project approval process: readiness support upon request for country work programme development Reflected in the accreditation process: “readiness and preparatory support in the context of direct access and the different capacities and capabilities of countries and institutions to enhance country ownership, with a view to facilitating capacity-building” Source: GCF update on designations (accessed 08.08.2014) GCF 7th Board Meeting Decisions: B.07/06, B.07/03, B.07/02

Readiness and preparatory support by the GCF Readiness scoping process Source: Update on the Green Climate Fund’s Readiness and Preparatory Support Programme, July 2014

Private Sector Facility

Private Sector Facility (PSF) … PSF implementation details to be decided at the next Board meeting Private Sector Facility is an integral component of the Fund that will evolve over time  will be reviewed no later than 3 years after initial resource mobilization It is reflected in the initial investment framework: “Maximize fund-wide engagement with the private sector, including through significant allocation to the PSF” PSF implementation details will be decided at the eighth Board meeting, based on the recommendations by the Private Sector Advisory Group, with a focus on: modalities to promote participation of private sector actors in developing countries, in particular local actors in Small Island Developing States, Least Developed Countries and Africa, and with a special emphasis on adaptation; modalities and instruments to mobilize private resources at scale including through special financing vehicles or instruments, including risk mitigation instruments Source: GCF decision B.07/08

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