The Green Climate Fund is a fund established within the framework of the UNFCCC as an operating entity of the Financial Mechanism to assist developing countries in adaptation and mitigation practices to counter climate change. The GCF is based in Incheon, South Korea. It is governed by a Board of 24 members and supported by a Secretariat. The objective of the Green Climate Fund is to "support projects, programmes, policies and other activities in developing country Parties using thematic funding windows". It is intended that the Green Climate Fund be the centrepiece of efforts to raise Climate Finance under the UNFCCC. The current executive director is Yannick Glemarec.
During COP-16 in Cancun, the matter of governing the GCF was entrusted to the newly founded Green Climate Fund Board, and the World Bank was chosen as the temporary trustee. To develop a design for the functioning of the GCF, the "Transitional Committee for the Green Climate Fund" was established in Cancun too. The committee met four times throughout the year 2011, and submitted a report to the 17th COP in Durban, South Africa. Based on this report, the COP decided that the "GCF would become an operating entity of the financial mechanism" of the UNFCCC, and that on COP-18 in 2012, the necessary rules should be adopted to ensure that the GCF "is accountable to and functions under the guidance of the COP". Researchers at the Overseas Development Institute state that without this last minute agreement on a governing instrument for the GCF, the "African COP" would have been considered a failure. Furthermore, the GCF Board was tasked with developing rules and procedures for the disbursement of funds, ensuring that these should be consistent with the national objectives of the countries where projects and programmes will be taking place. The GCF Board was also charged with establishing an independent secretariat and the permanent trustee of the GCF. The fund partners with 84 organizations that include commercial and development banks, state agencies and civil society groups, which pilot and execute innovative approaches to climate programs.
Issues
The process of designing the GCF has raised several issues. These include ongoing questions on how funds will be raised, the role of the private sector, the level of "country ownership" of resources, and the transparency of the Board itself. In addition, questions have been raised about the need for yet another new international climate institution which may further fragment public dollars that are put toward mitigation and adaptation annually. The Fund is also pledged to offer "balanced" support to adaptation and mitigation, although there is some concern amongst developing countries that inadequate adaptation financing will be offered, in particular if the fund is reliant on "leveraging" private sector finance. The Fund's initial investments have met with mixed responses. The Fund's former director Héla Cheikhrouhou has complained that the Fund is backing too many "business-as-usual types of investment proposals", a view echoed by a number of civil society organizations. But in at least one case it also drew praise for involving local communities in the formulation of an adaptation project, and for incorporating consumer protection into a plan for off-grid solar energy.
Role of the private sector
One of the most controversial aspects of the GCF concerns the creation of the Fund's Private Sector Facility. Many of the developed countries represented on the GCF board advocate a PSF that appeals to capital markets, in particular the pension funds and other institutional investors that control trillions of dollars that pass through Wall Street and other financial centers. They hope that the Fund will ultimately use a broad range of financial instruments. However, several developing countries and non-governmental organizations have suggested that the PSF should focus on "pro-poor climate finance" that addresses the difficulties faced by micro-, small-, and medium-sized enterprises in developing countries. This emphasis on encouraging the domestic private sector is also written into the GCF's Governing Instrument, its founding document.
Additionality of funds
The Cancun agreements clearly specify that the funds provided to the developing countries as climate finance, including through the GCF, should be "new" and "additional" to existing development aid. The condition of funds having to be new means that pledges should come on top of those made in previous years. As far as additionality is concerned, there is no strict definition of this term, which has already led to serious problems in evaluating the additionality of emission reductions through CDM-projects, leading to counter-productivity, and even fraud. While climate finance usually only counts pledges from developed countries, the US$10.3 billion pledged to the GCF also includes some contributions from developing countries.
Failure to ban fossil fuel funding under climate finance
At its board meeting in South Korea held in March 2015, the GCF refused an explicit ban on fossil fuel projects, effectively allowing for the funding of coal plants. Japan, China, and Saudi Arabia opposed the ban.
