Operationalisation of the Green Climate Fund

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Date produced: 01/11/2011

Assuming that the draft foundational document in the Annex I of the report of the Transitional Committee meeting gets adopted as an Annex to a COP decision at COP17, without major changes:

1. What steps would need to be taken for the GCF to be lifted up into full operational mode (i.e able to receive and disburse funds)?

2. What are the next key steps (i.e. developing the funding guidelines, rules and procedures, giving the GCF legal capacity etc.) that need to be taken and who is to take these steps (e.g. GCF board, COP decisions by the COP, country hosting the GCF etc.)?

3. What would the “seed” money need to cover in order to lift the fund into operational mode and fund its early moves? Are their any comparable funds to look at on this?

1. The following steps need to be taken for the GCF to be lifted into full operational mode (note: the steps required to establish the Adaptation Fund has been used as an example where appropriate).

 Steps required to establish the GCF:

  • COP17 to approve the governing instrument of the GCF developed by the Transitional Committee.
  • Board to be appointed:
    • To comprise of 24 members of equal number from developed and developing countries.
    • Executive Committee to invite regional groups and constituencies to nominate their Board members.
    • Board members selected by their respective constituency or regional group within a constituency.
    • Two Co-Chairs of the Board to be elected by the Board members.
  • Executive Committee to establish the interim secretariat immediately after COP17 to provide technical, administrative and logistical support to the Board until the Independent Secretariat of the GCF is fully operational (in the case of the Adaptation Fund, an MOU was signed by the CMP).
  • Parties to submit expressions of interest to host the GCF.
  • Depending on the country chosen as the host, legislation or other acts may be required to establish the legal capacity of the Board (as in the case of the Adaptation Fund which required legislation to be passed in Germany).
  • Board to make the determinations listed below.
  • Board to invite voluntary contributions which will be held in an account managed by the trustee in accordance with the decisions of the Board.

 Determinations to be made by the Board:

  • Board to appoint the World Bank as the interim trustee (in the case of the Adaptation Fund, terms and conditions of service were agreed between the World Bank and the CMP).
  • Board to develop and approve operational modalities, access modalities and funding structures.
  • Board to develop and approve specific operational policies and guidelines, including programming, project cycle, administration and financial management.
  • Board to develop thematic funding windows and sub-structures to address specific activities – initially at least for adaptation and mitigation.
  • Board to establish sub-committees and panels and define their terms of reference (as in the case of the Adaptation Fund which established an Ethics and Finance Committee and a Project and Programme Review Committee with general guidelines for their operation).
  • Board to develop rules and procedures for approval processes, monitoring, evaluation of performance and financial accountability of projects and programmes.
  • Board to develop criteria and application processes for the accreditation of implementing entities (as in the case of the Adaptation Fund which established an Accreditation Panel with terms of reference for its operation).
  • Board to establish an operationally independent evaluation unit and appoint a head for the unit.
  • Board to establish an independent integrity unit and appoint a head for the unit.
  • Board to establish an independent redress mechanism.

 Steps required to operationalise disbursement of funds to recipient countries:

  • Recipient countries to nominate a competent sub-national, national and regional implementing entity for accreditation by the Board.
  • Recipient countries to designate a national authority to recommend and be consulted on funding proposals to the Board.

2. Whilst all of the matters outlined about are necessary to operationalise the Fund, the next key steps that need to be taken by the following responsible entities are:

  • COP17 – approval of governing instrument.
  • Executive Committee – appointment of the Board (following nominations from participating countries) and establishment of the interim secretariat.
  • Board – appoint the trustee and develop operational modalities, access modalities and funding structures.

3. In the Cancun Agreements developed country Parties committed to a goal of jointly mobilising US$100 billion per year by 2020 to address the needs of developing countries, a significant share of which is to flow through the Green Climate Fund to be balanced between adaptation and mitigation activities.

 The Fund will receive direct financial inputs from developed countries and a variety of other sources, public and private, including alternative sources. In relation to financing of projects and programmes, the Fund will provide financing in the form of grants and concessional lending, and through other instruments or facilities approved by the Board. The Fund will seek to catalyse additional public and private finance through its activities at the national and international levels.

 The Fund will need to finance the operating costs of the Board, secretariat and trustee. Therefore, operational costs of the Fund will need to be met prior to the provision of financing to adaptation and mitigation projects under the Fund.

 Dedicated climate funds, typically managed by bilateral and multilateral institutions, channel a small but growing portion of finance (currently US$1.1-3.2 billion). To date the Adaptation Fund has received contributions of $225 million. The Green Climate Fund can be distinguished from the Adaptation Fund which derives its funding source from CERs and is therefore dependant on the monetisation of the CERs in order to operate the fund. Another comparable fund, the Global Environmental Facility, has received replenishment commitments totalling $16 billion over nearly 20 years.

 Outside of the UNFCCC, there are numerous other funds that have mobilised public and private resources, including the GAVI Alliance (which finances vaccines purchases and immunisation programmes in developing countries) which has received contributions and commitments of more than $12 billion over eleven years of existence and the Global Fund to Fight AIDS, Tuberculosis received more than $30 billion in pledges and over $19 billion in contributions.

 One of the keys to success of participatory global health institutions has been the development of engaged and empowered constituencies in donor countries. In organisations such as the Global Fund, these groups have shown a strong commitment to leverage contributions from their home countries.