Climate Finance Fundamentals 11: The Green Climate Fund
The Green Climate Fund (GCF) became fully operational in 2015 as a dedicated fund to help developing countries shift to low-emission and climate-resilient development pathways. While the GCF is an operating entity of the Financial Mechanism of the United Nations Framework Convention on Climate Change (UNFCCC) and serves the Paris Agreement (UNFCCC, 2015), it remains a legally independent institution hosted by South Korea. The GCF has its own Secretariat with the World Bank as its Trustee. The 24 GCF Board members, with equal representation of developed and developing countries and support from the Secretariat, have been working to operationalise the Fund and implement its vision since their first meeting in August 2012.
In 2023, the GCF continued work on updating and reforming important policies and frameworks with a view to making the Fund ‘fit-for-purpose’ for its next programming phase from 2024-2027. These included most prominently updating its initial investment framework with allocation and portfolio targets for this period, a revised strategy and some USD 500 million in additional funding for readiness support, implementation of its revised and further streamlined accreditation framework and strategy as well as advancing efforts for the Fund to better serve recipient country partners, such as looking into options for local currency funding and for establishing a regional presence. The Secretariat continued with efforts to speed up the disbursement of approved funding. It also improved operational procedures intended to drive up the number of funding proposals submitted by direct access entities as well as the overall quality and impacts of GCF projects and programmes, both approved and in the pipeline.
As of October 2023, the GCF had accredited 120 implementing entities as partners to deliver projects (with eight added in 2023), and had approved USD 13.5 billion for 243 active projects in 129 countries with an overall worth of almost USD 52 billion. Throughout 2023, the GCF Board in three Board meetings approved 34 funding proposals worth USD 2.1 billion in GCF resources. This was more than in 2022, when the GCF was facing financial constraints to its commitment authority, but with its first replenishment period (GCF-1, 2020–2023) coming to an end still less than in some previous years, as the GCF was limited by what was left of the 100% confirmed pledges of USD 9.9 billion by 34 contributors for GCF-1.
The process for the GCF’s second replenishment period (GCF-2, 2024-2027) was formally kicked off in July 2022. It required an update to the GCF’s strategic planning and operational modalities for a successful resource mobilisation effort, which the Board approved in July 2023, and culminated with a high-level pledging conference in October 2023, which netted USD 9.3 billion by 25 contributors. Since then several more countries have come forward during COP 28 with either new or updated pledges, most prominently the United States with a new USD 3 billion commitment, for a total of USD 12.8 billion from 31 countries. Of these, as of January 2024, less than a third or USD 3.9 billion has been confirmed by eight contributors, with pledges worth USD 8.9 billion by 23 countries still to be formalised. At the same time, the GCF Secretariat came under new leadership with a new executive director joining in August 2023 and articulating an ambitious “50 by 30” capitalisation vision for the GCF.
These efforts come as the Fund seeks to confirm and maintain its role in the climate regime as the major finance channel under the UNFCCC and as the largest multilateral climate fund within a dynamically changing global climate finance landscape and with discussions about a new collective goal on climate finance (NCQG) post-2025 to be concluded at COP29 in Baku, Azerbaijan in November 2024.
This Climate Finance Fundamental (CFF) provides a snapshot of the operations, programming and functions of the GCF at this crucial phase for its future. Past editions of this CFF further detail the design and initial operationalisation phases of the Fund.