Green Climate Fund Private Sector Finance in Focus

Farm workers clean solar panels at a privately owned farm in India

The Green Climate Fund (GCF), established by and accountable to the United Nations Framework Convention on Climate Change (UNFCCC), is the world’s largest multilateral climate fund. A core part of its remit is to encourage private sector investment in mitigation and adaptation measures that address climate change in developing countries. The GCF has arguably probably the strongest private sector focus of the multilateral climate funds and this is seen by many countries, including several developed country contributors, as a core feature that differentiates it from other public actors in the global climate finance architecture.

GCF private financing should be “consistent with a country-driven approach,” with a particular focus on “local actors, including small- and medium-sized enterprises and local financial intermediaries” as detailed in the GCF’s Governing Instrument. On paper, the GCF can accept considerable investment risks in order to achieve impact and innovation, while maintaining rigorous fiscal standards, environmental and social safeguards. However, various evaluations by the GCF's Independent Evaluation Unit have identified shortcomings in policies and practices that have so far prevented the GCF from achieving this goal.

This series of short briefings provides timely analysis by civil society observers to the GCF on the Fund’s private sector engagement several years into its full operationalization with the effectiveness and future of the GCF’s existing private sector engagement strategy under review. Individual briefings scrutinize key trends, the GCF’s engagement with micro-, small- and medium-sized enterprises, the accreditation of private sector partners, as well as programmatic private sector funding approaches such as equity investments.

Cover of Green Climate Fund Private Sector Finance in Focus Briefing 1: A Critical Review of Key Trends

GCF Private Sector Finance in Focus 1: Key Trends

Briefing

This analysis critically reviews the status quo of private sector support in the GCF several years into the Fund’s full operationalization finding that the dividing line between “private” and “public” GCF finance often remains unclear. This review by civil society observers to the GCF comes at a time when the effectiveness and future of the GCF’s existing private sector engagement strategy are under internal review.

Private Sector Finance in Focus Briefing 2 Cover

GCF Private Sector Finance in Focus 2: MSMEs

Briefing

This paper analysis whether the GCF’s Private Sector Facility (PSF) is falling substantively short of meeting its mandate to support micro-, small- and medium-sized enterprises (MSMEs). It finds that while the GCF does not issue portfolio-wide data on MSME support, almost a third of its funded activities offer at least some support to MSMEs. However most of those are classified as public sector projects and programs.

Cover of GCF Private Sector Finance in Focus Briefing 3

GCF Private Sector Finance in Focus 3: Accreditation

Briefing

This analysis looks at the 26 private sector entities currently accredited with the GCF as implementing entities and the approaches and financial instruments they use for GCF funded climate actions. It highlights significant transparency and accountability deficits with a number of these actors, including with respect to their experience and track record in implementing environmental and social safeguards and gender mandates of the GCF.

Cover of Green Climate Fund Private Sector Finance in Focus Briefing 4: Programmatic Approaches

GCF Private Sector Finance in Focus 4: Programmatic approaches

Briefing

The vast majority of private sector activities funded by the GCF are programmatic in nature. Butthe GCF has not set specific rules regarding what constitutes a program. Although private sector programs are far more prevalent than public sector ones, the proposed policy does not address the specific challenges that private sector programs pose. This briefing offers guidance to strengthen the proposed policy on programmatic approaches to take account of issues specifically arising in the case of private equity financing programs.