By Sheldon Zakreski
The U.S. recently began shifting its global gaze to an inward focus, and climate policy is no exception. From President Trump declaring he represents Pittsburgh and not Paris, to California passing a new carbon law that requires 50 percent of eligible emission reduction projects to occur in the state, our once broad and inclusive views have narrowed considerably. While the sentiment is country-first or state-first, climate change has been, and always will be, a global issue.
This is where the Green Climate Fund (GCF) comes in. The fund was conceived in 2010 and has received over $10 billion in pledges dedicated to support mitigation and adaptation projects in the least developed countries in the world. Such support is crucial because while many of these countries may have a less direct role in negative climate impacts, they also face disproportionately greater risks from climate change. Moreover, these countries face the challenge, unlike developed countries, of trying to raise their living standards by developing their economies in a way that doesn’t substantially increase greenhouse gas emissions.
The GCF is promising in its ability to help on both fronts. Part of its core mission is to support adaptation projects—a review of their adaptation portfolio reveals an emphasis on water, flood management, and soil conservation projects. The mitigation portfolio shows support for projects that develop and facilitate the transition towards clean energy sources. To date, the GCF can boast $2.2 billion in commitments to 43 projects that benefit 125 million people and are anticipated to avoid nearly 1 billion tons of emissions.
Notably, the GCF deploys multiple pathways to funding projects; as of July 24, 2017, GCF disbursed funds through grants, loans, and equity. The use of private capital approaches is key, as it enables projects to leverage GCF funding to attract capital from private sector sources. This is an explicit goal of the GCF, with the program creating a Private Sector Facility that is designed to attract institutional capital to support adaptation and mitigation projects that could also provide a financial return. The goal is to mobilize $100 billion in investments annually to lesser developed country adaptation and mitigation efforts by 2020, with only a fraction coming from government commitments and the majority from the private sector. So far, GCF projects have attracted $2.27 in funding from private sources for every dollar it has committed to projects.
The GCF is still in its infancy, and as such, it faces some marked operational challenges. Notably, the GCF has not been immune to criticism that it has focused on green energy projects in middle income countries at the expense of adaptation projects in the least developed countries. There is also an uneasy balance over the Facility designed to attract private capital at the expense of prioritizing micro and small project finance efforts.
Such challenges and criticisms are natural for any ambitious effort in its initial stages. Despite any obstacles, ongoing support of the GCF is necessary if we are to reach the Paris Agreement goal of limiting the rise of temperatures by 2 degrees, while improving the living standards and resiliency of the poorest and most vulnerable people on the planet.
Image credit: Flickr/UN Women
Sheldon Zakreski is the Director of Asset Management for The Climate Trust