Growing Ambition: The Role of the Green Climate Fund in Scaling up Finance for Climate Action

Coordinating international financing for climate adaptation and mitigation remains a persistent challenge. In its 2020 Adaptation Gap Report, the United Nations Environment Programme observes that the annual cost of climate adaptation in developing countries could rise from $70 billion today to $280-500 billion by 2050—and current funding levels are growing at too modest a pace to keep up.

Addressing this shortfall could be a chance for the global community to make integrated progress on a number of the world’s most pressing challenges. “The good news is that there is an opportunity in how we respond to climate change, to build greater food and water security, to build new paths to employment, and to provide clean power to the nearly 1 billion people without electricity today,” said Ambassador Mark Green, President, CEO, and Director of the Wilson Center, at a recent panel discussion on the Green Climate Fund and worldwide efforts to catalyze private sector participation in climate finance.

In their remarks, the panelists—who represented federal agencies and international organizations working at the forefront of climate finance—repeatedly highlighted the theme of interconnectedness. The problems of accelerating climate change, biodiversity loss, and state fragility in certain parts of the world are all linked, and only a multidimensional approach to mobilizing private sources of capital and public policy action can yield lasting progress in these areas.

“The Green Climate Fund stands ready to support this effort through innovative, inclusive climate finance that can help climate action reach scale,” said Yannick Glemarec, the fund’s executive director. Established in 2010 during COP 16, the Green Climate Fund (GCF) collaborates with a broad range of partner institutions around the world to build capacity and finance low-emissions projects in countries most vulnerable to the consequences of climate change.

How the Green Climate Fund works

“The percentage of international funding for [adaptation and resilience] remains stubbornly low, and people are suffering as a result,” said Megan Rowling, climate correspondent and editor at the Thomson Reuters Foundation and moderator of the panel discussion. In 2009, developed countries committed to providing $100 billion in climate finance every year by 2020, but precisely measuring this number is complicated, so it’s not yet certain whether that target has been met—in 2018, the latest year for which good data is available, global climate finance for developing countries reached $80 billion.

The Green Climate Fund works to remedy this gap by working with developing countries to build policy environments conducive to climate-related investment, supporting innovation and new business models, and improving the capacity of financial institutions and entrepreneurs at the national level. De-risking private sector participation in the climate sector is an essential component of the fund’s mission. “The private sector perceives risk in multiple different ways, especially in developing countries. There are risks associated with policy, of course—legal transparency and integrity risks,” said Kavita Sinha, the fund’s deputy director for mitigation and adaptation. “These are things that the private sector doesn’t want to take on.”

The fund finances projects by engaging a wide coalition of stakeholders—including commercial and development banks and private investment funds—and investing alongside them. By taking this collaborative approach, the fund tries to shore up nascent markets for climate solutions and encourage private sector involvement. Between 2015 and 2020, the total value of the fund’s approved projects was over $23 billion, roughly one-third of which came from cooperating partners.

Glemarec raised the fund’s partnership with the Development Bank of South Africa (DBSA) as a prime example of the GCF’s approach. In 2018, the fund approved a $170 million Climate Finance Facility, to be operated in conjunction with the DBSA, to spark new investment in the climate sector in southern Africa. Part of this effort will involve convening stakeholders in the region, like government ministries and multinational organizations, to devise a coordinated climate finance strategy. In addition, the fund is in the early stages of implementing a water reuse program in South Africa, which will help the country bolster its water security and adapt to a changing climate. “In some ways, the most important part of the GCF isn’t the money—although that’s of course quite important,” said Leo Martinez-Diaz, senior advisor for climate at the U.S. Department of State. “It’s the process through which it engages its member states, its countries, and the way it uses its bottom-up approach.”

Rethinking American leadership in climate finance

In late April, at a global summit on climate, President Biden announced a new plan to cut U.S. emissions to half of 2005 levels by the end of the decade. The summit also saw heightened ambition from Japan and Canada, which both announced increased emissions reduction targets. Meeting these objectives will require cooperation and commitment on a global scale. To this end, the Biden administration will request $1.2 billion for the Green Climate Fund in the next fiscal year’s budget, Martinez-Diaz said.

The U.S. Agency for International Development (USAID) plays a complementary role to the Green Climate Fund, by preparing countries to access international sources of climate finance. “We actually see USAID as a bridge on the other side of the spectrum for those countries who probably are not yet eligible for GCF funding for various reasons and/or need more assistance before they can become eligible,” said Michele Sumilas, assistant to the administrator of the agency’s Bureau for Policy, Planning, and Learning.

Since 2017, USAID’s Climate Ready project has helped island nations and regional groups in the Pacific achieve accreditation and secure $36 million in funding from the Green Climate Fund. These funds have gone to improving food security and building administrative capacity in recipient countries. More broadly, USAID has supported early-stage financing for emerging technologies and devoted attention to the issues of climate-smart agriculture and sustainable water management. “This is a major theme for us, which is really to understand how climate change needs to be integrated into our existing programs and can’t be a standalone project, over there, away from everything,” Sumilas said.

The role of nature-based solutions

“The connection between biodiversity financing and climate financing has never been more important than now,” said Jennifer Morris, chief executive of the Nature Conservancy. According to researchers at the National Climate Adaptation Science Center, biodiversity and ecosystems together provide several essential “regulation services” that enhance human well-being, like the mitigation of extreme weather, suppression of diseases, and sequestration of carbon. Protecting biodiversity can even help prevent future pandemics.

Morris raised the issue of soil health as an example of how environmental stewardship can sometimes go under-acknowledged in broader conversations around mitigating climate change and lowering emissions. Every year the United States alone loses 10 billion tons of fertile soil, and replenishing this lost soil could make a substantial contribution toward decarbonization, said Morris. Global soils actually store 2,500 billion tons of carbon, almost twice as much as the 800 billion tons in the atmosphere and the 560 billion tons in animals and plants combined; each year, they absorb a quarter of the world’s fossil fuel emissions. But changes in land use, certain agricultural practices, and more frequent wildfires have sharply diminished the carbon storage potential of the planet’s soils. While carbon sequestration in soil is likely not a complete solution to the climate conundrum, some research suggests that declining soil health and the resultant release of soil carbon has been a significant source of greenhouse gas.

“I would implore all of us who are engaged in this space to think about the nexus between biodiversity, climate finance, and of course the need to protect future generations from another COVID crisis, by ensuring a healthy relationship between nature and people,” Morris said.

Despite the scale of the challenge, the panelists shared a sense of optimism about future possibilities. The track record of the Green Climate Fund has made it easier for stakeholders and policymakers to articulate a compelling case for it, Martinez-Diaz said. But only with continued vigilance—and an appreciation for the interconnections between environmental change, economic development, and governance—can the world marshal the resources necessary to secure human well-being in the face of mounting climate stress. “It’s really encouraging to see that the overall trajectory of climate finance since about 2013 has been on an upward, steady slope,” Martinez-Diaz said. “Remember it’s not just about hitting $100 billion, you have to continue to mobilize $100 billion every year, systematically.”

Written by Anuj Krishnamurthy, edited by Lauren Risi

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