A long-term strategy to access climate finance: lessons from GCF Readiness

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As momentum grows across the world to reduce emissions and adapt to climate threats, science reminds us that the ‘tipping points’ are closer than ever before. Unless we are ready for a drastic transformation of economic and development models at a planetary scale, it is likely we will lose the battle against global warming. 

However, while there is growing evidence that engaging in low-carbon, climate-smart business and development pathways presents economic opportunities which are currently underestimated, it is also true that for many developing countries, the costs for achieving climate targets is colossal and the need for finance is urgent.  

Multilateral sources of climate finance have been around for over 25 years. During this time, countries have approached these different funds or donors through proposed projects that target specific sectors or geographic areas. Some of these projects have resulted in actual emissions reduction, even in lives saved from climate- induced disasters. However, all projects have a finite lifetime and unless politicians and governments have an established vision or mechanism to sustain gained results, these critical actions will remain dependent on such projectized approach. 

The Green Climate Fund (GCF), through its “readiness” programme presents an opportunity for countries to design this vision and put the systems in place to systematically address climate finance gaps and opportunities. A pioneering effort funded by the Government of Germany and supported by the UNDP and UN Environment in 9 countries served to solidify foundations and partnerships for national designated authorities, or NDAs to understand and engage with the Green Climate Fund. This week, practitioners from Benin, Colombia, El Salvador, Fiji, Ghana, Kenya, Nepal, the Philippines and Uzbekistan, along with the GCF Secretariat, the UN Food and Agriculture Organization (FAO) and technical experts gather in Berlin to share lessons and experiences from the past three years of work. 

This programme allowed Governments to shape their own national readiness plans based on institutional needs. Ministries of environment, finance and planning worked together to create sectoral policies, national strategies, and even laws to effectively access climate finance from public and private, domestic and international sources, even beyond the GCF. Project proposal screening and formulation tools were developed and national institutions willing to be accredited to the GCF, were trained on these processes, as well as financial management and project implementation. The Fiji Development Bank and the National Environmental Management Authority of Kenya are now fully accredited to directly access the GCF and have solid proposals in the pipeline. The NDAs have significantly increased their understanding and engagement with the GCF and established technical committees to decide on future climate investments, which are aligned with their Nationally Determined Contributions and Sustainable Development Goals. 

More importantly, an unprecedented paradigm shift occurred, whereby Governments are not only focusing on tagging climate projects to their development strategy, but rather modifying development strategies to embed climate risks and opportunities and be able to accommodate such climate targets. Industry leaders and financial institutions were critical partners in this process, for example in Colombia where the banks association is now piloting financial instruments to engage with GCF directly.

The underlying benefit of going through a readiness process is entering a virtuous cycle of iterative learning, whereby investments are aimed to meet climate targets and development goals, and such goals are being shifted to ensure that these investments are not only long-term, but scalable. With the alarm on global warming being rung, it is up to decision-makers to embrace a new vision on economic and development gains which go hand-in-hand with climate action.