At the Fund’s heart is a balanced governance structure that ensures consensus-based decisions between developing and developed countries. The Fund is governed by a Board of twenty-four members, equally drawn from developed and developing countries, with two Co-Chairs, one each from a developed and developing country.
Representation from developing countries includes representatives of relevant United Nations regional groupings and representatives from small island developing States and least developed countries. Each Board member has an alternate member, and Board members and their alternates are selected by their respective constituency or regional group within a constituency. They serve for a term of 3 years and are eligible to serve additional terms as determined by their constituency. There is no voting, but rather the Board reaches decisions through consensus.
One of the first tasks for the Board was to establish rigorous fiduciary principles and standards as well as environmental and social safeguards to govern all of the Fund’s activities. The Board has also adopted policies which guide the Fund’s financial risk management and investments. These include ensuring that in its initial stages, grants will constitute at least 50% of the total contributions to the Fund. The Fund measures its impact through an initial results management framework, which sets targets for all investments. The World Bank currently serves as the interim trustee to manage the financial assets of the Fund.
Country ownership and National Designated Authorities
The Fund’s approach is strongly country-driven, engaging with countries to ensure that its investments are aligned with national priorities, promoting direct access for national entities, and providing readiness grants that build national capacity. It is this national engagement which enables the Fund to act as a facilitator for countries to implement their Intended Nationally Determined Contributions (INDCs) – the key element of the Paris Agreement.
The Fund recognises the need to ensure that developing country partners exercise ownership of climate change funding and integrate it within their own national action plans. The Governing Instrument of the Fund makes clear that it will adopt a country-driven approach and strengthen program coherence and stakeholder coordination at the national level. To support this in every developing country there are National Designated Authorities (NDAs) who are the interface between each country and the Fund. These focal points communicate the Country’s strategic priorities for financing low-emission and climate-resilient development across its economy. Over 130 countries have selected NDAs to play this role. They are chosen by Governments to act as the core interface between a developing country and the Fund. The NDAs provide broad strategic oversight of GCF’s activities in a country and serve as the point of communication with the Fund.
Country readiness support
It is crucial that developing countries are able to effectively access and deploy resources from the Fund. That is why the Fund provides early support for readiness and preparatory activities to enhance country ownership and access. This ‘country readiness’ funding is a dedicated and cross-cutting programme that maximises the effectiveness of the Fund by empowering developing countries. These readiness and preparatory support activities are not one-off measures, but are part of an ongoing process to strengthen a country’s engagement with the Fund. The Fund focuses its readiness support on particularly vulnerable countries, including small island developing States (SIDS), least developed countries (LDCs) and African States - a minimum of 50% of country readiness funding is targeted at supporting these countries.
Getting projects done: the role of implementing entities
The Fund relies upon a network of partner institutions known as accredited entities to deliver projects on the ground, and to date has accredited 41 organisations to partner with it. These accredited entities include national, regional and international organisations, drawn from the public, private and non-governmental sectors. Recipient countries are also allowed direct access through accredited sub-national, national and regional implementing entities they propose and set up as long as these implementing entities fulfil certain fiduciary standards.
This growing network of well-established, trusted partners works closely with the Fund to effectively and efficiently deploy funding to support the Fund’s objectives. The Fund ensures this through a rigorous accreditation system. Applications are made via an online accreditation system, and are then reviewed by a Board committee on an ongoing basis before final approval from the Board.
Implementing Entities have a responsibility to develop and submit funding proposals for projects and programmes. They then oversee management and implementation of projects and programmes, deploy a range of financial instruments within their respective capacities (grants, concessional loans, equity & guarantees), and mobilise private sector capital.
Financial instruments
The Green Climate Fund is able to use a variety of financial instruments to realise its goals, including concessional loans, subordinated debt, equity, guarantees and grants. These financial tools allow the Fund the flexibility to tailor its support to the project needs of public, private and nongovernmental entities. This is particularly useful for those developing countries in which climate action requires the full flexibility of financial instruments and counterpart risk-taking, beyond fiscally-constrained central governments.
The Fund is unique in its ability to engage directly with both the public and private sector in transformational climate-sensitive investments. As part of its innovative framework, the Fund has the capacity to bear significant climate related risk, allowing it to leverage and crowd-in additional financing. The Fund offers a wide range of financial products, enabling it to match project needs and adapt to specific investment contexts, including using its funding to overcome market barriers for private finance.
Applying for grants
Project proposals can come from a variety of sponsors within a country, including public, private and not-for-profit entities. Proposal sponsors work with an accredited intermediary or Implementing Entity to develop proposals. The Implementing Entity then carries out a funding proposal appraisal to assess the entire project or programme’s viability, assessing a variety of considerations including climate change, environmental, social, gender, economic, and financial factors. Following the initial proposal approval process, a two-set process is followed – the first step being an analysis and recommendation from the Secretariat, then followed by a Board decision as to whether to approve the proposal.