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How the world’s largest climate fund works with the financial sector to drive global change
GCF MEANS BUSINESS
Climate change threatens to cause massive disruption to the world’s financial system.
At the same time, the financial system is an integral part of the solution to the climate
challenge. That is why the world’s largest dedicated funder of climate action in over
100 developing countries, the Green Climate Fund (GCF), is working with a wide range
of financial players to catalyse both public and private sector resources.
A CHANGING BUSINESS CLIMATE OFFERS NEW OPPORTUNITIES
The World Economic Forum’s Global Risks Report 2019 listed five environmental factors
among the ten biggest global risks for business – with the failure to reduce greenhouse
gas emissions and adapt to climate change listed second after natural disasters. To
safeguard future profits, all financial players – including banks, investment funds and
insurers – need to embed the effects of climate change in their business models.
Climate change offers businesses an unprecedented chance to capitalise on new
growth and investment opportunities that can also protect the planet as well. GCF
employs part of its funds to help mobilise financial flows from the private sector to
compelling and profitable climate-smart investment opportunities.
WHAT IS GCF?The United Nations Framework Convention on Climate Change (UNFCCC) set up
GCF in 2010 to help drive a low-emission and climate-resilient “paradigm shift”
in developing countries. GCF provides finance to developing countries to help
them realise their plans for climate action, known as their Nationally Determined
Contributions (NDCs). Ambitious NDCs are essential in achieving the Paris Agreement’s
goal of keeping average global temperature rise well below 2 degrees Celsius. NDCs
will also feature in the 26th annual climate change conference (COP26) scheduled
to be held in the UK in 2021, along with the goal of unlocking USD 7 trillion from the
financial system to support investment towards a zero-carbon economy.
GCF helps developing countries raise and realise their climate ambitions
Business cannot succeed on a planet that failsYANNICK GLÉMAREC GCF Executive Director,
GCF Private Investment for
Climate Conference 2019
GREENCLIMATE.FUND
GCF’S PRIVATE SECTOR SUPPORTGCF uses a variety of financial instruments to enable both the public and private
sectors to blend different sources of finance to deliver and mobilise climate friendly
investments. Notably, GCF promotes private sector investment through concessional
instruments, including low-interest and long-tenor project loans, lines of credit to
banks and other financial institutions, equity investments and risk mitigators, such
as guarantees, first-loss protection, and grant-based capacity-building programmes.
Out of the USD 5.6 billion which GCF has committed to date, 40 per cent is directed to
private sector projects in 35 countries.
GCF financing captures the evolving trend of blending public and private funds.
Its public sector-targeted projects also include concessional sovereign loans, which
can be on-lent, often through national development banks, to direct private sector
investments in sustainable, climate-focused directions.
GCF’s private sector support promotes private sector climate action in developing
countries by de-risking the delivery of capital flows for low-carbon and climate-
resilient development. To further this aim, GCF has set up the Private Sector Facility
(PSF), a dedicated division designed to capture the entrepreneurial energies of the
business world. PSF funds help mobilise other private sector finance, including from
private and institutional investors, and encourage climate co-investment across all
spectrums of climate action.
Specifically, GCF’s PSF has four objectives:
1. Address the perceived dearth of “bankable” projects through its Readiness Programme and its Project Preparation Facility (PPF), which help build institutional capacity and enabling policy environments;
2. Foster innovation by supporting climate technology incubators and accelerators, and deploying patient capital;
3. De-risk large investment projects through blended and structured finance; and
4. Align financial flows with sustainable development.
EIGHT AREAS OF CLIMATE ACTIONGCF has identified eight areas where its climate finance is aimed equally at mitigation
and adaptation to target emission reductions and enhance climate resilience:
GREENCLIMATE.FUND
GCF MEANS BUSINESS
Energy generation and access
Transport Buildings, cities, industries and appliances
Livelihoods of people and communities
Forests and land use
Ecosystems and ecosystem services
Health, food and water security
Infrastructure and the built environment
GCF’s private sector support promotes private sector climate action in developing countries by de-risking the delivery of capital flows for low-carbon and climate-resilient development
MITIG
ATIO
NADAPTATIO
N
GREENCLIMATE.FUND
HOW THE WORLD’S LARGEST CLIMATE FUND AND THE FINANCIAL SECTOR ARE DRIVING GLOBAL CHANGE
GCF helps Jamaica set up first regional green bond exchangeGCF’s financial support will help Jamaica create the Caribbean’s first green bond
marketplace on its national stock exchange. The bond market is designed as a source
of debt capital to finance climate-focused business opportunities in the Caribbean,
as well as allowing international institutional investors to support climate resilience
and low-carbon development. The GCF Readiness grant will be used to develop
a regulatory framework for green bonds and raise awareness in the marketplace
among potential issuers and investors. Andrew Holness, Prime Minister of Jamaica,
has credited GCF’s Readiness programme as being key to the development of the
green bond market, reflecting his intent to make Jamaica a leader in climate action.
GCF’s partnership with Mongolian bank points to low-carbon futureMongolia’s XacBank is the first commercial bank in a developing country to partner
with GCF and capitalise on its long-term concessional loan and grant instruments to
mainstream climate change across its loan portfolio. A business loan programme for
greenhouse gas emissions reduction is one of three approved GCF funding proposals
in Mongolia that cut carbon emissions by providing affordable financing. GCF is
supporting XacBank make renewable energy and energy-efficient technologies more
commercially feasible for micro-, small-, and medium-sized enterprises (MSMEs) by
providing long-term and affordable credit lines. This will have a far-reaching effect in
Mongolia as MSMEs make up more than 90 per cent of national businesses. At least
50 per cent of GCF’s financial support is going to women-led MSMEs.
GCF supports innovative financing model for renewable energy The pace of the green energy transition in many developing countries is frequently
hindered by a number of obstacles, such as the scarcity of early-stage financing
for large-scale renewable energy projects, lack of equity financing and complex
contractual frameworks. In partnership with FMO, the Dutch entrepreneurial
development bank, GCF is supporting Climate Investor One (CIO), an innovative
USD821 million blended finance facility. CIO provides integrated, full project life cycle
financing to support the development, construction, and commissioning of renewable
energy projects in developing countries experiencing energy poverty. This leads to
faster and more cost-effective project development and delivery vis-a-vis conventional
project financing. By providing a USD100 million reimbursable grant, GCF helps
catalyse a significant volume of institutional private sector co-financing for the CIO
facility – demonstrating a novel financing model with significant paradigm-shifting
potential and considerable scope for replication across other areas of climate finance.
GCF PARTNERING FOR ACTIONEmploying a strong partnership approach, GCF works with a wide range of other
organisations to promote co-investment opportunities and tap into their specialist
knowledge. They include multilateral and national development banks, international
financial institutions, private commercial banks, United Nations agencies, conservation
organizations, equity funds, impact investment funds, government agencies, regional
institutions and non-governmental organizations. These “Accredited Entities” and the
delivery partners they work with propose and carry out climate finance projects in
developing countries. GCF also helps to improve the capacities of these partners in
developing countries through its Readiness Programme.
The examples below give a sense of GCF’s range of engagement with its
financial partners.
Adaptation
GCF fundingUSD 2.2bGCF fundingUSD 2.2b
Co-financingUSD 7.2b
No of projects27
CO2eq. avoided1.1 billion tonnesCO2eq. avoided1.1 billion tonnes
No of beneficiaries47 million
Mitigation
Cross-cutting or Cross-cutting plus Adaptationand/or Mitigation
No. of projects
GCF funding
Co-financing
8
USD 335.7 m
USD 1.772 b
LATI
N A
MER
ICA
& TH
E CA
RIBB
EAN
AFRI
CA
17
USD 1.383 b
USD 4.183 b
ASIA
PAC
IFIC
8
USD 350.0 m
USD 986.7 m
EAST
ERN
EU
ROPE
&
CEN
TRAL
ASI
A
2
USD 121.0 m
USD 316.4 m
GREENCLIMATE.FUND
CONTACT
For any enquiries please contact: Private Sector Facility privatesector@gcfund.org
THE WAY AHEAD – FORGING NEW MARKETS FOR CLIMATEEnergised by its first replenishment launched in 2019, GCF has received pledges so far
of USD 9.8 billion to progress its mandate to strengthen climate ambition and action
in developing countries. GCF’s strengthening ties with the financial sector will help
to open up new markets, driving reduced emissions and enhanced climate resilience.
Central to its role as the world’s largest climate finance fund, GCF will continue to work
with the financial sector to absorb the risks of the climate investments needed now to
turn these risks into future profits.
The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by GCF.
MAP OF PRIVATE SECTOR FACILITY PORTFOLIO
GCF MEANS BUSINESS
as of 15 March 2020
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