Green Climate Fund

In News

• Countries with the highest vulnerability to climate change have missed out on finance for adaptation through the Green Climate Fund (GFC), a new study showed.

About

• Climate finance: refers to local, national, or transnational financing, which may be drawn from public, private and alternative sources of financing.
• One of the largest vehicles for climate finance connected to the UNFCCC is GCF: which was born out of the Copenhagen Accord of 2009.
  • It offers financing through “a flexible combination of grants, concessional debt, guarantees or equity instruments”.
• Part of its mandate is: to invest 50 per cent of its resources to mitigation and 50 per cent to adaptation in grant equivalent.
  • At least half of its adaptation resources must be invested in the most climate vulnerable countries such as small island developing states or SIDS, least developed countries or LDCs, and African States.
• This makes 154 countries eligible for funding: of which 84 received $2.5 billion GCF adaptation funding between 2015 and 2019.
  • Since 54 per cent of the funds went to countries that are LDC, SIDS and / or African countries, the GCF met its mandate.

Issues/ Challenges

• The lengthy and complicated processes: to access funding are among factors behind this gap.
• Regional disparity: Most of them are in Africa, particularly in regions affected by conflict.
• Historical responsibility: That wealthy industrialized nation emitted a bulk of the greenhouse gas emissions currently accumulated in the atmosphere, and they are morally bound to fund poor nations’ efforts to achieve low-carbon development.
  • Developing countries called out wealthy nations on their failure to deliver the $100 billion goal promised over a decade ago.
• Climate finance has been plagued with problems: of non-transparency, dubious categorisations of diverse funding under the ‘climate’ banner and a greater proportion of loans versus grants.
• Categorisations like SIDS, LDC and others did not represent climate vulnerability adequately: They ranked all GCF-eligible countries in terms of global vulnerability indices and found 16 of the 37 countries most vulnerable to climate change did not receive GCF funding. Many of these are countries facing violent conflicts like Afghanistan.
• Institutional capacity is another factor: Countries compete for funding by submitting proposals in adherence to complicated sets of guidelines and criteria.
  • But many of the vulnerable countries suffer from poor governance, weak institutions and a lack of financial and human capacities in their administrations.
• Countries with higher government capacity to prepare strong proposals: experienced greater success in the competition for funds, while countries like Eritrea, Somalia or Yemen with weaker capacity have not been able to access funding.
• Oxfam: found that only a fifth of all climate financing went to LDCs overall in 2017-18, and just three per cent to SIDS.

Importance/ Significance

• Prioritizing the most vulnerable countries is a key goal of global climate change finance.
• It is critical to addressing climate change: because large-scale investments are required to significantly reduce emissions, notably in sectors that emit large quantities of greenhouse gasses.
• Climate finance is equally important for adaptation: for which significant financial resources will be similarly required to allow societies and economies to adapt to the adverse effects and reduce the impacts of climate change.
• Transformational planning and programming: by promoting integrated strategies, planning and policymaking to maximize the co-benefits between mitigation, adaptation and sustainable development.
• Catalyzing climate innovation: by investing in new technologies, business models, and practices to establish a proof of concept.
• De-risking investment to mobilize finance at scale: by using scarce public resources to improve the risk-reward profile of low emission climate resilient investment and crowd-in private finance, notably for adaptation, nature-based solutions, least developed countries (LDCs) and small island developing states (SIDS).
• Mainstreaming climate risks and opportunities into investment decision-making to align finance with sustainable development: by promoting methodologies, standards and practices that foster new norms and values.

Way Forward

• The UN Environment Programme expects annual adaptation costs in developing countries to reach $140 to 300 billion per year by 2030, and $280-500 billion by 2050.
• Capacity development and simplified approval tracks need to be strengthened in the emerging climate finance architecture.

Source: DTE