Project approval process - Project cycle - 7. Legal arrangements

Stage 7 consists of the Funded Activity Agreement (FAA) negotiation and signing process following FP approval by the GCF Board. For each approved FP, the GCF and the relevant AE enter into an FAA.

Following FP approval, the Secretariat prepares the first draft of the FAA and sends it to the AE to start the negotiation process. In some cases, a negotiations may start prior to the FP approval as long as key prerequisites are met, such as, where applicable, an effective Accreditation Master Agreement (AMA), and delivery by the AE of a certificate of internal AE approval. Furthermore, there should not be any outstanding project-specific conditions precedent to FAA execution.

Revised Approach to Legal Arrangements – transitional arrangements
Under the transitional arrangements adopted in decision B.42/13, paragraph (m) in respect of the Revised approach to legal arrangements with accredited entities (Revised Approach) adopted in decision B.42/13, paragraph (e), AEs accredited prior to 31 October 2025 (the effective date of the Revised Approach) who have a signed AMA (or amended and restated AMA) may continue to submit funding proposals under their AMA, which would be incorporated in the relevant FAA, provided that (i) the AMA or amended and restated AMA becomes effective and the related FAA is signed before 31 December 2027, which FAA will incorporate the relevant AMA; or (ii) the FAA is signed under the Revised Approach and will incorporate the Standard Conditions (or, where applicable, the relevant framework agreement).

Revised Approach
Under the Revised Approach, the FAA will incorporate the Standard Conditions in effect on the date the related FP was approved and will include any project-specific modifications to the Standard Conditions.
In those limited circumstances where GCF and the AE have entered into a framework agreement codifying the Standard Conditions in respect of such AE, the FAA will incorporate the applicable framework agreement.

FAAs are tailored by the Secretariat to each financial instrument offered by the GCF, such as grant, loan, sub-participation, trust arrangement, and also REDD+ RBPs. It is important to have a comprehensive and consistent FP and Term Sheet to make the FAA negotiation process efficient and effective for both the AE and the GCF.

After negotiations, the FAA must be signed by the parties within a set period determined by the Board in the decision approving the FP.

The FAA contains or incorporates a set of conditions to be fulfilled by the AE before the FAA becomes legally effective. Once all conditions for effectiveness have been fulfilled, the Secretariat sends to the AE a Notice of Effectiveness for the FAA.

Lastly, the FAA also contains or incorporates conditions to be met by the AE before the GCF makes the first disbursement for the implementation of the project. Following fulfillment of these conditions, the disbursement is made by the Fund (by the GCF Trustee) to the bank account opened by the AE.