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‘We need to use GCF resources in a very clever way’

A conversation with the Co-Chairs of the Green Climate Fund Board, Gabriel Quijandría Acosta and Henrik Harboe on the occasion of the UN Climate Change Conference in Bonn, Germany, in June 2015. The Co-Chairs discuss the progress of GCF, its role in the upcoming Paris Conference of the Parties, and where they see the Fund heading in the next few years.

Gentlemen, are you content about the latest developments of the Green Climate Fund?

Henrik Harboe
: Yes, I’m quite satisfied with its recent developments. I think we have achieved a lot. We have pledged more than US$ 10 billion for the Fund, and almost 60 percent of that has been confirmed in contribution agreements. This means that, financially, the Fund is now able to commit money to projects and programmes.

Of course we still have some important decisions to make to finalize the operationalization of the Fund, and these are very important policy decisions. We have two challenging Board meetings in front of us to get there. It is of paramount importance that we, collectively, arrive at quality decisions from the very beginning. I see there is a balance now between getting everything in place while living up to the ambition of making the first financing decisions this year. But we must not compromise on quality. We still have some challenging Board meetings in front of us to get there.

Gabriel Quijandría Acosta: I’m happy with the results, too, and with all we have achieved so far. Obviously, there is still a long road ahead of us, a long path indeed, but I think we’ve made major achievements in terms of securing the base of the resources that have been pledged to the Fund to operate. Now we need to move forward and shape the reputation of the Green Climate Fund. We will need to generate its basic capacity to intervene, its basic capacity to deal with climate change challenges in developing countries.

How do we ensure that this Fund is recognized as the most important partner in this process? It will need to become a natural partner that will solve many of the challenges developing countries face when trying to obtain finance to deal with issues of mitigation or adaptation. The Green Climate Fund is to be different; it can be a novelty in generating instruments and new approaches on how to manage climate change.

Both of you are addressing challenges. Are there any particular obstacles you foresee over the next few months in the run-up to the Paris Conference of the Parties?

: One very important aspect here is to ensure that developing countries that are going to use the Fund prepare high-quality funding proposals. That is a very critical part of the equation, I think. And we have used the Bonn meeting this time to signal to countries that, hopefully, they have already started reviewing projects that may be relevant and that they could propose for funding to the Board. The GCF employs a country-driven process. We need strong country ownership and country commitment. So there’s a lot of work that needs to be done at the country level, with support from the Fund’s readiness programme.

Based on decisions related to investment criteria and policy direction from the Fund, we hope to see projects that are really innovative and contribute to a green shift, to the paradigm shift we seek, so that we get good “climate results.”

Acosta: Let me add here that we need to find a specific niche for the Fund, because the sources that are currently available at the GCF will not suffice to deal with the scale of the problem, so we will have to manage expectations. We will need to define how this Fund will be characterized, what will be the difference between the GCF and all the other finance entities we see in the global climate finance landscape.

And how can we use the resources of this Fund to leverage additional resources that will generate an enabling environment for the private sector so it will invest its own resources into GCF-funded climate projects and interventions? How can these resources become part of the implementation of national priorities? And how do we ensure that the decisions the GCF Board takes in terms of project approvals are aligned with priorities at the national level? That will be a big challenge and something that will be very, very interesting to see how we can handle as an institution.

We are in Bonn, where the future Paris agreement is being framed. Could you speak of the role the Green Climate Fund is to be given in that agreement?

: Well, we all know that climate finance is an absolutely critical part of the discussions about the new agreement. Financing needs are huge if we are to help developing countries get onto a path that both reduces poverty and delivers on climate results. So finance is absolutely critical, and the Fund has been created to be a main channel of financial resources for climate projects in developing countries. That makes the GCF a very important part of the conversation now. The exact link, I think, is up to the negotiations. The rationale is very much linked to establishing a good Fund, which can demonstrate that it can make a difference; a Fund that is different from existing channels. And if we are able to deliver on being a good climate fund that stimulates this paradigm shift, I foresee a very important role for the GCF in moving forward.

But the exact language and the exact linkage to the new agreement in the GCF’s case is actually not our role to decide, that’s more up to the negotiators. But I see that there should be a sharp function for the Fund moving forward.

Acosta: I fully agree with Henrik. I think that the Fund must have a critical role. I don’t have the exact text in my head that I would expect in the agreement. But I believe it has to recognize the previous decisions of the Convention in the will to generate a channel that is credible and legitimate, significant and efficient to provide resources to combat climate change.

I think some of these principles should be recognized as part of the agreement and recognized as well outside the Convention by other major players that need to be engaged in order to be able to respond to climate change in an adequate way.

Do you expect the Green Climate Fund to eventually open up to very different contributors, so that it could in time become a much more important fund, financially?

: I do look for that. That is something that is desirable for the Fund, to become this channel, this tool, for channelling significant resources to countries, to address country needs and country priorities. This will very much depend on how the first operations of the Fund are going to happen. Future financial success will depend on the credibility that is built at the early stage of GCF; it will depend on whether the institution is seen as an interesting partner for countries, for the private sector, and for actors coming from outside the official discussions on climate change.

Harboe: I think there is clearly an ambition to mobilize serious climate finance. And the $100 billion which have been committed – and which are supposed to be a mix of public and private funds, from innovative sources – they should clearly guide us to be open towards a wide diversity of contributions to the Fund. We have already welcomed contributions to GCF from several developing countries, so we would welcome more of that. We are going to have a discussion at the Board meeting on innovative financial sources, so we are looking forward to that exchange and hope it will enable us to tap into other sources.

Where do you envision the Green Climate Fund five years from now? What is your best-case scenario?

: GCF has become the most important multilateral fund for financing climate change initiatives in developing countries. It has been truly innovative in contributing to a paradigm shift. And it has also become a sort of learning institution in the sense that the experiences gained can be used in other countries, so that gradually it grows into a centre of excellence for good climate results for both adaptation and mitigation in developing countries. And through that success, I hope GCF will be able to mobilize much larger funds because it has demonstrated its cost-effectiveness.

Acosta:  As an institution, the Fund has been able to become a legitimate partner for developing countries dealing with climate change. GCF is a tool that allows them to deal with this issue at full capacity.

Now, if you take the case of middle-income economies such as the one I come from, Peru, the resources provided by GCF or other multilateral or global institutions will not be enough. So we will need to use these resources in a very clever way in order to generate and scale-up national money — public and private. This is especially true in the case of middle-income countries that have experienced successful economic growth for the last 10 years, as in the case of Peru, but that are, given that success, now facing new responsibilities at the global level. That is, there are new issues that have to be taken in account that, before, were shadowed by the struggle against poverty or other issues that are still pending, but that are not as grave today compared to what they used to be 10 years ago.

Let us wrap up this interview by opening the floor to both of you for any other aspects you would like to raise.

: I would like to add that it is very important that developing countries take a more active role and interest in the Fund, both in terms of preparing good proposals for GCF financing, but also in terms of engaging with Board members in the work of the Board. Because what we are doing at the Board is capturing the interests of a diverse set of countries — and that is very important work. And I hope that some of the events we organized here in Bonn — and we will do the same in other negotiations and meetings — will help Partners to know more about the Fund, and that will increase interest and engagement in Board matters, and in the Fund as a whole.

Acosta: I have a very important message to convey to developing countries: use the Fund! Take the Fund as your own. You need to be a part of what happens with this Fund. So, whatever you, as a developing country, want the Fund to be: be aware of it, take care of it, communicate with it – you have to be very, very clear on what your needs are, what your priorities are, what you need from the Fund in terms of support, in terms of listening, in terms of comprehension, in terms of intervention. So what the Green Climate Fund is to become in the next five years will depend on how engaged the developing countries are in this process.