Overview of the Project Preparation Facility
GCF recognises developing countries may face capacity constraints in developing climate finance proposals. That is why we provide financial and technical assistance for the preparation of project and programme funding proposals through the Project Preparation Facility (PPF).
Funding available is up to USD 1.5 million for each application to the PPF, commensurate to the funding proposal being developed and to the activities included in the PPF application. The Project Preparation Facility is especially designed to support Direct Access Entities for projects in the micro and small-sized category. However, all Accredited Entities are eligible to apply.
Support is available through two modalities: PPF funding; and PPF service.
AEs receive funding in the form of grants, repayable grants or equity to undertake project preparation activities by themselves. As such, AEs organize the procurement and implementation process directly and are accountable for the oversight and reporting of the approved funding and activities. AEs who request up to USD 300,000 from GCF are eligible for the Simplified PPF Funding.
In general, if a PPF results in a feasible project with income generation potential, the PPF amount financed by the GCF should be repayable at financial close of the funded activity. In principle, the PPF funding from the GCF should be repaid within the financial structure of the Funding Proposal, with terms and conditions to be determined at the Funding Proposal development and review process, prior to submission to the GCF Board. If an AE assigns a project supported by the GCF PPF to a third party without the consent from the GCF, the AE should repay the PPF funding to the GCF. This is not limited to private sector projects.
The GCF provides project preparation services directly to AEs through a roster of independent consultancy firms, ensuring fast and quality delivery to AEs who do not wish to take on the procurement and project management of PPF activities by themselves.
As is the case for all types of GCF projects, Accredited Entities may seek PPF financial resources to prepare funding proposals for consideration under the Simplified Approval Process, based on a high potential concept note.
The PPF can support one or more of the following activities. The activities need to contribute directly to the development of one particular project and will need to be submitted as part of the Funding Proposal package.
Pre-feasibility and feasibility studies should compare scenarios with and without the project under a projection of climate change and against a baseline situation, and compare those scenarios to each other to determine the impact of the project. This would include data collection, research, site specific technical appraisals, and cost benefit analysis, as well as market research and estimated GHG reduction calculations.
Other examples could include studies on specific technological solutions proposed, such as studies for scaling up deployment of a specific climate solution.
As articulated in the Environmental and Social Safeguard Policy, GCF requires that due diligence be exercised in the projects and programmes such that all measures are undertaken to identify, assess and manage the environmental and social risks and impacts. The exercise of environmental and social due diligence shall follow good international industry practices (GIIP) and based on established relevant guidance.
Examples of risk assessments include: Analysis on risk mitigation instruments; Site-specific hazard assessments, including identifying hazards and determining hazard mitigations; Risk analysis as part of the pre-feasibility and detailed feasibility studies; Development of sensitivities and case scenarios as part of the financial analysis; or Identification and assessment of potential executing entities.
If not already included in the feasibility study, examples of this type of activity include: Logical frameworks, including GCF relevant indicators, and project indicators, their baselines and targets; Assessment of the project/programme against the GCF Investment Criteria; Market assessment and recommendations; Economic analysis and recommendations, including cost benefit analysis; or Financial analysis and recommendations.
Examples of activities under this type include: Terms of Reference (TOR); Bidding Documents; Procurement Packages; Request for Proposals; Expression of Interests; or Prequalification criteria.
Example services under this type of activity includes: Advisory services for costing and budgeting according to GCF standards, including the costing in relation to incremental cost for adaptation, in case the project/programme targets adaptation or cross-cutting results; or Advice on legal, financial, tax, regulatory and governance matters, to help structure the investments.
Where necessary, and provided that sufficient justification is provided, other activities such as workshops and consultations or translation of documents may be covered under the PPF.