GCF will finance projects and programmes that demonstrate the maximum potential for a paradigm shift towards low-carbon and climate-resilient sustainable development, in accordance with its agreed results areas and consistent with a country-driven approach.

Funding received and extended by GCF will be accounted for in grant-equivalent terms based on a standard methodology, to be developed by the Fund based on best international practices, to provide an accurate comparison of funding amounts between financial instruments.

GCF will provide the minimum concessional funding necessary to make a project or programme viable. Concessional funding is understood as funding with below-market terms and conditions. Consistent with the Governing Instrument, the minimum amount of concessional funding needed can be up to and including the full cost of the project or programme.

Financing provided by GCF to intermediaries may be used by the latter to blend with their own financial resources in order to increase the level of concessionality of the financing they extend to projects and programmes.

GCF will not “crowd out” potential financing from other public and private sources.

Only revenue-generating activities that are intrinsically sound from a financial point of view will be supported through loans by the Fund.

Potential of the project or programme to contribute to the achievement of GCF's objectives and results areas

Indicators

Separate indicators are proposed for the impact potential of mitigation and adaptation projects.

• Mitigation impact indicator: project lifetime emission reductions (in tonnes of carbon dioxide equivalent). Project proposals should describe the expected reductions in emissions resulting from the GCF intervention.
• Adaptation impact indicator: Project proposals should describe the expected change in loss of lives, value of physical assets, livelihoods, and/or environmental or social losses due to the impact of extreme climate-related disasters and climate change in the geographical area of the GCF intervention. Proposals should also refer to the number of direct and indirect beneficiaries of the project, taking into account the needs of developing countries that are particularly vulnerable to the adverse effects of climate change.

Degree to which GCF can achieve sustainable development impact beyond a one-off project or programme investment through replicability and scalability

Indicator

Necessary conditions indicator: Project proposals should identify a vision for paradigm shift as it relates to the subject of the project. The vision for paradigm shift should outline how the proposed project can catalyse impact beyond a one-off investment. This vision for longer-term change should be accompanied by a robust and convincing theory of change for replication and/or scaling up of the project results, including the long-term sustainability of the results, or by a description of the most binding constraint(s) to change and how it/they will be addressed through the project.

Wider benefits and priorities: Does the project have wider benefits and priorities? Are environmental and social safeguards and gender equality an integral part of the project?

Indicator

Co-benefits indicator: In addition to the impacts of the project, the proposals must identify at least one positive co-benefit – with an associated indicator, and baseline and target values, disaggregated for men and women if disaggregated data are available domestically – in at least two of the four coverage areas:

• Economic co-benefits, such as the creation of jobs, poverty alleviation and enhancement of income and financial inclusion, especially among women
• Social co-benefits, such as improvements in health and safety, access to education, cultural preservation, improved access to energy, social inclusion, improved sanitation facilities and improved quality of and access to other public utilities such as water supply
• Environmental co-benefits, including increased air, water and soils quality, conservation and biodiversity
• Gender empowerment co-benefits outlining how the project will reduce gender inequalities

Where appropriate, proposals should reference the ability of the project to enable the achievement of one or more of the Sustainable Development Goals.

Vulnerability and financing needs of the beneficiary country and population: Does the project provide financing needs to the beneficiary country and population? Is there an absence of alternative sources of financing?

Indicator

Mitigation and adaptation indicator - barriers to climate-related finance: Project proposals should describe the country’s financial, economic, social and institutional needs and the barriers to accessing domestic (public), private and other international sources of climate-related finance. The proposal should outline how the proposed intervention will address the identified needs and barriers.

Beneficiary country ownership of, and capacity to implement, a funded project or programme (policies, climate strategies and institutions)

Indicators

Alignment with nationally determined contributions (NDCs), relevant national plans indicator, and/or enabling policy and institutional frameworks: Project proposals should clearly describe how the proposed activities align with the country’s NDC and other relevant national plans, and how the funding proposal will help to achieve the NDC or these plans by making progress against specific targets defined in national climate policies and strategies, such as nationally appropriate mitigation actions and national adaptation plans. The proposals should also outline how the project will help to achieve national development goals and/or climate change policies. Proposals should also reference the degree to which the project is supported by a country’s enabling policy and institutional framework or includes policy or institutional changes.

Explanation of engagement with relevant stakeholders, including national designated authorities indicator: Project proposals should outline how they were developed in consultation with relevant stakeholders. Engagement with national designated authorities is required.

Economic and, if appropriate, financial soundness of the programme/project: Does the project foster cost-effectiveness and private sector funding mobilisation?

Indicators

There are separate indicators for the efficiency and effectiveness of mitigation and adaptation projects:

• Mitigation efficiency and effectiveness indicator: cost per tonne of carbon dioxide equivalent. Projects should give the cost per tonne of carbon dioxide equivalent of the GCF intervention.
• Mitigation efficiency and effectiveness indicator: ratio of co-financing. As appropriate, projects should indicate the ratio of co-financing mobilised relative to the GCF contribution to the total project.
• Mitigation and adaptation indicator: expected rate of return. As appropriate, projects should provide an estimate of the expected economic internal rate of return and/or financial internal rate of return, depending on the needs of the project.
• Mitigation and adaptation indicator: application of best practices. Projects should describe how the proposal applies and builds on the best practices in the sector.