How the world’s largest climate fund works with the financial sector to drive global change

GCF MEANS BUSINESS

Climate change threatens to cause massive disruption to the world’s financial system.

At the same time, the financial system is an integral part of the solution to the climate

challenge. That is why the world’s largest dedicated funder of climate action in over

100 developing countries, the Green Climate Fund (GCF), is working with a wide range

of financial players to catalyse both public and private sector resources.

A CHANGING BUSINESS CLIMATE OFFERS NEW OPPORTUNITIES

The World Economic Forum’s Global Risks Report 2019 listed five environmental factors

among the ten biggest global risks for business – with the failure to reduce greenhouse

gas emissions and adapt to climate change listed second after natural disasters. To

safeguard future profits, all financial players – including banks, investment funds and

insurers – need to embed the effects of climate change in their business models.

Climate change offers businesses an unprecedented chance to capitalise on new

growth and investment opportunities that can also protect the planet as well. GCF

employs part of its funds to help mobilise financial flows from the private sector to

compelling and profitable climate-smart investment opportunities.

WHAT IS GCF?The United Nations Framework Convention on Climate Change (UNFCCC) set up

GCF in 2010 to help drive a low-emission and climate-resilient “paradigm shift”

in developing countries. GCF provides finance to developing countries to help

them realise their plans for climate action, known as their Nationally Determined

Contributions (NDCs). Ambitious NDCs are essential in achieving the Paris Agreement’s

goal of keeping average global temperature rise well below 2 degrees Celsius. NDCs

will also feature in the 26th annual climate change conference (COP26) scheduled

to be held in the UK in 2021, along with the goal of unlocking USD 7 trillion from the

financial system to support investment towards a zero-carbon economy.

GCF helps developing countries raise and realise their climate ambitions

Business cannot succeed on a planet that failsYANNICK GLÉMAREC GCF Executive Director,

GCF Private Investment for

Climate Conference 2019

GREENCLIMATE.FUND

GCF’S PRIVATE SECTOR SUPPORTGCF uses a variety of financial instruments to enable both the public and private

sectors to blend different sources of finance to deliver and mobilise climate friendly

investments. Notably, GCF promotes private sector investment through concessional

instruments, including low-interest and long-tenor project loans, lines of credit to

banks and other financial institutions, equity investments and risk mitigators, such

as guarantees, first-loss protection, and grant-based capacity-building programmes.

Out of the USD 5.6 billion which GCF has committed to date, 40 per cent is directed to

private sector projects in 35 countries.

GCF financing captures the evolving trend of blending public and private funds.

Its public sector-targeted projects also include concessional sovereign loans, which

can be on-lent, often through national development banks, to direct private sector

investments in sustainable, climate-focused directions.

GCF’s private sector support promotes private sector climate action in developing

countries by de-risking the delivery of capital flows for low-carbon and climate-

resilient development. To further this aim, GCF has set up the Private Sector Facility

(PSF), a dedicated division designed to capture the entrepreneurial energies of the

business world. PSF funds help mobilise other private sector finance, including from

private and institutional investors, and encourage climate co-investment across all

spectrums of climate action.

Specifically, GCF’s PSF has four objectives:

1. Address the perceived dearth of “bankable” projects through its Readiness Programme and its Project Preparation Facility (PPF), which help build institutional capacity and enabling policy environments;

2. Foster innovation by supporting climate technology incubators and accelerators, and deploying patient capital;

3. De-risk large investment projects through blended and structured finance; and

4. Align financial flows with sustainable development.

EIGHT AREAS OF CLIMATE ACTIONGCF has identified eight areas where its climate finance is aimed equally at mitigation

and adaptation to target emission reductions and enhance climate resilience:

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Energy generation and access

Transport Buildings, cities, industries and appliances

Livelihoods of people and communities

Forests and land use

Ecosystems and ecosystem services

Health, food and water security

Infrastructure and the built environment

GCF’s private sector support promotes private sector climate action in developing countries by de-risking the delivery of capital flows for low-carbon and climate-resilient development

MITIG

ATIO

NADAPTATIO

N

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HOW THE WORLD’S LARGEST CLIMATE FUND AND THE FINANCIAL SECTOR ARE DRIVING GLOBAL CHANGE

GCF helps Jamaica set up first regional green bond exchangeGCF’s financial support will help Jamaica create the Caribbean’s first green bond

marketplace on its national stock exchange. The bond market is designed as a source

of debt capital to finance climate-focused business opportunities in the Caribbean,

as well as allowing international institutional investors to support climate resilience

and low-carbon development. The GCF Readiness grant will be used to develop

a regulatory framework for green bonds and raise awareness in the marketplace

among potential issuers and investors. Andrew Holness, Prime Minister of Jamaica,

has credited GCF’s Readiness programme as being key to the development of the

green bond market, reflecting his intent to make Jamaica a leader in climate action.

GCF’s partnership with Mongolian bank points to low-carbon futureMongolia’s XacBank is the first commercial bank in a developing country to partner

with GCF and capitalise on its long-term concessional loan and grant instruments to

mainstream climate change across its loan portfolio. A business loan programme for

greenhouse gas emissions reduction is one of three approved GCF funding proposals

in Mongolia that cut carbon emissions by providing affordable financing. GCF is

supporting XacBank make renewable energy and energy-efficient technologies more

commercially feasible for micro-, small-, and medium-sized enterprises (MSMEs) by

providing long-term and affordable credit lines. This will have a far-reaching effect in

Mongolia as MSMEs make up more than 90 per cent of national businesses. At least

50 per cent of GCF’s financial support is going to women-led MSMEs.

GCF supports innovative financing model for renewable energy The pace of the green energy transition in many developing countries is frequently

hindered by a number of obstacles, such as the scarcity of early-stage financing

for large-scale renewable energy projects, lack of equity financing and complex

contractual frameworks. In partnership with FMO, the Dutch entrepreneurial

development bank, GCF is supporting Climate Investor One (CIO), an innovative

USD821 million blended finance facility. CIO provides integrated, full project life cycle

financing to support the development, construction, and commissioning of renewable

energy projects in developing countries experiencing energy poverty. This leads to

faster and more cost-effective project development and delivery vis-a-vis conventional

project financing. By providing a USD100 million reimbursable grant, GCF helps

catalyse a significant volume of institutional private sector co-financing for the CIO

facility – demonstrating a novel financing model with significant paradigm-shifting

potential and considerable scope for replication across other areas of climate finance.

GCF PARTNERING FOR ACTIONEmploying a strong partnership approach, GCF works with a wide range of other

organisations to promote co-investment opportunities and tap into their specialist

knowledge. They include multilateral and national development banks, international

financial institutions, private commercial banks, United Nations agencies, conservation

organizations, equity funds, impact investment funds, government agencies, regional

institutions and non-governmental organizations. These “Accredited Entities” and the

delivery partners they work with propose and carry out climate finance projects in

developing countries. GCF also helps to improve the capacities of these partners in

developing countries through its Readiness Programme.

The examples below give a sense of GCF’s range of engagement with its

financial partners.

Adaptation

GCF fundingUSD 2.2bGCF fundingUSD 2.2b

Co-financingUSD 7.2b

No of projects27

CO2eq. avoided1.1 billion tonnesCO2eq. avoided1.1 billion tonnes

No of beneficiaries47 million

Mitigation

Cross-cutting or Cross-cutting plus Adaptationand/or Mitigation

No. of projects

GCF funding

Co-financing

8

USD 335.7 m

USD 1.772 b

LATI

N A

MER

ICA

& TH

E CA

RIBB

EAN

AFRI

CA

17

USD 1.383 b

USD 4.183 b

ASIA

PAC

IFIC

8

USD 350.0 m

USD 986.7 m

EAST

ERN

EU

ROPE

&

CEN

TRAL

ASI

A

2

USD 121.0 m

USD 316.4 m

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CONTACT

For any enquiries please contact: Private Sector Facility privatesector@gcfund.org

THE WAY AHEAD – FORGING NEW MARKETS FOR CLIMATEEnergised by its first replenishment launched in 2019, GCF has received pledges so far

of USD 9.8 billion to progress its mandate to strengthen climate ambition and action

in developing countries. GCF’s strengthening ties with the financial sector will help

to open up new markets, driving reduced emissions and enhanced climate resilience.

Central to its role as the world’s largest climate finance fund, GCF will continue to work

with the financial sector to absorb the risks of the climate investments needed now to

turn these risks into future profits.

The boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by GCF.

MAP OF PRIVATE SECTOR FACILITY PORTFOLIO

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as of 15 March 2020