What Should the Green Climate Fund Look Like?

At the international climate talks in Cancún last December, negotiators agreed to create a Green Climate Fund. The fund would be governed by a board of 24 members, with equal representation from developing and developed countries. An independent secretariat would support the fund’s operations, with the World Bank invited to be the trustee to manage the fund’s financial assets, subject to review in three years.

A transitional committee, made up of representatives from 25 developing and 15 developed countries, was commissioned to design the fund. Its members include a mix of government ministers and senior government officials from both the world of United Nations Framework Convention on Climate Change negotiations and international finance. They will meet for the first time on April 28-29 in Mexico City.

The committee’s task is challenging given the critical need for funding to accelerate the transition to low-carbon and climate resilient development and the centrality of climate finance in the broader climate negotiations. Although there is agreement that, by 2020, $100 billion per year in climate finance will be forthcoming, its sources are still highly uncertain, as is the portion of this that would flow through the fund. The design choices made by the committee will influence the extent to which the fund can attract an important part of this longer-term pledge.

As the committee begins its work, it will be guided by the broad parameters established in Cancún. Yet the details matter, and there continue to be important differences between the points of departure of potential contributing and recipient countries. Nonetheless, common ground can be found if the committee can agree on a vision, a set of guiding principles and a business model that focuses on results.

In a new Brookings policy paper, “Designing the International Green Climate Fund: Focusing on Results”, I discuss some of the committee’s choices. I argue that a compelling vision would highlight the fund’s commitment to achieving significant and transformative climate results by supporting ambitious country development strategies and programs, and by using instruments that maximize the leverage of public and private capital. Guiding principles of the fund could promote: balance and inclusion, ownership, transformation, leverage, operational efficiency, and results and learning. A business model will need to be assessed against these principles to ensure alignment, with two models – partnership and independence – under active consideration. Regardless of the business model, the fund’s balanced governance will give developing countries strong voice and influence. They should use this to push for new ways of doing business which can drive innovation in the development landscape. The committee also has the opportunity to push for results: by devising resource allocation processes that align resources with potential benefits, levels of ambition and capacity; by using the fund to leverage private capital; and by driving effectiveness through results metrics.

The design process for the Green Climate Fund will be complex. There are many fault lines ahead even though high-level parameters for the fund were agreed on in Cancún. Trust between contributors and recipients needs to be nurtured, but this will be difficult since the sources of finance are still uncertain, as is the fund’s target size. Given the fiscal pressures in contributing countries, a design that provides assurances that investments will provide value for money will be critical. In recipient countries, a design that is sensitive to development priorities and that builds on country systems will be similarly critical. Yet instead of these points of departure driving a wedge between these two groups, they can be channeled toward meeting a shared objective: climate funds can achieve results that will help the world move toward low-emission growth and climate resilient futures. The transitional committee has the chance to build the needed trust by discerning a common vision and by delivering on this vision through a robust design that meets this challenge by focusing on results.