Climate financing

USD 10.2 billion was the initial resource mobilization result of the Green Climate Fund: highlights of UNFCCC CP.20 and KP.10 decisions (8 January 2015)

GMRNotes, Original: 8 January 2015
The 20th session of the Conference of the Parties and the 10th session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol, held from 1 to 14 December in Lima, Peru, delivered a series of substantive decisions on climate finance.
1. Report of the Green Climate Fund to the Conference of the Parties and guidance to the Green Climate Fund
The decision welcomes the successful and timely initial resource mobilization (IRM) process of the Green Climate Fund that led to the mobilization of USD 10.2 billion to date by contributing Parties, making it the largest dedicated climate fund, including Australia, Austria, Belgium, Canada, Colombia, Czech Republic, Denmark, Finland, France, Germany, Indonesia, Italy, Japan, Liechtenstein, Luxembourg, Mexico, Monaco, Mongolia, Netherlands, New Zealand, Norway, Panama, Peru, Republic of Korea, Spain, Sweden, Switzerland, United Kingdom of Great Britain and Northern Ireland, and United States of America. In addition, Germany made a pledge of 55 million Euros to the Adaptation Fund, and China announced $10 million for South-South cooperation and mentioned they would double it next year.
The commitment authority of the Green Climate Fund will become effective when 50 per cent of the contributions pledged by the November 2014 pledging session are reflected in fully executed contribution agreements/arrangements received by the secretariat no later than 30 April 2015. The IRM exercise would secure financing for the 2015-2018 programming period. GCF aims for a 50:50 balance of funding between mitigation and adaptation over time, on a grant-equivalent basis, with the aim for a floor of 50 per cent allocation of funding for adaptation, particularly for vulnerable countries, including small island developing States (SIDS), the least developed countries and Africa.
Once the Fund’s cumulative funding approvals exceed 60 per cent of the total contributions, confirmed by fully executed contribution agreements/ arrangements, received during the IRM, the Fund will initiate a formal replenishment process. The IRM participants envisage that this is likely to occur by end-June 2017.
Parties are invited to submit to the secretariat annually, and no later than 10 weeks prior to the subsequent session of the Conference of the Parties, their views and recommendations in writing on the elements to be taken into account in developing guidance to the Green Climate Fund.
Comparing resource mobilization approaches
Ad Hoc Voluntary Resource Mobilization Process
Used by Global Agriculture and Food Security Program, Consultative Group on International Agricultural Research Fund, Climate Investment Funds, Least Developed Countries Fund, Special Climate Change Fund. The Adaptation Fund - originally intended to be financed primarily through the monetization of CERs – uses this approach for additional contributions.
Features: Contributors’ pledge amounts are based on individual interest/capacity; Contributions accepted at any time; Contributors can make single- or multi- year commitments; Contribution payment schedules are based on contributor preferences; Potential programming uncertainty
Voluntary Replenishment Cycles
Used by Global Fund for Aids Tuberculosis and Malaria, Global Alliance for Vaccines and Immunization Alliance, Global Partnership for Education
Features: Greater certainty and predictability for programming; Multi-year pledges that can be formalized through single- or multi- year contribution agreements; Contributions can be accepted outside of the replenishment ‘cycle’; Contributor pledge amounts are based on individual interest/capacity; Can be customized to budgetary cycles of contributors
Burden-Shared Replenishment Cycles
Used by Global Environment Facility, International Development Association, African Development Fund, Asian Development Fund, International Fund for Agricultural Development, and other multilateral development banks and funds.
Features: Greater certainty and predictability for programming; Contributions based on some measure (e.g. past contributions), but with flexibility to contribute other amounts; Can result in a ‘structural funding gap’ if contributors’ shares do not add up to 100 per cent (A ‘structural gap’ occurs under a burden-shared approach if, for instance, not every country in the benchmark index contributes to the fund. Other contributors may be constrained to go beyond their ‘share’ to fill the gap.); Multi-year commitments with coordinated, “pro- rata” - based payment arrangements and schedules; Contributions can be accepted outside of the replenishment ‘cycle’; Can provide greater planning certainty for contributors

2. Long-term climate finance
The decision on long-term climate finance provides a global picture of climate finance:
  • Welcomes the pledges to the Green Climate Fund and to the sixth replenishment of the Global Environment Facility, and contributions to the Least Developed Countries Fund, the Special Climate Change Fund, and the Adaptation Fund;
  • Takes note of the in-session workshop on long-term climate finance held in 2014 and the summary report prepared by the secretariat thereon;
  • Welcomes the biennial submissions received to date from developed country Parties on updated strategies and approaches for scaling up climate finance from 2014 to 2020, and urges those developed country Parties that have not yet done so to do so;
  • Welcomes the first biennial high-level ministerial dialogue on climate finance convened in accordance with decision 3/CP.19;
  • Notes with appreciation the 2014 Biennial Assessment and Overview of Climate Finance Flows Report;
  • Takes note of the decisions on methodologies for the reporting of financial information by Parties included in Annex I to the Convention and on the report of the Standing Committee on Finance;
  • Recognizes that developed country Parties commit, in the context of meaningful mitigation actions and transparency on implementation, to a goal of mobilizing jointly USD 100 billion per year by 2020 to address the needs of developing countries;
  • Requests developed country Parties, in preparing their next round of updated biennial submissions on strategies and approaches for scaling up climate finance for the period 2016– 2020, to enhance the available quantitative and qualitative elements of a pathway, placing greater emphasis on transparency and predictability of financial flows;
  • Requests the secretariat to organize annual in-session workshops through to 2020 and to prepare a summary report of the workshops for annual consideration by the Conference of the Parties and the high-level ministerial dialogue on climate finance.

3. Methodologies for the reporting of financial information by Parties included in Annex I to the Convention
The decision outlines several steps:
  • Subsidiary Body for Scientific and Technological Advice: Extend by one year the deadline of its mandate, with a view to recommending a decision on the methodologies for the reporting of financial information, to the Conference of the Parties at its twenty-first session (November– December 2015);
  • Parties and observer organizations: Submit to the secretariat, by 25 March 2015, views on the methodologies for the reporting of financial information, for compilation into a miscellaneous document;
  • Secretariat: Prepare a technical paper, prior to the forty-second sessions of the subsidiary bodies (June 2015), summarizing existing international methodologies and drawing on relevant information contained in submissions from Parties included in Annex I to the Convention, on their experience with reporting the first biennial reports, the submissions above, information submitted by Parties on appropriate methodologies and systems used to measure and track climate finance, and the work of the Standing Committee on Finance on the 2014 biennial assessment and overview of climate finance flows;
  • Secretariat: Organize a joint in-session technical workshop in conjunction with the forty-second sessions of the subsidiary bodies, drawing on the information above, so as to inform the work of the Subsidiary Body for Scientific and Technological Advice. The workshop shall be jointly organized under the auspices of the Subsidiary Body for Scientific and Technological Advice, the Subsidiary Body for Implementation and the Standing Committee on Finance;
  • Standing Committee on Finance as a part of its work on measurement, reporting and verification of support beyond the biennial assessment and overview of climate finance flows: include its recommendations on the methodologies for the reporting of financial information in its annual report to the Conference of the Parties at its twenty-first session; present an update on its work on this matter to the Subsidiary Body for Scientific and Technological Advice for its consideration at its forty-third session (November–December 2015)

4. Report of the Standing Committee on Finance
The decision notes the 2014 biennial assessment and overview of climate finance flows covering the period 2010–2012, and the 2014 Standing Committee on Finance forum on the mobilization of adaptation finance, and looks forward to the third forum of the Standing Committee on Finance, taking place in 2015, which will focus on issues related to finance for forests.

5. The report of the Global Environment Facility to the Conference of the Parties and guidance to the Global Environment Facility
The decision touches upon several fronts:
Replenishment: Welcome the sixth replenishment of the Global Environment Facility (July 2014 to June 2018), and notes that the amount of funding available for the climate change focal area was reduced in the sixth replenishment period of the Global Environment Facility and that the country allocation of some countries, including some least developed countries, small island developing States, and African States has decreased as a consequence. Welcomes the pledges and contributions made to the Least Developed Countries Fund and the Special Climate Change Fund;
Project cycle: Notes the actions being taken by the Global Environment Facility to expedite its project cycle, and encourages the continuation and increase the overall transparency and openness of its operations, particularly with regard to the disclosure of information on the status of the implementation of projects and programmes, the project-level accountability of its implementing agencies and with respect to the timely disbursement of funds, as well as the advice provided to countries on co-financing. Welcomes the gender mainstreaming policy and ensure that gender mainstreaming is implemented both within its portfolio and within its structure; further simplify its procedures and improve the effectiveness and efficiency of the process; finalize the accreditation of project agencies;
Co-financing: Takes note of the policy on co-financing of the Global Environment Facility and the concerns regarding the implementation of this policy as raised by some Parties;
Further guidance: Invites Parties to submit to the secretariat annually, in writing, and no later than 10 weeks prior to the subsequent session of the Conference of the Parties, their views and recommendations on the elements to be taken into account in developing guidance to the Global Environment Facility. Requests the Standing Committee on Finance to take into consideration the submissions when providing draft guidance to the Global Environment Facility for consideration by the Conference of the Parties.

6. Further guidance to the Least Developed Countries Fund
The decision welcomes the increased allocation and disbursement of funds to least developed country Parties under the Least Developed Countries Fund, and notes the additional contributions made by Parties to the Least Developed Countries Fund. It notes that the Least Developed Countries Fund has financed the preparation of 51 national adaptation programmes of action, of which 50 have been completed, and has approved the funding for 159 national adaptation programmes of action implementation projects and for programmes in 48 least developed countries (as at 3 December 2014); encourages developed country Parties and other Parties in a position to do so to continue contributing on a voluntary basis to the Least Developed Countries Fund in order to support the implementation of the least developed countries work programme.

7. Fifth review of the Financial Mechanism
Process: Welcomes the expert input to the fifth review of the Financial Mechanism provided by the Standing Committee on Finance, contained in the technical paper on the fifth review;
Conclusion: Recognizes the general positive assessment of the performance of the Global Environment Facility; Notes, however, that the least developed countries and small island developing States still experience challenges in accessing the resources from the Global Environment Facility;
Action: Encourages the operating entities of the Financial Mechanism to address, as appropriate, these recommendations in their future work, particularly with regard to the complementarity between the operating entities of the Financial Mechanism; consider the timing of guidance provided by the Conference of the Parties to the operating entities of the Financial Mechanism, especially that guidance which has resource implications vis-à-vis the replenishment cycles of the operating entities of the Financial Mechanism, in order to ensure that key guidance is fully considered in the programming strategies and policy recommendations associated with each replenishment period of the operating entities of the Financial Mechanism;
Further review: Initiate the sixth review of the Financial Mechanism at its twenty-second session (November–December 2016); the Standing Committee on Finance to provide expert input to the sixth review of the Financial Mechanism in 2017 with a view to the review being completed by the Conference of the Parties at its twenty-third session (November–December 2017).

8. Guidance relating to the clean development mechanism
The decision notes the progress on the clean development mechanism of the Kyoto Protocol:
  1. Over 7,500 project activities being registered in over 95 countries;
  2. Over 1,700 component project activities being included in over 270 programmes of activities registered in over 75 countries;
  3. Over 1.5 billion certified emission reductions being issued and over USD 215 billion being invested;
  4. Over 1.6 million certified emission reductions being voluntarily cancelled;
  5. Over 30 million certified emission reductions being transferred through the share of proceeds to the Adaptation Fund;
  6. Over USD 190 million of revenue being accrued for the Adaptation Fund from the sale of certified emission reductions;
  7. 56 loans under the clean development mechanism loan scheme being approved and over USD 5 million of total commitment;
  8. 16 sustainable development co-benefits description reports being published using the voluntary sustainable development tool;
The decision designates as operational entities those entities that have been accredited, and provisionally designated, as operational entities by the Executive Board to carry out the sector-specific validation and verification functions.
On baseline and monitoring methodologies and additionality, the decision encourages the Executive Board to continue its work on the simplification and streamlining of baseline and monitoring methodologies with the aim of reducing transaction costs for all project activities and programmes of activities, taking into account that countries, regions and subregions underrepresented in the clean development mechanism are especially affected by high transaction costs; and requests the Executive Board to explore additional cost-effective approaches to demonstrating the eligibility of land to qualify as a clean development mechanism afforestation or reforestation project activity.
On registration of clean development mechanism project activities and issuance of certified emission reductions, the decision allows the validation by a designated operational entity and the submission for approval by the Executive Board of a monitoring plan at any time up to the first request for issuance of certified emission reductions for all scales of project activities and programmes of activities in order to provide flexibility; and endorses the development of a procedure by the Executive Board that would allow for the voluntary deregistration of clean development mechanism project activities by project participants, while ensuring environmental integrity and the consultation of Parties involved.

9. Outcome of the work programme on modalities and procedures for possible additional land use, land-use change and forestry activities under the clean development mechanism
The decision requests the Executive Board of the clean development mechanism to assess the applicability of the modalities and procedures to project activities involving revegetation, including in areas with agroforestry and silvopastoral practices where the established vegetation is not likely to reach the forest thresholds selected by the host Party, in the event that such project activities would be eligible under the clean development mechanism.
It requests the Subsidiary Body for Scientific and Technological Advice to consider the report of the Executive Board of the clean development mechanism at its forty-third session (November–December 2015), and continue its consideration of additional land use, land-use change and forestry activities under the clean development mechanism at its forty-fourth session (May 2016), with a view to recommending a draft decision on this matter for consideration and adoption by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol at its twelfth session (November–December 2016).

10. Report of the Adaptation Fund Board
The decision notes the level of market prices for certified emission reductions and their expected impact on the availability of funding from the Adaptation Fund and on its ability to fulfil its mandate, and requests the Adaptation Fund Board, in its future reports to the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol, to provide further clarity on the effect of the fluctuation of the price of certified emission reductions and the impact of this fluctuation on the resources available to the Fund.
The decision also notes the cumulative receipts of USD 407.9 million into the Adaptation Fund Trust Fund, and that the pledges have surpassed the initial fundraising target set by the Adaptation Fund Board of USD 100 million for the calendar years 2012 and 2013. It continues to encourage Parties included in Annex I to the Convention to provide funding to support the target and to scale up funding, with a view to the resource mobilization goal of the Board being reached from resources that are additional to the share of proceeds from clean development mechanism project activities, the first international transfers of assigned amount units and the issuance of emission reduction units for activities under Article 6 of the Kyoto Protocol.
It further notes the following updates:
  1. The accreditation of 17 national implementing entities that can directly access resources from the Adaptation Fund, including one accredited during the reporting period; and the accreditation of four regional implementing entities, including two during the reporting period;
  2. Cumulative project and programme approvals reaching USD 264.8 million as at November 2014;
  3. Approval of the environmental and social policy of the Adaptation Fund;
  4. Approval of the readiness programme for direct access to climate finance, launched on 1 May 2014, and of its execution arrangements and eligibility criteria for the allocation of funds to accredited implementing entities for specific activities;
  5. Approval of one annual intersessional project/programme review cycle during an intersessional period of 24 weeks or more between two consecutive Board meetings;
  6. Approval of 16 project/programme proposals, totalling USD 80.6 million, submitted by implementing entities from July 2013 to November 2014, including 10 proposals submitted by national implementing entities totalling USD 43.2 million;
  7. Establishment of a new fundraising target of USD 80 million per calendar year in 2014 and 2015

11. Second review of the Adaptation Fund
The decision underlines the crucial importance of the Adaptation Fund as an essential channel for supporting adaptation action and the main promoter of direct access, together with its focus on funding the full costs of concrete adaptation projects and programmes in developing countries, and notes the continued issues related to the sustainability, adequacy and predictability of funding from the Adaptation Fund, given the current prices of certified emission reductions, which affect its ability to fulfil its mandate.
The decision underlines the urgent implementation of the resource mobilization strategy of the Adaptation Fund Board, and encourages the Adaptation Fund Board to consider the following options for addressing the predictability of resources, in particular: (a) The scale of resources; (b) Regular estimates of the resources needed; (c) Continuous review of the status of projects. It requests the Adaptation Fund Board to consider options for addressing the diversification of revenue streams of the Adaptation Fund, including: additional mechanisms to facilitate the collection of individual donations, including through the United Nations Foundation; the issuance of adaptation certificates, promissory notes, adaptation fund bonds; debt for adaptation swaps; a specialized funding window for disaster risk insurance; and a window on investment guarantees for adaptation.
It requests the Adaptation Fund Board to consider, under its readiness programme, the following options for enhancing the access modalities of the Adaptation Fund: (a) Targeted institutional strengthening strategies to assist developing countries, in particular the least developed countries, to accredit more national or regional implementing entities to the Adaptation Fund; (b) Ensuring that accredited national implementing entities have increased and facilitated access to the Adaptation Fund, including for small-size projects and programmes.

Basis for action: To encourage the Parties to United Nations Framework Convention on Climate Change and its Kyoto Protocol to take into account biodiversity when developing any funding mechanisms for climate change"...Strategy for resource mobilization, objective 4.6

Indicator:
Number of initiatives, and respective amounts, supplementary to the financial mechanism established under Article 21, that engage Parties and relevant organizations in new and innovative financial mechanisms, which consider intrinsic values and all other values of biodiversity, in accordance with the objectives of the Convention and the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of the Benefits Arising out of Their Utilization

  • United Nations
  • United Nations Environment Programme