In 2010, parties to the United Nations Framework Convention on Climate Change established the Green Climate Fund (GCF) with the hope that it would become the primary global fund for climate change finance in developing countries. Through targeted financial support, the GCF aims to help countries develop and implement low-emission, climate-resilient development strategies that address the causes and consequences of climate change.
The magnitude of the GCF’s contribution to climate change goals will depend in large part on how its resources are allocated. The GCF’s Governing Instrument and associated decisions by the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties lay out basic principles and guidance on how the GCF should allocate its resources. However, the GCF Board now must develop more detailed rules to operationalize these principles and guidance through a formal allocation system. In doing so, the GCF Board can draw upon the experience of other environment and development funds, which offer useful insights on fund allocation systems.
This paper focuses mainly on questions of allocation, including both ex-ante allocations and investment decisionmaking. Investment decisionmaking is included because, in practice, investment decisions also result in the allocation or distribution of a fund’s resources even if not decided exante. While other analyses often focus only on ex-ante allocations to broad themes like mitigation and adaptation, and to countries, this paper takes a broader view of allocation to also consider allocations across sectors and industries, and across activity types. It also touches on other issues relevant to the GCF Board including the result areas of the GCF, its access modalities, and its financial instruments, but it does not discuss them in detail as these topics are covered in other papers in WRI’s Climate Finance series