Climate Action 2011-2012

Climate Policy, Governance & Finance
investment in emerging markets
Private capital for a
sustainable future
66 climateactionprogramme.org
© yomanimus
In order to reach its targeted amount of US$100
billion, the GCF must effectively mobilise both
capital and expertise from the private sector.
By Paul Clements-Hunt, Head of Unit, UNEP Finance
Initiative
The Green Climate Fund (GCF) presents a major opportunity
for catalysing low-carbon, climate-resilient development
in developing countries, according to the private financial
sector represented by UNEP Finance Initiative (UNEP FI).
Through strategic deployment of its funds, the GCF could
provide a vital stimulus to achieve, in developing countries,
economic development and growth which is carbonefficient
and climate-resilient. In order to reach its targeted
amount of US$100 billion, and to maximise its impact
in addressing climate change, the GCF must effectively
mobilise both capital and expertise from the private sector.
To this end UNEP FI looks forward to a GCF that employs
three facilities for dispersing its funds, and a toolbox
of measures that will improve the risk-return profile
of climate investments in developing countries – and
therefore help to mobilise the essential finance.
The Green ClimaTe Fund
The decisive battleground on climate change will be in
emerging economies, where rocketing growth in energy
demand will have to be met, while energy-related carbon
emissions reduced. At the same time, it seems unequivocal
that developing countries will be hit hardest by the physical
impacts of a changing climate. If catastrophic climate change
is to be avoided, and the unavoidable impacts made bearable
for the most vulnerable communities, any future climate
change regime must feature systematic support from the
international community for low-carbon and climate-resilient
development and prosperity in developing countries.
One notable achievement in the international climate
negotiations is the establishment of a process towards the
creation of a GCF which is expected to become the world’s
main financial instrument to enable and facilitate lowcarbon
and climate-resilient development in developing
countries. The fund will seek to raise finance for adaptation
and mitigation in developing countries, will leverage private
sector investment, and will be charged with supporting
projects, programmes, policies and other measures in
developing countries. At the time of writing (October 2011),
the details of the governance, objectives and operation of
the GCF remain under discussion. The fund’s operational
aim and most pressing challenge at the moment consists in
mobilising, and making the most effective use of, financial
resources – at least US$100 billion for mitigation and
adaptation activities in the developing world.
Any future climate change
regime must feature systematic
support from the international
community for low-carbon and
climate-resilient development.
The task of designing the GCF was given to the Transitional
Committee (TC), comprising 40 members with 14
representatives from developed country parties, and 25 from
developing country parties. The TC is mandated to develop
and recommend operational specifications for the GCF in
time for approval by the 17th session of the Conference of the
Parties (COP17) to the UNFCCC in Durban.
PrivaTe seCTor hoPes For The GCF
A stable and competitive risk-return profile of climate
investments is a prerequisite to mobilising private sector
capital. At an International Finance Roundtable hosted by
Chatham House in August 2011, experts agreed that there
is no lack of investment capital per se, contrary to common
perception. Pools of funds are available, and currently are
allocated in areas that financiers feel comfortable with. This
reflects the fact that, ultimately, private capital flows depend
on the risk exposure private investors are willing to take and
are not only a function of capital availability.