Climate Action 2011-2012
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Figure 1. Suggested structure of relationships with the GCF.<br />
Source: Allianz, <strong>2011</strong>.<br />
The private financial sector represented by UNEP FI<br />
believes that the GCF presents a major opportunity for<br />
catalysing low-carbon, climate-resilient development in<br />
developing countries. In order to reach its targeted amount,<br />
and to maximise its impact in addressing climate change, the<br />
GCF must institutionally mobilise both the capital and the<br />
expertise of private finance.<br />
In particular, UNEP FI sees the transformational potential<br />
of the GCF in how it deploys finance to public and private<br />
sectors, and proposes that the GCF should comprise a multiaccess<br />
fund that serves as a distribution point for public<br />
monies in order to fully integrate the private sector into the<br />
GCF process. Further, a toolbox of risk-alleviating measures<br />
should be developed.<br />
The GCF must institutionally<br />
mobilise both the capital and the<br />
expertise of private finance.<br />
a mulTi-aCCess Fund<br />
A key design feature of the GCF will be the three main<br />
facilities that act as windows of fund disbursement:<br />
• The first facility will serve implementing agencies<br />
such as international financial institutions (IFIs),<br />
including development banks, as well as the UN and<br />
other international agencies to apply for funding at the<br />
programmatic and individual project level.<br />
• The second facility will provide direct access for developing<br />
country governments.<br />
• Third is a private sector facility to which the private sector<br />
can apply for fund investment, creation of public-private<br />
partnership funds, and projects that satisfy GCF criteria.<br />
A particular priority for the three facilities will be<br />
to ensure that they are focused on currently underserviced<br />
developing countries, with the aim of avoiding<br />
the crowding out of both private and public sources.<br />
Programmes and projects on the ground could be provided<br />
with debt capital and could be implemented by existing<br />
development banks.<br />
a Toolbox oF oPTions<br />
To minimise the conventional barriers, and particularly<br />
risks, faced by the private sector when investing in newer<br />
technologies in developing countries, the GCF can offer<br />
various de-risking tools. Four generic types of instrument<br />
have been identified to give a flavour of the range the GCF<br />
can provide.<br />
Political risk reduction mechanisms. Private sector<br />
investors expect transparency, longevity and certainty<br />
(TLC), as discussed in the Deutsche Bank publication<br />
Paying for Renewable Energy: TLC at the Right Price (2009;<br />
www.dbadvisors.com), and a clearly defined, long-term<br />
investment horizon. If these prerequisites are not fulfilled,<br />
tailor-made risk reduction mechanisms need to be set<br />
up in order to ensure a fair return. One possible solution<br />
would be to mandate GCF to provide a political risk<br />
insurance for climate-related investments in developing<br />
67 climateactionprogramme.org
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