The green climate fund in Africa: What should be different?

Abstract

There are several climate funds already in operation before the establishment of the Green Climate Fund (GCF). This paper draws on the analysis of climate funds relevant for climate change activities in Africa to improve stakeholders understanding of what should be different with the GCF in Africa. The analysis indicates that projects financed by climate funds are predominantly small-scale with high transaction costs. The mean amount of total approved projects in Africa is US$7.21 (28.41) million. Over 95% of these projects is funded with grants. The mean disbursement ratio for the projects is 34.9% (45.4) and the mean initial disbursement lag is 1.9 years (1.2). To enhance scalability of projects and predictability of funds, African countries will have to work with the GCF to diversify financial instruments away from grants to loans and private capital to finance medium- and large-scale projects. The analysis also indicates that African countries should rally behind a position for ‘additionality’ of financial flows from the GCF that is realistic. Outsourcing fund management (including risks analysis and due diligence) activities of national funding entities to domestic financial institutions (FIs) will help reduce the expense ratio and enhance mainstreaming of climate finance in FIs in Africa.

Source: resolved