Enhancing Access to Multilateral Climate Funds by Developing Countries: A Way Forward

A rich and varied architecture of public institutions is involved in raising, channelling and deploying finance for climate-related activities from the developed world for the developing world countries. These institutions are financing flows through several funds and institutions across countries using bilateral and multilateral channels and various financial instruments. Within the wider contours of developed nations’ US$100 billion commitment, a small portion of climate finance flows through UNFCCC-linked multilateral climate funds.

IEEFA’s paper titled “Enhancing Access to Multilateral Climate Funds by Developing Countries: A Way Forward” evaluates the operational mechanisms of major multilateral climate funds (MCFs). These include the Global Environment Facility (GEF), Green Climate Fund (GCF), Adaptation Fund (AF), Special Climate Change Fund (SCCF), Least Developed Countries Fund (LDCF).  and Climate Investment Funds (CIF). The paper finds that funds’ finance architecture has differing governance structures, modalities and objectives and they also exhibit diverse thematic focuses and operational structures. While GCF tackles mitigation and adaptation, GEF prioritises mitigation, and AF, LDCF, and SCCF specialise in adaptation. Accordingly, funding types and amounts offered by MCFs also vary. GEF relies heavily on grants but offers limited non-grant options, whereas GCF balances loans and grants equally and AF solely provides grants.

The paper also assesses the challenges faced by developing countries in accessing funds from the MCFs. Some of the key challenges include cumbersome and lengthy disbursal processes, multiple mandates inhibiting scale, inefficient readiness programs, under-prepared national entities, lack of catalytic interventions to spur climate investments, project-based approach with inadequate systemic transformation and multiple guidance for MCFs. The paper notes the work undertaken by the G20 India Presidency to overcome some of these challenges and provides recommendations for the G20 Brazil Presidency for enhancing access to MCFs.

(Admitted as an official input paper for the G20 Sustainable Finance Working Group during the Brazilian Presidency)