Guest Blog: Can private money save the Green Climate Fund?
Given a repeat pattern of governments failing to live up to their funding promises, Barbadian economist Kelly Hunte asks whether it is now time for the Green Climate Fund to seek support from the private sector and philanthropic sources, as well. This SustMeme Guest Post represents a follow-up to her previous piece: Is the new Climate Goal just smoke and mirrors?
KH: Cast your mind back to the pre-pandemic days of 2014, with Godzilla on the big screen and Brazil playing host to the football World Cup… Well, that was also the date when member countries pledged $10.3bn towards the first five years of operations of the Green Climate Fund (GCF) — a time of promise!
Only about $7bn of that total was ever received, however, with the United States paying over just $1bn from its original pledge of $3bn, plus major contributor currencies having depreciated against the US Dollar.
With most of the available funds already fully committed by the end of 2019, replenishment of the GCF became an urgent necessity. The first replenishment took place that year, with 30 countries and one region pledging a total of $9.87bn.
Again, however, the reality appears to be falling to live up to the promise, with only $5.29bn confirmed so far (according to the status of pledges and contributions on the GCF website). In effect, with many countries facing economic downturns due in part to COVID, it seems inevitable that the conversion of pledges into actual contributions might be slowed and, ultimately, the $9.87bn total may not be reached, in the short run.
Furthermore, even if the target is reached, it may not effectively meet the climate financing requirements of many Developing Countries. So how can things be done differently and better, going forward?
Lessons to learn and changes to make
Discussing lessons to be learned from the first replenishment, global facilitator Johannes Linn suggested that:
“A high priority will be to bring the US and Australia back to the table, along with other developed countries that so far have not pledged, or pledged below what would be expected given their contribution to climate change (eg, Canada). Moreover, the GCF should aim to attract contributions from more emerging market economies.”
Indeed, the US has come back to the table; and this is good news. However, the dependance on political government-led pledges may arguably not prove a satisfactorily reliable and resilient resource mobilisation strategy, in the long run.
So, given that there is no real way for the GCF to know for sure whether countries will maintain their political stance on climate change, it may be time for the Fund to adopt an alternative strategy and focus on private-sector and philanthropic resource mobilisation, instead (or, better still, as well).
So much is owed, by so few
The global private sector’s contribution to greenhouse gas emissions and increased global temperatures is not only significant, but primarily comes down to a relatively small number of actors.
Since 2017, the received wisdom has been that just 100 companies are responsible for 71% of global emissions; with more recent data suggesting that the top 20 firms alone account for a third of all carbon.
Fingers are beginning to point. Under pressure from activists and investors alike, several oil and gas companies such as Shell and Chevron are now publicly upping their commitments to cut carbon and pursue Net Zero pathways.
Tempted with the right incentives, they could conceivably be motivated further to become part of the global thrust to assist Developing Countries — especially those classed as Least Developed Countries (LDCs) and Small Island Developing States (SIDS) — in their fight against climate change.
Going forward, part of the GCF’s new resource mobilisation strategy should be to target these companies and either offer carbon credits in exchange for contributions, or some other sweetener to persuade them to part with private-sector cash.
The GCF should also think about ways of attracting philanthropic flows from tech giants such as Facebook, Amazon and Google, plus other large corporates and brands who have signalled alignment with the agenda of the Climate Emergency.
No longer dependent on country pledges which can be withdrawn or reduced, therefore, the Green Climate Fund resource mobilisation strategy must be diversified to leverage these new sources of income and revenue — including interest from loans they provide, contributions from the billion- and trillion-dollar companies whose operations cause major climatic disruptions, plus the deep pockets of corporate philanthropy. This diversification is not merely desirable; it is essential.
Barbadian economist Kelly Hunte is currently a project administrative officer attached to the Caribbean Community Climate Change Centre. Kelly has a passion for climate finance and development assistance.
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