Direct access to climate finance as a new modality was introduced in 2007 while operationalizing the Adaptation Fund (AF) at the 3rd meeting of the Parties to Kyoto in Bali. This means that national institutions with approval by the governments will be allowed to submit proposals, while funding oversight and management lie in the hands of domestic institutions, rather than in multilateral or external agencies. The domestic institutions will operate under the AF’s guidance and rules. However, the progress was not as expected, as the National Implementing Entity (NIE) applications often failed to meet the oversight and fiduciary standards set by the AF and the Global Environment Facility (GEF). Then came the concept of ‘enhancing direct access’ (EDA).
The Green Climate Fund (GCF) -- the fund established within the framework of the United Nations Framework Convention on Climate Change to “support projects, programmes, policies and other activities in developing country Parties using thematic funding windows" -- also took the initiative to pilot EDA in 2015. The goal was to allow national Direct Access Entities (DAEs) to move beyond the financing of individual projects toward a more stakeholder-driven programmatic approach. The GCF has other windows for funding projects, such as the common funding window, Simplified Approval Process (SAP, with max $10 million allocations), and Private Sector Facilities (PSF). Also, the GCF provides financial support to enhance the capacity of the nationally designated authority (NDA), established at national level as the oversight body, and of the DAEs under its Readiness Support program and Project Preparation Facilities.
Unlike other GCF access windows, EDA projects/program proposals do not need to submit detailed individual sub-projects for approval by the GCF. Instead, the decision-making mechanism for such sub-projects is devolved at the country level through pre-approved selection criteria. The funding proposal should elaborate on the decision process and the composition of the decision-making body as well as how they will be managed and implemented. This way the EDA projects provide flexibility to accommodate a broad range of country conditions and circumstances.
“EDA has several advantages including enhanced level of country ownership”
Specifically, EDA has several advantages including enhanced level of country ownership, more effective use of financial resources, stronger involvement of local organizations and other stakeholders; and flexible and context-specific approaches. EDA pilot proposals can support community-based small and medium-sized enterprises (SMSEs), provide small grants or extended lines of credits and activities that target local actors, addressing the gender aspects and needs of vulnerable communities. It also allows the flexibility to create local funds for sustaining the process of community adaptation.
Accordingly, the Board of the GCF approved a pilot in 2016 to channel funds to NIEs in developing countries with a fund of $200 million for this program. Usually, each project/program can apply for a $20 million pilot. The first pilot included three countries – Antigua and Barbuda, Dominica, and Grenada in the Caribbean. There is yet no evaluation available on this pilot.
In the meantime, the GCF has drafted a detailed Guideline for Proposal Development under the EDA. The objective of these guidelines is to provide detailed guidance about the GCF-EDA Pilot to set up and operationalize EDA related processes. The EDA facility will award funding to sub-projects with impact-potential in climate adaptation and/or mitigation, in line with the areas detailed in the GCF Results Management Framework. Also, the appraisal of sub-projects would be carried out with climate investment criteria that are comparable with those of the GCF investment framework.
A screenshot of the Green Climate Fund official website
Community-led initiatives, as well as local/regional institutions, often face significant difficulties in accessing climate finance due to lack of capacity. However, they represent the key elements of the success of climate projects, especially those focusing on adaptation outcomes. An EDA proposal should not present communities as mere beneficiaries of the GCF finance, but rather as active agents of change, who have the potential to realize a paradigm shift as well as its medium and long-term sustainability.
As the proponent, DAEs should therefore demonstrate that the EDA pilot will empower local communities and groups and/or support local MSMEs thanks to its structure based on local/regional institutions, partners, and grassroots organizations, including local women’s unions and associations. The DAE should also demonstrate how such groups are involved in the consultation processes of the EDA proposal and how their specific needs are addressed through the grant/loan facility. The representation and ability to contribute to decision making in the grant/loan facility should be ensured. The DAE should ensure that relevant communities and indigenous peoples are closely involved in the designing, appraisal, and implementation of sub-projects. This will not only lead to climate impact at the community level, it will also result in longer-term empowerment of local communities and indigenous peoples.
The EDA process has two components: (i) support for the implementation of sub-projects and (ii) funding facility. The first component involves capacity building through technical assistance. Here the university networks like the LDC Universities’ Consortium on Climate Change (LUCCC) can play a crucial role in developing endogenous capacity through training and awareness-raising programs of stakeholders including the local community and women leaders.
Both the locally-led adaptation (LLA) and nature-based solution (NbS) components of the Global Commission on Adaptation can be promoted under the GCF-EDA, as the local communities to a large extent depend on natural resources for their livelihoods. Also when they are in the drivers’ seat, they can find indigenous and innovative ways of diversifying their livelihoods and conservation of natural resources.
“Both the locally-led adaptation (LLA) and nature-based solution (NbS) components of the Global Commission on Adaptation can be promoted under the GCF-EDA”
There are several challenges in the way the GCF investment framework works. It calls for a paradigm shift through transformative adaptation. At the same time, the criteria require projects to be bankable, founded on a sound business model. However, the GCF does not focus on how its funding can help such an outcome. For example, transformative adaptation can be achieved gradually, with a focus on locally-led adaptation, which requires reallocation of local resources and resetting the rural governance structure. Besides, adaptation projects are largely of public good’s nature, so it is very challenging to have economically viable business models. The Guideline also does not spell out clearly the relationship between national governments and DAEs of EDA. How much autonomy the DAEs and their sub-projects can enjoy is not clear.
However, the GCA-EDA can learn lessons from the pilot projects under the Adaptation Fund. EDA is costly in the short term but worth it; it requires, at least initially, a higher level of technical assistance, monitoring, and oversight, such as the development of capacity building tools and a higher level of monitoring through frequent field visits, and contracting at multiple levels, which has an impact on the operational costs. Therefore, any specific funding window for EDA might need a higher provision for overhead costs.
Finally, monitoring, evaluation, and learning (MEL) through action research by faculty members and graduate students are part of the LUCCC capacity building culture. Students guided by faculty members go to the field, observe the implementation process and their after-completion sustainability. Based on this, they submit their report as part of their degree requirements. This process involves little costs only in terms of the cost of field visits. Thus, EDA facilities are expected to live past GCF’s exit from the EDA interventions. Lessons learned through MEL will increase the chance of the grant/loan facility to last over time and to potential scaling-up. Once a good amount of experience and evidence of best practices are available, GCF-EDA is expected to scale to realize its vision of transformative adaptation, led by Locally Led Adaptation.
EDA projects also allow action research that could have been otherwise difficult under the usual adaptation projects. It also raises awareness of small, local organizations on climate change issues and builds their capacity to address climate-related risks and impacts by enabling such local organizations to identify their adaptation needs by themselves and implement adequate measures to address those needs.
Prof Mizan R Khan is the Deputy Director of International Centre for Climate Change and Development (ICCCAD).
Prof Saleemul Huq is the Director, International Centre for Climate Change and Development (ICCCAD).
