The Green Climate Fund (GCF) is still a work in progress, but it has the potential to become a decisive player in global climate finance. It is thought to eventually become a financial supermarket – which may or may not be desirable – offering loans, equity and guarantees in accordance with market demands. As a new organization, it does not have any accumulated experience in providing such instruments as yet; however, such experience can be acquired. It would be unfortunate if the GCF ultimately draws up a shopping list that essentially duplicates existing offers in the market. Recalling the ‘nonquote’ in Chapter 4, there is likely sufficient financing available to undertake the necessary investments; however, the framework conditions that determine its deployment need to be improved. This may sound overly simplistic, but the current donor financiers have not yet found the key to unlocking the traditional financial markets – or the key is not compatible with the way they traditionally deploy their assistance.

The GCF Governing Instrument states that, ‘financing will be provided to cover the identifiable additional costs of the investment necessary to make the project viable.’ Intuitively this is sensible, but it is far from operational. A clearer guidance is required on how to assess ‘additional costs’, and who is affected by them, along with references to the former definition of NAMA finance. It seems to refer to the investment cost, in which case the GCF is indicating an intention to invest in physical assets – presumably on conditions similar to the GEF, i.e., without taking up any ownership. If this will ultimately be its mode of intervention, not only will it have chosen the most expensive and least efficient intervention model, it will also have duplicated the GEF. That is not what the market needs. Furthermore, it does not qualify what viable means, either. There are many viable projects that are not bankable, due to risk perceptions and lack of sufficient risk guarantee.

The financial products offered by the GCF to cover these additional costs have yet to be determined and the GCF, therefore, has all the options to inject itself with tailored assistance that is complementary to what is already available on the market. Financial instruments are to be approved by the GCF Board and may evolve over time and vary over financing windows.