correction
A previous version of this article gave an incorrect number for how many complaints of sexual misconduct the fund faced in 2019. There were 24 complaints of misconduct, two of them sexual. This version has been corrected.
Finally at a meeting in Zambia, where giraffes and zebras wandered the grounds of the hotel, the board members approved eight projects worth a total of $168 million.
Today, the Green Climate Fund is a different animal.
After more than a decade in operation, it has now approved 181 projects with more sophisticated financial packages and cut its average approval time from more than 1,200 days to less than a year. Its commitments this year alone totaled roughly $3 billion, which Yannick Glemarec, the fund’s third executive director, said left just enough to pay the electric bill at its headquarters in South Korea.
“One of the disadvantages of being established from scratch is you have to reinvent everything,” Glemarec said. “One of the advantages is that you can reinvent everything.”
But while the GCF is feverishly launching new projects, its portfolio is small compared with the climate challenge. Even if the planet’s wealthy countries meet their overdue pledges to generate $100 billion a year for poorer, more vulnerable ones, that money must be spent effectively. And that figure, too, will probably be dwarfed by demands as rising seas, heat waves and other disasters become more common.
So world leaders are looking to private capital to meet the challenge.
“The U.N. finance report says we need to quadruple investment in this transition,” John F. Kerry, Biden’s special envoy on climate, said recently at the London School of Economics. “We all understand that no government on earth can fill this gap alone. It can only happen with the full participation of the private sector.”
Officials at the U.S. Treasury Department say they have been focused on unlocking the approximately $2 trillion to $3 trillion of private sector investments they believe is needed to achieve the 2050 goal of a net-zero global economy.
On Tuesday, Treasury Secretary Janet L. Yellen met in Scotland with the heads of more than a half-dozen of the world’s most powerful financiers — including Mike Bloomberg and the CEOs of Bank of America and BlackRock — and urged private firms to speed up their climate investments, according to a person who spoke on the condition of anonymity to share details of the meeting.
Yellen said financial institutions with nearly $130 trillion in collective assets had joined the Glasgow Financial Alliance for Net Zero — a collection of more than 400 banks, insurers, and other financial firms — with the aim of converting their holdings to carbon-neutral by 2050.
“The gap between what governments have and what the world needs is large, and the private sector needs to play a bigger role,” Yellen said at the climate summit in Glasgow, Scotland, on Wednesday.
In the past, climate investments have come largely from the wallets of foreign governments or multilateral banks. Many profit-seeking private companies — with loyalties and responsibilities to shareholders — have stayed on the sidelines or put their money into large, familiar, surefire projects.
But recently the climate world is looking to private firms, creative multilateral institutions or philanthropic organizations such as the Rockefeller Foundation, which has joined with Ikea as well as others in an alliance using sophisticated financial tools to unlock private capital, usually by taking on a key deterrent — risk. Whereas it has taken the GCF six years to build a roughly $10 billion portfolio, the alliance says it seeks to build a $100 billion portfolio in less time.
Glemarec, who has advanced degrees in business administration, hydrology and environmental science, says the GCF has “a fairly high risk appetite,” which he noted “for investors is not that common.” As a public entity, it can make grants or loans, or invest directly — provided it has a transformative impact, he said.
The GCF has recently approved a grant for an early-warning system in the small island state of Timor-Leste, invested $150 million in a private-equity venture whose partners then chipped in $450 million of their own, and taken a 50 percent stake in a $200 million project to bring climate-friendly agriculture techniques to Tanzania’s farmers.
The GCF can also take chances on technology. It has financed an experiment in using solar to generate electricity all day, as a baseload plant. The project would include a 531-megawatt solar plant in Chile’s northern province of Tarapacá. During the day, a portion of the power would go to pumping water to a nearby storage facility at a higher altitude. Then a 300-megawatt hydroelectric facility would provide power at night. Japan’s Mitsubishi UFJ Financial Group Bank is a partner in the project.
If the solar-powered storage works, the GCF will not have to supply as much money for the next project.
The joint effort between the Rockefeller Foundation and Ikea, the Global Energy Alliance for People and Planet, aims to catalyze $100 billion worth of commercial projects that could replace diesel generators and coal plants with renewable alternatives that do not spew carbon into the air. The foundation and company chipped in a total of $1 billion, and this week the Bezos Earth Fund announced it would add $500 million more. (The founder of the Bezos Earth Fund, Jeff Bezos, owns The Washington Post.)
Rockefeller Foundation President Rajiv Shah said that energy-poor countries today are responsible for a quarter of global carbon-dioxide emissions and that unless they start using clean energy they will account for three-quarters of the world’s emissions by 2050. In Malawi, for example, only 11 percent of the population has electricity.
“These are countries that need to consume more, not less energy. And how do you do that in way that doesn’t aggravate the problem?” said Ashvin Dayal, the alliance’s interim chief executive.
The foundation has raised $700 million in a bond offering for the alliance, which is eyeing projects. It hopes to replace diesel or firewood with solar power in 26 small cities in the Democratic Republic of Congo that lack electricity. Along with the Asian Development Bank, it aims to decommission 10 small coal-fired power plants in Indonesia. And it is already installing solar mini-grids and solar rooftops in rural India, replacing diesel and coal power.
In another combination of private and public climate finance, South Africa reached an $8.5 billion deal with four wealthy nations and the European Union that could become a template for other developing countries that rely heavily on coal. South Africa will use the money to decommission coal plants, accelerate renewable developments and aid communities in a just transition to other livelihoods.
It has been harder to marshal public financing for projects that help communities adapt to climate change. While the Paris climate agreement says adaptation funding should constitute half of the $100 billion rich nations provide, public projects such as municipal flood protection might not attract private investors.
“These countries need to invest massively in adaptation and building resilience to their communities,” U.N. Secretary General António Guterres said in a recent interview. “And until now, adaptation has been the forgotten part of climate finance.”
For much of the developing world, the $100 billion a year remains an immovable figure.
“This $100 billion is key in terms of trust,” said Glemarec, who earlier worked at the U.N. Development Program overseeing a $6 billion portfolio at the Global Environment Facility.
New research from the World Resources Institute found that many of the nearly two dozen developed countries that long ago vowed to generate $100 billion annually in climate financing for developing nations have yet to put forward their full share toward the goal.
Three major economies — the United States, Canada and Australia — provided less than half their share of the financial effort in 2018, the WRI researchers found. President Donald Trump had cut off $2 billion in spending. President Biden has proposed to boost the annual U.S. contribution to $11.4 billion.
Even if developed nations soon deliver on their promise, the money needs to be well managed, which has not always been the case. A 2017 European Union study found that 85 percent of climate-related projects under the Clean Development Mechanism failed to have the expected emissions impact, the Financial Times reported.
The Green Climate Fund has had its share of setbacks. It provided money to a venture capital firm that failed to spread its risks geographically and went out of business. The GCF has also tangled with potential partners over its burdensome accreditation process. “If you interview commercial banks, they will tell you we are a nightmare,” Glemarec said.
One of the first projects funded by the GCF went to the Maldives, an island nation on the front lines of sea level rise. The five-year project was designed to provide fresh water — rainwater, ground water or desalinated water — at low cost during storm season emergencies. Desalination plants were to be built on four of the larger islands.
But after six years the project still isn’t finished, in part due to the pandemic. It won’t be completed for at least another six months.
There have been other distractions besides covid-19. The year Glemarec arrived, the fund was hit with 24 complaints of misconduct, including two of sexual misconduct. Glemarec bolstered grievance procedures and fired the individual cited in the sexual complaints.
But the U.S. Treasury has backed the GCF. In April, Yellen said the Biden administration would request another $1.25 billion this year and more money for the GCF in the future.
Glemarec remains hopeful. “At the end of the day, we have to shift gigantic financial flows,” he said. “The size of problem today often makes people a bit despondent. It is so big, and we have so little time. But we are all much more powerful than we think.”
Stein reported from Glasgow, Scotland.