As the largest climate fund in the world, it is vital for the Green Climate Fund (GCF) to have flexible financing instruments and achieve the highest possible impact and ambition to strengthen climate actions. To help project proponents design their financing structure that fit with the GCF requirements, the Indonesia’s NDA GCF, supported by Global Green Growth Institute (GGGI), discussed about ‘the GCF Financing Structure and Co-financing’ on Wednesday 6 October 2021, in the final webinar of the Call for Project Concept Note webinar series.

Grant Ballard-Temeer, the lead trainer from ECo., who has assisted the NDA throughout the capacity building program, explained that a project’s financial instrument is like a formula used to solve a certain problem. The financial instrument can be used as it is or combined with other instruments and should address the barriers while adjusting with the needs and types of beneficiaries. The choice of instruments must be guided by a set of justifications surrounding how it addresses barriers, how it will affect the financial models, and the minimum concessionality requirement for the beneficiaries.

The GCF possesses a wide variety of financial instruments, from grants, loan, equity, guarantee, and reimbursable grant, which aim to facilitate various climate financing barriers. In being flexible with its disbursement means, the GCF allows transformations to occur through innovative financing within its projects. With grants as the instrument that most likely to be chosen by project proponents, the webinar covered the likelihood for a project to secure the GCF grants. One of them is when a project cannot be financed through other forms of financing to meet the minimum concessionality.

One of the goals of the GCF is to mobilize climate finance both from public and private sectors. Therefore, co-financing becomes the evidence of public and private sectors’ contribution to the climate action, showing commitment to achieve higher impact. It will also strengthen ownership of parties involved and provide the necessary resources for the country’s long-term sustainability of climate actions. The co-financing can be accepted in the form of grants, loans, guarantees, and in-kind resources, as long as it is confirmed along with the submission of a funding proposal. One key point discussed in the webinar is related with other forms of investments resulting from the intervention of the initial GCF and co-financier’s investment which is confirmed after the project is approved. This should be considered as a ‘Leveraged Finance’, and should not be mistaken as a form of co-financing.

There is no minimum amount set from GCF for required co-financing. However, appropriate levels of co-financing that can help maximize the impact of GCF proceeds are always desirable. The webinar facilitated by ECo. Ltd, discussed the overview of GCF co-financing portfolio across different project types, project scale, and Accredited Entities. Projects that can generate new income, often have a co-financing ratio of more than 75% particularly for mitigation projects proposed by affluent and international private sector entities with more than USD 250 million.

As the final webinar series, this session concluded the capacity building program provided by the NDA GCF for project proponents under the Second Call for Project Concept Note Activity. Moving forward, concept notes that have received initial interest from Accredited Entities will further collaborate to develop and improve the proposed concept note until the submission stage to the GCF.