Green Climate Fund fails to strengthen private sector engagement
The Green Climate Fund (GCF) is the world’s largest dedicated multilateral climate fund, and aims to support climate mitigation and adaptation efforts in developing countries. Mobilizing financial resources from the private sector is an important priority for the donor countries backing the GCF. However, so far the GCF has underperformed in this respect. According to a new study by Thomas Kalinowski (Ewha Womans University, Seoul, and Research Institute for Sustainability - Helmholtz Centre Potsdam) this is due to numerous shortcomings in the GCF’s strategy.
The Green Climate Fund was established in 2010 under the UN Framework Convention on Climate Change (UNFCCC). It currently administers some 200 projects with a total value of USD 40 billion, of which the private sector accounts for only a small share. This is due to a number of reasons, as Thomas Kalinowski explains: "This shortfall in private sector engagement is largely driven by the perception that investments are unlikely to be profitable. There is a lack of attractive business models, especially when it comes to climate adaptation, and investments in particularly vulnerable countries in the Global South are considered excessively risky."
An exception to this is the renewable energy sector, where private sector engagement with the GCF is concentrated. According to Kalinowski, this suggests that private climate financing from the Global North is unlikely to play a decisive role in enabling the paradigm shift towards sustainable development in the Global South. In light of this, public funding for development cooperation should not be reduced.
Private sector projects are financed from public funds
In September 2022, the Green Climate Fund had 47 approved private sector projects (out of a total of 207 projects). Five of these 47 projects had lapsed and were no longer under implementation, which is a much higher rate of failure compared to the public sector, where only two of 160 projects failed. This leaves 42 private sector projects, with a volume of USD 16.9 billion, out of a total of USD 40.2 billion in GCF funds. This means that 21 per cent of all projects and 42 per cent of all project funds are allocated to private sector projects.
This is not the full picture, however, as Kalinowski's analysis shows. In fact, 22 per cent of the total volume of USD 16.9 billion invested in private sector projects are funds provided by the Green Climate Fund itself. The remainder comes from other, largely public institutions, such as the European Bank for Reconstruction and Development (EBRD) and other regional or national development banks. "In other words, a large proportion of the Green Climate Fund's project financing for the private sector does not come from the private sector, but from public sources," explains the political scientist.
Short-term profit interests vs. long-term transformation
More important than the quantity of private projects, however, is their quality. Kalinowski highlights the urgent need to ensure that private sector projects are compatible with the principles of the GCF and of good development cooperation in general. "It is critical that climate projects in the Global South are embedded in national development and climate strategies. Efforts to strengthen the involvement of private sector actors and civil society in the Global South, and to improve the broader business environment in recipient countries, are more important than maximizing private capital flows."
If these aspects are not properly considered, the GCF and private climate finance risk adding to the already high external debt burden of countries in the Global South, further destabilizing financial markets and exacerbating economic dependency. Kalinowski concludes that although renewable energy generation is preferable to the continued exploitation of natural resources, this alone will not provide a pathway to sustainable development in the Global South.
JOURNAL
Climate Policy
METHOD OF RESEARCH
Systematic review
SUBJECT OF RESEARCH
Not applicable
ARTICLE TITLE
The Green Climate Fund and private sector climate finance in the Global South
ARTICLE PUBLICATION DATE
21-Nov-2023
Non-profit organisations can act as drivers of sustainability for multinational companies
For successful non-profit impact on business governance, it is essential to advocacy non-profit organisations to engage key business stakeholders, a new study from the University of Eastern Finland shows. These stakeholders, such as employees, investors, politicians and the media, can be influenced by non-profit organisations in various ways.
“With a Strategic Confrontation and Collaboration Interaction Model (SCCIM), non-profit organisations can plan their strategy and figure out how to engage these important business partners effectively,” Doctoral Researcher Maike A. Diepeveen of the University of Eastern Finland says.
Advocacy non-profit organisations aim to protect, promote and support interests, often recommending new practices. They focus on issues like climate change, ecosystems and biodiversity. Additionally, they assist vulnerable or marginalised groups who may struggle to voice their concerns. The study examined how resource-strapped non-profit organisations can effectively promote their interests or causes by influencing the practices of multinational businesses.
As global issues like climate change become more urgent, everyone is expected to contribute by adopting more sustainable practices. Certain forward-thinking companies, driven by their stakeholders, quickly establish new guidelines to lead the way in adopting sustainable practices.
“When non-profit organisations work closely with these responsible businesses, it creates a chance to create excellent best practice examples,” Diepeveen concludes.
With the help of the SCCIM, these best practices can then be applied to other companies either through collaboration or influence, and they can also inform improved government policies.
JOURNAL
Nonprofit and Voluntary Sector Quarterly
ARTICLE TITLE
How Advocacy Nonprofits Interact With and Impact Business: Introducing a Strategic Confrontation and Collaboration Interaction Model (SCCIM)
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