Green Climate Fund preparing first capital raising

The new head of the Green Climate Fund, Hela Cheikhrouhou, is helping to prepare an initial capital raising to conclude as soon as 2014.

The fund is charged with distributing approximately $US100 billion a year pledged to poor countries affected by climate change and Cheikhrouhou said,“The desirable scenario is that some time in the third quarter of 2014 we would successfully conclude what we are calling an ad-hoc pledging process, the equivalent of the first financial close,”.

Developed countries meeting at United Nations climate meetings have pledged $US100 billion a year to help poor countries cut their emissions and develop climate change adaptation and mitiagtion programmes.

So far donors have contributed $US7.5 million for start-up costs to the GCF.

One of the key ambitions of the Fund is to make climate finance  more efficient, said Sam Bickersteth, chief executive of the Climate and Development Knowledge Network at PricewaterhouseCoopers LLP in London.

The GCF is important “because it will catalyse finance, not because it's the facility through which all money will flow.”

The funding should lead to  wind and solar farm construction, renewable-energy subsidies like feed-in tariffs, or carbon taxes and markets, depending what emerging nations prefer, said Cheikhrouhou (pictured below).

It's too early to speculate how much the GCF will raise, Cheikhrouhou and the 24-person board, led by South African representative Zaheer Fakir and Australian Ewen McDonald, will meet in Paris on October 8 to shape further details of the capital “mobilisation” and set more rules governing how money will be disbursed.

South Korea, listed as a developing nation in the 1992 UN Framework Convention on Climate Change, had contributed the most to the fund as of June 30, at $US2.1 million, and has pledged $US40 million.

Germany, the U.K. and Sweden are among others who have contributed, according to a statement on the fund's website.

Pension funds and other private investors hold the key to supplementing government cash to transform energy markets and industries, including agriculture, away from fossil fuels without threatening economic growth, Cheikhrouhou said.

Cheikhrouhou became manager for private infrastructure & public/private partnerships at the African Development Bank Group in 2007, where she boosted finance activities across the continent, including over US$240 million for the first phase of the planned Ouarzazate concentrated solar project in Morocco. The plant will be the largest in Africa, according to Bloomberg New Energy Finance.

That plant will help diversify away from mainly fossil-fuel energy production in the country, which imports almost 97 percent of its needs, according to AfDB's website. Cheikhrouhou previously worked for the World Bank and for Citigroup Inc., where she helped manage African market risks.

“I don't have a strong preference on whether the private sector should be able to lend us money directly or not,” Cheikhrouhou said. “If private investors don't make a contribution to the fund directly, they will definitely be important players in the projects and programs that are ultimately going to benefit from the contributions in the fund.”

The fund's first few projects will be key as it tries to build a reputation for making climate finance more efficient and convince richer nations to give up piecemeal direct spending, said Anthony Hobley, president of the Climate Markets & Investment Association, a lobby group in London supporting carbon markets. “They will be judged at their success at leveraging private money,” he said today in an interview.

While progress setting up the fund may seem slow, it's coming together quite quickly, he said in London. “Those used to UN processes are amazed how fast it's going.”