THE GREEN CLIMATE FUND:
A WAY TO INVEST IN CLEAN ENERGY
The Green Climate Fund is supposed to help transform “development” by supporting the
shift in developing countries away from carbon-intensive growth and toward sustainability
and resilience.1
A ban on funding fossil fuels will help the GCF achieve its mission, and promote economic,
social, and environmental justice.
Why should the Green Climate Fund exclude fossil fuels?
• It’s common sense — Digging up and burning fossil fuels is overwhelmingly
recognized by the scientific community to drive climate disruption. In fact, the
International Energy Agency estimates that to stay below dangerous levels of global
warming, more than two-thirds of all commercially viable oil, coal, and gas must stay in
the ground.2 It’s a no-brainer that the GCF just shouldn’t finance these activities or the
infrastructure that supports it.
• The risk is real — While it might seem redundant for a fund with “green” and “climate”
in its name to ban fossil fuels, there’s a real threat that dirty energy proposals could
sneak into the GCF. For starters, carbon capture and storage (CCS) technology, which
some governments claim makes coal and oil “clean,” is included in the fund’s founding
documents. And natural gas is still considered by some to be a “lower carbon” fuel than
coal — and therefore worthy of climate funding.
• It will help the GCF avoid a bad reputation — Civil society has been central in winning
political and financial support for the GCF. The recent negative public reaction to
Japan’s funding of coal in the name of climate finance should serve as a warning to
keep dirty energy out of the Green Climate Fund,3 especially in these early days as it’s
trying to solidify its status as a reputable climate finance institution.
• Financing fossil fuels isn’t transformational — The GCF’s mandate is to support the
transformation of the development paradigm. Transformational change means systemic
change. And in the context of a more sustainable economy, it means approaching
energy and energy access in a whole new way.
• Make space for renewable energy alternatives — By explicitly excluding fossil fuels,
the GCF can send a clear signal about its role in making financing for renewable energy
more accessible and build confidence of other investors in the new energy economy.
The Green Climate Fund needs an exclusion list
An exclusion list is exactly what it sounds like – a tool for institutions to define the types of projects they will not
knowingly finance, either directly or indirectly.4 The use of these kinds of prohibitions is common in international
financial institutions.
What’s in an exclusion list?
Most exclusion lists include provisions that prohibit the funding of
activities that are commonly understood as unacceptable, like forced
labor (slavery) or sex trafficking. By making these exclusions explicit,
institutions can help change the culture of what is sanctioned practice.
Exclusion lists are also used to prevent institutions from supporting
activities that are outlawed in many countries by international treaties
that institutions like development banks aren’t a party to, such as
the production or trade of ozone-depleting substances or trading of
endangered species. They often prohibit an institution from funding an
activity itself, e.g. commercial logging operations in primary tropical or
old-growth forests, and outline the associated infrastructure that will not
be financed either, e.g. the purchase of logging equipment used in such
operations.
In addition, exclusion lists include activities that might not be directly
related to the mission of an institution, but are generally considered
unethical or morally offensive, like financing casinos, alcohol, and
weapons trade or manufacturing.
Institutions that have prohibition
policies:
•
•
•
•
•
•
•
International Finance Corporation*
US Overseas Private Investment
Corporation (OPIC)
UK’s Climate Public Private
Partnership (CP3)
Asian Development Bank
European Bank for Reconstruction
and Development (EBRD)
Nordic Investment Bank
Norwegian Investment Fund for
Developing Countries (Norfund)
*Many institutions model their prohibition
policies on the IFC’s Exclusion List. The
GCF has temporarily adopted the IFC’s
Performance Standards, but not the IFC’s
Exclusion List.
Beyond safeguards…
An exclusion list is complementary to, but distinct from, safeguards policies, investment criteria, and results or
performance indicators. Where investment criteria are used up front as a screen to guide investment (often giving
criteria varying weight), while performance and results indicators define the outcomes an institution would use to
measure success, and safeguards outline negative impacts that an institution is trying to avoid. The added value of
prohibiting funding certain activities is that it can make clear what kinds of activities do not fit within the vision and
objectives of the institution – in the case of the GCF, showing that we need to move away from fossil fuels in promoting
the shift toward to a clean energy, climate resilient, and more sustainable economy.
1http://www.gcfund.org/about/the-fund.html
2
IEA, 2012. World Energy Outlook 2012, “Carbon in energy reserves and energy infrastructure”, pp. 259ff.
3http://www.bloomberg.com/news/articles/2014-12-04/japan-defends-use-of-climate-finance-for-coal-projects-abroad
4
An exclusion list is sometimes called a prohibited investment activities list, environmental and social exclusions, or
categorical prohibitions.
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