Review of the initial modalities of the Private Sector Facility – Addendum VI Technical notes

The document outlines a strategic roadmap for the Green Climate Fund's Private Sector Facility (PSF), based on demand and supply analyses of climate finance. It identifies significant barriers to private investment in developing countries, particularly for micro, small, and medium-sized enterprises (MSMEs) and in least developed countries (LDCs) and small island developing States (SIDS). To address these, the Secretariat proposes five new modalities: targeted endowments for adaptation, local currency funding pilots, climate-focused centres of excellence for early-stage innovation, co-investment solutions for institutional investors, and a direct investment approach to bypass accreditation bottlenecks.

• A demand analysis of 36 countries revealed that while 72% of interviewed National Designated Authorities (NDAs) acknowledge the private sector's key role in implementing Nationally Determined Contributions (NDCs), most are unclear on how to move from general frameworks to a concrete investment pipeline.
• The supply analysis of 177 financing entities showed that 73% finance climate investments through equity (with 50.2% providing quasi equity or mezzanine), 56% use debt instruments, and 24% deploy grant-based instruments, while only 10.7% offer guarantees.
• NDAs identified a lack of awareness of business opportunities and the absence of attractive opportunities as primary hurdles, with 86% of NDAs reporting these issues.
• Micro, small, and medium-sized enterprises (MSMEs) face severe barriers, particularly in Africa where they account for approximately 90% of businesses in Sub-Saharan Africa but struggle with high transaction costs and a lack of access to equity.
• Regional analysis highlights specific market failures: Latin America struggles with a lack of longer tenor debt (typically limited to 7-10 years), while the Caribbean faces a lack of creditworthy off-takers and low projected rates of return for renewable energy.
• The proposed 'Endowment' modality for adaptation aims to generate constant revenue for the most vulnerable communities by investing GCF and philanthropic capital into climate-related investments.
• To mitigate foreign exchange risk in LDCs and SIDS, the PSF proposes piloting local currency funding through the Currency Exchange Fund (TCX) and by seeding local currency climate investment vehicles.
• The 'Centres of Excellence' modality is designed to support early-stage climate innovation through a three-tier structure: regional incubators, a global accelerator, and a global growth fund.
• The PSF intends to mobilize institutional investors (such as pension and sovereign wealth funds) through a co-investment vehicle targeting 4-5 times the GCF's catalytic capital and a syndication platform for sharing projects.
• A proposed 'Direct Investment Approach' would allow the GCF Secretariat to conduct primary due diligence and invest directly in projects, bypassing the accreditation model which currently limits private sector funding to less than 4% of the total portfolio.

APA

Green Climate Fund (2019). Review of the initial modalities of the Private Sector Facility – Addendum VI Technical notes. https://www.greenclimate.fund/sites/default/files/document/gcf-b23-12-add06.pdf

Chicago

Green Climate Fund. Review of the initial modalities of the Private Sector Facility – Addendum VI Technical notes. 2019. https://www.greenclimate.fund/sites/default/files/document/gcf-b23-12-add06.pdf.

Wikipedia

{{cite report |author=Green Climate Fund |title=Review of the initial modalities of the Private Sector Facility – Addendum VI Technical notes |date=21 June 2019 |url=https://www.greenclimate.fund/sites/default/files/document/gcf-b23-12-add06.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{greenclimatefund2019review, author = {{Green Climate Fund}}, title = {{Review of the initial modalities of the Private Sector Facility – Addendum VI Technical notes}}, institution = {Green Climate Fund}, year = {2019}, month = jun, url = {https://www.greenclimate.fund/sites/default/files/document/gcf-b23-12-add06.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }