Annual portfolio performance report (2020)

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Annual portfolio performance report (2020)

GCF/B.30/Inf.09 13 September 2021

Meeting of the Board 4 – 7 October 2021 Virtual meeting

Provisional agenda item 14

Summary

This annual portfolio performance report presents a review and analysis of the performance of the GCF portfolio of investments via funded activities, of the Readiness and Preparatory Support Programme, and the Project Preparation Facility under implementation as of 31 December 2020.

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List of Tables

Table 1: Approval, disbursement and expenditure by implementing entity ... 33

Table 2: Regional distribution of no-cost extensions ... 34

Table 3: Regional distribution and number of Readiness grants receiving subsequent no-cost extensions per year... 35

Table 4: Minimum, maximum and median number of days to grant closure. ... 35

Table 5: Overview of no-cost extensions by implementing entity for Project Preparation Facility grants ... 36

Table 6: Overview of no-cost extensions by region for Project preparation Facility grants... 36

Table 7: Lessons Learned for Funded Activities ... 40

Table 8: Lessons learned for Readiness Programme and Project Preparation Facility ... 41

List of Figures

Figure 1: Time taken for GCF board approval to FAA effectiveness and first disbursement (median months) ... 9

Figure 2: Status of project/programme outputs (per cent of scheduled activities) ... 10

Figure 3: Growth in GCF disbursements from 2016-2020 (in USD) ... 11

Figure 4: GCF disbursements by project/programme sector (in USD) ... 12

Figure 5: GCF disbursements by access modality (in USD) ... 12

Figure 6: GCF disbursements by region (in USD) ... 15

Figure 7: Trend of GCF disbursements by region (in USD) ... 14

Figure 8: Cumulative GCF disbursements by financial instrument (per cent) ... 15

Figure 9: Cumulative GCF disbursements trend by financial instrument (in USD) ... 15

Figure 10: Cumulative trend of GCF funding under implementation, disbursement and expenditure (in USD) ... 16

Figure 11: Co-financing of portfolio under implementation in focus countries (in USD) ... 16

Figure 12: Co-financing of portfolio under implementation by project/programme type (in USD) ... 17

Figure 13: Annual reflows and investment income received (in USD) ... 18

Figure 14: Cumulative reflows and investment income (per cent) ... 18

Figure 15: GCF funding under implementation result areas (in USD) ... 20

Figure 16: Achievement rate of core indicators ... 20

Figure 17: Project categorization of environmental and/or social risks and impacts (number of approved projects/programmes) ... 26

Figure 18: Key information on the Readiness and Preparatory Support Programme ... 29

Figure 19: Readiness and Preparatory Support Programmes by key dimensions (in USD) ... 30

Figure 20: Regional distribution of Readiness support for NAP and non-NAP activities (in USD) from 2015 to 2020 ... 30

Figure 21: Key information on the Project Preparation Facility ... 31

Figure 22: Top five countries in approved funding for Project Preparation Facility (in USD) ... 31

Figures 23 and 24: Readiness funding approved (left); Number of grants and countries covered (right), by implementing entity type ... 32

Figure 25: Categorization of implementation challenges reported by accredited entities in 2019 and 2020 ... 36

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Executive Summary

1. This is the fourth Annual Portfolio Performance Report (APPR) to be presented to the GCF Board but the fifth year since annual performance reports (APR)¹ were first submitted to GCF. This report provides an overview of the progress in implementation of, and results achieved by the portfolio of GCF funded activities, the Readiness and Preparatory Support Programme (Readiness Programme) grants, and the Project Preparation Facility (PPF) grants as of 31 December 2020. It also highlights implementation challenges encountered by accredited entities (AEs), delivery partners (DPs), and national designated authorities (NDAs), lessons from implementation, and the proposed actions for improving portfolio monitoring and management.

2. Despite the challenges encountered due to the COVID-19 pandemic, implementation of projects and programmes continued albeit with some delays. This report provides an update and additional details on the impact of the pandemic together with the adaptive management measures being taken to support our partners to respond to the identified challenges/risks.

Progress and results in 2020

3. Funded activities: The portfolio of funded activities under implementation grew by 55 per cent from 75 projects (USD 3.5 billion) in 2019 to 116 projects (USD 4.9 billion) as of 31 December 2020. The total amount of co-financing mobilized for the portfolio under

implementation amounted to USD 11.5 billion with the private sector leveraging the largest proportion of co-financing. In line with its focus on supporting the most vulnerable countries to cope with the effects of climate change, GCF targeted 57 per cent of its portfolio of funded activities under implementation targets (USD 2.8 billion) at least developed countries (LDCs), small island developing States (SIDS) and African States.

4. The slowdown in project/programme implementation due to the pandemic impacted on the number of and growth in disbursements requested with about 32 projects that had received disbursement in previous periods not submitting new requests for disbursement in 2020.

Consequently, disbursements grew at a slower pace than the previous periods due to the COVID-19 pandemic headwinds. Cumulative disbursements grew by 65 per cent from USD 0.9 billion in 2019 to USD 1.5 billion in 2020, but lower than the 113 per cent growth reported in the 2018–2019 period. Similarly, the volume of disbursements grew year-on-year by 23 per cent in 2020 from USD 481 million in 2019 to USD 593 million (lower than the 69 per cent growth in 2019). The slowdown in project/programme implementation due to the pandemic impacted on the number of disbursements requested with about 32 projects that had received disbursement in previous periods not submitting new requests for disbursement in year 2020.

5. The COVID-19 pandemic slowed down implementation of projects/programme activities due to travel restrictions and lockdowns, supply chain bottlenecks, reduced demand for loan products and delays in receiving co-financing which affected utilization of funds at the field level, adversely impacting growth in expenditure rates. The expenditure rate² also increased from 33 per cent to 39 per cent of the funds disbursed driven by an increase in the number of projects/programmes currently disbursing and under implementation. Nevertheless, total project expenditures from GCF disbursements almost doubled from USD 305 million in 2019 to USD 592 million, reflecting a 94 per cent growth.

1 The Annual Performance Report (APR) is defined in the GCF Monitoring and Accountability Framework and represents the main annual monitoring tool of GCF-funded activities to be provided by accredited entities, as outlined in the accreditation master agreement and the funded activity agreement(s) for each approved project/programme.

2 The expenditure rate is defined as project expenditures (from GCF disbursements) divided by GCF disbursements.

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6. In line with its maturity, the portfolio witnessed over threefold growth in cumulative reflows and investment income from USD 5.7 million in year 2019 to USD 24.9 million in 2020, driven principally by activities in the loan portfolio in the private sector mitigation thematic area.

7. Funded activities showed slight progress in results compared to previous years. Based on AEs self-reporting, the portfolio under implementation contributed to the abatement of 50 million of carbon dioxide equivalent (tCO2eq) out of 723 million tonnes of carbon dioxide equivalent (tCO2eq) from 61 mitigation and cross-cutting projects, accounting for 7 per cent of the total climate mitigation impact potential with most of impact materializing towards and beyond the end of project cycle. By the end of 2020, the total number of direct and indirect beneficiaries reached was 49 million which accounts for 16 per cent of the total adaptation impact target for the projects under implementation.

8. Projects and programmes submitting APRs for the first time reported establishing project steering committees, project management, implementation units and other relevant mechanisms as required and in line with expectations to facilitate compliance with legal conditions and covenants, environmental and social safeguards (ESS).

9. In terms of compliance with environmental and social safeguards, projects/programmes continued implementation of environmental and social management frameworks (ESMFs), environmental and social management plans (ESMPs), as well as compliance with ESS, gender and indigenous peoples -related conditions and covenants in funded activity agreements. The majority of the funded activities reported the establishment and operationalization of grievance redress mechanisms (GRMs) following the Secretariat’s request to institutionalize AE-specific GRMs and report on how information about the GCF Independent Redress Mechanism will also be disseminated to project-affected or potentially affected populations. Others are working towards establishing the GRMs and already setting up the processes.

10. During the year, a number of projects/programmes highlighted some good practices which led to positive outcomes on gender while others demonstrated high engagement with indigenous peoples and their knowledge. These emerging good practices can be showcased, including through the GCF Secretariat’s involvement in other relevant gender-related forums, as well as in bodies such as the Facilitative Working Group of the United Nations Framework Convention on Climate Change (UNFCCC) Local Communities and Indigenous Peoples Platform.

11. Readiness and Preparatory Support Programme: By the end of 2020, GCF had approved 450 Readiness Programme grants in 140 countries with a total funding of USD 305 million. Of these, 370 grants had received disbursements as of 31 December 2020, showing an increase of 23 per cent compared to the year 2019. As of 31 December 2020, there were 352 grants under implementation, 36 grants yet to become effective and disbursed, 53 grants successfully closed, and 9 grants cancelled. Of the 352 grants under implementation, 62 were pending closure.

12. The volume of disbursements to readiness grants increased markedly, by 80 per cent from USD 78 million in 2019 to USD 141 million in 2020, equivalent to a cumulative

disbursement rate of 46 per cent. On the other hand, the cumulative expenditure rate stood at 21 per cent as of 31 December 2020 while the number of completed grants increased from 44 in 2019 to 53.

13. Project Preparation Facility: The number of PPF grants provided to countries

continues to increase. As of 31 December 2020, 37 grants had been approved, up from 27 grants at the end of 2019, corresponding to a USD 5 million increase over the same period, to result in a total PPF-related funding of USD 23 million. The increase is due to the concerted efforts by the Secretariat towards improving and expanding the PPF support to assist direct access entities (DAEs) in the development of funding proposals, which represents two-thirds of approved

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grants. Of the approved PPF grants, USD 15 million has been disbursed as of the end of 2020, compared to USD 12 million that was disbursed in 2019. Like the Readiness Programme portfolio, the PPF portfolio is gradually maturing and more than 50 per cent of the PPF grants will be completed by 2022, barring any implementation delays.

Implementation challenges

14. In 2020, the onset of the COVID-19 pandemic significantly caused unprecedented implementation challenges and slowdown in GCF funded activities with a total of 91 funded activities reportedly having experienced COVID-19 pandemic related implementation

challenges. Some of the reported challenges included experiencing disruptions to activities in the field (activities in the field include feasibility studies, training, workshops, and conferences) and limited access to project/programme areas due to travel restrictions and lockdowns; supply chain challenges related to access to equipment and markets, and liquidity risks as the economic impact of the pandemic that has resulted in market disruptions along with cost inflation and local currency fluctuations. Those projects/programmes also reported delays in communication with stakeholders accordingly. The pandemic also aggravated existing challenges facing the portfolio with more projects reporting challenges similar to those reported in 2019.

15. The Readiness and PPF portfolio, reported similar challenges to those in previous APPRs, such as delays in recruitment of experts and procurement, change of governments, and unrealistic implementation timelines from inadequate planning.

16. In response to the COVID-19 pandemic, the Secretariat introduced flexible, adaptive management measures including frequently engaging with stakeholders and improving

efficiency in operational procedures to facilitate faster responses and implementation of project activities. For instance, the Secretariat has provided flexibility in disbursement schedules to allow continued implementation while allowing AEs more time to comply with conditions that need to be met prior to disbursements. Additionally, time extensions were granted to AEs for the submission of required reports, baseline assessments and compliance, other covenants and conditions precedent to disbursement, cognizant of the pandemic’s disruptions and consequent impact of delaying implementation activities.

17. With regard to the Readiness and PPF portfolio, the Secretariat proactively deployed more flexible adaptive management actions to address implementation challenges related to the COVID-19 pandemic. As part of these measures, the Climate Resilient Recovery (CRR) initiative for the Readiness Programme was announced by the Secretariat in 2020 as a programmatic approach to the COVID-19 response. This initiative granted more flexibility on delivery modalities, implementation timelines, and budget reallocations. In addition, the Secretariat granted up to six months’ extension for specific readiness grants that had been approved by GCF prior to the pandemic. A total of 179 readiness grants, affected by COVID-19 and valued at USD 164.1 million, benefited from these extensions.

18. The Secretariat will continue to adopt a dynamic adaptive management approach by maintaining frequent communication and engagement with partners to monitor COVID-19 impacts on project implementation as well as respond to individual project circumstances. More details of the impact of COVID-19 on the GCF portfolio of funded activities, Readiness

Programme and PPF, and the Secretariat’s response measures, are provided in annex 1.

Lessons learned

19. The challenges faced by funded activities, Readiness Programme and PPF in 2020 provided insights into the lessons learned by the AEs, which are being integrated into the Secretariat project monitoring processes.

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20. One of the lessons learned from the challenges posed by COVID-19 is the critical role that partnerships with other stakeholders play in ensuring project/programme success. Some projects were able to attain synergistic partnerships with other projects/programmes operating in the same locality by leveraging on the expertise, utilizing their regional offices to provide support to projects on the ground, and successfully reaching out to other donors for support including temporary/bridge finance. Such proactive action fostered the resilience of the projects/programmes in the face of adversity and is commendable.

21. For funded activities, political transitions and policy changes continued to add risks to project implementation, showing the need to factor in potential delays at the planning and design stage and the need to quickly engage with incoming new public officials in order to achieve effective project/programme coordination.

22. With delays in requests for disbursements, lack of co-financing, and budget reallocations being some of the most common financial challenges for funded activities, it is imperative that realistic financial planning and budgeting projections consider the macroeconomic context of the country right from the design stage to minimize financing issues and disruptions during implementation. The Secretariat may need to strengthen its initial assessment of reliability of AEs’ co-financing projections as a performance measure to minimize the possibility of

jeopardizing and revising results projected due to non-realization of co-financing needed to achieve them. For instance, GCF could request AEs to have secured co-financing as a

requirement for disbursement or have a plan to deal with instances where co-financing does not materialize and would partly address reductions in subsequent disbursements because of co- financing issues. Also, ensuring that projects use a reasonable cost basis and incorporate

reasonable contingency fund provisions into approved projects will go a long way in minimizing or addressing cost overruns during project implementation.

23. Continued and constant engagements are critical for a timely and proactive approach to managing problems and issues encountered during project implementation. Delays in notifying the Secretariat of issues/challenges during project implementation might lead to escalation of risks which, if not mitigated, could lead to project failures.

24. For RPSP and PPF, the increase in the number of no-cost extension requests was mainly due to delays in the recruitment of experts and procurement, and unrealistic planning at the project design stage. The lesson from this experience and trend is that recruitment process and identification of consultants by the NDAs and DPs needs to be initiated immediately after approval of proposals to avoid delays in implementation. Where feasible, delivery partners and NDAs should utilize the PPF resources to hire consultants or technical support providers with a good understanding of the project outcomes to align with country needs and benchmark more realistic work plans to work with NDAs and stakeholders.

25. There is also a need to establish benchmarks for the projects’ duration per types of activities by the Secretariat based on experience to date to improve quality at entry in terms of implementation planning. Additionally, a streamlined, comprehensive template will help in efficiently managing the adaptive management procedures for the projects under

implementation.

Proposed priorities for 2022

26. With the need to track and ensure delivery of results and impact of GCF funding across its funded activity portfolio and within the context of the Updated Strategic Plan (USP) for 2020–2023, the operational focus will be on harnessing the lessons learned from

implementation to improve project selection, design, review, and implementation including integrated results management framework (IRMF) roll-out and implementation. The Secretariat will continue to work on initiatives to support proactive portfolio performance and risk

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monitoring and management, ensure dynamic adaptive management processes, build stakeholders’ capacities and sharing knowledge and sensitizing AEs, DPs, and NDAs on GCF requirements. Anticipating the increasing volume of the portfolio under implementation, the Secretariat will work on increasing human resources and ICT capacity of the Office of Portfolio Management to manage the growing workload and requirements including adaptive

management, results data capture and analytics to help track performance and risks. Where applicable, the Secretariat will conduct site visits and ad hoc checks as part of its efforts to strengthen portfolio implementation based on the portfolio performance risks assessed through early warning systems.

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I. Introduction 1.1 Background

1. The Governing Instrument for the GCF, in paragraph 23 (d) and (j), established the mandate for the Secretariat to carry out monitoring functions and prepare reports on the performance of the implementation of activities under GCF. It was subsequently codified into the GCF monitoring and accountability framework.¹ This annual portfolio performance report (APPR) presents an update on the progress made in the performance of funded activities under implementation as well as the progress achieved through the Readiness and Preparatory Support Programme (RPSP) and Project Preparation Facility (PPF) support for the reporting period ending 31 December 2020.The report is informed by qualitative and quantitative information on funded activities gathered from the annual performance reports (APRs), financial reporting and annual financial statements submitted by the accredited entities (AEs) as well as active monitoring and adaptive management performed by the Secretariat on

implementation challenges and issues. For RPSP and PPF support, information for the reporting period is drawn from interim progress reports and completion reports submitted by delivery partners (DPs) and national designated authorities (NDAs) in line with the relevant legal agreements.

1.2 Structure of the report

2. This section presents the structure of the APPR and briefly summarizes the progress made in the actions taken to improve internal processes and procedures as well as the measures taken to strengthen the monitoring and adaptive management of the portfolio in 2020. Section 2 focuses on the performance of the portfolio in terms of progress in implementation and

highlights some results achieved for the funded activities portfolio. It reports the trends in implementation, financial performance including disbursements, results performance, compliance with the legal conditions and covenants relating to the environmental and social safeguards (ESS), gender and indigenous peoples policies. Section 3 presents the progress in implementation of RPSP and PPF support in 2020 while section 4 highlights the lessons learned from implementation of the funded activities, RPSP and PPF. Section 5 covers the next steps and planned priorities for 2022 in order to strengthen portfolio implementation and performance with an annex that provides details on the COVID-19 pandemic impact on the GCF portfolio of funded activities, RPSP, PPF, and the Secretariat’s response measures.

1.3 Actions taken in 2020 to strengthen portfolio monitoring

3. In 2020, the Secretariat continued to strengthen its core function of monitoring the portfolio under implementation by ensuring adequate monitoring and evaluation (M&E) systems at design/origination stage and throughout the entire project/programme cycle.

Emerging challenges or changes during implementation continue to be proactively addressed and resolved to facilitate successful delivery of the expected results. Below are the follow-up actions and new initiatives taken by the Secretariat during the year of 2020 for funded activities, RPSP and PPF.

Funded activities

1 Initial monitoring and accountability framework for accredited entities, decision B.11/10, paragraph 14.

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Enhancing the quality of funding proposals

4. Over the past year, the Secretariat continued its efforts to improve the quality of funding proposals at entry by supporting AEs to better define Theories of Change (ToC) and logic

frameworks in their funding proposl submissions. This support is expected to improve the structuring, implementation and subsequent evaluability of funding proposals and maximize the potential of these proposals to generate real and measurable results and impacts.

5. As part of its quality enhancement processes, the Secretariat continues to review the existing portfolio to extract and reflect learnings as well as to identify and address issues at early stages that may affect implementation and impact on results. One example was the review of the mitigation impact of the funded activities, which the Secretariat conducted in 2020, based on which the Secretariat drafted guidelines on mitigation impact estimation that are to be applied in the process of reviewing new funding proposals. The Secretariat plans to conduct similar analysis on adaptation impacts on the beneficiaries which will further strengthen the quantification approach of the impact of adaptation projects.

6. In addition, the Secretariat established, in October 2020, an internal climate impact team (C-NET) to be headed by a Climate Science Lead with the purpose of advising and supporting AEs in better developing and structuring adaptation and mitigation funding proposals through the integration of the most recent climate science. The team took over the GHG emission reduction verification review and in 2020 piloted the review of 10 adaptation, mitigation and cross-cutting projects. The team is fully operational and now supports the review of all concept notes and funding proposals submitted to the Secretariat and eventually presented to the Board.

Addressing the monitoring and evaluation gap in the portfolio under implementation

7. Following guidance from the Board, the Secretariat conducted a gap analysis in the funded activities portfolio for measurement (M&E Gaps Analysis) covering a total of 100 projects/programmes between 2019 and 2020. As a result of the analysis, the Secretariat proposed conducting remediation measures for all projects/programmes where the risk levels were classified as medium, elevated or high.²

Improving monitoring capacity through online tools and guidance

8. To strengthen its portfolio monitoring and management capacity, the Secretariat has developed the first version of the Portfolio Performance Management System (PPMS) in 2020 which was rolled out for the funded activities portfolio in January 2021. The system not only allows AEs to submit reports such as the Annual Performance Reports (APRs) and inception reports online but also streamlines communications related to the reports’ review and feedback process within the Secretariat’s inter-divisional review teams and between the Secretariat and AEs, thereby increasing the efficiency of GCF support provision to AEs.The Secretariat will: (i) during 2021 upgrade the PPMS to process disbursement requests from AEs and include an internal approval on the system; (ii) expand the PPMS for the Readiness and Preparatory Support Programme (RPSP) in early 2022 to accelerate its digital transformation and (iii) continue working towards integrating the PPMS with other GCF management systems such as the digital accreditation platform, the integrated portfolio management system, and the financial management system in order to facilitate real-time monitoring of portfolio risks and

2 The work of the Secretariat in 2020 culminated in the approval of the M&E gap analysis by the Board at B.28.

Furthermore, following approval by the Board of the budget for Phase I of the remediation measures in August 2021, the Secretariat is currently in the process of recruiting a vendor to support its work. It is expected that once remediation activities are completed, the overall risk profile of the GCF portfolio in relation to results and impact will be significantly improved.

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proactive risk management actions. This integration will also aid the seamless exchange of information between the Secretariat and independent units.

9. The Secretariat will continue to to improve its evidence-based decision-making mechanisms by strengthening its portfolio and IT systems, data collection, analysis, management and dissemination. A preliminary study to develop the GCF portfolio data

management strategy and road map will soon be completed following an extensive consultation and engagement process across the Secretariat, with comparator/peer agencies and a select number of AEs. Once launched, a cross-divisional team will develop and implement an integrated data management and governance initiative. One example of such is the planned development and operationalization of the integrated project/programme risk and

performance management framework and dashboards on the PPMS which will enable the Secretariat to access integrated and consumable data from multiple divisions in one place and make evidence-based decisions.

10. Alongside the online tool for enhanced monitoring, the Secretariat has continued to provide necessary tools and guidance to AEs to fill important gaps in line with the maturing portfolio requirements. A template for a Project Completion Report was officially published and shared with AEs for reporting on projects/programmes that are coming to closure and to assist them collate valuable lessons and knowledge gained throughout the project/programme

implementation. To guide AEs whose projects are due for interim evaluations, a sample terms of reference (TOR) for evaluators to be hired to conduct interim and final evaluation of

projects/programmes was developed and currently included as an annex (annex V) in the programming manual. The TOR lay out overall scope, criteria and a methodology to be applied for the evaluation as well as expected outputs and deliverables which could serve as a useful reference, particularly for AEs without sufficient M&E capacity in place.

Strengthening results management framework

11. GCF continues to strengthen its results-based management practices and tools. During 2020, crucial preparatory work was undertaken to streamline and update the GCF results management framework (RMF) which in turn will enable a clearer and simpler results-based management of GCF’s portfolio for funded activities to support AEs in reporting actual results of their projects/programmes more accurately. The series of consultations on the updated

framework with stakeholders including Board members and AEs in 2020 was expected to lead to the adoption of the integrated results management framework (IRMF).³

Readiness and Preparatory Support Programme (RPSP) and Project Preparation Facility (PPF)

12. For the RPSP and PPF portfolios, the Secretariat has focused its efforts on assessing the performance of the grants and capturing lessons to enhance the effectiveness of portfolio monitoring and create a learning loop between portfolio monitoring and proposal development, as well as timely adaptive measures for implementation challenges.

13. In 2020, the Secretariat undertook development of the Readiness Results Management Framework (RRMF), assessment of the Readiness 1.0 grants, and the Readiness Knowledge Bank (RKB) Survey. In addition, the Secretariat proactively offered climate resilient recovery support and took more a flexible adaptive management approach for readiness grants, in response to the impact of the COVID-19 pandemic.

3 The Integrated Results Management Framework was approved and adopted by the Board at B.29, in July 2021.

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II. Performance review of the funded activities in 2020

14. This section provides a snapshot of the performance of funded activities under implementation for the reporting period spanning January to December 2020. As in previous years, this section will focus on progress in implementation, results performance, progress made against the investment criteria as well as compliance with the environmental and social safeguards, gender and indigenous peoples policy as reported by the AEs.

2.1 Implementation progress and performance

15. The number of projects under implementation continued on steady growth. As of 31 December 2020, there are a total of 116 out of 159⁴ approved projects/programmes (37 approved in 2020) under implementation, with the total value of USD 4.9 billion. When compared against the 75 projects/programmes under implementation in 2019, there are 40 additional projects/programmes in the portfolio, thus a 53 per cent increase.

16. The pace of graduation of projects from approval to implementation improved significantly. In 2020, it took less than a third of the time it took in 2019, 3.0 median months from project approval to implementation (funded activity agreement (FAA) effectiveness) compared to 10.7 months in 2019. The trend was reflected in the time taken from approval to first disbursement, which took less than half the time it took in 2019 with 4.9 median months compared to 11.3 months in 2019. This reflects the continuous improvement in efficiency as reflected in the downward trend (figure 1) in the time taken for projects to move to

implementation; in 2015 the time involved for projects to reach FAA effectiveness was 16.4 median months and 19.1 months to receive first disbursements.

Figure 1: Time taken for GCF board approval to FAA effectiveness and first disbursement (median months)

17. There was an increase in the number of projects reporting delays, most of which were due to restrictions on travel and gatherings in response to the COVID-19 pandemic. The status of project/programme activities as reported by the AEs in 2020 shows that 35 per cent of project/programme activities were on track, 28 per cent were not yet due for implementing, whilst 27 per cent experienced delays (figure 2).

4 A full list of the approved funding proposals is available on the GCF website at Approved projects | Green Climate FundThe Board approval has lapsed for FP104: Nigeria Solar IPP Support Program by the Africa Finance Corporation (AFC) as of 13 February 2021.

16.4

12.5

10.0 12.8

10.7

3.0 19.1

14.0 16.0

13.7 11.3

4.9

2015 2016 2017 2018 2019 2020

Approval to implementation Approval to first disbursement

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Figure 2: Status of project/programme outputs (per cent of scheduled activities)

18. Private sector projects tended to report higher activity completion rates and fewer delays compared to public sector projects. A comparison between public and private sector projects/programmes shows a huge difference in the proportion of completed activities. In 2020, while 25 per cent of the project/programme activities from private sector

projects/programmes had reached completion, only 4 per cent of the activities in the public sector portfolio were reported as completed. The relatively higher proportion of completed project/programme activities in the private sector are due to projects/programmes

implemented by direct access entities (DAEs) including XacBank, Development Bank of Southern Africa (DBSA), and National Bank for Agriculture and Rural Development, India (NABARD). In terms of project delay, 22 per cent of the activities from private sector

projects/programmes and 28 per cent for public sector projects/programmes reported that their activities were delayed mainly due to disruption in operation and supply chain due to the COVID-19 pandemic. Both public and private sector projects/programmes reported almost 35 per cent of their activities being on track, 31 per cent and 15 per cent of the activities from the public and private sector projects/programmes respectively reported as not yet due.

19. There was a sharp contrast in the proportion of activities completed by DAEs vis-à-vis those by international accredited entities (IAEs) with DAEs reporting higher rates of activity completion compared to IAEs. In 2020, the DAEs reported 14 per cent of their activities as completed while the IAEs only had 5 per cent of their project/programme activities being completed. This is due to the difference in average project/programme implementation duration between DAEs (7 years) and IAEs (9.8 years) with more complex designs, rigorous standards and procedures applied by the IAEs. With DAEs having a much shorter

implementation period, 42 per cent and 32 per cent of the activities by DAEs and IAEs respectively, are reported to be progressing on track, 25 per cent and 28 per cent of the activities by DAEs and IAEs were delayed, mostly due to COVID-19 and its impact on project/programme implementation, while respectively 16 per cent and 33 per cent of the activities from DAEs and IAEs were reported as not yet due.

20. Thematic analysis of the activities showed noteworthy differences in completed and delayed activities with mitigation projects/programmes reporting higher completion rates compared to cross-cutting and adaptation projects/programmes. In 2020, 19 per cent of the mitigation project/programme activities, 7 per cent of the activities from the cross-cutting portfolio, and only 3 per cent of the activities from the adaptation portfolio were reported as completed. Also, 30 per cent of the adaptation portfolio and 31 per cent of cross-cutting projects/programmes activities were being delayed compared to 16 per cent of the

project/programme activities in the mitigation portfolio reporting delays. Based on the AE

37%

34%

18%

8%

2% 1%

(75 projects/programmes)2019

Progress on track Not yet due Progress delayed Completed Ahead of schedule Other

35%

28%

27%

7%

2% 1%

(115 projects/programmes)2020

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reporting, the most common challenge experienced was found to be operational (57 per cent for adaptation and 48 per cent for mitigation) followed by challenges related to procurement (12 per cent for adaptation and 5 per cent for mitigation.) The proportion of activities progressing on track was however consistent across the three thematic areas – 34 per cent for mitigation, 36 per cent for adaptation, and 34 per cent for the cross-cutting portfolio. Finally, 28 per cent of mitigation, 29 per cent of adaptation and 24 per cent of cross-cutting project/programme activities reported that they were not yet due.

2.2 Financial performance, disbursement, and fund utilization

2.2.1. Disbursements

21. Cumulative disbursements grew by 65 per cent from USD 0.91 billion in 2019 to USD 1.51 billion in 2020 despite the COVID-19 pandemic headwinds. However, this was lower than the 111 per cent growth reported over the 2018–2019 period. Year-on-year, the volume of disbursements remitted in 2020 grew by 23 per cent from USD 481 million in 2019 to USD 593 million, though lower than the 72 per cent growth registered in 2019 as shown in figure 3.

There was a noted slowdown in project/programme activities with 32 projects that previously received disbursements not presenting new requests for disbursement in 2020. These projects mainly cited implementation delays related to COVID-19, delayed receipt of co-financing, and political challenges as contributing to the slowed implementation pace.

Figure 3: Growth in GCF disbursements from 2016–2020 (in USD)

In parentheses: Annual growth.

Abbreviation: M = million.

22. As the GCF portfolio under implementation grows, a widening gap between private sector disbursements and public sector disbursements has been observed in favour of the public sector as shown in figure 4. This cascades from the volume and number of

projects/programmes that have been approved – private sector share of approved projects/programmes as of December 2020 is 38 per cent by volume and 21 per cent by number. Consequently, the cumulative private sector disbursements amounted to USD 522 million compared to USD 985 million for public sector. Of the disbursements made in 2020, the private sector share accounted for 15 per cent (USD 91 million) with public sector contributing 85 per cent (USD 503 million).

5M

142M

(101%)285M

(72%)481M

(23%)593M

2016 2017 2018 2019 2020

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Figure 4: GCF disbursements by project/programme sector (in USD)

Abbreviation: M = million.

23. Thematically, the share of disbursements to mitigation projects/programmes in the portfolio, by volume, cumulatively increased from 40 per cent in 2019 (USD 370 million) to 46 per cent (USD 693 million) in 2020. Whilst the proportion of disbursements to adaptation projects/programmes increased from 22 per cent in 2019 (USD 198 million) to 26 per cent (USD 386 million) in 2020, there was a reduction in the share of cross-cutting project

disbursements from 38 per cent (USD 346 million) to 28 per cent (USD 428 million). Overall, the average disbursement rate for mitigation projects stood at 57 per cent, 34 per cent for

adaptation, and marginally lower at 33 per cent for the cross-cutting projects. This ranking was maintained in the utilization of funds with expenditure rates for mitigation, adaptation and cross-cutting observed at 45 per cent, 41 per cent, and 32 per cent respectively. Mitigation projects/programmes reported higher completion rates for project activities and fewer delays compared to the adaptation and cross-cutting ones as captured in section 2.1 of this report.

24. The volume of disbursements processed in 2020 witnessed a widening gap in favour of disbursements to IAEs which drew down USD 517 million (an increase of 23 per cent from 2019), whereas disbursements to DAEs declined from USD 82 million to USD 76 million (7 per cent decrease). Cumulatively, disbursements to IAEs stands at USD 1.29 billion versus USD 217 million for DAEs (figure 5). This disparity in volume terms is attributable to the number of projects disbursing in each category – of the 96 projects that have made disbursements as of 31December 2020, only 22 relate to DAEs with the remaining 74 managed by the IAEs.

Furthermore, the size of the disbursements requested by IAEs was larger (average – USD 14.2 million; median – USD 5.3 million) while DAE disbursements averaged USD 8.7 million with a median of USD 3.8 million.

Figure 5: GCF disbursements by access modality (in USD)

Abbreviations: B = billion, DAE = direct access entity, IAE = international access entity, M = million.

5M

88M

194M 143M

53M 91M 90M

337M

503M

2016 2017 2018 2019 2020

Private Public

1.29BIAE 86%

0.22BDAE 14%

105M

269M

399M

517M

5M 37M 16M 82M 76M

2016 2017 2018 2019 2020

IAE DAE

(16)

25. In terms of geographical distribution, disbursements to projects in the Asia-Pacific region continue to remain the highest, accounting for 36 per cent of the cumulative

disbursements (USD 536 million), followed by the Latin America and Caribbean (LAC) region with 28 per cent of the total disbursements (USD 416 million) and Africa receiving 22 per cent (USD 324 million) of total disbursements (figure 6).

Figure 6: GCF disbursements by region (in USD)⁵

Abbreviations: LAC = Latin America and Caribbean; M = million.

26. For year-on-year growth in disbursements broken down by region (see figure 7), LAC registered the highest growth of 307 per cent from USD 79 million in 2019 to USD 321 million in 2020 driven by full disbursements to three large REDD-plus projects totalling USD 210 million.

Africa also recorded a 121 per cent year-on-year growth in disbursements from USD 62 million to USD 137 million with a total of 24 projects/programmes requesting disbursements during the year as well as Eastern Europe which recorded a growth of 71 per cent (equivalent to USD 4 million). However, the Asia-Pacific region registered a 61 per cent decline in growth year-on- year mainly due to average size of the disbursements per project/programme that reduced from USD 13 million in 2019 to USD 5 million. Furthermore, three projects in the Asia-Pacific region that disbursed USD 154 million in 2019 still had adequate funds for project activities and hence did not request disbursements in 2020. Multi-region programmes also disbursed a lower volume of USD 29 million in 2020 compared to USD 88 million in 2019. This is explained by the fact that three approved multi-region projects/programmes had not commenced

implementation by the end of the year. Also, one big multi-region programme under implementation reported a slowdown in programme activities due to COVID-19 and consequently, rolled over their request for disbursement to next year.

5 The Secretariat does not require the AEs to report on the country allocation of disbursed GCF funds. Hence disbursements to four multi-regional projects are aggregated in a separate field.

Asia- Pacific

536M36%

Africa 324M21%

Multi-region 210M14%

416MLAC 28%

Eastern Europe 20M1%

(17)

Figure 7: Trend of GCF disbursements by region (in USD)

Abbreviations: LAC = Latin America and Caribbean, M = million.

27. Disbursements to vulnerable countries (VCs)⁶ were USD 239 million in 2020, matching prior year disbursements (USD 238 million) with cumulative disbursements at USD 647 million representing 43 per cent of total disbursements. A further USD 210 million (14 per cent) have been cumulatively remitted to multi-country projects/programmes with part contributions to VCs. Total disbursements to SIDS stand at USD 315 million being 21 per cent of all remittances.

An additional USD 28 million was disbursed to multi-country projects/programmes partly contributing to SIDS.

28. In terms of volume (see figure 9), grants, representing 44 per cent of the total disbursements by volume (USD 659 million), remain the most frequently used financial

instrument with 86 of the 96 projects that have received disbursements, most of which (75) are public sector projects. The share of grants disbursements in the total disbursements has

remained unchanged compared to the previous year. Senior loans rank second by volume and by number of projects, having disbursed USD 553 million as of December 2020 channelled through 16 projects. However, the share of senior loan disbursements in the portfolio, by volume, declined from 53 per cent in the previous year to 37 per cent in 2020. This is explained by the non-uniform distribution of loan disbursements over the project life with higher amounts frontloaded in the first disbursement particularly for large projects/programmes. The loan projects also reported a slowdown in uptake of loan products at subproject level due to the challenging macroeconomic environment exacerbated by the COVID-19 pandemic. The year 2020 saw remittance of USD 229 million in disbursements to results -based payments mainly to REDD-plus projects in Latin America. There was also drawdown of equity commitments (USD 34 million cumulative drawdowns) exclusively by the private sector; reimbursable grants (USD 28 million cumulative disbursements); and subordinated loans (USD 3 million cumulative disbursements).

6 Least developed countries, small island developing States and African States are collectively referred to as

“vulnerable countries”.

36M

157M

246M

96M

5M

96M

24M 62M

137M

94M 88M

9M 8M 29M

79M

321M

1M 2M 6M 11M

2016 2017 2018 2019 2020

Asia-Pacific Africa Multi-region LAC Eastern Europe

(18)

Figure 8: Cumulative GCF disbursements by financial instrument (per cent)

In parentheses: Number of projects/programmes.

Figure 9: Cumulative GCF disbursements trend by financial instrument (in USD)

2.2.2. Utilization of disbursed funds

29. Total expenditures for funded activities increased from USD 305 million in 2019 to USD 592 million, reflecting a 94 per cent growth as shown in figure 10. The expenditure rate⁷ also increased year-on-year from 33 per cent to 39 per cent of the funds disbursed driven by greater expenditure volumes from maturing projects that had commenced implementation before 2020.

The funded activities that had received the first disbursements prior to year 2020 exhibited cumulative expenditure rates of 54 per cent on average. In contrast, the projects that received the first disbursement in the course of 2020 only reported an average expenditure rate of 15 per cent in tandem with their young implementation age. By sector, cumulative expenditure by volume depicts the public sector accounting for USD 312 million (53 per cent) compared to USD 279 million (47 per cent) for the private sector. It is noteworthy that expenditure in the private sector was concentrated on only 17 projects/programmes compared to 79 public sector projects/programmes. The private sector projects/programmes thus exhibited a higher

cumulative expenditure rate of 54 per cent vis-à-vis 32 per cent for the public sector. The lower expenditure rate for the public sector can be explained by the reported implementation

bottlenecks particularly at project start-up such as delays in obtaining government approvals, establishing implementation arrangements, delayed co-financing and lengthy procurement processes as highlighted by many projects in this category. This position is also supported by

7The expenditure rate is defined as project expenditures (from GCF disbursements) divided by GCF disbursements.

Equity 2% (4) Grants 44% (86)

Reimbursable Grants 2% (1)

Results-Based Payment 15% (4)

Senior Loans 37% (16) Subordinated

Loans 0% (1)

54M 161M 402M 659M

5M 8M 8M

9M

34M

85M 263M

481M

553M 229M3M 21M

28M

2016 2017 2018 2019 2020

Grants Equity Senior Loans

Subordinated Loans Results-Based Payment Reimbursable Grants

(19)

the low expenditure rate of just 11 per cent for public sector projects that received first disbursement in year 2020.

30. DAEs reported a cumulative expenditure rate of 53 per cent compared with 37 per cent by the IAEs whereas the average disbursement rates were 42 per cent for DAEs and 39 per cent for IAEs. The higher disbursement and implementation rates for DAEs has translated to faster implementation of projects/programmes as evidenced by the higher proportion of completed activities and lower percentage of delayed activities for the DAE cluster as narrated in section 2.1 of this report. Projects in Africa recorded an expenditure rate of 61 per cent as of December 2020, with Asia-Pacific at 43 per cent, Eastern Europe at 40 per cent and Latin America and Caribbean at 19 per cent.

Figure 10: Cumulative trend of GCF funding under implementation, disbursement and expenditure (in USD)

2.2.3. Co-financing ratio

31. The GCF expected to mobilize co-financing of USD 11.5 billion, from the

projects/programmes under implementation with nominal value of USD 4.9 billion representing a co-financing ratio of 1:2.4. The anticipated co-financing ratios for various categories are reflected in the charts below:

Figure 11: Co-financing of portfolio under implementation in focus countries (in USD)

Abbreviation: B = billion.

25M 633M

1,791M

3,462M

4,878M

5M 147M 432M 913M 1,506M

0M 34M 127M 305M 592M

2016 2017 2018 2019 2020

Under Implementation Disbursement Expenditure

2.1B 2.8B

4.9B

(1: 2.8 ) (1: 2.1 )

(1: 2.4 )

5.8B 5.7B

11.5B

Other countries Vulnerable countries Total

GCF financing Co-financing

(20)

Figure 12: Co-financing of portfolio under implementation by project/programme type (in USD)

32. Narrowing down to the co-financing realized as of December 2020, the

projects/programmes report USD 1.06 billion in co-financing utilized in implementation, representing 9 per cent of the total anticipated co-financing. The COVID-19 pandemic is having an adverse impact globally and with governments and donors shifting priorities to tackling the pandemic, several AEs have expressed concerns over reduction or delays in receiving co- financing.

33. The split of co-financing realized by sector shows the private sector mobilizing more than USD 0.62 billion (58 per cent), primarily through loans with the public sector mobilizing USD 0.44 billion - almost exclusively through grants. This underpins the critical role that the private sector can play in mobilizing global climate finance.

34. IAEs marshalled USD 0.9 billion in co-financing, realized across 62

projects/programmes representing 85 per cent of total co-financing. This might be attributed to the sheer number and size of projects under the IAEs management. DAEs on the other hand, realized USD 0.16 billion in co-financing, channelled through 16 projects, accounting for 15 per cent. The role that IAEs play in mobilizing climate finance cannot be downplayed, but also equally important is the need for building the capacity of DAEs with respect to mobilizing climate financing and enhancing partnerships in efforts to tackle the climate change challenge.

2.2.4. Reflows and investment income

35. The portfolio witnessed over a threefold growth in cumulative reflows and investment income from USD 5.7 million in 2019 to USD 24.9 million in 2020 driven principally by activities in the loan portfolio in the private sector mitigation thematic area. The growth in 2020 was boosted by the capital repayments of USD 10.6 million from three private sector projects in the energy access and power generation result area.⁸ Cumulative interest repayments more than doubled from USD 2.7 million in 2019 to USD 8.5 million with the AEs making repayments in line with the agreed terms in the FAAs. Likewise, there was a 50 per cent cumulative increment in fees from USD 2 million to USD 3 million. The fees relate to commitment fees, service fees, front-end fees and other fees as set out in the respective FAAs. Overall, the loan facilities are performing with no defaults (non-performing loans) reported in the portfolio. The reported loan loss provisions however stand at USD 1.9 million as at the end of 2020. Investment income of USD 1.7 million was also received during the year from four AEs. The split of the reflows and investment income as at end of 2020 is as follows:

8Capital repayments of USD 10.6 million includes early loan settlement of USD 8.7 million by XacBank (FP046).

3.2B 1.7B

(1: 1.7 ) (1: 3.6 )

5.4B 6.1B

Public Private

GCF financing Co-financing

(21)

Figure 13: Annual reflows and investment income received (in USD)

Figure 14: Cumulative reflows and investment income (per cent)

2.3 Progress on results

2.3.1. Portfolio composition by eight result areas

36. In 2020, the portfolio distribution in eight results areas was reported as per the initial RMF and the programme management framework (PMF).⁹ For the mitigation portfolio under implementation, energy access and power generation represented the largest share accounting for 34 per cent (USD 1.63 billion) of the total GCF funding (USD 4.85 billion). Buildings, cities, industries and appliances had 11 per cent (USD 0.55 billion) allocated, followed by 10 per cent (USD 0.5 billion) for forestry and land use and 3 per cent (USD 0.12 billion) for transportation.

While the mitigation portfolio is still predominantly concentrated on energy and building sectors, the cumulative funding amount towards the remaining two sectors has increased by more than threefold (from USD 157 million to 0.5 billion) for forestry and fivefold for transport (from USD 71 million to 0.12 billion) from the previous reporting period of 2019.

37. For the adaptation portfolio under implementation, the area of health and well-being, food and water security had the largest share with 13 per cent (USD 0.63 billion) of the total GCF funding. Livelihoods of vulnerable people and communities was in second place, accounting for 12 per cent which is an increase by almost 40 per cent from 2019 (from USD 425 million to 0.6 billion) as shown in figure 15. Infrastructure and built environment also represented 12 per

9Currently, AEs are using the initial RMF and PMF in reporting their results in the APR. Once the IRMF formally replaces the initial RMF and PMF applying to funding proposals submitted at B.32 and onwards, the reporting structure and arrangement will follow the new framework and guidelines.

2.0M 2.2M 1.0M

10.6M 1.1M

5.8M 1.7M

Capital Repayment Fees Interest Payment Investment Income

2019 2020

Capital Repayment 43%

Fees12%

Interest Payment

34%

Investment Income 11%

(22)

cent (USD 0.56 billion) while ecosystem and ecosystem services amounted to 5 per cent (USD 0.26 billion) of the total funding, which, although the smallest amount in absolute terms, increased by 59 per cent from 2019, the highest rate of increase among adaptation result areas year-on-year.

Figure 15: GCF funding under implementation result areas (in USD)

In blue shades: Mitigation result areas.

In green shades: Adaptation result areas.

2.3.2. Impact potential and achievement rate of the portfolio¹⁰

38. In 2020, the total climate mitigation impact potential of the 61 projects under implementation is estimated at 723 million tonnes of carbon dioxide equivalent (tCO2eq) of emissions reduced or avoided over the lifetime of the projects. By the end of 2020, the AEs reported to have reduced or avoided 50 million tCO2eq, which accounts for 7 per cent of the total impact potential.

39. With regard to the adaptation impact, 83 projects under implementation are expected to contribute to a total of 305 million beneficiaries over the lifetime of the projects. By the end of 2020, the AEs had reported that the total number of direct and indirect beneficiaries reached was 49 million, accounting for 16 per cent of the total adaptation impact target. The figures below show graphical illustrations of progress per region, core indicator, access modality, and project type.

10The overall approach (and methodologies) for impact calculation and reporting is being assessed by the Secretariat and will be reflected in future reporting.

1.18B 34%

0.43B 13%

0.16B 0.07B 5%

2%

0.49B 14%

0.42B 12%

0.54B 15%

0.16B 5%

2019

1.63B 34%

0.55B 0.5B 11%

10%

0.12B 3%

0.63B 13%

12%0.6B 0.56B

12%

0.26B 5%

2020 Energy access & power generation

Buildings, cities and industries &

appliances

Forestry and land use Low emission transport

Health and well-being, and food &

water security

Livelihoods of vulnerable people and communities

Infrastructure & built environment Ecosystem & ecosystem services

(23)

Figure 16: Achievement rate of core indicators

Figure 16a: Achievement rate of mitigation core indicator by region

Abbreviations: LAC = Latin America and Caribbean, M = million.

Figure 16b: Achievement rate of adaptation core indicator by region

Abbreviations: LAC = Latin America and Caribbean, M = million.

Figure 16c: Achievement rate of core indicators by access modality

Abbreviations: DAE = direct access entity, IAE = international access entity, M = million.

Figure 16d: Achievement rate of core indicators by project/programme type

81 M

330 M

159 M

3 M

149 M

19% 4% 13% 1% 1%

Africa Asia-Pacific LAC Eastern Europe Multiregional Mitigation impact target (tCO2eq) Achieved

136M 201M

24M 9M 24M

36% 0% 1% 5% 0%

Africa Asia-Pacific LAC Eastern Europe Multiregional Adaptation impact target Achieved

65M

658M

21% 6%

DAE IAE

Mitigation impact target (tCO2eq) Achieved

54M

340M

78% 2%

DAE IAE

Adaptation impact target (number in millions) Achieved

445M

278M

6% 8%

Public sector Private sector Mitigation impact target (tCO2eq) Achieved

348M

2% 46M 91%

Public sector Private sector

Adaptation impact target Achieved

Annual portfolio performance report (2020)