policy report: analysis of the green climate fund ... · analysis of the green climate fund...

Dialogue. I ns ight . S olut ions.

P O L I C Y R E P O R T:

A N A LY S I S O F T H E G R E E N C L I M AT E F U N D F R A M E W O R K F O R M E A S U R E M E N T, R E P O R T I N G , A N D V E R I F I C AT I O N

WRIT TEN BY:

Carolina Aguirre Echeverri, Carley Reynolds and Stacey Davis

D E C E M B E R 2018

1 Analysis of the Green Climate Fund Framework for Measurement, Reporting, and Verification

Analysis of the Green Climate Fund Framework for Measurement, Reporting, and Verification

December 2018


Acknowledgements This paper was written by Carolina Aguirre Echeverri, Senior Policy Associate, Carley Reynolds, Research

Associate, and Stacey Davis, Director of Policy and Programs, with input from Laurence Blandford,

Director of International Policy Analysis. We would like to thank all those with whom we consulted on

this paper. We thank interviewees from accredited entities Claudia Godfrey Ruiz (Profonanpe), Pradeep

Kurukulasuriya and Srilata Kammila (UNDP), Steven Panfil (Conservation International), Andrea

Rodriguez Osuna (Fundación AVINA), and Greg Zegas (Xac Bank). We would also like to thank the staff

from the Green Climate Fund that provided their views (Division of Mitigation and Adaptation, Office of

Portfolio Management, and Private Sector Facility) and Andreas Reumann from the Fund’s Independent

Evaluation Unit. Finally, we thank Pedro Barata (former Clean Development Mechanism); Knut Roland

Sundstrom, Ming Yang, Carlo Carugi, Sonja Sabita Teelucksingh, Minna Maria Kononen, Filippo Berardi,

and Milena Gonzalez Vasquez (Global Environment Facility); and Janka Clauder and Gunnar Wegner

(NAMA Facility).

This work was undertaken with the generous support of the Swedish Energy Agency (SEA).

The views expressed in this paper represent only those of CCAP and not necessarily those of any other

institution or individuals mentioned above. For further information, please contact Carolina Aguirre

Echeverri at [email protected]

mailto:[email protected]


List of Acronyms

AE Accredited Entity

AMA Accreditation Master Agreement

APR Annual Performance Report

CDM Clean Development Mechanism

FAA Funded Activity Agreement

GCF Green Climate Fund

GEF Global Environmental Facility

GHG Greenhouse Gases

GI Governing Instrument

IEU Independent Evaluation Unit

ITAP Independent Technical Advisory Panel

MAF Monitoring and Accountability Framework

MDB Multilateral Development Bank

MRV Measurement, Reporting and Verification

NDA National Designated Authority

NDC Nationally Determined Contributions

OPM Office of Portfolio Management

PMF Performance Measurement Framework

RMF Results Measurement Framework

UNFCCC United Nations Framework Convention on Climate Change


Table of Contents Acknowledgements ....................................................................................................................................... 2

List of Acronyms ............................................................................................................................................ 3

Executive Summary ....................................................................................................................................... 5

Introduction .................................................................................................................................................. 6

Methodology ................................................................................................................................................. 7

Brief Overview of GCF Procedures ................................................................................................................ 8

Findings ....................................................................................................................................................... 10

Recommendations ...................................................................................................................................... 14

1) Improve MRV guidance and current practice in applying MRV procedures. ..................................... 14

2) Develop systems to measure paradigm shift outcomes ..................................................................... 16

Annex I. Review of GCF MRV Requirements and Procedures

Annex II. Review of MRV in Selected Energy Efficiency Proposals

Annex III. Review of MRV Practices at Comparable Institutions


Executive Summary As the primary operating entity of the UNFCCC financial mechanism, the Green Climate Fund (GCF) is the

largest dedicated fund to support the achievement of the Paris Agreement, including the goal to limit

the global temperature increase to 1.5 degrees Celsius and the implementation of developing countries’

Nationally Determined Contributions (NDCs). To this end, the Fund has a distinct mandate to effect a

paradigm shift to fundamentally lower carbon emissions and support adaptation. The GCF needs metrics

and methods tailored to measure whether its investments are in fact transforming the decisions of

climate finance users and providers (public and private). The Fund also needs to credibly assess the

actual mitigation and adaptation impact of its investments. Accurate and comparable information would

allow stakeholders to determine whether and how well the Fund is fulfilling its critical mission.

This paper presents the findings from our research and recommended steps to improve existing

Measurement, Reporting and Verification (MRV) systems. Overall, while there are policies in place that

have been applied since the Fund started operating, GCF’s MRV procedures are incomplete. As the Fund

began allocating resources soon after it was founded, many of its policies and procedures, including

those for MRV, were built up quickly and should be re-examined. Our findings are summarized below:

Finding 1: The GCF proposal design process is missing sufficient MRV guidance Finding 2: The Fund’s proposal review process is inconsistent in its assessment and improvement of MRV quality Finding 3: The Fund lacks sufficient MRV guidance for reporting during implementation Finding 4: MRV guidance is not sufficiently included in other policies or processes of the Fund Finding 5: Existing MRV procedures do not adequately measure paradigm shift The paper offers recommendations to improve internal and external MRV guidance and current practice

in applying MRV procedures, summarized as follows:

Recommendation 1: The Secretariat should improve MRV guidance and current practice in applying MRV procedures. This includes:

Finalizing the MRV system and developing internal and external guidance to strengthen MRV

procedures during the proposal design and review processes;

Including MRV procedures and guidelines under policies and processes up for Board consideration

such as the second level due diligence, programmatic policy approach, and two-stage approval

process; and

Modifying the internal review process to ensure that OPM provides an early review of the quality of

theory of change and logic framework design.

Recommendation 2: The Board and Secretariat should develop systems to support evaluation and achievement of paradigm shift outcomes. In particular:

The Board should put forward a work agenda (with corresponding resources) to improve the Fund’s

MRV system and how the Fund measures transformation; and

The Secretariat should work with the Independent Evaluation Unit (IEU) to design an MRV system

with indicators and methods for transformation.


Introduction The Green Climate Fund (GCF) was created under the United Nations Framework Convention on Climate

Change (UNFCCC) to finance ambitious efforts by developing countries to reduce greenhouse gas (GHG)

emissions and adapt to climate change. As the primary operating entity of the UNFCCC financial

mechanism, the Fund is expected to support the achievement of the Paris Agreement, including the goal

to limit the global temperature increase to 1.5 degrees Celsius and the implementation of developing

countries’ Nationally Determined Contributions (NDCs). To this end, the Fund has a distinct mandate to

effect a paradigm shift to fundamentally lower carbon emissions and support meaningful adaptation.

In its first four years, the GCF committed USD 4.6 billion to 93 projects/programs covering mitigation

and adaptation. With only USD 1.5 billion1 left to allocate, the Fund has launched the process to solicit a

second round of funding commitments (replenishment). As the Fund began allocating resources soon

after it was founded, many of its policies and procedures were built up quickly and remain rudimentary.

Those for monitoring, reporting, and verification (MRV) are no exception.

Having accurate and comparable

assessments of emissions reductions

and other criteria and outcomes at

each stage of the process is critical to

meeting the overall mission of the

Fund. At the proposal design stage,

MRV information can be used to

modify project/programme designs to

be more impactful. At the proposal

review stage, MRV information can

support the selection of the strongest

proposals. MRV is also important to

ensure that projected impacts are

realized. Having comparable methods

will allow the Fund to aggregate

outcomes from individual projects to

report on the overall achievements of

the Fund and support continuous

improvements. Overall, having data

that are viewed as comparable will foster confidence in the impact of individual projects and the Fund as

a whole.

1 The Fund’s commitment authority, as reported by the Secretariat at the twentieth first meeting of the Board, leaves approximately USD 1.3 billion to be committed for the remaining GCF initial resource mobilization period. An additional USD 0.5 billion has been set aside for the operation of the Fund.

Box 1. MRV definition The practice of MRV integrates three interrelated processes: Measure: Gathering data and information on emissions and mitigation actions. This may entail direct physical measurement of GHG emissions, estimating emissions/emissions reductions using activity data and emission factors, calculating changes relevant to sustainable development, and collecting information about support for climate mitigation Report: The compilation of this information in inventories and other standardized forms to make it accessible to a range of users and facilitate public disclosure of information Verify: Periodically subjecting the reported information to some form of review or analysis or independent assessment to establish completeness and reliability. Verification helps to ensure accuracy and conformance with established procedures, and can provide meaningful feedback for future improvement


Furthermore, a strong MRV system has the potential to support credible assessments of the

transformational change the Fund aims to effect. Evidence of a project/programme’s transformational

impact is needed to evaluate whether the Fund is “shifting the paradigm”. Currently, despite a prevalent

aspiration of environmental, climate, and development organizations to deliver transformational

change, “definitions remain elusive, and there is nearly a complete absence of evidence on whether

transformational change has been achieved.”2

To assess whether the Fund’s MRV procedures are supporting the aims of the Fund, CCAP undertook a

comprehensive assessment of current practices. This paper presents the findings from our research

along with recommended steps to improve existing MRV systems. The following sections of the paper

explain: the methodology used in our assessment; the current MRV procedures used by the GCF; the

main findings with respect to current GCF MRV approaches; and recommendations to improve each of

these processes. We also provide technical appendices that go into more detail on 1) the GCF’s MRV

procedures; 2) a review of MRV procedures used in a sample of proposals on energy efficiency; and 3)

MRV approaches used by comparable institutions, including potential lessons for the GCF.

Methodology To assess whether the Fund’s MRV procedures are 1) supporting the development and selection of

impactful, transformational proposals and 2) adequately tracking the Fund’s contributions to

international climate mitigation goals, CCAP undertook a comprehensive review of the GCF’s MRV-

relevant policies and practices, including how a sample of proposals interprets the MRV requirements.

We also looked at procedures used at three comparable institutions. Based on this research and our

knowledge of the GCF and MRV methodologies, this paper includes recommendations to overcome the

identified shortcomings.

Our analysis began with a desk review of the GCF’s current MRV practices over the different stages of

the GCF process. We supplemented this with interviews with GCF Secretariat staff, including staff from

the Division of Mitigation and Adaptation (DMA) and the Office of Portfolio Management (OPM), as well

as the Independent Evaluation Unit (IEU) and accredited entities (AEs). Questions related to the role of

the Secretariat and AEs in the MRV framework, existing MRV procedures, and the quality of the MRV

and how it can be improved. Questions for AEs drew on their experiences with MRV during proposal

design, proposal review, and implementation.

To get a better sense of how well the GCF’s MRV framework yields accurate and comparable results, we

reviewed a subsample of approved GCF funding proposals in a single result area (“buildings, cities and

industries and appliances”). Proposals that were deemed to be cross-cutting were excluded from the

2 Puri, Jyotsna. Transformational Change – The challenge of a brave new world. IEU Working Paper No. 001, 2018. https://ieu.greenclimate.fund/documents/977793/985626/Working_Paper_-_Transformational_Change_-_The_Challenge_of_a_Brave_New_World.pdf/96702562-0e1d-3e9a-a9cc-bbea65103bbe

https://ieu.greenclimate.fund/documents/977793/985626/Working_Paper_-_Transformational_Change_-_The_Challenge_of_a_Brave_New_World.pdf/96702562-0e1d-3e9a-a9cc-bbea65103bbe

https://ieu.greenclimate.fund/documents/977793/985626/Working_Paper_-_Transformational_Change_-_The_Challenge_of_a_Brave_New_World.pdf/96702562-0e1d-3e9a-a9cc-bbea65103bbe


analysis (e.g., those that included both the buildings result area as well as adaptation result areas). The

review looked at the MRV methodology and data used to estimate emission reductions; logic

frameworks and theories of change; and AEs’ stated monitoring, reporting, and evaluation plans.

Finally, to gather insights on recommendations applicable to the GCF process, we reviewed MRV

approaches used by several comparable institutions: the NAMA Facility, the Global Environment Facility

(GEF) and the Clean Development Mechanism (CDM). In each case, we began with a desk review of MRV

procedures and reinforced the findings with interviews.

Brief Overview of GCF Procedures MRV is a part of every stage of the GCF project cycle, from the accreditation of entities to the

quantification and aggregation of project outcomes at the portfolio level, as follows (see Annex I for

additional details):

1. Accreditation: Prospective applicants must go through an accreditation process to channel GCF

resources. The Secretariat and an Accreditation Panel review applicant’s qualifications and their

capacity to act as fiduciaries to the Fund. The Fund relies on the internal processes and policies of

prospective AEs to guarantee project/programme quality (known as first-level due diligence). For

MRV purposes, the accreditation process requires AEs to have in place frameworks to design,

appraise, manage, monitor, and evaluate projects and programmes, in order to conduct a first-level

due diligence that guarantees proposal quality. The accreditation review, however, focuses on

procedures, not on the quality of MRV AEs use. Upon accreditation, AEs and the Fund formalize

their partnership in an Accreditation Master Agreement (AMA).

2. Proposal Design: Funding proposals must address requirements set in the Fund’s frameworks and

policies. A proposal template guides AEs on required proposal content. AEs must describe how

proposed activities perform against the Fund’s investment framework (criteria on expected impact,

transformation potential, co-benefits, country-ownership and needs, and efficiency and

effectiveness of proposals), conduct economic and financial analyses, and develop a theory of

change to indicate the causal changes leading to expected impacts. The Fund developed a Results

Management Framework (RMF) that indicates the causal chain through which project/programme

level changes should lead to Fund-level impacts, and ultimately, to achieve its paradigm shift

objective for mitigation and adaptation. The RMF provides indicators for impacts (outcomes) at

project/programme level (e.g., lower energy intensity of buildings, cities, industries and appliances),

portfolio (Fund) level (e.g., reduced emissions from buildings, cities, industries and appliances), and

long-term objective level. A Performance Measurement Framework (PMF) further develops the RMF

and provides additional indicators that AEs must incorporate in proposal design and measure during

implementation (e.g. tons of carbon dioxide equivalent (t CO2eq) reduced or avoided as a result of


Fund funded projects/programmes). Proposals also include basic plans for monitoring and reporting

at the implementation stage.

3. Proposal Review: The Secretariat and an independent Technical Advisory Panel (ITAP) review

funding proposals and make recommendations to the Board on proposal approval or conditional

approval3. The Secretariat conducts an initial review of proposal completeness, and a second-level

due diligence. It must also assess proposal compliance with environmental and social safeguards,

the Fund’s gender policy and its operational guidelines4, risk guidelines, financial policies, and

relevant Board guidance. The Secretariat also assesses the performance of project/programmes

against the Fund’s investment framework, and the proposed logic model. This review involves

multiple divisions within the Secretariat and back and forth between the Secretariat and AEs. The

process can take months to complete.

In turn, ITAP, a six-member body of experts in various sectors and geographies, reviews proposals’

performance against the Fund’s investment criteria and the proposed theory of change. ITAP must

use a low-medium-high scale to assess the performance of medium and large projects/programmes

against the Fund’s six investment criteria. Micro and small projects/programmes are also assessed

against the criteria, but are not assigned a score. ITAP will consider how proposals perform against

investment criteria indicators—indicators that are meant to inform how a given proposal performs

as compared to others that have been submitted—once these are considered and approved by the

Board. However, the details are still being defined and are subject to consideration by the Board.

The expected timeline for ITAP’s review of funding proposals is not defined in the Panel’s terms of

reference or other GCF policies. Per current practice, ITAP is given approximately two weeks to

review funding proposals.

4. Reporting during Implementation: Per the Fund’s Monitoring and Accountability (MAF) framework,

AEs must submit Annual Performance Reports (APRs) on project/programme implementation.

Throughout programme implementation, each project follows each AE’s methodologies. AEs must

report on the implementation of project activities, financial performance, and progress toward logic

framework indicators. Upon proposal approval, the AE in charge and the Secretariat agree on a

Funded Activity Agreement (FAA) that provides the legal scope for project/programme

implementation, and may include additional reporting requirements. Per the MAF, AEs must

conduct a mid-term and final evaluation of projects/programmes under implementation.

3 Per the Fund’s reviewed proposal approval process (B.17/09), the Board can, in turn, approve, approve based on conditions or modifications, or reject funding proposals. 4 The Board adopted the Fund’s Gender Policy and Action Plan, including operational guidelines applicable to activities in funding proposals, at its ninth meeting (B.09/11). A review was requested by the Board at its twelfth and sixteenth meetings; however, there have been no decisions on the review and update of the document and corresponding action plan.


5. Verification: Neither the MAF nor any other existing policies provide an indication of the extent or

depth of the verification conducted by the Secretariat of APRs, mid-term or final evaluations.

According to MAF, the Secretariat can make additional arrangements for post-implementation

verification.

6. Quantification and aggregation of project-level outcomes: The Secretariat’s Office of Portfolio

Management (OPM) aggregates reported data from individual projects with a view to measure

portfolio-level impact and effected transformation. It is unclear which data the Secretariat would

use for this aggregation.

Findings This section presents the results of CCAP’s review of the GCF’s MRV-relevant policies and practices.

Overall, we find that, while there are some MRV-relevant policies in place that have been applied since

Fund was operationalized, the GCF MRV system is incomplete, and it fails to assess the transformation

the Fund is mandated to effect. As the Fund began allocating resources soon after it was founded, many

of its policies and procedures, including those for MRV, were built up quickly and remain rudimentary.

We highlight five main findings below:

Finding 1: The GCF Proposal Design Process is Missing Sufficient MRV Guidance The Fund offers limited guidance to AEs on what proposals’ MRV components should look like or the

level of depth in which they should be described. This leads to varying interpretations and uneven

mention of MRV methodologies and processes in the proposals. Little guidance on expectations and

depth of MRV content also means that AEs have flexibility in selecting their own approaches.

The Fund does not provide guidance on assumptions and methodologies to be used by AEs or on

expectations in terms of impact.

In terms of assumptions, for example, there is no clarity on what discounts rates should be used.

As a result, some AEs use guidance provided by MDBs5 while others do not.

In terms of methodology, important terms such as “cost-effective”6, “attribution”, or “incremental

cost” are not defined. For CO2 reduced, for example, there is no guidance on how to define the

project scope, inclusion of direct vs. indirect emissions reductions, or how to define the life of the

project. Quantification procedures, including how to define project boundaries and baselines, or

consider factors such as emissions leakage or the rebound effect, are also not clear. In the case of

paradigm shift, no metrics have been identified to measure the shift, and quantification

methodologies also do not exist.

5 Some of the AEs CCAP interviewed noted using methodologies for financial and economic analyses developed by the World Bank or the Asian Development Bank. 6 While the GCF has an approved indicator to calculate cost-effectiveness that all mitigation projects must report on, there is no conceptual definition of cost-effectiveness to guide AEs.


In terms of expectations, there is no guidance as to desirable levels of performance for GHG

emissions, paradigm shift, or any of the investment criteria.

The Fund’s limited guidance often results in proposals with low quality MRV.

Some proposals have a logic framework that lacks internal consistency and indicators that do not

match expected outcomes. Some proposals resort to generic recounts of the RMF section in their

AMA, and the OPM has identified the need to work with AEs to develop fewer, but higher-quality,

results-oriented metrics. CCAP’s analysis of GCF energy efficiency proposals showed that results

tracked in logic frameworks were poorly aligned with presented theories of change. Additionally,

proposal logic frameworks did not consistently track indicators from the PMF. (See Annex II for

details of this analysis of MRV in GCF energy efficiency proposals.)

Many projects do not quantify emissions baselines.

o Based on our review of funding proposals, while proposals gave qualitative descriptions of

the project objective against the baseline scenario, few proposals included quantitative

analysis of baseline scenarios and assumptions in the methodology description of emission

reduction calculations. Only one proposal described in detail assumptions made regarding

the baseline scenario and how these were incorporated into the investment criteria

calculations. (See Annex II for further detail.)

o Further, the IEU’s review of the RMF revealed that half of approved proposals do not plan

to collect baseline data on key variables. Only 14 percent of proposals explicitly indicated

they would collect baseline data7. Proposals that lack a quantified emissions baseline would

also not be able to quantify the impact of the investment, one of the Fund’s fundamental

metrics.

o Few projects mention in their proposal a valid counterfactual. Few proposals explain how

they would compare the outcomes of their interventions to a counterfactual that is

constructed in a methodologically valid way.

AEs may not select useful metrics. AEs appear to prefer “low-hanging fruit” metrics that can be

conveniently and inexpensively monitored, but do not necessarily contribute to measuring impact.

The OPM noted it has prioritized incentivizing AEs to use results-oriented metrics and reliable

measuring methods and avoid selecting indicators that fail to provide relevant information on

effected changes.

MRV is being systematically under-budgeted. In its review of the GCF RMF, the IEU found that 70

percent of the projects in the GCF portfolio have insufficiently planned and budgeted for monitoring

and evaluation to credibly assess whether their targets have been met.

Finding 2: The Fund’s Proposal Review Process is Inconsistent in its Assessment and

Improvement of MRV Quality

The Fund appears to assume that AEs already have solid MRV systems.

7 Independent Evaluation Unit (2018) Independent Review of the GCF’s Results Management Framework, Evaluation Report No. 1/2018, Green Climate Fund, Songdo, South Korea.


Based on the first due diligence principle8, the Fund assumes that entities that have been

accredited have the capacity to design high-quality proposals, including sound MRV components,

but this is not necessarily the case. For instance, CCAP’s review of a subset of energy efficiency

projects revealed that although the GCF requires proposals to include a theory of change, only four

of the ten proposals had any explicit description of one. Three of the four proposals included a visual

representation of the theory of change, while the fourth had a brief description and referred to an

annex with the full theory of change. Two of the proposals with visual representations of the theory

of change somewhat aligned their theory of change with their logic framework, mostly on the

activity level, while the third did not align their theory of change with their logic framework at all.

The Fund lacks a clear protocol for vetting proposals, negatively affecting AEs and the Fund.

Various divisions within the Secretariat apply their own internally developed criteria and may

comment on proposals’ MRV and performance. This has led to contradictory feedback as the

different divisions have varying priorities. Some AEs have indicated that goalposts tend to move as

they engage with different teams within the Secretariat or as new staff joins. As the IEU noted in its

RMF review, due to the absence of guidance, different divisions in the Secretariat draw from various

policy documents and interpret and operationalize criteria for proposal selection and approval in

different and often inconsistent ways1.

OPM, whose role is to manage the Fund’s portfolio during implementation, often reviews

proposals at a later stage once other divisions have already vetted projects. OPM is thus unable to

offer early feedback to AEs on their MRV procedures. This means any recommendations made by

the OPM would require substantial changes at a late point in the process, making it less likely that

AEs incorporate them in their proposals prior to Board consideration.

Use of inconsistent metrics hampers assessments. Currently each proposal uses its own metrics to

define success, making it burdensome on the Fund to assess the relative impacts of different

proposals.

There is a need for greater consistency in how impacts are evaluated across projects. We note that

other institutions have also observed a tension between comparability and flexibility. MRV procedures,

however, work best when they avoid a one-size-fits all approach and ensure that individual projects are

still able to use procedures that are appropriate for the sector and scale of the initiative.

Precedence exists for a more extensive review process. In particular, the NAMA Facility conducts

on-site assessments of projects considered for support. As part of this, they may require

recalculation of estimates and make efforts to verify data quality and assumptions. Desk officers at

the NAMA Facility also use a standardized check list to evaluate proposals.

8 Once accredited, the Fund relies on AEs to design high-quality funding proposals based on their internal capacities, policies, and practice, and comply with GCF requirements and policies.


Finding 3: The Fund Lacks Sufficient MRV Guidance for Reporting during Implementation

Inconsistent methodologies at the stage of monitoring and reporting means that reported metrics are

not comparable. While all projects report to the Fund using the same APR template, and therefore use

the same indicators for outcomes and impacts at the portfolio level (for example, tons of CO2 reduced

over the life of the project, cost/ton, incremental cost of the project, and co-financing), the use of

different methodologies to estimate emissions and emissions reduced during implementation means

that the reported results generally cannot be aggregated at the portfolio level. In fact, the IEU has

observed that a large proportion of GCF projects have not made sufficient provisions to ensure credible

reporting of results. The IEU further emphasized “AEs vary in their methodologies to measure and report

indicators. This raises questions on the comparability of the data and the reliability of aggregated data

across the portfolio”.9

Evaluation plans in funding proposals are vague. Proposals tend to provide only general information on

evaluations that will be conducted and their timing. The level of detail provided by AEs varies

significantly. According to our review of funding proposals, only one proposal in the sample provided a

detailed description of the actual methodology that the AE planned to use to measure energy savings.

(See Annex II for further detail.)

Finding 4: MRV Elements are not Sufficiently Integrated into Other Policies and Processes of

the Fund

The second-level due diligence process10 is not yet finalized. There are currently no formal policies or

guidance or shared understanding on the nature, scope, and extent of the second-level due diligence

that the Secretariat must conduct.1 The Secretariat is currently developing a proposed policy that fleshes

out the second-level due diligence scope and steps, and assigns responsibilities for divisions within the

Secretariat. No document with a proposed approach has been made available yet.

Several pending policies awaiting Board consideration and approval are relevant to complement the

Fund’s MRV system. Incorporating sound MRV elements into these policies could contribute to

improved proposal comparability and data consistency. Failing to address MRV requirements in these

documents would be a missed opportunity. Key pending policies include:

Two-stage approval process. The proposed policy describes options for a two-stage review process

of funding proposals. It makes the submission of concept notes mandatory as part of the project

cycle. Two review processes would be conducted, first of concept notes, then of fully developed

proposals. There are no references to a review of key MRV elements early on (for instance, a sound

theory of change to guide proposal design) in the proposed scope of the two-stage review policy or

in the tables detailing information to be included in each stage of the project/programme cycle.

9 Independent Evaluation Unit (2018) Independent Review of the GCF’s Results Management Framework, Evaluation Report No. 1/2018, Green Climate Fund, Songdo, South Korea. 10 Per stage V of the Fund’s proposal approval process (reviewed in decision B.17/09), the Secretariat must conduct “necessary and appropriate second level due diligence”.


Programmatic policy approach. The proposed policy provides the definition of a GCF programme,

and guidance for programme submission and approval. There are no references to the challenges

that data collection and MRV may pose for programmes, or how to approach MRV in programme

design and review.

Finding 5: Existing MRV procedures do not measure paradigm shift

While the GCF’s mission is to effect a “paradigm shift”, the Fund’s MRV framework lacks indicators

and methods to measure transformational impacts at both the project and portfolio levels. For

instance, the GCF currently faces challenges in determining the impacts of its investments on the

achievement of countries’ NDCs or longer-term low carbon development goals. Similarly, it is unclear

whether the Fund is helping to transform markets and shift financial flows towards climate-compatible

investments. In its review of the Fund’s RMF, the IEU found that indicators for paradigm shift objectives

are not well-designed, and “yet are expected to inform critical top-level results from the Fund”11.

Absent appropriate indicators and methods to measure paradigm shift, some AEs develop internal

interpretations. AEs’ interpretations may not align with the Fund’s own understanding and may also be

inconsistent with definitions used by other AEs. Having consistent metrics and methods on paradigm

shift is critical to selecting the most transformational projects as well as demonstrating the Fund’s wider

impact towards reaching global climate mitigation goals.

Recommendations Our findings and analysis point to a number of opportunities to improve the Fund’s MRV systems to

realize more impactful outcomes. This includes making improvements to ensure that existing metrics

that are tracked yield meaningful results at both the project and Fund levels. It also means ensuring the

Fund has the capability to demonstrate that it can deliver a paradigm shift as it supports developing

countries in achieving low-carbon, climate-resilient development and in mobilizing international and

domestic private climate flows. Our recommendations are as follows:

1) Improve MRV guidance and current practice in applying MRV procedures. As there is already a strong structure for the MRV process and existing proceedings aimed at improving

the proposal process generally for GCF projects and programmes, many of the changes that would help

improve the effectiveness of these procedures can be implemented by the Secretariat12.

11 Independent Evaluation Unit (2018) Independent Review of the GCF’s Results Management Framework, Evaluation Report No. 1/2018, Green Climate Fund, Songdo, South Korea. https://www.greenclimate.fund/documents/20182/1270184/GCF_B.21_20_-_Results_management_framework__Independent_Evaluation_Unit_recommendations_to_improve_the_Results_Management_Framework_-_Final_Report.pdf/17a4ccbb-b891-53bf-55b1-b4d4c8a7a734 12 Note there is a pending mandate from the Board (decision decision B.08/07) to the Secretariat to review and further complement the Fund’s RMF and PMF.

https://www.greenclimate.fund/documents/20182/1270184/GCF_B.21_20_-_Results_management_framework__Independent_Evaluation_Unit_recommendations_to_improve_the_Results_Management_Framework_-_Final_Report.pdf/17a4ccbb-b891-53bf-55b1-b4d4c8a7a734




Finalize the Fund’s MRV system. Use the Fund’s RMF and PMF13 as the basis for an improved and

comprehensive MRV system, and use the IEU’s recommendations to improve the RMF. The Secretariat

could consider whether differentiation is needed by result area, and whether to allow larger

programmes that consist of multiple smaller investments to utilize common baseline methodologies

where the conditions for individual projects are comparable.

Develop internal guidance to assess MRV content in funding proposals. The Secretariat should

develop internal guidelines, checklists, and protocols for proposal review and vetting, to be applied

consistently by relevant divisions and teams reviewing funding proposals.

Develop external guidance for AEs on MRV content in funding proposals. The Secretariat should

develop a manual to support AEs in preparing proposals. In particular, this manual should

communicate expected minimum MRV content and include guidance on MRV assumptions and

methodology and on expectations in terms of impact. Among content that could strengthen

mitigation proposals are: scope of the analysis and expectations on materiality, leakage and

rebound effect; approaches to selecting emission factors; and expectations for updating the

baseline.

Include MRV procedures and guidelines within policies or documents up for Board consideration.14

The following policies would benefit from stronger references to MRV elements and guidance:

Second-level due diligence. Although there is not yet a document for Board consideration, this

process currently under development should clarify the role of the Secretariat in evaluating whether

proposals meet established MRV guidelines and identifying required improvements to ensure

minimum MRV standards are met before proposals can be considered by the Board. This evaluation

should look at the quality of the theory of change and logic framework as well as the methods and

assumptions used to estimate indicators and plans and budgets for monitoring, reporting, and

evaluation.

Programmatic Policy Approach. The document should include guidance on expected MRV elements

that are tailored to programmes, and how to approach MRV for programme design and review. The

references to monitoring and evaluation components of programmes in the document should be

improved to provide more nuance.

Two-Stage Approval Process. The document should include explicit mandates for Secretariat

reviewers to assess theory of change and logic framework quality of the concept notes, and to

provide MRV-relevant feedback to AEs at the first review stage.

Funding Proposal Template. Adjust the order of the current template to have the theory of change

and logic framework requirements as the basis of proposal design in the funding proposal template.

Subsequent sections should build on the expected changes described in the logic framework.

13 In decision B.07/04, the Board requested the Secretariat to further develop the mitigation and adaptation PMF, for Board consideration, including an approach to gender, mitigation and adaptation indicators, and methodologies, data sources, frequency, and responsibilities for reporting. 14 Some of these policies or documents could be considered at the twentieth second meeting of the Board in 2019.


Modify the internal review process to ensure that OPM provides early review of the quality of the

theory of change and logic framework design. Avoid delaying OPM feedback to post-approval stages

(such as term sheet or FAA negotiations).

2) Develop systems to measure paradigm shift outcomes The GCF’s mission is to effect a “paradigm shift” and its MRV system should have the indicators and the

methods to measure transformation at the project and portfolio levels. Transformation in the context of

the GCF cannot be measured by merely aggregating project-level impacts of CO2 reduced or other

required metrics. Adopting the required changes will require strategic decisions by the Board in addition

to actions by the Secretariat.

We recommend that the Board puts forward a work agenda/program (with the appropriate resources)

to improve how the Fund measures transformation. Further, the Board should provide mandates to the

IEU and the Secretariat (with input from stakeholders) to develop policy and practice options that

elucidate:

How the second-level due diligence needs to be improved and implemented to support the

selection of transformational proposals;

How to measure whether GCF investments transform country-level decision-making and

investments to achieve NDCs or other national policies; and

How to measure whether GCF investments are contributing to a market transformation and the

shifting of private climate flows to climate-compatible investments.

We also recommend that the Secretariat works with the IEU (in line with IEU’s advisory and capacity

support function) to design an MRV system with indicators and methods that measure the

transformation effected by GCF investments. In particular, the Secretariat should prioritize development

of systemic indicators necessary to measure wider transformation, beyond transaction-level impacts.

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