GCF EFA

1. Integrating Economic and Financial Analysis
in GCF Funding Proposals
Timothy Breitbarth
Korea GlobalAdaptationWeek
NAP Expo
9 April 2019
Economic & Financial Analyst
Division of Mitigation & Adaptation

2. Economic & financial analysis for GCF
Financial cash flow analysis
• Quantitative comparison of the
project’s financial revenues and
expenditures over time
• Analyzed from the perspective of a
single party (e.g. AE, project
facility, utility company, household,
etc.)
Economic cost-benefit analysis
• Quantitative comparison of the
project’s monetary and non-
monetary costs and benefits over
time
• Analyzed from the perspective of
national or global society
• EA is not about money, but rather
the efficient use of scarce
resources

3. • Cost effectiveness: Assess whether the benefits to society exceed the
costs
• Valuing non-market benefits: Assess the value of non-monetary benefits
(e.g. GHG reductions, ecosystem services, etc.)
• Sustainable development potential: Assess the level of economic co-
benefits
• Theory of change: Assess the assumptions and linkages in the theory of
change
How does GCF use economic analysis?

4. • Sustainability: Assess whether the revenues are sufficient to
sustain the investment
• Paradigm shift potential: Assess whether sufficient incentives
exist for others to make the necessary investments to facilitate
the project
• Minimum concessionality: Assess the level of concessionality
required to make the project financially viable
How does GCF use financial analysis?

5. Basic steps in EA and FA
• At present, GCF does not have technical guidelines or standards for economic
or financial analysis
• AEs may use their own technical guidelines as appropriate
• The methods described in this presentation are my own, based on my experience and
international best practice
• At their core, economic and financial analysis are both types of cost-benefit
analysis:
1. Project outputs and outcomes over the life of the investment
2. Estimate values for those outputs and outcomes
3. Estimate the costs to achieve those outputs and outcomes
4. Compare to a counterfactual scenario (i.e. what would happen in absence of the project)

6. • EA is generally more relevant to small-scale agriculture projects than FA
• What is the problem being addressed?
– Increased frequency of drought?
– Increased flooding or saline intrusions?
– Degraded pastures due to poor rangeland management?
• What is the theory of change?
– Does the project lead to economic gains or reduce economic losses?
– Will the investment lead to increased yields or prevent decreased yields?
– Crop insurance to increase resilience to weather and other shocks?
• What would happen in the absence of the project?
– Steady decline in yields?
– Periodic crop losses/failures due to weather-related disasters?
– Costly mitigation measures being implemented by farmers?
EA/FA for agriculture & food security

7. • When appraising adaptation options, consider economic impact
– What types of economic losses would be prevented by each option?Can they be
quantified?
– Are there variations in those losses based on location or affected population?
– What types of national and regional data are available to estimate these impacts?
• When developing implementation strategies, consider cost and
economic impact
– What is the estimated cost for the strategy? How large would annual benefits need to
be to justify it?
– Are there ways to target investments to those experiencing the greatest impacts?
– Are any of the national or regional data sources informing the NAP sufficient to inform
localized projects?What would need to be done to acquire more local data?
Linking NAPs to project EA/FA