A breakthrough for international climate finance: Green Climate Fund (GCF) all set

The GCF building
© Brandon Wu, ActionAID

The pressure on the 24 members of the Green Climate Fund (GCF) Board could hardly have been greater after the last meeting in February: After old tensions between industrialized and developing countries once again came to the fore, the Board members left Bali with just two decisions on the eight essential requirements for the start of the GCF resource mobilization process scheduled for this year. The dismal mood in the wake of the meeting was often marked by mutual recriminations and expressions of mistrust.

One of the objectives of the seventh meeting of the GCF Board, which took place from the 18th to the 21st of May in Songdo, South Korea, was thus to restore trust on both sides. It was also essential to send an important political signal in the run-up to the climate summit that UN General Secretary Ban Ki-Moon called for September on the sidelines of the UN General Assembly and to the UN climate conference in Lima in early December – to finally get the GCF ready to receive and distribute funds, thus underscoring the serious intention of the participating countries to establish the GCF as the most important component of international climate finance, rather than the empty shell it had been in the past.

To ensure the proper focus of the most important meeting in the short history of the GCF in advance, the two GCF co-chairs – Manfred Konukiewitz from Germany and José Maria Clemente Sarte Salceda from the Philippines – decided to limit the agenda of the meeting to the outstanding six decisions and the arrangements for the subsequent start of the resource mobilization process. (This is also a lesson from Bali, where valuable time was wasted on lengthy discussions of less relevant topics such as travel expenses and the fund’s administrative regulations.) Other important pending decisions were thus postponed to the next meeting in October.

After a short introduction of all agenda items in which the documents and draft resolutions of the Secretariat were discussed in plenary, the board members split up into several focused working groups in which they honed the remaining six issues to the decision stage in the most time-efficient manner possible. The co-chairs repeatedly emphasized that “the perfect must not be the enemy of the good”, and that the policies to be put in place were “initial decisions”, the adequacy of which will be reviewed at regular intervals.

Key decisions of the GCF meeting

After 60 long hours of negotiations over four days, the GCF Board did in fact manage to adopt all six of the remaining policies considered essential to mobilizing GCF resources – also thanks to the strong leadership of the co-chairs. The first decision pertained to theguiding framework for the accreditation of national, regional and international implementing entities. The focus was above all on social and environmental, as well as the necessary fiduciary standards, applicable to the relevant institutions when implementing projects and programs funded by the GCF. Here, the Board decided to adjust the underlying standards to the nature, scope and risks of the proposed activities (“fit-to-purpose” approach). It was decided to establish an accreditation panel consisting of six independent technical experts from industrialized and developing countries to support the work of the Board in accreditation matters. One of the first tasks the panel will tackle with the support of the Secretariat will be to review whether, and to what extent, institutions already accredited for other relevant funds (Global Environment Facility, Adaptation Fund, etc.) can also be accredited for the GCF in an expedited application process (“fast-tracking”).

The Board also reached a decision on the process for approval of project and program proposals. In this case, the project cycle from the development of projects and programs to their approval by the GCF Board were defined in six steps as an initial measure. The GCF Board meeting after next will be building on this by dealing with the implementation process following a successful approval (monitoring of project outcomes, etc.). As with the accreditation decision, it was concluded that an independent technical advisory panel would be established to assess project applications and issue recommendations to the GCF Board.

A further important decision concerned the results management framework. To this end, the Board adopted a variety of indicators to evaluate the results of mitigation and adaptation activities supported by the GCF. In addition to general indicators of impact at fund level (e.g. emission reduction through increased low-emission power generation), indicators were also established for outcomes at project and program levels (e.g. enhanced regulation systems for low-emission planning and development). The use of national or sector-wide indicators that had previously been subject of considerable discussion was left to the discretion of the recipient countries. Equally important was the decision on the financial risk management and investment framework, which determines the types of projects and programs to be supported and the financial risks that the fund must consider in doing so. The Board adopted an investment strategy and portfolio targets based on the Bali allocation decision (long-term 50-50 split between mitigation and adaptation, 50% of the adaptation funds for LDCs, etc.). Criteria for assessing project and program proposals were also adopted, but without a decision on how these criteria are to be weighted. A proposal on assessing the relative quality of comparable proposals will be put forth at the next Board meeting in October.

Finally, the Board also decided on the structure of the fund, as well as modalities for the operation of the Fund’s adaptation and mitigation windows and its private sector facility – two fundamental decisions that did not lead to broader discussions in Songdo, however.

Start into the resource mobilization process

Since the eight requirements had now been met, the seventh meeting was concluded with the decision to commence the resource mobilization process. The Board decided to discuss further arrangements and guidelines for initial contributions at a first meeting with “interested contributors” in late June. In its decision, it also underscored the need to reach pledges by November 2014, noting that the initial resource mobilization process may need to continue beyond this date. The meeting will be attended by the aforementioned contributors, as well as Board members and two “active observers” (one each from civil society and the private sector).

Following the thoroughly successful meeting of the GCF Board in Songdo, the objective is now to set the course for the deposit process. The contributor meeting in Oslo on June 30 and July 1 was planned as a next step in that direction. Beyond that, arrangements for the operationalization of the GCF are far from complete. The decisions that were postponed in Songdo until the next meeting in October in Barbados are very important above all for the issue of direct access; in some cases they are closely linked to the recently adopted policies. These include options for a Fund-wide gender-sensitive approach, the revised program of work on readiness and preparatory support, additional modalities that further enhance direct access, and the crucial decision on country ownership. Many of the decisions reached in Songdo also still involve numerous details that need to be resolved at upcoming GCF Board meetings.

Until mid-October, the GCF Secretariat around Executive Director Hela Cheikhrouhou will certainly have a lot to do with preparing more than 30 papers on major decisions and ensuring that the eighth Board meeting in Barbados will be a similar success.

David Eckstein, Germanwatch