Green Climate Fund (GCF): Much progress, but many open questions remain in 2017

At the end of the 15^th meeting of the Green Climate Fund (GCF), which was held from the 13^th to the 15^th December 2016 in Samoa, there was a big round of applause from the attending board members. Firstly to bid farewell to the resigning co-chair from South Africa and to thank Samoa for its great hospitality; but, most importantly, because the attendees were proud of the progress that was made, not only during the 15^th meeting, but also during the entire year of 2016 as well as the last couple of years.

And the GCF has indeed made significant progress since 2014. After the adoption of the necessary framework, the fund has started its operative business as far as possible. In a first round of resource mobilization in 2015, a total number of 43 countries committed to donating around USD 10 billion to the fund. The GCF created an extensive support programme which has the main purpose of facilitating the building and strengthening of national institutions in developing countries, in order to enable those countries to implement projects on their own. Up to now, 48 national, international and regional institutions have been accredited to submit project proposals. The GCF board has, since the end of 2015, approved disbursement of USD 1.5 billion for 35 projects. Moreover, it surely isn’t presumptuous to state that the improvements made by the GCF are an essential milestone on the way towards the successful realisation of the Paris Agreement.

However, even though there are many positive aspects to mention about the development of the GCF, some challenges remain which the Fund has to face in 2017.

Direct access for developing countries so far remains restricted

When looking at the current project portfolio it becomes apparent that until now mainly UN-institutions and regional development banks have access to GCF-finance. In total, 83% of the approved projects are implemented by internationally acting institutions, including the Deutsche Bank and the KfW. The picture becomes even clearer when the corresponding funding volumes of the propositions are taken into account: Approximately 94% of the financial means pass through these institutions. This fact is not necessarily surprising. It is normal that the international institutions, due to their experience, struggle less to master the complicated GCF-accreditation-process in a short period of time and to develop projects which correspond to the Fund’s high standards. But considering the project pipeline, which will be presented to the GCF board presumably this year, this trend is consistent: among the 29 projects for 2017 only three shall be implemented by national institutions.

Therefore, the GCF still has huge backlog demands if it strives for a project portfolio which is well-adjusted with regard to partner organisations. And it should. Consequently, it is crucial to thoroughly analyse the reasons for the delays regarding direct access for developing countries and to discuss the adequate countermeasures (e.g. a concerted prioritisation of national institutions, a reservation of financial means for direct access or the creation of a mentoring programme in order to foster the cooperation between national and international institutions). By these means, the number of corresponding projects could be elevated. For setting transformative impulses in the GCF’s partner countries, besides the setting of national institutions and capacities, mainly the countries’ ownership concerning the conceptual design and execution of a project is needed. Only by the inclusion of all relevant actors in the countries – from the most affected people and communities all the way to the responsible ministries – transformative projects can be developed, which encompass in a sustainable manner the desired change (in GCF terminology “paradigm shift”). This “paradigm shift” cannot be realized with projects which only reflect the “business as usual” and undermine the added value of the GCF compared to other finance mechanisms.

Bottleneck secretariat – slow implementation processes

One reason for the slow progress concerning the direct access can be found in the insufficient capacity of the GCF-secretariat. The secretariat does not only consider project and accreditation proposals and answers questions regarding the complex GCF procedures and forms; is also involved in the follow-up process to further assistance and supervision of the institutions. To fulfil its duties the secretary lacks the necessary resources.

It can be observed that the portfolio of already accredited institutions has amplified drastically. Moreover, the interest of all countries concerning the work and the possibilities of the GCF is constantly increasing. Accordingly, the pipeline of institutions seeking accreditation from the GCF is long. In October 2016, a document was released by the secretariat which predicts that, assuming that the time to process the requests stays the same, two and a half to four years would be needed to handle all current requests.

The handling of accreditation requests is by far not the only task of the secretariat. The preparation of board meetings and the related elaboration of background documents remains a time-consuming duty as well. In the past, a lot of documents were communicated at a very short notice before the board meetings. Especially for Board Members from developing countries, this is highly problematic as they do not dispose of large senior staff (like e.g. Germany) to support the preparation of the sessions. Consequently, decisions were repeatedly postponed or discussions were held over multiple sessions.

The implementation of previously approved projects also shows major delays. On the one hand, this is due to tough negotiations over rights, duties and accountabilities in the relation between the GCF and the individual implementing entities. On the other hand, a lot of institutions were accredited with certain restrictions and projects were approved only under certain conditions. For this reason, only one out of the 35 approved projects has already started implementation.

Altogether, a large amount of work needs to be undertaken by the new head of the secretariat, executive director Howard Bamsey. Fortunately, he indicated that one of his priorities for this year’s work plan will be the further development of the secretariat. To achieve this goal, he will need the adequate support of the GCF board. It has to be clearly stated that for a long time, the GCF board has failed to prepare the secretariat for its numerous tasks. The struggle to enlarge the secretariat took surprisingly long as the decisions taken by the Board sometimes lacked the necessary guidance.

Decision-making and transparency within the GCF need to be improved

Another matter that needs to be addressed is the decision making process of the Board. Under the motto “we build the plane during the flight” there were quite a few (premature?) decisions which manoeuvred the GCF in an unpleasant position. For example, already controversial actors were accredited despite serious doubts of some board members or the civil society. The creation of such precedents negatively affects upcoming discussions; for example, in the case of a sudden new and stricter guideline laid out for the accreditation to the GCF. In this case, the GCF would have to re-evaluate its already existing portfolio of partner institutions. In the assessment of project proposals, the board still hasn’t created an option to put projects on hold for a re-proposal in an upcoming session in order to improve weak spots or ambiguities of the project formulation. Instead, projects were approved with a huge catalogue of conditions attached.

Furthermore, in terms of transparency, there are also shortcomings within the GCF. At the meeting in October 2016, new project and accreditation proposals were adopted as a bundle without larger discussions on the content after informal consultations “behind closed doors” were held. At the last meeting in October 2016, the consultations on the individual project proposals were held during an informal meeting of the board members. The broad public and the majority of the attending observers had no access to this session. Moreover, the processes in the GCF secretariat are still difficult to comprehend. It is for example still not clear which institutions are in the process of accreditation and what the criteria are for prioritising candidates during the selection process. The pipeline of already submitted project proposals also does not contain much information. It is hardly possible to retrace how certain projects are elected by the secretariat for presentation at a board meeting. The evaluation of projects by the secretariat is not published. Additionally, in case of published project proposals additional documents are missing, which are relevant for the assessment.

Hopefully the GCF will successively keep working on increasing its transparency in 2017 and improve the decision-making processes of the Board. The decision to stream the board meeting via the internet was an important step in the right direction. Step by step, the available documents provided an increased amount of details. Nevertheless, if the GCF is seeking to fulfil the extraordinarily high expectations regarding its performance, it also has to take a leading role in its procedures. Missing transparency and untraceable board decisions could damage the image of the GCF as an institution in the long term.

Board Meetings should not serve as a political arena

Last but not least, it is to hope that in the future, Board Members concentrate even more on the Fund’s development and that meetings are decreasingly perceived as a political stage. This is of course a delicate issue as climate finance has always been a politically charged topic. It is also clear that Board Members are first and foremost representatives of their corresponding interest groups. This leads to issues on which opinions strongly polarize.

Nevertheless: The Board should strive not to transfer political infightings that often occur at UN Climate Change Conferences to the GCF. Geopolitical conflicts of interests (like the blockage of a project in Pakistan by a Board Member from India), artificial debates about the line between “climate adaptation” and “development” or unnecessarily politicized debates about the next funding round distract the Fund from the more essential topics.

Next Board Meeting in April

The 16th Board Meeting which takes place in South Korea from 4 to 6 April 2017, is the first opportunity to address these challenges and problems. Fortunately, the Board has already identified some of the above mentioned points and intends to tackle them in 2017. A new procedure for dealing with project applicants is already on the agenda. Furthermore, the Board will deal with the accreditation framework.

The way in which dynamics in the Board unfold with the new Executive Director and the new Co-Chairs from Australia and Saudi-Arabia remains to be seen. Also, the presidency of Donald Trump could have impacts on the GCF, especially with the expected suspension of American money pledged to the GCF.

David Eckstein, Germanwatch