Green Climate Fund (GCF)

Green Climate Fund: all obstacles for pledges removed

The GCF building
© Brandon Wu, ActionAID

The 8th Meeting of the Green Climate Fund (GCF) Board, which was held in Bridgetown, Barbados from October 14 to 17, was originally expected to benefit from the positive momentum of the successful previous meeting, at which the Board members agreed on the eight essential requirements for the planned start of the GCF resource mobilization process. Once arrived on the picturesque Caribbean island, however, the members took their time with the decision-making process and did not reach a satisfactory conclusion until the early morning hours of October 18.

Yet the goal and the top priority for the Board meeting were in fact very clear: decisions related to the rapid programming and disbursement of funds still needed to be made. These also included a range of administrative regulations needed for the day-to-day operations of the GCF Secretariat, including provisions for human-resources policy and management guidelines for awarding contracts.

To ensure success, the GCF co-chairs – Manfred Konukiewitz from Germany and José Maria Clemente Sarte Salceda from the Philippines – were asked to consult within their respective groups of industrialized and developing countries in the wake of the 7th meeting in Songdo, South Korea, in order to prioritize the numerous open items on the agenda for the meeting in Bridgetown. This could not be achieved, however, due to the differing views of the two camps and in light of renewed tensions between developing and industrialized countries following the first two meetings on the GCF resource mobilization.

Without agreement on a prioritization, ALL of the outstanding issues were thus on an agenda containing a total of 36 items – and more than 40 associated background documents.

Slow start

The Board thus began its work faced with a packed agenda – a circumstance that garnered critical remarks from numerous Board members. Nevertheless, it was decided to open the meeting with the proposed agenda – not least to avoid yet more discussions. Particularly controversial topics that did not lend themselves to rapid agreement were to be postponed wherever possible.

The first days were primarily dominated by discussions on the framework for the accreditation of national, regional and international implementing institutions, the further development of the structure to verify the success of the Fund’s activities, as well as topics that are top priorities for developing countries in particular: the revised work program for the preparation of developing countries, the development of project pipelines for financing by the GCF (readiness program), additional arrangements for enhanced direct access, and the key decision on guaranteeing the individual responsibility of recipient countries (country ownership). Specific decisions on these issues were not made initially. Instead, the relevant GCF committees were tasked with working on solutions in consultation with all parties and with the assistance of the GCF Secretariat in order to present the Board with fully developed decision texts.

Marathon final session

The Board members went into the final day of the meeting with exactly zero decisions made. The pressure to agree on the most urgently needed decisions and policies was thus considerable. A number of important decisions were in fact made over the course of the day.

The Board adopted a comprehensive “accreditation package” – a key prerequisite for the actual programming and disbursal of GCF funds in 2015. The members initially agreed on the modalities of the “fit-for-purpose” approach, the basic structure of which had already been established in Songdo. The approach is intended to acknowledge the role of the broad range of institutions that vary in the type and scope of their activities as well as their institutional capacities. This diversity should be reflected in the appropriate application of fiduciary rules as well as the social and environmental standards to be maintained in studying and evaluating the nature, scope and risks of planned activities. This approach gives smaller institutions in developing countries the opportunity to be accredited for the Fund without compromising compliance with the Fund’s adopted standards. In practical terms, the Barbados decision envisions the allocation of the complete volume of activities financed by the GCF into four groups for which implementing institutions can obtain accreditation: “micro” (up to US$ 10 million); “small” (US$ 10-50 million), “medium” (US$ 50-250 million) and “large” (more than US $250 million). The social and ecological risks that could arise from the activities are to be assigned to three categories (high, medium and low).

The Board members also approved a fast-track process for the accreditation of institutions that have already been accredited by other funds. It would be open to entities already acting as implementing institutions in the Global Environment Facility (GEF), the Adaptation Fund (AF), and the Directorate-General Development and Cooperation – Europe Aid of the European Commission (EU DEVCO). An appropriate assessment of the institutions in the context of the “fit-for-purpose” approach will be carried out in the review of each candidate.

Further provisions pertaining to applicable accreditation fees, accreditation of private institutions and the start of the accreditation process complete the package. In the course of negotiating the package, the panel responsible for reviewing accreditation applications was appointed as well.[1]

Positive conclusions were also reached for topics of particular importance for developing countries. The Board agreed on a work program to assist developing countries in the accreditation process and the subsequent development of promising project proposals. US$ 15 million were made available for the first phase of the program. Least-developed, small island and African states were assured a minimum of 50% of the total volume. Progress was also made in the design of enhanced direct access: the GCF Secretariat will work out the details for a pilot phase to start in early 2015 before the next Board meeting. An important decision was also reached on ensuring country ownership that had initially involved long discussions between industrialized and developing countries. In accordance with the “no-objection” process, a written statement of consent must now be submitted by the relevant countries prior to the review of a project proposal by the Board to ensure that the planned activities are also in line with national priorities and strategies.

Numerous other major and minor decisions were made. The structure to verify the success of the fund’s activities was developed further and now takes forest conservation into account in addition to mitigation and adaptation. Following a lengthy debate, the World Bank was re-elected as the provisional trustee of the GCF Trust Fund for the next three years. The question of a permanent trustee is to be settled during that period. Institutions other than the World Bank are to be considered: for example, the question of whether the GCF can act as its own trustee will be explored. Administrative regulations required for the GCF Secretariat were tentatively approved. While they are slated to be discussed again in one year, this provides a provisional basis for the Secretariat’s work. The outstanding decisions on the structure of the private-sector facility, as well as measures to implement the GCF’s mandate for a gender-sensitive approach, were deferred to the next meeting.

Showdown at night                       

Despite the increasingly good progress being made on the final day, the situation escalated as expected when the members debated the formalities of the resource mobilization process. This topic had already caused tensions between industrialized and developing countries after the last pledging meeting in September in Bonn. The concrete issue was the background paper on policies for contributions to the Fund, specifically two points therein: decision-making in cases in which consensus cannot be reached and the targeting of contributions.

According to the GCF’s governing instrument (GI), consensus is the preferred way of decision-making within the Fund. However, the GI also states that additional arrangements must be defined for the event that consensus cannot be reached. For such cases, the background paper on policies for contributions proposed a vote by the Board members in which the individual votes would be weighted according to the respective countries’ contributions. The developing countries unanimously rejected this. They also criticized the process by which this item had been put on the agenda in the first place. After a long discussion, the members of the Board finally agreed to omit the passage from the decision. Instead, options for reaching decisions without consensus will be explored during the first meeting in early 2015. The Secretariat is preparing a document on this topic.

Discussions on the targeting of contributions were considerably more critical. The relevant sections of the background paper foresee allowing donors to distribute up to 20% of their contributions freely across the GCF financing windows (adaptation, mitigation and private-sector facility). The developing countries saw this as an affront and an attempt to undermine the principles of the GI. Again, they sharply criticized the development process of the background paper – a document that many industrialized countries considered to have been cautiously negotiated between interested donors and a fundamental prerequisite for donations actually flowing into the Fund. According to the developing countries, the paper lacked legitimacy because it was negotiated outside the GCF and thus was not an agreement in accordance with the powers of the Board.

The debate, in which the industrialized countries repeatedly upheld the passage as a condition for payments into the GCF, was interrupted several times for consultations in both camps. It culminated in the following statement by a developing-country representative:

“If we take out the targeting, we have a place to move forward. Insist on it, and let’s go our different ways – after all, we are used to structural adjustment programs. We have been there. I was there when we were hit with those terrible conditions. I lined up to buy a package of soap. I know what it feels like. …

Take the conditions out, or we tell the world we never solved this problem because some people insisted on targeting.”

At the point at which a postponement of the decision appeared inevitable (which would have amounted to the 8th Board meeting ending in a failure), the industrialized countries finally yielded to a repeated intervention by the co-chairs, who proposed omitting the offending passage. This was finally accepted by the industrialized countries after repeated requests.

Paths going forward

In the end, the 8th GCF Board Meeting was able to reach at least some of the most important decisions for the swift programming and disbursement of funds. The extensive accreditation package is a first step in this direction. The first implementing institutions are due to be accredited at the 9th meeting from February 25 to 27 in Songdo (Update: since November 11, institutions have been able to officially apply for accreditation online). Nevertheless, some important issues – including the further development of the investment framework and terms for grants and loans – were postponed, and those decisions will be required at the next meeting at the latest.

With the adopted procedures for resource mobilization, all of the obstacles standing in the way of the Fund’s capitalization have now been removed. It is now up to the industrialized countries to act on their noble words from the 8th meeting and provide the GCF with adequate initial capital. A few countries (including Germany and France) have already made announcements to that effect. The Fund still has a long way to go to reach the US$ 10-15 billion called for by many actors, however. Hopes in this regard are pinned on the planned donor conference scheduled for November 20 in Berlin. Reaching at least US$ 10 billion would be a vital political signal in the run-up to Lima that could give the negotiations for the 2015 climate agreement the necessary impetus.

David Eckstein, Germanwatch

[1] As a rule, members of small-island developing states (SIDSs), least-developed countries (LDCs) and African states are exempted from accreditation fees; accreditations falling in the “micro” category are also free for all other developing countries.