TWN Info Service on Climate Change (Oct13/04)
14 October 2013
Third World Network

Agreement on steps to mobilise resources for Green Climate Fund

Paris, Oct 12 (Meena Raman) – The Board of the Green Climate Fund (GCF) adopted several key decisions to further its operations, including steps to mobilise resources for the Fund in 2014, at its 5th meeting in Paris, France on 7-10 October, 2013.

The Board agreed that it will commence an initial resource mobilization process as soon as possible and transition subsequently to a formal replenishment process. It was agreed that the first two meetings of the Board next year, in February and May, will focus on completing the essential requirements for the Fund to receive, manage, programme and disburse financial resources.

No later than three months after the essential requirements for the Fund have been met as decided by the Board, the Secretariat is to make arrangements with all interested contributors, facilitating a collective engagement in the initial resource mobilization process. This will be followed by the first formal replenishment meeting.

There was a tug-of-war between among Board members on the “requirements” to be in place before contributions could be made to the Fund. Agreement was eventually reached on the “essential requirements” (see below for details).

Some developed country members of the Board indicated their willingness to contribute to the GCF, with Germany signalling that initial capitalisation of the Fund needs to be a “serious number with several billion dollars”.

Manfred Konukiewitz (Germany) said that there are contributors ready to put money in the Fund when it is ready to receive the money, adding that the first sum of capitalisation needs to be a serious number, with several billion dollars. He added that donors are ready to provide their fair share of funds but there needed to be a fair burden sharing among them. This, he said, was important to Germany and he called on others to also commit to resource mobilisation.

Anton Hilber (Switzerland) also said that his country was ready to contribute its “serious fair share” to the GCF once certain essential requirements were in place. Henrik Harboe (Norway) expressed hoped for serious resource mobilization by 2014 and wanted the Fund to be large.

Kwang-Yeol Yoo (South Korea) said that it was contributing USD 1 million this year and another USD 1 million next year, and called on other countries to mobilise resources for the GCF.

The United States however indicated that it had no resources in the 2014 budget for the GCF. Matthew Kotchen (United States) said there are no resources in the 2014 budget for this and resources need to be requested now for 2015.

Developing country Board members especially from Zambia, the Democratic Republic of Congo (DRC), Egypt, China, Belize, Brazil and Saudi Arabia called for urgency in resourcing the GCF, and not wait for a “perfect” Fund to be in place.

David Kaluba (Zambia) who represents the Least Developed ountries (LDCs), made an emotive plea, as he struggled to contain tears, sending a strong and powerful message for urgent action. He said that his constituency was in desperate need of funds for adaptation, as people are dying now; time has run out and the desperation is real. He said that it was a moral imperative to ensure a decision that enables the Fund to have serious resources that make a difference. Kaluba called for symmetry in approach in mobilising resources and having the essential requirements for the GCF’s operations.

Tosi Mpanu Mpanu (DRC) said he understood Kaluba’s emotion. He said that African countries are eager to see the Fund operational and were worried about the lack of political commitment. Some developed countries had said three years ago that the GCF was the main channel for climate finance but are now asking if the GCF is the best channel. He said there is need to have some number and date for the initial capitalization of the Fund and to ensure no delay tactics.

Liang Ziqian (China) said that the mobilisation of resources is a political decision and called on developed countries to provide the funds as soon as possible. He said that conditions were in place for this and if they waited for the GCF to be a “perfect” institution, it will never be initiated. He stressed the need for specific targets as regards the scale of the resources and that it should be “big-sized” and “meaningful”. He wanted the GCF to be the primary operating entity of the climate finance architecture and to be the most prominent environmental Fund. (See below for more interventions from Board members.)

The Board also made other decisions which included agreement on initial areas for its funding and performance indicators at the project and Fund level, readiness and preparatory support, types of financial inputs for the Fund, the way forward on determining allocations, accreditation of entities for access to the Fund and the terms of reference for the Fund’s Risk Management Committee, Investment Committee and the Private Sector Advisory Group.

The meeting was co-chaired by Ewen McDonald (Australia) and Zaheer Fakir (South Africa). It also saw, on its final day, the election of two new co-chairs, Jose Maria Clemente Sarte Salceda (Philippines) and Manfred Konukiewitz (Germany). Also present at what was her inaugural meeting of the Board, was Hela Cheikhrouhou, the Executive Director of the GCF.

Resource Mobilisation

On the mobilisation of resources for the Fund, following discussions during an informal reception held on the evening of 7October as well as at the formal Board meeting the following day, it was agreed that:

(a) The Fund’s resource mobilization process will commence through an initial resource mobilization process as soon as possible and transition subsequently to a formal replenishment process;

(b) That the first two meetings of the Board in 2014 (to be held in February and May) will prioritize and focus on working towards completing the essential requirements for the Fund to receive, manage, programme and disburse financial resources;

(c) The Secretariat will be requested to make arrangements with all interested contributors, facilitating a collective engagement in the initial resource mobilization process no later than three months after the essential requirements for the Fund to receive, manage, programme and disburse financial resources, have been met as decided by the Board;

(d) The policies, procedures and documents necessary to trigger the first formal replenishment meeting will be decided upon at the first Board meeting following the completion of the process outlined in paragraph (c) above.

The essential requirements for the Fund to receive, manage, programme and disburse financial resources were identified as follows:

(i)             An initial Fund structure and Secretariat structure, including administrative policies, best-practice fiduciary principles and standards and environmental and social safeguards;

(ii)           The Fund’s financial risk management and investment framework;

(iii)          Initial results areas, initial core performance indicators and an initial results management framework of the Fund;

(iv)          Procedures for accrediting national, regional and international implementing entities and intermediaries;

(v)           Policies and procedures for the initial allocation of Fund resources, including results-based approaches;

(vi)          Initial proposal approval process, including criteria for programme and project funding;

(vii)        Initial modalities for the operation of the Fund’s mitigation and adaptation windows and the Private Sector Facility;

(viii)       The terms of reference of the Fund’s Independent Evaluation Unit, the Independent Integrity Unit and the independent redress mechanism.

The decision was viewed generally as an improvement over the initial draft presented by the Secretariat for consideration which did not have clear timelines for the resource mobilisation process. 

Omar El-Arini (Egypt) stressed the need for the process to be simple and strategic. He called for its capitalisation and replenishment and reminded members of the pledges made by developed country leaders in Copenhagen (in 2009 to mobilise USD 100 billion per year by 2020).

Audrey Joy Grant (Belize) said that the developing world was really losing its enthusiasm for the Fund unless something happens. There was need to discuss the minimum threshold to get the Fund started to move forward on funding decisions, and called for funding of readiness activities. She also stressed the need for concrete time-lines, as without that, there would be no urgency.

Sergio Serra (Brazil) stressed the need for a simple decision which reflects urgency, scale of ambition and political commitment.

Irfa Ampri (Indonesia) said that GCF should be different and not replicate the failures of others climate funds.

Ayman Shasly (Saudi Arabia) reminded Board members that that use of the term “donors” was not appropriate as under the United Nations Framework Convention on Climate Change (UNFCCC), developed countries have an obligation to fulfil their commitments. He said the GCF was not about doing charity. He said further that if developing countries do not get support for their actions, they will not be able to make any commitments under the 2015 agreement which is now under discussion in the UNFCCC. He said developed countries could easily mobilise USD 22 million for the UNFCCC’s Climate Technology Centre and Network but that was not the case for the GCF.

Manfred Konukiewitz (Germany) emphasised the need for the Fund to have proper standards to not allow misappropriation. He added, however, that not everything needed to be perfectly in place for mobilisation to happen. He said there should be funding for “readiness” activities.  

Anton Hilber (Switzerland) said it was important that all interested contributors are called upon to make the contributions. He stressed the need for certain essential requirements to be in place. On the issue of fiduciary standards, environmental and social safeguards, Hilber was of the view that there was no need to reinvent the wheel but to borrow best practices from other institutions.

Jan Cedergren (Sweden) expressed the need for urgency in getting resources for the GCF, adding that readiness and preparatory support activities could be taken care of immediately.  He too stressed the need for fiduciary standards, and environmental and social safeguards to be in place and to learn from the experiences of the Adaptation Fund and the Global Environment Facility (GEF). He added that as regards long-term replenishment of the GCF, efforts need to start immediately, because a replenishment system will take some time.

Rod Hilton (Australia) said that several conditions or incentives needed to be in place before one dollar could flow into the GCF: fiduciary standards and safeguards; policies for accreditation; Secretariat to be in place; and an appropriate risk management procedure. Once money goes through the door, for the good use of money, there is need for results areas, performance indicators and allocation procedures. For scale and transformation to happen, there is need for a very clear pathway on how results will be delivered with the Private Sector Facility, how to leverage private sector finance, and having financial instruments with a lot of flexibility. He said there is also need to accept funding from everyone.

Frederic Glanois (France) also stressed the need to have serious initial pledges because the formal replenishment will take a few years. He shared the view that the list of requirements for the GCF to receive money should not be exhaustive. He cited the initial results areas, results-management framework, the Secretariat structure, fiduciary standards and safeguards and accreditation procedures and core criteria for allocation as being important.

Henrik Harboe (Norway) said that he also shared the need for urgency. He did not expect every requirement to be in place. He said there were a “lot of channels” for climate financing but the ambition should be for the GCF to be the best choice.

Nick Dyer (United Kingdom), while agreeing with Kaluba of Zambia that time was running out did not agree that there were no other options to the GCF. He cited the GEF and the Climate Investment Funds of the World Bank. He said decisions were needed to have assurances for the pledging of resources to the GCF.

Matthew Kotchen (United States) said the GCF is not the only “climate fund out there” but hoped that it would be one of the leading funds. As regards the process for resource mobilisation, he said that specific time-lines with dates are not useful. He said pledging resources is up to the legislative bodies and needed public support.

The active observer representative for civil society organizations from developing countries, who was from the Third World Network, also expressed the need for urgency in the mobilisation of resources. She called for an initial capitalisation of at least USD 20-30 billion by 2014, adding that a phased approach could be adopted with grants for readiness support and adaption being a priority for meeting the needs of especially the poor countries. She also said that developed countries could resort to raising money through financial transaction taxes and Special Drawing Rights, stressing that if banks could be bailed out, there was no reason why the poor and the planet could not be saved.

Election of Co-chairs

The election of the Co-chairs was held behind closed doors as it was deemed an ‘executive session’. According to official sources, the election of the Co-chair from the developed countries was without problems. However, the election of the developing country Co-chair had some hiccups.

Around lunch time on Thursday, 10 October, the final day of the meeting, developing country Board members and their alternates met to confirm their candidate. It seems that initially, South Korea was opposed to the Philippines being the candidate, although all the other members from the Asian Group were in support. South Korea apparently wanted Fakir of South Africa to continue as Co-chair, although his tenure of one year had ended. [South Korea (alternate to China) is part of the Asian Group, whose other members include Philippines (India is the alternate), China, and Saudi Arabia (Pakistan is the alternate)].

Following interventions from fellow Asian Group members, South Korea relented and agreed to the Philippines being the developing country Co-chair.

When the developed and developing country members met in their groupings respectively to reaffirm their nominees at around 5 pm the same day, according to official sources, Colombia (who is an alternate member to Ecuador) wanted more time to have further consultations within its region, and indicated that there could be a nominee from the Group of Latin America and the Caribbean (GRULAC) region. Ecuador was not present at the meeting although it was the principal member, and Colombia took its place. Along the corridors of the meeting, the Colombian representative was seen making phone calls.

According to sources, when the official Board meeting convened at around 5.30 pm, Dipak Dasgupta (India) informed members that the Philippines candidate was agreed to by most developing countries, including members from Asia, LDCs, Africa, and some members of GRULAC.

When the presiding Co-chair McDonald asked if there was a consensus over the Philippines and Germany as the Co-chairs, no one expressed objections, leading to the formal election of the new Co-chairs. 

(More reports will follow).