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TWN Info Service on Climate Change (Oct14/06)
22 October 2014
Third World Network
 

GCF agrees on ‘no-objection procedure’ for funding proposals 

Bonn, 22 Oct (Indrajit Bose) — The Green Climate Fund (GCF) Board reached an important decision that enables the Board to only consider funding proposals that are submitted with a formal letter of “no-objection” from the country concerned. 

The no-objection procedure was a sub-item of the agenda of the 8th meeting of the Board in Bridgetown, Barbados under the issue of ‘country ownership’ and had been a very ‘sticky issue’ for the Board over which developed and developing country Board members had been unable to reach agreement for a year. Hence, the resolution of this issue in Barbados was seen by Board members and observers as a significant step forward in advancing country ownership. The decision was reached on Saturday, 18 October.

The other major decisions adopted by the Board relate, among others, to trustee arrangements, accreditation, and readiness and preparatory support. The meeting was co-chaired by Ayman M. Shasly (Saudi Arabia) and Manfred Manfred Konukiewitz (Germany).

Highlights of the exchanges on these issues are provided below.

No-objection procedure

On the no objection procedure, Omar El-Arini (Egypt) reported back on the discussions of the small group that was dealing with the no-objection procedure wherein he said that they could not resolve the impasse on this issue. “Some feel that every country should submit a letter of no-objection to receive funding from GCF, while others think this should be left to the country concerned to decide the procedure,” Arini said.

Bernarditas Muller (the Philippines) said that no-objection is at the heart of the country driven approach. “If you do not have the no-objection, the funding intermediaries will be able to impose their own conditionalities, even their own programmes, on a country,” she said.

Ziqian Liang (China) insisted that a letter of no-objection is a must. David Kaluba (Zambia) said one cannot receive an investment or aid, unless there is a firm confirmation of no-objection in writing. It is a way of ensuring that demonstrates that a country is not being pushed or pressured, he added. Jorge Ferrer (Cuba) supported Kaluba and added that there was a legal risk not to have a no-objection.

Arini (Egypt) said that he had proposed a simple no-objection proposal which comprises a letter from the National Designated Authority (NDA) or Focal Point (FP) of a country which expressly states that the funding proposal being submitted to the Board is without objection and that it is in line with the country’s national climate strategies. He asked if this was too much to ask and wanted his proposal to be circulated to the Board.

 

Leonardo Martinez-Diaz (the United States) said it should be left to the countries to choose if they need a no-objection procedure or not and did not agree with the language proposed by Arini.

On the instructions of the Co-chairs, Arini and Martinez-Diaz worked on the side-lines of the Board meeting to reach a compromise which initially seemed elusive. On the morning of the final day, Martinez-Diaz reported to the Board of the compromise reached, where a letter of approval must come from developing country governments. They agreed to introduce a further element that in the event that a no-objection letter did not accompany a submission, the Secretariat will request such a letter to be communicated within 30 days by the NDA. If such a letter is not received, the Secretariat will suspend the submission. The decision reads: “The Board will only consider funding proposals that are submitted with a formal letter of “no objection”, in accordance with the procedure approved in this decision”.

Trustee Arrangements

The World Bank is the current interim trustee of the Fund and the existing trustee arrangement ends in April 2015. In the decision proposed to the Board for adoption, it was stated that the World Bank would continue serving as the interim trustee for an extended period ending three years after the operationalization of the Fund and the Secretariat would initiate “timely action for the review of the Interim Trustee”. Options for when the GCF is deemed operational were also presented to the Board for consideration viz. (i) the date of confirmation of the completion of the essential requirements (21 May 2014), or (ii) the date of the GCF pledging conference (20 Nov 2014) or (iii) the effectiveness date for the Fund commitment authority (30 April 2015).

Shuichi Hosoda (Japan) and Andrea Ledward (the United Kingdom) said to make a contribution, clarity and certainty on trustee arrangements were required over the entire initial resource mobilization (IRM) period. On when the GCF was operational, Martinez-Diaz (US) said the first date did not make sense because the Fund becomes a Fund when there is money in it. He said the effectiveness date should be considered as the operationalization of the Fund and that the US would not show any flexibility on this decision.

Dipak Dasgupta (India) said that it would not help to go into reopening the date at when the Fund becomes operational. Arini (Egypt) suggested deleting the proposed decision regarding the operationalization of the Fund.

Kaluba  (Zambia) asked why the GCF could not be its own trustee.

Gabriel Quijandria (Peru) was against putting a specific date until when the World Bank would continue to remain the trustee. “The IRM process cannot take any amount of time. Why don’t we say up to three years and if selection process is over before three years, the new trustee can assume its role,” said Quijandria.

Arini (Egypt) suggested putting a ceiling on the time; that the process of the Fund’s new trustee selection must end at the end of 2017.

It was finally decided that the World Bank would continue serving as the Interim Trustee until a permanent Trustee is appointed. “The process to appoint the permanent Trustee should end no later than the end of 2017, to enable the permanent Trustee to commence its contractual agreement with the Fund no later than April 2018,” reads the decision adopted by the Board.

The Board also requested the Secretariat to:

(i)                                          “Submit to the Board draft terms of reference for the review of the Interim Trustee, in accordance with paragraph 26 of the Governing Instrument, by the eleventh Board meeting;

(ii)                                         Examine the option for the Fund to provide its own permanent Trustee services, including  an assessment of internal capacity requirements to perform this function;

(iii)                                       Develop a list institutions/organizations which could potentially serve as permanent Trustee, including, but not limited to, a synopsis of their experience, costs and qualifications, to be submitted to the Board by the eleventh Board meeting; and

(iv)                                        Develop a methodology for an open, transparent and competitive bidding process to select a Trustee, to be submitted to the Board by the eleventh Board meeting.”

Matters related to the Accreditation Panel

A lot of debate took place over the appointment of members of the Accreditation Panel to the GCF Board.

Jan Cedergren (Sweden) informed the Board that a member from Peru had recently withdrawn from the Panel and they were looking for a sixth person with expertise in “fiduciary standards”. Of the five members, two are from the UK and one member each from Austria, the US and Indonesia. Developing country Board members wanted to know why there were not enough candidates from developing country Parties.

Muller (the Philippines) said that it is an important Panel which would affect the functioning of the Board and wanted to know if candidates from developing countries did not have enough expertise. Liang (China) said he could not endorse the list of nominated candidates and he said that in a six-member Panel, there cannot be two members from the same country. Kaluba (Zambia) reflected on the balance issue and asserted that balance needs to be maintained between developed and developing countries. In line with China’s suggestion, Dasgupta (India) said the size of the Accreditation Panel could be increased. Ferrer (Cuba) said there needs to be an amendment before the draft decision is adopted and also reflected on the imbalance.

Martinez-Diaz (the US) stressed on the importance of having a candidate with a strong background in fiduciary standards. Irene Jansen (the Netherlands) argued that while geographical balance is important, that’s not the goal and one must focus on merits. Ana Fornells de Frutos (Spain) said that the members of the Accreditation Panel should show diversity in languages, including Spanish and French.

Finally, it was decided that the sixth expert to the “Accreditation Panel will be nominated by the Accreditation Committee after the eighth Board meeting and the decision for endorsement by the Board will be taken between meetings”.   It was further decided that, “consideration of the sixth expert to the Accreditation Panel will take into account fiduciary expertise and representation from developing countries”.

It was emphasized that “for future additions and appointments, the importance of balance between developing and developed countries, gender and language diversity” would be maintained and the Board members also recommended “strengthening these elements of balance in future recruitments and in the subsequent term of the Accreditation Panel, with the aim of reaching a 50%-50% balance between developing and developed countries, and ensuring that no two members will be from the same country”.

Revised programme of work on readiness and preparatory support

Under the readiness and preparatory support discussions, initially the decision for the consideration of the Board was the allocation of 75 per cent of readiness support funding to Small Island Developing States (SIDs) and Least Developed Countries (LDCs) and African states, and 25 per cent would be allocated to other “eligible developing member countries”.

Admitting that readiness is critical, Fakir (South Africa) said that the reason for readiness is to deliver on the ground and he was concerned that the proposal did not have enough on direct access, which would mean a serious regression of progress. He added that the paper on readiness needs “major reorientation to support activities of developing countries”.  He stressed that, “The Secretariat has proposed that the readiness resource is a channeling one, rather than giving it directly to the national designated authorities. This Fund should not be designed by consultants, for consultants. It should be for developing countries”.

George Zedginidze (Georgia) and Rodrigo Rojo (Chile) wanted clarity on the term “eligible developing member countries”.

Muller (the Philippines) supported Fakir’s statement and said that the readiness is to enable direct access. Referring to eligible developing countries, she added that neither the UN Framework Convention on Climate Change, nor the Governing Instrument of the GCF divides developing countries. She added that the 75% to 25% allocation division was a constraint and asked what could be done if more requests came from developing countries.

Quijandria (Peru) expressed discomfort with a pre-set allocation for different regions. “We support the idea that we need a fair and equitable allocation framework responsive to needs of all countries; and hence we would like to respect the language of the Paris decision of prioritising the needs of SIDS, LDCs and African States but with due regard to middle income countries,” he said.

Liang (China) said he would not like to a see a sub-group within the larger group of developing countries. “I don’t know how the division of 75-25 came about. I cannot understand why it is not 71 or 60. I can understand the logic, but it is not a good way to do it,” said Liang. 

After these deliberations, it was decided that “all developing countries would have access to readiness support and that the Fund will aim for a floor of 50% of the readiness support allocation to particularly vulnerable countries, including SIDs, LDCs and African States”. It also decided that “readiness commitments to individual developing member countries will be capped at the US 1 million per calendar year.”

Among the crucial issues that were deferred included a decision on gender policy and action plan, the Fund’s initial investment framework and the Fund’s initial risk management framework. These will be taken up at the ninth meeting, scheduled for 25-27 February 2015 in Songdo, South Korea.+

 


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