TWN Info Service on Climate Change (Jul15/01)
13 July 2015
Third World Network  

Green Climate Fund Board adopts key decisions after intense debate

Songdo, 13 July (Meena Raman)-  The Green Climate Fund held its tenth Board meeting in Songdo, South Korea, from 6 – 9 July and adopted several important decisions after long and intense debate. The Board meeting ended at 3 am, in the wee hours of the morning of 10th July.
Among the most controversial decision surrounded the accreditation of 13 new entities as a ‘package’, which saw concerns raised by developing country Board members, especially over the accreditation of Deutsche Bank and the World Bank. The Board members from South Africa and Egypt raised concerns that the GCF was accrediting “a preponderance of financial institutions” and called for this “imbalance to be redressed”. The accredited entities (AEs) will act as channels through which the Fund will deploy its resources to developing countries.

The accreditation of these two entities as well as the African Finance Corporation and the Development Bank of Latin America (Corporacion Andina de Fomento), drew much flak from civil society groups present at the meeting, in what was viewed as an un-transparent and flawed accreditation process.

Another issue which saw intense exchanges between the Board and the Secretariat was a document prepared by the latter on what would be the main financial instrument to be used by the GCF – whether grants or concessional loans. The discussion took place under the agenda item on ‘level of concessional terms for the public sector’. Developing country Board members took issue with the document, as the Secretariat was advocating the use of low-level concessional loans as the main instrument, as opposed to grants, with grants to be used sparingly. The initial draft decision proposed that grants will be used on a case by case basis.
Several developing country Board members stressed that the GCF is a Fund and not a bank, and it is not meant to give predominantly loans but grants. After long and protracted exchanges among members in this regard, the Board could not agree on a decision to guide the Secretariat further, despite a push by developing countries to have a decision.
The developing countries were supportive of a draft decision that would affirm that each recipient country would, through their national designated authority (NDA), indicate its preferred financial instrument, based on the country’s need and priorities. It was then for the Board to decide the terms and conditions of the concessional financial instruments that will be determined and agreed to on a case by case basis, taking into consideration the country’s preference as well as previous Board decisions. Developed country Board members were opposed to the proposed decision. Given a lack of consensus on the issue, the Board did not adopt any further decision on the matter.
At the next meeting in November, the Board will be considering funding proposals forwarded by the Secretariat and the independent Technical Advisory Panel (iTAP), just before the 21st Conference of the Parties (COP 21) to the UN Framework Convention on Climate Change (UNFCCC) in Paris.

On the status of resources, the meeting was informed that the Fund was able to reach effectiveness (able to disburse money) on 21 May this year, with the signed contributions amounting to US$5.47 billion. As of 16 June, the total resources that were legally committed to the Fund were about US$5.75 billion equivalent.

The Secretariat also informed members that by the end of this year, the Fund is expected to have about US$600 million in cash and that the Board will be able to make funding decisions of up to US$1.4 billion in 2015.

Several developing country Board members wanted to set a deadline for the conversion of the remaining pledges into contribution agreements by 2015. (In November 2014, the pledges made to the GCF were US$ 9.3 billion, with the United States (US) pledge amounting to US$ 3 billion. The total amount of pledges by March 2015 was US$10.2 billion. The US is yet to convert its pledge into a legal commitment).

The US Board member, Leo Martinez said that he could not support any deadlines for the conversion of the pledges into contribution agreements. He said “making good on the pledge is a priority of the US President. There is a request for a substantial portion of the pledge in the President’s budget. The Congressional appropriations process is in its early stages. There is engagement and outreach from CSOs, the private sector and the faith community. I cannot support deadlines. They would not be helpful as part of our political process.”
Given the US position, the Board decision on the ‘status of the initial resource mobilisation process’ merely welcomed “the progress made by those countries that have converted their pledges to the Fund into fully executed contribution agreements” and “urges other contributing countries to confirm their pledges to the Fund in the form of fully executed contribution agreements,” with no deadlines set.

The Board also agreed to launch a pilot programme at US$ 200 million for enhancing direct access to increase country ownership of the projects proposed. The programme devolves decision making on specific pilot activities from the Fund to the country level, through AEs, and offers mechanisms for increased national oversight and multi‐stakeholder engagement.

In this regard, the Secretariat, under the guidance and oversight of the Accreditation Committee and in consultation with the iTAP and relevant stakeholders is requested to prepare and launch a request for proposal (RFP) to countries, through their NDAs or focal point and public media.

The Board also requested the Secretariat and the iTAP to undertake the assessment of pilot proposals received in response to the RFPs and to provide recommendations on pilots to be approved with the initial aim of providing up to US$ 200 million for at least 10 pilots, including at least 4 pilots to be implemented in Small Island Developing States (SIDs), the LDCs and African States.

The Board also set‐aside resources to establish additional pilot programmes of up to US$ 200 million to support micro, small and medium‐sized enterprises (MSMEs), as well as to mobilize resources at scale (up to US$ 500 million) from the private sector. The programmes are to be prepared and launched gradually in 2016, 2017 and 2018.

The Secretariat also provided information that as regards the Fund’s ‘Readiness and Preparatory Support Programme’, the GCF is set to disburse US$ 2.5 million to 9 countries to build the capacity of their NDAs/focal points in preparing their strategic frameworks to fully engage with GCF.

The Board also adopted various other decisions which included an initial monitoring and accountability framework for accredited entities; applying a scaling pilot in the assessment of funding proposals; adopted a methodology to determine and define the Fund’s risk appetite; and endorsed the selection process and terms of reference of the heads of the Independent Evaluation Unit, Independent Integrity Unit and Independent Redress Mechanism.

It was also agreed that the next meeting of the Board will be held from 4th to 6th November in Zambia.(Further articles will follow).