Info Service on Climate Change (Nov15/04)
GCF Board aspires to approve projects worth US$ 2.5 billion next year
11 November, New Delhi (Indrajit Bose) — The Green Climate Fund (GCF) Board at its eleventh meeting held in Zambia from 2-5 November, adopted a key decision on funding proposals that included an aspiration to approve funding proposals worth US $2.5 billion next year.
Several developing country Board members had expressed their disappointment that the funding proposals for their consideration and approval at the meeting only amounted to US$ 168 million. This led to the decision by the Board to set a higher aspirational target for the approval of funding proposals in 2016.
In addition, the Board also decided to establish a project preparation facility to provide funding of up to 10% of requested GCF funding with a maximum of US $ 1.5 million for any single proposal, to help developing countries in preparing their funding proposals.
In the decision, the Board agreed on the approval process for future proposals and also gave its nod to eight projects, with conditions and recommendations.
The discussion on the funding proposals was intense, with wide divergences among the Board members.
Pointing to several policy gaps in the proposal approval process, developing country Board members, led by Egypt, India and Saudi Arabia wanted to first ensure that a robust process for the approval of funding proposals was in place before approving the eight projects which were on the table for their consideration.
They also felt it would be premature to approve the projects at the Zambia meeting and suggested that the decision on approving the projects be deferred to the twelfth meeting, scheduled to be held in March 2016.
Developed country Board members, however, were in favour of approving the proposals for funding under consideration and stressed that the GCF would learn from the experience of approving the first batch of projects.
Concerns of the developing country Board members revolved around the lack of engagement with the National Designated Authorities (NDAs) in developing countries, the need to strengthen country ownership over future project proposals and pipelines. They stressed that the projects should be transformational and bring about paradigm shift, which are the core principles of the GCF. They also said that the process should not be onerous on developing countries and that there was need to simplify the template for funding proposals.
Developing country Board members also sought transparency in the approval system and asked to make GCF’s independent Technical Advisory Panel’s (iTAP’s) assessments of the proposals public. The developing country Board members also said that there was need to support project preparation and strengthen readiness support to look into the development of the proposals in the pipeline. They also wanted to know the timeline for disbursal of funds.
After several rounds of discussions (see exchange on this below), the Board members finally agreed that before moving into a decision on the eight projects under consideration, there should be a decision on the process for approvals. This led to a rich discussion on the policy gaps that exist in the existing proposal approval process.
Several developing country Board members were concerned that the approvals of the funding proposals were being hurried to gain political mileage at COP21 in Paris. See earlier article titled: ‘Green Climate Fund approves first set of funding proposals after debate’).
Initially, the co-chairs of the GCF, Henrik Harboe (Norway) and Gabriel Quijandria (Peru) proposed a draft decision for approval based on the discussions, but Board members were not happy as some felt that the proposals of the developing country Board members were not reflected. Then a small group comprising Board members from India, Ecuador, UK, Germany and France was formed, which worked further on the draft decision. The decision was approved in the wee hours of the morning of 6 November.
In the decision taken, the Board agreed that the “GCF is a continuously learning institution and will draw on the lessons from this first round of proposal consideration in order to improve the process in future iterations”.
The Board acknowledged existing policy gaps in the GCF’s approval process, including “project eligibility criteria, calculation of incremental costs, and risk investment criteria”.
The Board also took note of the need within the approval process to enhance “transparency, clarity, accessibility, balance, knowledge management and country ownership, including by actively seeking participation of NDAs, focal points and relevant stakeholders in the early stages of the project cycle and beyond the provision of the no-objection letter”. ( All proposals seeking funding from the GCF require a ‘no-objection’ letter from the respective NDA of the country where the project is to be implemented).
For a robust system, the Board requested the Secretariat to provide an update of the portfolio of projects in the pipeline and to submit it for information to the Board as part of the documentation submitted for every Board meeting. The Board also requested the Secretariat to include the iTAP assessment of each funding proposal as part of the documentation published in the Fund’s website for funding proposals.
On the way forward, the Board agreed to include in the consideration of the 2016 workplan matters related to outstanding decisions regarding the proposal approval process and the programme and project cycle.
For future projects, the Board decided to review the proposal approval process based on the experience gathered from the review of the first batch of proposals submitted for consideration of the Board, with a view to:
• “Strengthen and scale up the Fund’s pipeline and country pipelines and programmes;
• Streamline and improve the transparency of the proposal approval process;
• Define further decision making options including deferral of proposal approvals;
• Review how concept notes should work within the project cycle, facilitate the independent Technical Advisory Panel’s feedback on concept notes, and facilitate contact of the ITAP with accredited entities as useful and necessary;
• Support the Board to make decisions regarding funding proposals;
• Strengthen project/programme eligibility criteria, including categories of incremental cost eligible for funding; and
• Interim procedures for redress pending the recruitment of the head of the independent redress mechanism.”
In addition to these, the Board also decided to “establish a project preparation facility to provide funding (of) up to 10% of requested GCF funding with a maximum of USD 1.5 million for any single proposal. The process would involve concept notes providing due justification of need from accredited entities. After an appropriate review and an initial assessment against the investment criteria and justification of need, the Secretariat will send its funding request for project preparation to the Board for approval. The project preparation facility would be targeted to small-scale activities and direct access entities. The Secretariat will review the project preparation facility for consideration by the Board at its fourteenth meeting.”
In the decision taken on funding proposals, the Board said it aspires to approve funding proposals worth US $2.5 billion in 2016. It also requested the accreditation committee to include options in their accreditation strategy for fast-tracking accreditation of national implementing entities. It requested the Secretariat, in consultation with the iTAP, NDA, focal points and accredited entities to “simplify finding proposal template and concept note template in an expeditious manner”.
The Board also decided that concept notes sent to the GCF should include a clear paragraph indicating how the project fits in with the country’s national priorities and its full ownership of the concept.
Highlights of exchanges regarding funding proposals
David Kaluba (Zambia) underlined the need for advanced preparatory grant to projects. He also expressed concerns about country ownership. He wanted to know what process was undertaken to engage the NDAs. He said while he was excited about the projects at hand, there were still too many gaps in policies. He preferred to see more direct access entities and less of international accredited entities. Kaluba added that the larger intention was to set the Fund on the right course because experience would be an “extremely dangerous” motivation to base decisions on. “Even when a perfect process has been followed, there are absorption capacity concerns in some of our countries and issues of institutional capacity remain. Our processes have not been adequate enough because we as a Board have not done what we were supposed to do to set implementation on the right course. We may be going ahead of ourselves here (if we approve the projects),” said Kaluba. He expressed difficulty in taking a decision because he said he understands the need for countries to have resources but he suggested that it is important to at least take stock of where the gaps are and reflect on them.
Dipak Dasgupta (India) stressed the importance of readiness in empowering countries, which would then ensure high-quality projects. On building a pipeline of high-quality projects, Dasgupta said that there were three options. One was to hand over the process to the Secretariat and the iTAP, which he said was not good enough. The second option is to hope that accredited entities would know how to do business, but the problem was the accredited entities were mostly international entities and it would not be sufficient. The third option was for the Board to set policies in place along with very strict firewalls to make sure there is a pipeline and that the right projects come through.
Omar El Arini (Egypt) said there was need for more clarity on the process and to make it less cumbersome, as complicating the process could inhibit viable proposals from coming through. He also expressed disappointment that despite repeated requests, the Board members were denied access to the concept notes in relation to the funding proposals, even though it was well within their right to see them.
Ayman Shashly (Saudi Arabia) said systems for good governance were needed, with checks and balances and adequate review and screening of projects and to not rush to approve projects at the Zambia meeting. He added that there is push from the outside to approve the project in view of COP21 in Paris and to say finance is flowing with US $168 million, but that the Board should see if they were doing justice to the projects or not. “Should we comply with the pressure or fulfill our responsibility? We have signed conflict of interest policy and we should honour that policy. It should not jeopardise the integrity of the Fund,” said Shashly. “We need much more studied proposals,” he added.
Zaheer Fakir (South Africa) said that there was no accreditation master agreement with the entities yet; no policies on co-financing, incremental costs or conflict of interest and it was important to agree on these policies.
Yingming Yang (China) said international accredited entities were way higher in number than the direct access entities and the number of the former must be reduced to strengthen country ownership. Yingming expressed disappointment that only eight projects were recommended for a total of US $168 million and said this is too little and the situation must be improved in the future.
Jorge Ferrer Rodriguez (Cuba) stressed the need to improve transparency. Patrick McCaskie (Barbados) stressed the importance of transformative projects and upscaling them as well.
Leonardo Diaz-Martinez (United States) said once the Board got through the initial hump, things would move fast and pick up speed. Andrea Ledward (UK) urged Board members to get on with the US $168 million to begin with and outlined the importance of taking a decision at the meeting. She said that the Board had a clear set of designs such as an investment framework, and a risk management framework, which allowed them to tell the world that they have met the initial set of policies and that the policy framework would evolve.
Ewen McDonald (Australia) focused on the learning aspect and said that the GCF would continue learning. Caroline Lecrec (Canada) agreed there were policy gaps but was skeptical that these would be fulfilled by the next Board meeting.
(Edited by Meena Raman.)