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TWN Info Service on Climate Change (Feb16/01)
1 February 2016
Third World Network

Crucial meeting on GCF strategic plan to begin in Cape Town

1 February, New Delhi (Indrajit Bose) — An informal dialogue of the Board of the Green Climate Fund (GCF) will be held in Cape Town, South Africa, from 2-4 February. The meeting is to primarily discuss the strategic plan for the GCF.

New Co-Chairs of the GCF, Zaheer Fakir (South Africa) and Ewen McDonald (Australia) in a note to the Board members outlined their expectations of the informal dialogue. “When we last met in Zambia, we committed to an ambitious aspirational approvals target for this year. This informal dialogue provides the opportunity to discuss that target and how we will put the systems and processes in place to deliver it. The informal dialogue will also allow us to deepen our collective understanding of the Fund’s shared vision and translate that understanding into meaningful input to our Strategic Plan,” the Co-Chairs wrote in their note.

The decision of conducting an informal meeting of the GCF Board was taken during the 11th Meeting of the GCF Board in Livingstone, Zambia from 2-5 November 2015. Also at the 11th meeting, the Board had agreed on the terms of reference for the strategic plan. Discussions among the Board members had seen a lot of convergence on the importance and need for a strategic plan for the GCF to further operationalize its Governing Instrument (see TWN article: ‘GCF Board agrees on terms of reference for Fund’s Strategic Plan’).

Developing country Board members, especially from the African countries, have been calling for a strategic plan in previous meetings of the GCF Board as well. During the 11th meeting, the Board had decided to establish an ad hoc group of members of the Board/alternate members of the Board consisting of three developing country members and three developed country members to oversee and guide the Secretariat’s preparation of the strategic plan, and requested the ad hoc group to present an initial draft and guiding questions requiring further consideration by the Board as input to the informal discussions of the Board.

The six board members comprising the ad hoc group include Amjad Abdulla (Maldives), Omar El-Arini (Egypt), Henrik Harboe (Norway), Leonardo Martinez-Diaz (USA), Karsten Sach (Germany) and Christian Salas (Chile).

The Board had also invited members and alternate members of the Board, active observers and observer organizations to make submissions to the Secretariat on the elements for a strategic plan by 1 December 2015.

Several proposals have been submitted to the GCF Secretariat. Among the countries that submitted proposals include Egypt and South Africa for the African Board constituency; Norway; United Kingdom; USA; Australia; Germany; Switzerland on behalf of the Constituency of Finland, Hungary and Switzerland; Sweden; Canada; and The Netherlands and Denmark, on behalf of the Dutch-Danish-Luxembourg Board seat. 

“I expect that the Cape Town meeting will spend about two days on the strategic plan issue; other issues on the agenda that relate to the strategic plan, for example the 2016 work plan, will also be discussed. The informal dialogue will not take any decision. It can, however, give some directions in order to have a more focused 12th meeting (of the GCF Board) in Songdo (scheduled in March 2016),” Omar El Arini, Board member from Egypt, told TWN when contacted. Arini, who is part of the ad hoc group, also said that the group was still discussing what should be included in the strategic plan structure.

The African Group in their submission highlighted many issues that needed rectification.

According to the African Group’s submission, a key outcome of the strategic plan of the Fund is to significantly advance the Fund’s approach to country programming with the dual focus of strengthening national institutions from the public and private sectors to access the fund via the accreditation process and the building of high impact programmes and pipelines at scale that can be financed.

“One core reason for a strategic approach to the development of the GCF’s pipeline, as well as the corresponding country pipelines, and work programmes of accredited entities, is to ensure the Board is delivering and operationalizing the objectives of the Fund as articulated in the Governing Instrument. This is further required to ensure that the Board is approving country-driven and owned, high-impact proposals on a meeting-by-meeting basis in order to trigger the first replenishment no later than June 2017,” stated the submission.

The African submission welcomed “the Board’s decision to set an approvals target for 2016 at US$ 2.5 billion. We believe a core element of the Plan would be that the Board is able to, at a minimum, adopt approaches and policies that would see a trebling of the Fund’s pipeline no later than June 2017,” the submission reads.

[During the 11th meeting in Zambia, there was a lot of disagreement over the first replenishment of the GCF. The GCF Board had decided that the funds would be replenished when 60 per cent of the funding is tied up to approved projects. But it remained unclear if that 60 per cent trigger was linked to the promised funds (currently at $10.2 billion) or those actually deposited ($5.8 billion). During the meeting, developing country Board members were very disappointed that no decision was taken on when the first formal replenishment of the Fund’s resources could take place, following the initial resource mobilization which happened in 2014. This was because developed country Board members did not want to zero in on any set date to trigger the replenishment (see TWN article: GCF approves first set of funding proposals after debate).]

[In addition, at the 11th meeting, the Board had also adopted a key decision on funding proposals that included an aspiration to approve funding proposals worth US $2.5 billion in 2016. Several developing country Board members had expressed their disappointment that the funding proposals for their consideration and approval at the 11th Board meeting only amounted to US$ 168 million. This led to the decision by the Board to set a higher aspirational target for the approval of funding proposals in 2016 (see TWN article: GCF Board aspires to approve projects worth US$ 2.5 billion next year).]

The African submission also explains its calculations on how the pipeline has to be increased and the size of approvals that have to be done before the first replenishment can be triggered.

 

“In order for the Board to meet the 2016 approvals target, the Board on a meeting-by-meeting basis would need to approve proposals for the 3 meetings in the range of approximately US$850-930 per meeting,” it said.

“Further, if we assume that the 60% trigger for the replenishment is based on the total pledged amount of US$10.2 billion and that the target date is still June 2017 …the Board would need to approve more than a billion dollars per meeting in the five meetings (between the 12th and 16th meetings), or an increase of more than US$ 800 million over the inaugural approvals in Zambia,” elaborated the submission further.

“If the Board decides that the trigger would be based on the current status of contributions agreements …of US$ 5.8 billion, the Board would need to approve US$ 3.48 billion at approximately US$ 680 million per meeting during the same period,” it added.

“Even at the low end of programming the Fund would need a significant increase to its current pipeline of 29 projects, of which 4 are at stage 2 (second level due diligence by the Secretariat), and 1 private sector project is at Stage 3 (independent assessment by the Independent Technical Advisory Panel). The 24 remaining proposals are at stage I (funding proposal receipt and completeness check). It is not clear at this stage how far the pipeline can be stretched to meet either the meeting-by-meeting approvals or the annual spending target for 2016,” the submission highlights.

In their submission, the African Group also stresses that the ethos of the Fund is developing country ownership and country programming.

“In this regard utilizing the direct access modality at scale with dedicated grant support to proposal is critical. In terms of the agenda on country ownership, there is some concern from developing country members that the importance of coherence and substantive country programming approaches has not been addressed by the Board in a holistic manner. In particular, there is a view that the Board requires a more coherent approach to the operationalization of Focal Points/ National Designated Authorities, including the consideration of funding for the sustainability of their activities. But also the need for a standardized approach to the preparation of low emission and climate resilient development strategies/plans based on a standard template,” says the submission.

On accreditation, the submission underscores the need for rectification, giving more teeth to national entities over international entities.

“The Fund has accredited 20 entities, of which 5 are national entities, 4 regional entities and 11 international entities. However, of the 6 national entities, 4 can only do projects to a maximum of US$ 10 million, 1 can do up to a maximum of US$ 50 million and only 1 can do above the maximum of US$ 250 million,” the submission explained.

“Furthermore, the risk profile of accredited entities is yet to be assessed based on their capacities to implement multiple proposals. Hence, large international commercial and development banks will dominate the Fund and its resources. This needs to be rectified. The strategic plan needs to increase the volume of funds national entities can access so as to give the direct access its true meaning,” says the submission.

According to the submission, the strategic plan also needs to reinforce the uniqueness of the GCF to promote direct access and ensure not only a greater number of national entities are accredited but also accredited to access a greater volume of resources than at present.

“Furthermore, the fact that we are accrediting so many international commercial and development banks would translate to a higher amount of loan instruments being utilized. We need to further strengthen Focal Points/NDAs in their role of ensuring country ownership and driveness of all GCF engagements within their countries,” says the submission.

Lastly, the submission says that a set of core targets and goals for approvals process will need to be adopted to substantially increase the volume of the Fund’s pipeline.

“In order to achieve this, we suggest the following measures be considered:

i) Enhanced Country Programming: The plan could include a focus strategy for engaging the NDA/FPs (focal points) in strengthening the country pipelines by encouraging NDAs/FPs to submit project concept notes and/or investment plans that could be approved by the Board. It is critical that we initiate this now to ensure the scaling-up of the Fund’s pipeline prior to the first replenishment period.

ii) Regional Programmes and Prioritization: Another consideration is for the Fund to initiate high-level consultations with NDAs and Accredited Entities related to identification of regional priorities and programmes. For example, African Heads of State and Government have endorsed two high-level regional programmes addressing renewable energy and adaptation and loss and damage finance. There is also a high-level work programme on climate action in Africa which was adopted by African Heads of State in January 2015. All these programmes can be further developed and utilized to access resources in consultations with NDA and accredited entities.”

In addition to discussing the strategic plan, the informal Board dialogue in Cape Town has on its agenda discussions on administrative budget and staffing, accreditation master agreements, accreditation and communications strategies of the GCF.

 


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