TWN Info Service on Climate Change (Mar16/07)
21 March 2016
Third World Network

GCF Board approves advance payments for readiness support

Kuala Lumpur, 21 Mar (Hilary Chiew) – The Green Climate Fund (GCF) Board agreed to provide advance payments of up to US$50,000 each to 13 countries that have signed readiness grant agreements, even though  the completion of the agreements are bogged down by lengthy domestic processes.

This decision was agreed to at the recently concluded 12th meeting of the GCF Board from 8 to 10 March in Songdo, South Korea. The decision to limit the advance payment of up to US$50,000 was reached after Board members considered the risks and the urgency to get the readiness grant out of the door to meet the disbursement of US$2.5bil this year. (See further details below on the decision and highlights of exchanges).

During the discussion on the Fund’s portfolio of projects in the pipeline, many developing country Board members and some developed country members registered their concerns over the slow development of direct access entities forwarding proposals to the GCF. Some expressed worries over a ‘trend’ in the relatively high number of proposals from the private sector, enjoying more than 50% probability of being presented to the Board in 2016 for approval.

During the meeting, the Secretariat presented an update on the Fund’s portfolio including pipeline of projects and programmes. It informed members that as of end of February, the GCF pipeline comprised of 34 funding proposals and 90 concept notes which requested a total of US$6.2bil from the GCF, to support projects and programmes totalling US$12bil.

The Secretariat judged that 22 projects and programmes within the pipeline have a greater than 50% probability of being presented to the Board in 2016 for a total requested GCF funding of US$1.5bil supporting projects and programmes worth US$5.4bil.

However, it expressed difficulty to accurately estimate the sequence of these proposals for the Board’s consideration and decision as it will depend on the circumstances of each individual funding proposal and their varying levels of advancement as well as the response time of each accredited entity to address remaining issues in the funding proposal.

It also noted that many of the direct access entities’ funding proposals are less advanced and require support in addressing the gaps.

The Secretariat also highlighted the geographical and thematic distribution of the projects which also showed that Least Developed Countries (LDCs), Small Island Developing States (SIDS) and Africa accounted for 45% of the projects while other developing countries accounted for 55% of the requested amount of funding. In terms of mitigation, adaptation and cross-cutting themes, the percentage are 18%, 16% and 66% respectively.

The Secretariat also reported that as of February (2016), it has approved readiness support for 38 countries totalling US$11.2mil for activity area 1, 2 and 3 under the Fund’s Readiness and Preparatory Support Programme.

[Activity area 1 refers to strengthening institutional capacity of a nationally designated authority (NDA) or focal points while activity area 2 refers to development of strategic frameworks for engagement with the GCF. Activity area 3 targets support for regional, national and sub-national entities nominated by the NDAs/focal points to meet the GCF accreditation standards.]

The Secretariat informed that 11 of the 38 countries will access readiness resources through national entities, six through regional entities, and 21 through international entities. Activities in these 38 countries range from the implementation of further actions to the finalisation of legal arrangements and the preparation of inception reports, including implementation plans, budgets, procurement plans and disbursement arrangements.

The Board was informed that 13 countries have already signed grant agreements, while 7 have completed their inception reports. A total of over US$356,165 has been disbursed to four countries: the Cook Islands, Ethiopia, Mali and Rwanda.

Highlights of exchange during the informal Board meeting on 7 Mar

Sally Truong (Australia) supported the updating of the support as a standing agenda item for the Board to consider at each Board meeting. She asked for clarification why 22 out of 34 proposals were determined to have a good chance of implementation. She expressed concern over the low level of direct access entities involved, which pointed to the fact of (more) support being needed for them.

Echoing Truong, Amjad Abdulla (Maldives) said the Board would be questioned if it does not send strong signals on expediting direct access entities in these early days of the Fund.

Omar El-Arini (Egypt) pointed out that the statistics on funding proposals and concept notes were the same as presented at the Board’s last July meeting (10th meeting in Songdo). He questioned why the report did not indicate whether the concept notes were spontaneous submissions or if the Secretariat actively sought submission of them by means of request for proposal.

He also questioned the criteria employed by the Secretariat in determining the 50% chance of implementation of the 22 funding proposals and if there were any possibilities for the 90 concept notes to be further developed into full-fledged concept notes.

El-Arini was concerned that there was a preponderance projects from the private sector and hoped that this was not the trend. He wondered whether these projects were totally owned by developing countries or if they are joint ventures of multinationals in developing countries. He expressed concerns that the funds would go to such international entities operating in developing countries.

Leonardo Martinez (United States) suggested that the Board consider an online data for stakeholders to see development (of funding proposals) in real time.

Diann Black-Layne (Antigua & Barbuda) lamented that many NDAs in her region do not get frequent communication from the Secretariat. Noting that the (two) direct access entities (out of the 22 with more than 50% probability of being successful) are private sector projects, she said there was a wrong perception of high risk (for direct access entities from the public sector). She said that the GCF “needs to move quickly if we want to see country ownership of projects”.

Ali’ioaiga Feturi Elisaia (Samoa) noted the strong focus on private sector and international access. (Out of the 22 projects with a 50% chance of being approved, two are via the direct access route, with 20 of the projects coming through international access.) He said the Secretariat report did not provide information on how many projects in pipeline with a more than 50% chance of success are from SIDs.

Jorge Ferrer Rodriguez (Cuba) said the Secretariat report caused him lots of concern particularly the breakdown of national and international entities and public and private sectors. He pointed out that of the total amount of GCF’s funding to the private sector (US$1,023mil), US$871mil requested will go to international entities.

“This we cannot approve. Otherwise, it will contradict what we had decided,” he stressed.

He also drew the attention on the many private sector projects in the energy field which are mitigation actions, but reported as cross-cutting actions.

Cyril Rousseau (France) and Henrik Harboe (Norway) expressed concerns that proposals from direct access entities are less developed and wanted to know what can be done to increase the number.

In response to the questions and comments, the Secretariat explained the common gaps (found in proposals) being robustness of the feasibility studies, assessment against the investment criteria (like climate impact potential, viability and sustainability of the projects, and efficiency and appropriateness) and compliance with the Fund’s safeguards, monitoring and reporting risk and fiduciary requirements.

On concept notes, it clarified that they were spontaneous submissions from NDAs and that there are five projects in SIDS amounting to US$195mil.

Highlights of exchanges on 10 March

On 10 March, the Board focused discussion on the draft decision on readiness support.

El-Arini (Egypt) said there were many lessons to be learnt on the Readiness and Preparatory Support Programme and these should be disseminated to the regions and would like the decision to include requesting the Secretariat to hold regional and sub-regional workshops.

Truong (Australia) said she could support a decision to approve the readiness payment.

(On this matter, two relevant paragraphs in the draft decision dated 9 Mar read:

“Decides that in order to facilitate the commencement of readiness activities, the Secretariat may provide advance payments to countries that have concluded readiness grant agreements where lengthy domestic processes are required to satisfy all of the Fund’s requirements in accordance with guidelines to be approved by the Board;

Requests the Secretariat to present to the Board guidelines on advance payments for consideration at its thirteenth meeting;”

She also said it is critical to support countries with little capacity and encouraged the GCF to employ full time regional experts.

Kamal Uddin Ahmed (Bangladesh) was happy that support is given to Africa and Asian countries but noted that vulnerable countries are more on the Asian side and that if their applications are pending, they should be given more attention.

Andrea Ledward (United Kingdom) recognised the need for the readiness programme to speed up work on direct access entities. She agreed with El-Arini and Truong on the need to strengthen regional focus and outreach.

Anders Wallberg (Sweden) agreed that it was important to continue regional capacity building as useful way to further GCF’s objective.

Colin Young (Belize) welcomed the consideration of regional hubs as SIDS in the Caribbean and Pacific that can lead to a greater number of proposals being developed.

Black-Layne (Antigua & Barbuda) supported elevating regional support staff to full time positions as “it is important for people working on the region to know the region and help the Secretariat”.

Feturi (Samoa) welcomed more coordinated support at the regional level especially at this initial phase when countries are trying to put together project proposals.  “This can expedite the support and not be constraint by the staffing situation at the headquarters,” he added.

On the issue of provision of an advance payment in relation to the readiness grant, Martinez (United States) expressed concerns that the Board was bypassing the readiness grant agreement process entirely. He said that waiving the condition of concluding the readiness grant agreement is a “big deal”. He asked what the lengthy domestic processes are and who defines that.

To this, co-Chair Zaheer Omar (South Africa) said the lengthy process relates to the readiness agreement being subjected to the (scrutiny of) domestic and international law advisors, including following domestic processes before the agreement can come into effect.

Ledward (United Kingdom) said from the risk point of view, a percentage rather than full payment being released is preferred.

Co-chair Zaheer again explained that there are domestic procedures to be fulfilled for the grant to be effected. The suggestion is for the Board to waiver this condition before an advance payment can be made to enable work to begin while countries take the necessary domestic steps.

Caroline Leclerc (Canada) wanted the Board to make sure that advance payments are made with legal standing.

Martinez (United States) asked what happens if the grant agreement does not get completed and if there should be a limit to advance payment.

Ledward United Kingdom) reckoned that the provision of an advance payment is a gap-filling measure and asked the Secretariat for more information on how to speed up the disbursement of readiness grants.

Morten Elkjaer (Denmark) acknowledged the risks but pleaded for the Board to trust the Secretariat and that countries will fulfil the condition.

Martinez (United States) said he was totally sympathetic and did not intend to hold up the readiness grants. He suggested that the decision include a request to the Secretariat to identify the obstacles faced by countries to get a sense of what the problems are and to insert the wordings “up to a limit of US$50,000” in the relevant paragraphs.

The main highlights of the decision that was finally adopted are as follows:

“The Board, …,

(a) Requests the Secretariat to prepare a document for consideration by the Board at its thirteenth meeting, which identifies alternative arrangements to readiness grant agreements aimed at disbursing readiness grants…,  and also identifies obstacles faced by countries;

(b) Requests the Secretariat to provide advance payments up to a limit of USD 50,000 to countries or their delivery partners that have signed readiness grant agreements where, in the judgement of the Secretariat, lengthy domestic processes are required to conclude the agreement, until a decision is taken regarding paragraph (a) above;

 (h) Requests the Secretariat to present for consideration by the Board at its thirteenth meeting a proposal on the activities to be covered by the readiness and preparatory support programme in relation to support for accredited direct access entities. The proposal may include building their capacities in areas related to adaptation, mitigation, environmental and social safeguards, gender, and monitoring and evaluation. The proposal should take into account lessons learned about the accreditation process from the experiences of direct access entities;

(i) Also requests the Secretariat, in consultation with the Co-Chairs, to present the country ownership guidelines … for consideration by the Board at its thirteenth meeting; and

(j) Also requests the Secretariat, in its progress report to the Board, to include updates on the regional workshops to be organized, on the development of regional hubs, on strengthening expertise in regions to support countries, and an overview of activities being undertaken by readiness partners.”

Edited by Meena Raman