Info Service on Climate Change (Oct18/04)
Kathmandu, 29 October (Prerna Bomzan) – The Board of the UNFCCC’s Green Climate Fund (GCF) decided to launch a process for the Fund’s first formal replenishment at its 21st meeting held in Manama, Bahrain from 17-20 October.
According to the decision adopted by the Board to launch the process, the Co-Chairs will issue an open invitation to all potential contributors and a series of meetings will take place, starting with an organizational meeting and concluding with a high-level pledging conference. The replenishment meetings will be open to potential contributors, with the Executive Director (ED)/ or the interim ED, active observers from civil society and the private sector observing the process. (The GCF is in the process of selecting its new ED).
The decision on the replenishment process was an important outcome, given the urgency to refill the Fund’s dwindling coffers.
Documents prepared by the Secretariat for the Board’s consideration revealed that the actual total amount of contributions received by the Fund under its initial resource mobilization (IRM) period as at end June 2018 was US$ 6.6 billion, with a remaining US$ 0.7 billion to be received during the year. There is also a shortfall of US$ 2 billion of the outstanding United States’ contribution from the total of US$ 10.2 billion of signed contributions from all contributors.
A sum of US$ 4.2 billion has been approved for funding as at end Aug. 2018, and at the 21st Board meeting, another US$ 1 billion was approved for funding proposals from developing countries.
Arriving at the decision on launching the replenishment process was not easy, with disagreements among developed and developing country Board members on a host of issues. Key contentious issues included the role of the Board in the replenishment process; the “period” of the replenishment cycle; and whether to have a timeline for replenishment process or to leave it open-ended. Discussions on most of these areas took place behind closed doors.
When the draft decision on the matter was presented to the Board for adoption, developing country Board members said that the proposed decision did not provide any role for the Board to have oversight of the replenishment process, adding that this was not acceptable.
Dr. Omar El-Arini (Egypt) expressed strongly that he could not agree to a draft decision which did not have any role for the GCF Board, stressing that it was an “absolute minimum” requirement. Zaheer Fakir (South Africa) echoed El-Arini, saying that the absence of the role of the Board in the process was rather strange.
The proposed draft decision was then amended to reflect the Board’s role; after which it was adopted.
The decision adopted requested “the group of Board members and alternate Board members, consisting of the Co-Chairs and five representatives of developing countries and three representatives of developed countries, to represent the Board and the GCF and actively engage in the replenishment process, including to present the outcomes of the Board’s deliberations…and to report back to the Board on a regular basis”.
The Board also agreed that the first and successive replenishments of the GCF should “take into account the stated ambitions, actions and contributions of developing countries to reduce their greenhouse gas emissions by meaningful mitigation actions and to adapt to the impacts of climate change, and that the Board will provide the replenishment process with strategic guidance”.
It was agreed that the period of first replenishment will be decided in 2019. The decision also stressed the urgency to reach pledges for replenishment, “aiming to conclude the process in October 2019, recognizing that further pledges may be received during the replenishment period”.
In the decision adopted, the Board also reaffirmed “the objectives of the GCF to channel new, additional, adequate and predictable financial resources and catalyze climate finance, both public and private, for developing countries, and promote a paradigm shift towards low-emission and climate resilient development.”
The Board also tasked the Secretariat with the preparation of certain documents for its consideration for the replenishment process, and asked of the Co-chairs to consult with members in this regard. The documents to be prepared include a “comprehensive report on the implementation of the Fund’s initial Strategic Plan over the initial resource mobilization period (2015−2018); a document outlining areas in the policies for contributions…including the conditions necessary to trigger subsequent replenishments; and a strategic programming document outlining scenarios for the Fund’s replenishment guided by ambitious mitigation and adaptation scenarios based on the Fund’s implementation potential, taking into account the needs of developing countries, including actions based on nationally determined contributions, national adaptation plans, country programmes and other sources.”
Besides replenishment, other contentious issues at the Board meeting included decision-making in the absence of consensus and selection of the permanent trustee.
Decision-making in the absence of consensus
The Board had difficult discussions on the issue of decision-making in the absence of consensus. The mandate for a policy on the issue stems from paragraph 14 of the Governing Instrument (GI), which states that “decisions of the Board will be taken by consensus of the Board members. The Board will develop procedures for adopting decisions in the event that all efforts at reaching consensus have been exhausted.”
(In 2014, when the Board had discussed the issue at its 8th meeting, the discussions had become contentious since developed country Board members were of the view that when decision-making by consensus had been exhausted, the Board could resort to voting linked to contributions to the GCF. However, developing country Board members were unanimous in rejecting the approach).
During the discussions at the Bahrain meeting, it emerged that developing country Board members were concerned about voting being linked to contributions, which they said was a non-starter. Some Board members also reminded the Board that in previous difficult issues where there was no consensus, such as on the selection of the host country of the Fund and the selection of the two previous Executive Directors, the Board had found ways of arriving at decisions. They were also of the view that the voting mechanism if any should apply to only funding proposals and not to policy issues, and that the Board should focus on the consensus approach. Developed countries, however, were not willing to accept this separation and while they clarified that they were not calling for voting to be linked to contributions, they insisted on having a system of voting.
Discussions on the issue moved to a small group, which met informally on the sidelines of the meeting. Sources said that in the closed-door discussions, the group could not agree on four key issues: the effectiveness of the policy and its application (to answer the question that if a decision is adopted, when does it apply or take effect); who determines and how to determine that all efforts to reach consensus have been exhausted; what should the scope of the policy be, i.e. whether it should it apply to policy matters or to funding proposals only; and whether and how to vote viz. what constitutes a quorum, and what would be the combinations for voting. No agreement could be reached on these issues and hence, there was no decision on the matter.
Matters related to the selection of the permanent trustee
The Board at its meeting, selected and appointed the World Bank as the “trustee” of the GCF, subject to the finalization of the terms and conditions of the legal and administrative arrangements between the Fund and the World Bank. (The Bank had been the interim trustee since the establishment of the GCF).
An ad-hoc Trustee Selection Committee had been instituted to oversee the selection process. As the Chair of the Committee, Zaheer Fakir (South Africa), apprised the Board of the selection process, saying that the Secretariat had started out with an “open and transparent” process, issued an advertisement requesting for expression of interest to candidates and the terms of reference were also posted on the GCF website. However, even after deadline was extended, there were “no real responses”; so the committee was tasked to do a “limited tender process” in line with GCF procurement procedure that involved “inviting” 11 international multilateral institutions to tender for or express interest in becoming the permanent trustee. “No responses” were received except from the World Bank to “confirm” that it was prepared to “continue” providing “existing” trustee services.
Fakir then spoke in his capacity as a Board member and stressed that “for the record, just so that the Board is alert to the facts” the World Bank was not interested in being the permanent trustee but only for a “period” of time and the committee was tasked to appoint a “permanent trustee” and hence, the Board needs to think about how to deal with the matter.
Fakir also said that since the terms of reference were amended for the selection of the permanent trustee, in issue was whether the Bank was prepared to engage on the revised terms since they were different from the existing arrangements. He added that all these fundamental matters need to be accurately reflected in the report of the GCF to the UNFCCC’s Conference of Parties (COP).
Ayman Shasly (Saudi Arabia) asked about the conformity of the trustee appointment with the guidance provided by the COP for an open and transparent bidding process. He added that the report to the COP needs to reflect how “we arrived at this decision without an open and transparent bidding process.”
Performance review of the GCF for the initial resource mobilisation period
The proposed performance review of the GCF is expected to be undertaken by the Fund’s Independent Evaluation Unit (IEU), with the overall objective to assess the extent to which it has delivered on its objectives and has responded successfully to the needs of developing countries.
An issue of contention was over the proposed budget allocation of US$ 830,000 for the review as set out in the initial draft decision, while the working group tasked with the issue of review had proposed a lower figure of US$ 750,000.
El-Arini (Egypt) was not in favour of a higher allocation for the review and said that “since the GCF was running out of money, every dollar saved will go to helping developing countries in their efforts to combat climate change.”
Sue Szabo (Canada) said that based on her previous experience, the budget allocation for the review was on the “very slim” side given the terms of reference, and added that “looking at best practice, driving it (the budget) down to a number that’s picked out of the air is highly problematic”. Frank Fass-Metz (Germany) said that the members should rely on the advice of the Board’s Budget Committee.
Following further exchanges, the adopted decision approved a budget allocation of US$ 500,000 for the review by the IEU and also requested the Budget Committee to review the allocation with the head of the Unit.
+With inputs from Meena Raman