Info Service on UN Sustainable Development (May14/13)
GCF Board agrees on process for initial resource mobilization
Geneva, 26 May 2014 (Meena Raman) – The Board of the Green Climate Fund (GCF) agreed to commence the process to mobilise resources commensurate with the Fund’s ambition at its seventh meeting in Songdo, South Korea.
Although no numerical figure or target was agreed to for the initial capitalisation of the Fund despite strong calls by developing country Board members and civil society, a process has been agreed to for the resource mobilisation, “commensurate with the Fund’s ambition to promote the paradigm shift towards low-emission and climate-resilient development pathways by providing support to developing countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change.”
Developed country Board members led by the United States and Japan could not even agree that “a very significant scale” of resources would be mobilised, as was initially proposed in the draft decision to be adopted on ‘Confirmation of the completion of the essential requirements and the commencement of the initial resource mobilisation process.’ At the insistence of the Board member from Egypt, Dr. Omar El-Arini for an indicative figure for the initial capitalisation, the final compromise reached was that the resources to be mobilised would be “commensurate with the Fund’s ambition”.
The Board arrived at this decision late night on the last day of the meeting on 21 May, confirming that the eight essential requirements for the Fund to receive, manage, programme and disburse financial resources have been met. It also took note that “the policies, frameworks and procedures of the Fund are evolving and may need to be further enhanced.” The seventh Board meeting began on 18 May.
The Board, in deciding to commence the process to mobilize resources requested the “Secretariat to make arrangements with all interested contributors, facilitating a collective engagement in the initial resource mobilization process…”
The decision also stressed “the urgency to reach pledges by November 2014, while noting that the initial resource mobilization process may need to continue beyond this date.” (This was one of the ‘sticky’ issues that saw much discussion, with Japan and the United States insisting that the timeline for the initial mobilisation not to be completed by end November this year, as was suggested in an earlier version of the draft decision).
The Board also decided that it “will consider the policies for contributions based on recommendations from the first meeting of interested contributors.”
(In an initial draft decision proposed for the Board’s consideration by the Secretariat, it was stated that the “Board will consider and approve the policies for contributions based on recommendations from the interested contributors collectively engaging in the initial resource mobilization process.” This drew strong criticism from several developing country Board members who felt that the Board was being given a rubber stamp role, with the interests of the contributors taking precedence over that of the Fund. The final decision agreed to enables the Board to consider the recommendations by interested contributors and not lead to an automatic approval by the Board of the policies for contributions.)
The Board further endorsed “the arrangements for a collective engagement in the initial resource mobilisation process.”
On the arrangements for the initial resource mobilization process, the following was agreed to: “(a) The collective engagement will take the form of one or more meetings, as well as virtual communication between meetings as necessary;
(b) The Co-Chairs will issue an open invitation to all potential contributors to the Fund’s initial resource mobilization process, including from the private sector and philanthropic organizations, within a week from adoption of this decision. (In an earlier version of the draft decision, it was stated that only public contributors who have expressed intent to contribute at least USD 5 million will be invited to participate in the process. This threshold limit was subsequently removed following interventions from several Board members).
(c) The first meeting of the initial resource mobilization process should take place before the end of June 2014. Further meetings may be arranged as necessary. A meeting aiming to finalize the collective engagement in the initial resource mobilization process will take place no later than the end of November 2014;
(d) The meetings will be open for participation by contributors, the Fund’s Co-Chairs, four representatives of the Board (two developed/two developing), two active observers of the Board (one civil society/one private sector), as well as the Executive Director;
(e) The meetings will be organized in the form of technical sessions, open to contributors and observers, as well as executive sessions, which will be open only to contributors and the Co-Chairs of the Fund. Representatives of the Interim Trustee will be invited to attend sessions of such meetings in order to provide relevant support to the Secretariat;
The rules of conduct of the initial resource mobilization process
will be developed at the first meeting.”
The first meeting of the initial resource mobilization process is expected to take place in Geneva, Switzerland, by the end of next month.
Following a general exchange among Board members on an initial draft decision proposed by the Secretariat on the matter, the Co-chairs of the Board, Manfred Konukiewitz (Germany) and Ayman Shasly (Saudi Arabia) tasked Zaheer Fakir (South Africa) and Henrik Harboe (Norway) to convene open-ended small group meetings to resolve issues around the draft decision on the initial resource mobilisation process.
Among the issues that were raised by Board members (both during the plenary session and in the small group meetings) included the following: scale and ambition of the resources to be initially mobilised; timelines related to the process; nature of the meetings; who is to participate; and thresholds in relation to which contributors to be invited.
Highlighted below are some of the interventions by Board members in response to the initial draft decisions:
Zaheer Fakir (South Africa), referring to the draft decision proposed by the Secretariat, said that the role of the Board in the resource mobilisation process seems to have been disempowered with it having a minimal role and as a rubber stamp. Having a governing body (in reference to the Board of the GCF) with no power over the process puts the process in jeopardy. To say that you have to pay to influence the institution is not the principle of multilateralism. The Board needs to be empowered in the decision. The decision also lacks ambition on the scale of resources. How are we going to involve participation of other parties like philanthropies? Fakir also asked what the rationale is for a prominent person to be involved in the process. He said that he had not seen this in other institutions.
Patrick McCaskie (Barbados) representing the Small Island Developing States (SIDs) envisaged the initial resource mobilisation to be participatory, efficient, quick and ambitious. It was his understanding that the process for the initial capitalization of the Fund will not set a precedent for future formal replenishment cycles. On participation, the proposed process misses the participation of non-contributing recipient country groupings. It is common practice in other multilateral funds that representatives of non-contributing recipient country groupings participate in these meetings. The right formula needs to be found that allows for an efficient process, while ensuring representation of non-contributing recipient countries’ from regional groupings that constitute the Board.
On the timeline, the SIDS believed that the mobilization process should be conducted with a sense of ambition and urgency and wanted the process to be completed by Lima (referring to the 20th meeting of the UNFCCC’s Conference of Parties [COP] in December this year). He did not believe a minimum threshold of USD 5 million should apply to developing countries willing to make voluntary contributions to the Fund as this might serve as a disincentive. It might also discourage interested contributors from private sector actors and foundations, he added.
Liang Ziqian (China) said that GCF was established four years ago but remains an “empty shell”. The task now is to let the resources grow as much as possible. All the essential requirements have been completed and there is hope that the Fund will be a milestone in international cooperation. He stressed that it was the obligation of developed countries to provide finance to the GCF, as the operating entity of the financial mechanism of the UNFCCC. He wanted the resource mobilisation to start right after the Board meeting and having a timeline was key. He added that the purpose of the first meeting needs to be clear and the process has to be completed before end of the year and could remain open-ended.
Omar El-Arini (Egypt) said Board members have a full right to be engaged in the process as they are representatives of constituencies and are on equal footing when discussing “our collective future.” He said the correct approach in relation to the mobilisation of resources is to refer to this as an initial capitalisation of the GCF and not as a pledging exercise. Referring to the decision adopted in the UNFCCC COP in Cancun in 2010 where developed countries agreed to mobilise resources of USD 100 billion per year by 2020, he said a figure needs to be set. He referred to the USD $30 billion that was involved in the fast-start financing (2010-2012) and said that the Board could not be less ambitious and deadlines were needed as regards the process to report to the COP on what was achieved in the initial capitalisation. In response to Board members who said that the June date for the meetings was unrealistic and referred to the ‘summer break’, El-Arini said that climate change does not know summer breaks or vacation.
He said thousands of people are dying and people back in developing countries are being asked what members have all been doing about their future. If there is a proposal for an eminent person to moderate the session, it would need to be someone who has suffered the impact of the climate crisis. El-Arini also wanted the Board to be in control of the process and not simply be a spectator and supported the need for representatives from the various regions. On the timeline for the initial process, he was of the view that it could not be open- ended and there needs to be an end point. He also stressed that there has to be reference in the decision of the Board to ambition on the scale of resources. Otherwise, it would be an “orphan Fund”, he emphasised further.
Dipak Dasgupta (India) said that there is need for symmetry on what developing countries are asked to do and to help move the process forward as regards the financial resources needed. Referring to the size, scale and urgency of the resources needed, he said that whether the resource mobilisation is initial or not, credible commitments are necessary from developed countries. There needs to be a sense of urgency to get the commitments met quickly and there cannot be excuses. He said developing countries are already spending massive amounts on the ground in addressing the climate crisis. He said the GCF is a broader partnership and is not about donors contributing aid.
Angel Valverde Gallardo (Ecuador) expressed concerns over the need for a minimum threshold for contributors. He called for a strong political signal on the scale of the resources for the GCF.
David Kaluba (Zambia) reminded members on how he had cried at a previous Board meeting when remembering the impacts and suffering of people every day affected by climate change. He said that the work and reputation of the GCF was now at stake.
Sergio Serra (Brazil) also underscored the importance of having Board members participate in the process and the need for a timeline for the initial resource mobilisation.
Audrey Joy Grant (Belize) said the role of the Board is crucial for the mobilisation of resources. She called for an innovative approach including looking at pledges from billionaires.
Irfa Ampri (Indonesia) was of the view that non-traditional contributors to the GCF could include developing countries.
Kentaro Ogata (Japan) wanted the initial resource mobilisation process to be continuous and was not agreeable to any end point or final date. He did not want the process to be closed to potential contributors who were not ready to pledge before November 2014.
Leonardo Martinez (US) said the GCF needs to attract high levels of capital instead of having many contributors. He said having a June date for the first meeting appeared unrealistic but supported the idea of having an eminent person to moderate the meeting. He said it was important to engage the private sector and non-government organisations. Martinez was sceptical about having a lot of representatives at the table and whether this would expedite the process. He was not supportive of having a USD 5 million threshold and called for it to be in the order of USD 20-25 million.
On the timelines, echoing the views of Ogata, Martinez said that there needs to be a clear starting point for the process. However, the resource mobilisation process needs to have a timetable that allows donors who are interested in contributing to deal with their fiscal cycles. He said the resource mobilisation was a continuous process of 5 years. He too agreed with Japan not to have the process end in November 2014.
Norbert Gorissen (Germany) said that initial mobilisation process needs to be continuous and ongoing. The meeting organised before the Lima UNFCCC COP would at least be a stocktaking session. He supported the threshold for contributors to be USD 5 million and wanted to see serious contributors.
Henrik Harboe (Norway) said that since the eight essential requirements have been met, the resource mobilisation has to commence.
Per Callesen (Denmark) said there is need to raise as much resources as possible and there must be a sense of fairness among contributors. Even smaller contributors are going to contribute their fair share.
Anton Hilber (Switzerland) said those who want to contribute to the GCF will change its policies. This is not a replenishment process but is its first resource mobilisation. The contributors need to agree on arrangements such as grants versus loans.
Arnaud Buisse (France) said having an eminent person moderating the process was appealing. He also called for creativity in involving the private sector in the process.
Adam Kirchknopf (Hungary) said that the process should allow for the budgetary timelines of countries. It should also allow for private sector engagement. An indicative timeline is useful, and should not be cast in stone.
Ana Fornells de Frutos (Spain) said that a threshold for contributors of USD 10 million was too high and difficult for some countries. (This was in response to a proposal by the US to raise the USD 5 million threshold to USD 10 million).
Ayman Shasly (Saudi Arabia) who was chairing this Board meeting on this issue said that members were not working in vacuum and reminded those present that the timelines for the resource mobilisation needs to be viewed in the context of the on-going negotiations under the Durban Platform (for a new agreement to be reached in Paris under the UNFCCC next year in 2015).