TWN Info Service on Climate Change (Apr17/02)
12 April 2017
Third World Network

GCF Board does not approve funding proposal from Ethiopia

12 April, Delhi (Indrajit Bose) — The Board of the Green Climate Fund (GCF), at its 16th meeting held in Songdo, South Korea, from 4-6 April, could not agree on a project from Ethiopia, titled ‘Responding to the increasing risk of drought: building gender-responsive resilience of the most vulnerable communities’.

The Board members did not approve the project as there was no consensus in the Board to do so. This was the first time that the GCF Board did not approve a funding proposal.

The controversial project from Ethiopia, was submitted by the United Nations Development Programme (UNDP) as the accredited entity, which sought USD 99.6 million from the GCF.

According to the proposal, the project aimed to develop an integral assistance for 1.2 million people (over 50 per cent being women) of the most vulnerable population of Ethiopia in 22 “woredas” (regions) by improving their access to water and food, promoting alternative livelihoods, empowering women, improving health and well-being, improving their access to climate information, improving the resilience of ecosystems and the availability of ecosystem services, and introducing improved and climate-smart technologies. The project was presented to the GCF as an adaptation project, justifying that with a diverse number of interventions, the communities would be more resilient to climate change.

The funding proposal of the project provided three components and each component comprised several activities: the first component was to provide technologies and infrastructural solutions for resilient livelihoods to increase the overall productivity of the direct project beneficiaries with gender responsive interventions, including to enhance agricultural and livestock productivity using irrigation and improved inputs, as well as improving the ability of farmers to access appropriate finance and training. The project also aimed to provide groundwater sources to supply water for drinking purposes with solar pump systems. The second component was to promote livelihood diversification and protection to secure the long-term sustainability of landscape ecosystems. The third component was designed to increase cross-linkages among the various thematic activities and to develop appropriate governance mechanisms to reinforce project sustainability and to extract valuable lessons that would help to replicate the project in other woredas.

The GCF’s independent Technical Advisory Panel (iTAP) had recommended that the project should not be approved in its existing format and that it should be redesigned to prioritize water-related activities and other sectoral and landscape interventions, besides elaborating on the regeneration of ecosystems through forest and soil conservation activities and the management, maintenance and appropriation of the climate information system. The iTAP also recommended that a sustainability strategy, including sources of co-financing be developed.

The fact that the iTAP had recommended that the project should not be approved presented a policy conundrum among Board members.

Some Board members were of the view that if the iTAP had recommended that a project not be approved, it should not have been presented to the Board for consideration in the first place. Others felt that the Board had to take the final decision on the project (despite the recommendation of the iTAP).

Responding to some of the comments from the Board, the Secretariat said that completed funding proposals are submitted to the Board for a decision and that the Secretariat did not have the authority to not bring completed and compliant proposals before the Board.

The developed country Board members’ objections to the project centred around the disparate components of the project that had no link to each other and the amount of grant funding requested for the project. Some members also stressed that the project was a development project and was not necessarily a climate change project.

While Board members from the United States, Switzerland, Canada, Sweden, Japan and Germany were not in favour of the project, several developing country Board members were in favour of the project.

Board members from Antigua and Barbuda, Democratic Republic of Congo (DRC), Pakistan, South Africa, Malawi, Samoa and China supported the project (see highlights of exchange below).

While the Board member from Denmark, Morten Elkjaer, supported the project with the recommendations from the iTAP, the French Board member Cyril Rousseau also supported the project saying that if the Board was not in a position to approve the project, it should look into what was the best way for it to be submitted again.

During the consideration of the proposal, an important question was raised by a member of the Board as to what options the Board had when there is no consensus among members, which led to an intense exchange of views among the Board members.

Omar El Arini (Egypt) too said that the project should be sent back to the UNDP to refine the proposal and consider the revised proposal at the next meeting.

Following the exchange on whether to approve the project or not, Arini said, “I am dismayed about this atmosphere. I made a specific proposal. We have no guidelines, no eligibility criteria…if this project were a USD 10 million project, would we have any discussion on it? At the same time, we have projects that are entirely developmental. An agency has spent money and has expectations; yet we are rejecting it. Why don’t we take the accredited entity and the country seriously?” asked Arini and appealed to the members to send the proposal back to the country for elements of resilience to be built into the proposal.

Larry McDonald (US) though said that if the accredited entity and the national authorities came with another proposal, he would be ready to accept it but not the one on the table.

Tosi Mpanu Mpanu (DRC) also appealed for a solution had to be found. “People forget that this institution is not a bank. This is a Fund of the UN Framework Convention on Climate Change (UNFCCC). Article 4.9 of the Convention is about giving special considerations on finance and technology to the Least Developed Countries (LDCs). It is hard to make a differentiation between climate and development. The low development of Ethiopia makes them more vulnerable to climate change. The project makes a clear link between development and climate. It is from an LDC. It is well justified and should receive climate finance from the GCF,” stressed Mpanu.

Towards the end of the discussions, Co-Chair Ewen McDonald (Australia) gaveled saying that since there was no consensus to approve the project, the project was therefore not approved.

The matter did not end there.

Evans Davie Njewa (Malawi) sought a clarification that if a project was not approved did it mean it was rejected? “My sense is if we have not had any consensus, can we have it in record that some of us had no consensus to reject it? Some of us supported it too,” said Njewa.

Mpanu followed it up by seeking legal clarity on the meaning of “consensus” regarding projects.

In response, the legal counsel of the GCF said that the Board had adopted a decision at its 7th meeting that gave three options to the Board. The three options in considering funding proposals which are: to approve; to approve with conditions; to reject. “Since the Board decides by consensus, each of the three is by consensus. The policy does not say what to do when there is no consensus,” said the legal counsel.

(According to decision B.07/03, where the Board adopted the ‘Initial Proposal Approvals Process’, the Board decided to:

(i) Approve the funding proposal; or

(ii) Provide an approval that is conditional on modifications to project or programme design or subject to availability of funding; or

(iii) Reject the funding proposal.

The decision is recorded by the Secretariat and communicated to the Interim Trustee….)

Mpanu responded by saying that the interpretation then is that there was no consensus in either approving the funding proposal, no consensus on a conditional approval and no consensus in rejecting the project. “So, for me, it is a clear case of no consensus around the table,” said Mpanu.

Njewa supported Mpanu and said that it should be recorded in the report of the meeting that there was no consensus to reject the proposal.

At this point Anton Hilber (Switzerland) said that the Governing Instrument mandates the Board to come up with a procedure in the case of absence of consensus and that they should explore such options.

(Decision-making in the absence of consensus has been a sticking issue with the Board. During the 8th Meeting of the Board in 2014, there were disagreements on the issue as to what to do in the event decision-making by consensus has been exhausted. Developed country Board members, wanting a voting system in place that is linked to the amount of contributions a country makes to the GCF. Developing country Board members were against such an approach and there were proposals for other methods of voting which did not find consensus. The Board had then decided that it would develop procedures for adopting decisions in the event that all efforts at reaching consensus have been exhausted, which is still a pending issue).

In response to Mpanu-Mpanu, Co-chair Ewen McDonald said that the decision adopted was to approve projects and that there was no consensus to approve the Ethiopian project. “That was the decision. There is nothing else,” said the co-chair and added that it was up to the accredited entity and the government of Ethiopia to decide whether to bring the project back for reconsideration.

Rousseau said that his interpretation of the decision was that there was no consensus to approve the proposal and added that the Board must give clear guidance to the accredited entity on how to move forward. 

Co-chair McDonald repeated that there was no consensus to approve the project and that decision was gaveled.

Below are further highlights from the discussions that took place.

Mpanu Mpanu said that while the project had weaknesses, these could be strengthened and some of the proposed conditions could be clarified. Mpanu also said that adaptation projects could be addressed more holistically and that there is no seamless differentiation between climate and development. A good adaptation project must address different aspects of vulnerability, he said. The Board has to take a final call on whether a project is approved.

El Arini said that none of the projects should be approved with conditions, as “we know these conditions would not be fulfilled.” He lamented that “something was wrong with our process here”. Arini said that the iTAP is a Board-appointed panel. In this case, it had a negative recommendation, and yet the Secretariat brought the project to the Board. “If the iTAP or the Secretariat identify some issues with projects, they should come to the Board with the issue,” he added. 

Zaheer Fakir (South Africa) said he felt sad for Ethiopia and that the Board had failed in the way it communicates to the world. “We sent out a message that these are the projects we want to see. We have not given people the clarity needed (on the type of projects that should seek GCF funding). “We are struggling now with how and what determines what the Fund finances. The struggle we have is manifesting the lack of clarity. Even within us there are such divergent views,” said Fakir. “We have not had the courage to say no to a project. We have beautified the ‘yes’ with conditions, knowing well that those conditions can never be fulfilled,” he stressed further, referring to the approval of projects with a list of conditions. 

Fakir also said that the Board had decided that there would be a review of the initial proposals approvals process and to strengthen the eligibility criteria but the Board had not done that. “We have not done the review and I do not like to be in a place where one defends and the other tries to kill a project. We need to conclude work on the review. There needs to be clarity on a whole lot of stuff. We are sitting on a conundrum- either to approve or reject a project. So, we will end up with putting conditions, which also does a dis-service. We need to think what is the option we exercise. The situation is rather grave. We have empowered the Secretariat by us not being clear. The Secretariat is left to decide on what gets to the Board or not…We need to empower the Secretariat in a positive way. It is not fair to blame the iTAP or anyone else,” he added further. 

Nauman Bashir Bhatti (Pakistan) said while the Ethiopian project lacked clarity in its holistic implementation, he was more concerned about the process of considering a project which the iTAP has not recommended for approval. Bhatti also suggested that the Board needed a committee that performed prior due diligence before a project comes to the Board for consideration.

Diann Black-Layne (Antigua and Barbuda) praised the project as it took into consideration the environmental and social management system (ESMS) and gender aspects and said that that was the way a project should be designed. (An ESMS is an overarching framework for achieving improvements in environmental and social outcomes while addressing any unintended adverse impacts in all the GCF-financed activities.) Black-Layne also mentioned that if there is disagreement with the iTAP assessment, the project should be brought to the Board. 

Mamdou Honadia (Burkina Faso) said he liked the project and it contributed in striking a relationship between drought and climate change. He added that in developing countries, one could not talk about environmental protection without promoting food security.

Evans Davie Njewa (Malawi) said the project is trying to support communities who have become vulnerable due to climate change, so it was a climate change project.

Larry McDonald (US) said that the relationship among the project components were weak. He said while he was not against multi-dimensional projects, and that it would be good if it was truly programmatic. McDonald was concerned about the size of the grant and the high level of concessionality. He also said that since the iTAP had recommended rejection, he could not “support or join consensus to support this proposal”. He said that the practice of identifying conditions was counterproductive.

Caroline Lecrec (Canada) said the Board should consider the implications when the iTAP had recommended that the project is not approved. She also said that with the recommendations of the iTAP, the project would change. “Obviously, we do not want to draw a line between climate change and sustainable development, but we have to be careful. Climate change investments will lead to sustainable development, but not all development investments lead to climate change adaptation. There is already a weak link between these activities and the iTAP has noted that,” she said, and added that such a complex project would require enormous institutional oversight for implementation and that it could not be implemented within a specified time period.

Lars Roth (Sweden) said the delegation took the recommendations of the iTAP very seriously. He also recommended that when the iTAP had recommended a project is not approved, it should not come to the Board.

Mikio Mori (Japan) said the size of the grant component was huge in that it reached 100 million USD and in such cases one had to look at the sustainability of the project with stricter consideration. Mori also said that when project proposals are discussed, he would like the Board to discuss how to scrutinize grant projects better. He also said that evaluating in kind co-financing would be very important and there is a need to find a way to characterize in kind co-financing.

Karsten Sach (Germany) said he shared the iTAP’s assessment and added that the project was complex and not well organized. He also said that he did not see the role of the UNDP as it was just being used as a vehicle for higher level of funding. 

Anton Hilber (Switzerland) said that while a project that has not been recommended for approval could come to the Board, the Secretariat should present it with compelling reasons why it was being presented. He also said that if the Secretariat is not clear, it was up to the Board to provide the clarity.

Kate Hughes (UK) said that the transformational aspect of the project was minimal, and that the extensive list of actions was to improve rural development. She also said that the climate additionality and incremental cost components were not clear. Hughes also said that it was not clear which activities would be implemented in what context and decision-making was not clear. She was also unclear about the role of the UNDP as the accredited entity and added that the iTAP’s comments should be taken seriously. “ The iTAP are conscious they are not the decision-making body. They are here to provide technical inputs. If we approve the project, with conditions, does it remain the same project? So, if we approve with conditions, how do we handle that?” asked Hughes.

Morten Elkjaer (Denmark) said the solutions of the needs assessment was not up to the expectations of the Board. “Has the UNDP done a lessons learnt from similar projects and whatever good lessons have been brought here? You have not done enough to make us feel comfortable. Or, is it that we do not have good solutions out there,” said Elkjaer and added that there should be policy guidance on what is adaptation and what is not.

A member of iTAP member responded that while he understood that Ethiopia is very vulnerable to climate change, the iTAP was giving a technical opinion. The iTAP member clarified that the iTAP was not suggesting conditions, but giving recommendations instead on how to bring back the project that is more integral and prioritizes the value for money.

Responding to the comments, the accredited entity said that the role of the UNDP was no different in similar projects it managed. “We will manage under the national implementation modality. The project will be executed under our rules and procedure. We have conducted due diligence. That resulted in a low risk rating. It is the same kind of assessment we do with respect to the national implementing modality. The project has been designed with UNDP support. One of the lessons learned is the need to address multidimensional needs of vulnerability,” said the representative from UNDP. 

The UNDP representative also said that the iTAP recommendations were perfectly do-able and did not suggest a different project and that the recommendations had been discussed with the Government of Ethiopia, which was fine with them.

(Edited by Meena Raman)