TWN Info Service on Climate Change (Jul17/01)
10 July 2017
Third World Network

GCF Board adopts host of important decisions

Delhi, 10 July (Indrajit Bose)- The Board of the UNFCCC’s Green Climate Fund (GCF) adopted a host of important decisions at its 17th meeting held in Songdo, South Korea, from 6-7 July.

Of crucial importance were decisions related to policy matters related to the approval of funding proposals. These decisions followed discussions from the agenda items on ‘review of the initial proposal approval process’ and ‘matters arising from the informal discussions’.

(The discussions on the gaps in the proposals approval process were held in a closed two-day informal session preceding the formal Board meeting. Since the informal session was not open to observers, nor was the session webcast, observers were not privy to the discussions. However, sources said that the discussions in the informal meeting were smooth and several crucial gaps were addressed and several others were scheduled for discussions at the Board’s 18th and 19th meetings.)

The Board also accredited 6 new entities that will be able to access the funds resources for projects. (See further details below.)

Another very significant decisions adopted on matters relating to funding activities in the forestry sector aimed at reducing emissions from deforestation and forest degradation in developing countries known as ‘REDD-plus’. (A further article on this will follow.)

Review of the Initial Proposal Approval Process

In the decision on the review of the initial proposal approval process adopted, the Board decided to update the project and programme activity cycle.

The Secretariat was requested to only submit to the Board those funding proposals by entities accredited by the Board that have signed the accreditation master agreements (AMAs); by entities accredited that have not signed accreditation master agreements, provided that such submission to the Secretariat occurs no later than 120 days from the date of the decision by the Board to accredit the relevant entity; funding proposals that have been obtained in response to requests for proposals issued by the GCF; or from those entities who have not yet signed the AMA that have proposals currently at stage 4 of the updated project and programme activity cycle.

(Proposals at stage 4 of the updated project and programme activity cycle refer to the following:
—Full proposal outline, where the Secretariat is expected to update the information on the GCF portfolio prior to each Board meeting and publish it on the GCF website;
—No-objection letter, where the National Designated Authority or the Focal Point has provided a no-objection letter;
—Funding proposal submission to the Secretariat, where the full funding proposal has been submitted to the Secretariat; the Secretariat has acknowledged such a submission; and where the Secretariat reviews the funding proposals for completeness of documentation and
—Information disclosure in accordance with the information disclosure policy of the Fund

In the past Board members have expressed concerns at the slow rate of disbursement of resources to approved projects and the lack of progress in signing AMAs. The latter has been cited by the GCF Secretariat as one of the reasons for the slow disbursement of resources.

(An AMA is a legal arrangement between the Secretariat and an accredited entity, which facilitates disbursements.  According to the AMA template, the number of days to be signed may be specified by the Board in its approval decision, but it is not to exceed 120 days after Board approval.)

(Also under discussion was the granting extension for two accredited entities for signing the AMAs. See below for further details.)

In the decision adopted on the approval process, the Board underscored “the importance of early engagement by accredited entities with national designated authorities and focal points in the preparation and submission of concept notes”.

The Board also agreed to insert a new stage into the project and proposal activity cycle: “On receipt of a concept note submission from an accredited entity, the Secretariat will seek confirmation from the national designated authority or focal point that the concept note fits under national priorities and country ownership”.

The Board also requested the Secretariat to prepare a document outlining options for the development of a “two-stage proposal approval process, with stage 1 focusing on concept note approval and stage 2 focusing on the assessments by the Secretariat and the independent Technical Advisory Panel (iTAP). The Board is expected to consider the two-stage approval process at its 19th Meeting.

The Secretariat was also requested “to present to the Board implementation challenges identified in the application of the initial proposal approval process, including policy matters identified during the Secretariat’s assessment of funding proposals, for the Board’s consideration at the earliest opportunity, including information on budgetary considerations”.

The Board decided that the Secretariat “shall only submit to the Board for its consideration those funding proposals…whose approval has been recommended by the independent Technical Advisory Panel and the Secretariat”.

(The Board has earlier in the past faced a policy conundrum especially when the Board had to consider funding proposals with the iTAP recommendation that they not be approved for funding. Some members of the Board have been of the view that if the iTAP has recommended that a project not be approved, it should not have been presented to the Board for consideration in the first place. Others have expressed that the Board has to take the final decision on the project, despite the recommendation of the iTAP).

The decision also confirmed that such proposals would continue to be revised by the Secretariat and accredited entities. The Secretariat however, is to inform the Board at each Board meeting of the status of the funding proposals which either the Secretariat or the iTAP did not recommend for approval.

The Board also requested the Secretariat to develop and publish clear timelines for its assessment of funding proposals to ensure timely consideration of funding proposals and further requested the Co-chairs to explore options for the timely consideration of funding proposals between Board meetings.

The Board requested the Secretariat to “define the nature, scope and extent of second-level due diligence and submit the same to the Board for its consideration no later than April 2018”.

In the decision adopted, the Board requested the Secretariat “to develop an interim restructuring and cancellation policy, including further options for decision-making, for consideration by the Board no later than its eighteenth session, and a comprehensive restructuring and cancellation policy no later than April 2018.”

Matters related to accreditation

The Board accredited 6 new entities to the GCF.

The entities accredited included Infrastructure Development Company Limited (IDCOL), based in Bangladesh; Small Industries Development Bank of India (SIDBI), based in India; Micronesia Conservation Trust (MCT), based in the Federated States of Micronesia; CDG Capital S.A. (CDG Capital), based in Morocco; Bank of Tokyo-Mitsubishi UFJ Limited (BTMU), headquartered in Japan; and Japan International Cooperation Agency (JICA), also headquartered in Japan.

Another related item on the agenda was the extension of the deadline related to the execution of the AMAs for two projects approved by the Board in the past.

The projects in question were the Global Energy Efficiency and Renewable Energy Fund NeXt (GEEREF NeXt) project covering several countries in Africa, Latin America and the Caribbean, Eastern Europe and Asia Pacific, for which the European Investment Bank is the accredited entity; and the Tina River Hydropower Development Project in the Solomon Islands for which the World Bank is the accredited entity.

During the discussions the Board members were faced with the challenge of whether to grant extension or not to one of the entities.

The Board members were in a quandary because if they did not grant an extension to the accredited entity, it would effectively lead to the cancellation of the project and the country would suffer as a result. While they did not want the country to suffer as a result of the accredited entity not signing the AMA, they wanted to send a strong message to the accredited entity in question.

The problem stemmed from the fact that the Board had no indication of when the entity in question would sign the AMA and yet an extension was being sought for it.

The Board members did not disclose the name of which entity they were talking about. After further discussions, the Board adopted a decision wherein it granted an extension to both the entities.

Also, in line with the discussions, in the decision adopted, the Board “requested the Secretariat to inform all national designated authorities of the risks involved in supporting a project or programme being proposed to the GCF by an accredited entity that has not signed an accreditation master agreement with the GCF”.

The Board is also expected to take up accreditation policy matters at its 18th meeting.

Matters arising from the informal discussions

Following the discussions in the informal session, the Board took a decision in relation to strengthening and scaling up the GCF pipeline as regards establishing strategic programming priorities.

In the decision adopted, the Board requested the Secretariat “to develop a mapping document that identifies all elements related to project and programme eligibility and selection criteria included in previous decisions, conditions imposed by the Board on funding proposals, and the Governing Instrument for the GCF that can contribute to strengthening the eligibility criteria of the GCF, and present this for the Board’s consideration at its 18th meeting as part of the ongoing process to simplify and clarify project and programme eligibility and selection criteria and update the policies and procedures of the GCF”.

The Board also requested the Secretariat “to develop a proposal for the Board’s consideration at its 19th meeting, taking into account best practices from other multilateral funds and other approaches, to address the development and application of an incremental cost calculation methodology and/or alternative methodologies; guidance on the approach to provide support to adaptation activities; a co-financing policy; and options for further guidance on concessionaility.”

On the overall strategic programming, the Co-chairs will consult on the issue and present the outcome of the consultations at the 18th meeting of the Board.

GCF portfolio of projects

The Board also adopted a decision on the status of the GCF portfolio in relation to the projects in the pipeline and those that have been approved.

In the decision adopted, the Board requested the Secretariat to “undertake additional analysis…to identify specific results areas where targeted GCF investment would have the most impact.”

The Board also requested the Secretariat to “undertake targeted outreach to promote partnerships between accredited entities and those potential non-accredited entities that have the technical expertise to support such results areas… and prepare targeted draft requests for proposals”.

Other decisions adopted

Among the other decisions adopted included barriers to crowding-in and maximizing the engagement of the private sector; terms of reference for the independent evaluation of the ‘Readiness and Preparatory Support Programme’; the ‘Risk Management Framework’; and country ownership guidelines.

Besides these, there were some contentious issues during the course of the Board meeting. These included discussions on the status of the Fund’s resources, selection of the permanent trustee, facilitating increase in proposals from direct access entities; and investment policy of the trust fund. (Separate articles on some of the issues will follow.)

The next board meeting is scheduled from 30 September to 2 October in Egypt.

Edited by Meena Raman