TWN Info Service on Climate Change (Oct17/03)
17 October 2017
Third World Network

GCF Board approves USD 500 million for REDD-plus pilot programme

Delhi, 17 October (Indrajit Bose) — The Board of the Green Climate Fund (GCF) has decided to allocate up to USD 500 million for a request for proposals (RFP) for the pilot programme for REDD-plus results-based payments.

(REDD-plus refers to ‘reducing emissions from deforestation and forest degradation’ in developing countries that includes the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries)

The Board agreed to initiate the RFP pilot programme for REDD-plus results-based payments.

It also decided to set the valuation of results at USD 5 per tonne of verified emission reductions of carbon dioxide equivalent (tCO2 eq). (Valuation indicates assigning a price for the results for per tonne of emission reduction.)

These decisions were taken at the 18th Board meeting in Cairo which met from 30 September to 2 October.

The Board also approved a further USD 50 million under the ‘Readiness and Preparatory Support Programme’ to support the preparation of National Adaptation Plans (NAPs) and/or other adaptation planning processes.

It also decided on a simplified approvals process for certain small-scale activities.

It also adopted a policy on ‘Anti-Money Laundering and Countering the Financing of Terrorism’ at the Cairo meeting.

Further details are provided below.

Request for proposals for REDD-plus results-based payments

The funding of REDD-plus activities is seen as a crucial matter for developing countries, with many awaiting finance for such activities in the forestry sector.

Prior to agreeing on the RFP pilot, several contentious issues had to be resolved in previous Board meetings such as the size of the pilot programme; eligibility date for results (this is about defining the start date for eligible results under the pilot programme); possible distribution of payments for the verified emission reductions achieved among successfully evaluated proposals, (this is about the distribution of payments which follows a certain calculation, and which ascertains how much money will a country get); application of the criteria for evaluating the proposals as described in the scorecard; (a scorecard comprises the criteria for evaluating whether a proposal merits funding from the GCF).

For more, see TWN Update on the funding of projects in the forestry sector.

Considering a valuation of USD 5/tCO2eq, the GCF would be able to pay for up to 100 million tCO2eq emission reductions (ERs). The maximum amount of payments per country would be set at 30 per cent of the total payable volume (30 MtCO2eq) during the length of the pilot.

The eligibility period for results, another area of contention, was also agreed upon. Under the pilot programme, the GCF would accept for consideration the results between 31 December 2013 and 31 December 2018.

The scorecard that was agreed is divided into a ‘concept note stage’ and a ‘funding proposal stage’, each of which has its own criteria for evaluation.

According to the draft terms of reference for the pilot programme for REDD-plus results-based payments, the RFP will comprise two stages: in the first stage, the GCF receives concept notes on a rolling basis, allowing any interested countries to apply.

In the second stage, countries that are notified of their eligibility are invited to submit a funding proposal to the GCF. A country could submit more than one proposal provided that the total amount of GCF payable volume of emission reduction will not exceed more than 30 per cent of the size of the total envelope, according to the details of the pilot phase.

The submission of REDD-plus results-based payments funding proposals should be through existing accredited entities to the GCF, in coordination with the REDD-plus national entity/focal point to the UNFCCC, and following the procedures defined by their corresponding National Designated Authority (NDA). A no-objection letter from the NDA/focal point is required for all REDD-plus results based payments funding proposals.

According to the terms of reference for the pilot programme, the RFP will run from its launch in October 2017 until the last meeting of the Board in 2022.

A minimum of 3 Concept Notes from 3 different countries needs to be submitted to initiate the RFP evaluation process.  The assessment of the concept notes will occur in the order in which they were received by the Secretariat.
The pilot programme will continue until the last meeting of the Board in 2022 and a minimum of three concept notes from three different countries will trigger the RFP evaluation process.

The terms of reference also mandate that countries receiving REDD-plus results-based payments through the accredited entities must reinvest the proceeds in activities that are aligned to their nationally determined contributions (under the Paris Agreement), their REDD-plus strategies or low-carbon development plans.

In the decision adopted, the Board requested the Secretariat to develop all corresponding templates and guidance for NDAs and accredited entities for applying to the RFP no later than two months after its adoption by the Board.

Readiness and Preparatory Support Programme

Discussions on the readiness and preparatory support programme were contentious around a request by the Secretariat to approve USD 190 million for funding National Adaptation Plans (NAPs).

According to the Secretariat, the requested amount would enable them to approve 18 NAPs by the end of 2017 and 40 NAPs in 2018. The Secretariat also informed the Board that they need at least USD 50 million to approve the NAPs in 2017, which was covered in the USD 190 million request.

Several Board members said that while they were ready to consider approving additional resources, these were also linked to a review of the programme.

Karsten Sach (Germany) said he would like to see the results of the review before committing to the “huge sum” requested by the Secretariat.

Zaheer Fakir (South Africa) also said that the Secretariat should make it clear as to what results it was seeking through the substantial increase it had put on the table.

Omar El Arini (Egypt) said without auditing or thorough evaluation, he was not in a position to support the request.

Tosi Mpanu Mpanu (Democratic Republic of Congo) though was supportive of the request.

After further consultations, the Board adopted a decision, where it agreed to conclude the terms of reference for the independent evaluation of the programme by adopting a decision on the terms of reference in between the 18th and the 19th meetings of the Board.

The Board also agreed that the evaluation should conclude by the 21st meeting and a progress update on the evaluation should be provided at the 20th meeting.

The Board also decided to approve USD 50 million for the execution of the Readiness and Preparatory Support Programme to address immediate requests for the funding of national adaptation planning and/or other adaptation planning processes.

The Board also requested the Secretariat to present at its 19th meeting, a revised work programme for the programme, including a request for funding for 2018.

Simplified approval process for certain small-scale activities

The Board approved a simplified approval process pilot scheme at the meeting.

The pilot will focus on projects and programmes that are ready for “scaling up and have the potential for transformation, promoting a paradigm shift to low-emission and climate-resilient development”; “whose total size is no greater than USD 50 million, provided that the GCF participation in such project or programme is capped at USD 10 million”; and “whose environmental and social risks and impacts are classified as mild or minimal to none”.

With reference to activities, the pilot scheme includes activities such as “capacity development, planning support, institutional development, advisory services, communication and outreach, household-level facilities and production within an already built-up area and with no additional footprint (basic post-harvest processing, rainwater harvesting, pico- to micro-scale renewable energy, retrofit renewable energy systems and energy efficiency and conservation, agroforestry and other small-scale climate smart agriculture), early warning and other monitoring systems, response planning support, in-situ rehabilitation of existing public facilities including maintenance and upgrading where waste will not be an issue, small-scale rural and urban community projects, small-scale watershed management and rehabilitation, climate smart agriculture, forest management activities and agroforestry among others”.

The pilot also says that the activities would be project and context specific and would be assessed on a case-by-case basis.

Only those entities that are accredited to the GCF can submit proposals under the pilot scheme. The pilot scheme also lays out that the Secretariat would take measures to “encourage direct access entities to submit projects or programmes under this pilot scheme with the aim of ensuring that submissions from such entities constitute at least 40 per cent of all approved projects.”

The pilot would require the submission of a concept note along with “a pre-feasibility study and the results of the environmental and social risk screening that identify project-related environmental and social risks and impacts and their proposed mitigation measures”.

“An Environmental and Social Action Plan (ESAP) will also be required that will describe the actions necessary to carry out the mitigation measures including timelines for their implementation, continuing consultations and engagement, monitoring and reporting, and actions to develop further the institutional environmental and social management system where gaps are identified,” reads the pilot scheme.

Under the project review criteria of such proposals, the pilot scheme states that while the entity submitting a proposal would conduct all relevant due diligence for the project prior to the submission of a funding proposal, the GCF would convene a second-level due diligence where it would “validate the risk category of the project/programme activity”.

Proposals under this pilot will also be subject “to a limited or streamlined review” by the independent Technical Advisory Panel of the GCF.

According to the pilot, “the entity proposing the project will need to provide a summary of consultations and a stakeholder engagement plan”.

In the decision adopted, the Board also decided that the scheme is to be reviewed in two years of its operationalization, or when the approvals under the scheme amount to USD 80 million in GCF financing.

The Board also requested the Secretariat to operationalize the pilot scheme expeditiously and to develop a proposal for funding proposals under the pilot between meetings of the Board.

Policies related to prohibited practices

The Board adopted the Anti-Money Laundering and Countering the Financing of Terrorism Policy (AML/CFT) during the meeting, which essentially aims to safeguard the GCF against money laundering (ML) and financing terrorism (FT).

The policy outlines the principles and minimum standards of internal AML/CFT controls which should be adhered to by the GCF to mitigate any “reputational, regulatory, legal and financial loss risks”.

According to the policy adopted, its “purpose is to provide principles and guidance regarding AML/CFT requirements and risks and to meet the following objectives:
(a) Prevent the abuse of the GCF’s resources for ML and/or FT;
(b) Meet applicable legal requirements and international standards in jurisdictions where the GCF and its counterparties operate;
(c) Mitigate any reputational risk;
(d) Support the establishing and/or strengthening of capacities in countries to meet the GCF’s fiduciary standards regarding AML/CFT;
(e) Guard against establishing any relations or undertaking any transaction that may relate to or may facilitate ML and/or FT or any other illicit activity;
(f) Exercise due diligence when dealing with Counterparties, persons appointed to act on behalf of Counterparties and connected parties of the Counterparties; and
(g) Continuously review and update its AML/CFT Policy and its corresponding AML/CFT Standard as threats and international standards evolve to prevent and detect ML and/or FT.”

The policy adopted also states that for its operationalization, a detailed AML/CFT Standard would be developed which would define the implementation procedures.

In the decision adopted, the Board also requested the head of the Independent Integrity Unit, under the supervision of the Ethics and Audit Committee of the GCF, to develop the standards for the implementation of the AML/CFT Policy for consideration by the Board by its 20th meeting.