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Info Service on Climate Change (Apr22/03) Green Climate Fund: Urgent need to clarify role and vision on adaptation Penang, 5 April ‘22 (Meena Raman) – At the 31st meeting of the Board (B.31) of the UNFCCC’s Green Climate Fund (GCF), members agreed that there is an urgent need to clarify the Fund’s role and vision on climate adaptation. In this regard, the GCF Board requested its Secretariat (based in Songdo, South Korea), to update a draft paper on the Fund’s support to adaptation for the Board’s consideration at its next meeting to be held in May this year. The Secretariat was also requested to prepare the paper, incorporating the findings and recommendations of the GCF’s Independent Evaluation Unit’s (IEU) evaluation and the views expressed by Board members at B.31. A very rich discussion took place among Board members, following the IEU’s evaluation. The decision in this regard was adopted on the final day of the Board meeting on 31st March, after a four-day meeting which commenced virtually on 28th March. The IEU evaluation revealed some alarming findings, notably that 40% of all registered concept notes for adaptation projects are withdrawn during the GCF review process, due to the lack of guidance and difficulty in identifying the “climate rationale” of projects, which is viewed “as the single most difficult hurdle for project development in both adaptation and cross-cutting projects.” Also alarming, as expressed by the African Group of Board members, is the fact that adaptation projects on average take over two years to complete the approval process, including in concluding the legal agreement with the GCF. The findings show that adaptation projects take longer than mitigation projects to move to the next stage of the approval cycle, for both approved projects and projects in the pipeline. (See further details below). The B.31 meeting, which was co-chaired by Jean-Christophe Donnellier (France) and Tlou Emmanuel Ramaru (South Africa), also saw the approval of two funding proposals and the accreditation of one new entity, along with the re-accreditation of four entities, including that of the Development Bank of Southern Africa (DBSA) which proved contentious between developed and developing country Board members. In relation to the DBSA reaccreditation, the Board discussed the issue of whether the GCF had a ‘net zero policy’, and the Secretariat confirmed that the Fund had not adopted such a policy, which led the way to its reaccreditation. (See further details below). The following projects were approved for funding during the meeting: · USD 73.3 million for ‘Climate-smart initiatives for climate change adaptation and sustainability in prioritized agricultural production systems in Colombia’, undertaken with Corporación Andina de Fomento (CAF); and · USD 114.4 million for ‘Inclusive Green Financing Initiative (IGREENFIN I): Greening Agricultural Banks & the Financial Sector to Foster Climate Resilient, Low Emission Smallholder Agriculture in the Great Green Great Wall (GGW) countries - Phase I’, undertaken with International Fund for Agricultural Development (IFAD). The new entity approved for accreditation was Jamaica Social Investment Fund (JSIF), while the following entities were reaccredited, in addition to DBSA: · Acumen, based in the United States; · Centre de Suivi Ecologique (CSE), based in Senegal; · Peruvian Trust Fund for National Parks and Protected Areas (PROFONANPE), based in Peru. The IEU’s evaluation on the GCF’s adaptation portfolio and approach The independent evaluation on the GCF’s adaptation portfolio and approach was published in February 2021, but was discussed only at B.31. The key findings contained in the report were presented by the IEU. Among the key findings in the evaluation included the following: In relation to ‘positioning in adaptation finance’, the evaluation pointed out that - · “Unlike other climate funds, the GCF avoids defining adaptation, allowing flexibility for developing countries to define what adaptation means in their unique context. · Conceptually, adaptation is inextricably linked to, and at the centre of sustainable development. It is a subset of development in areas with high climate risks. The same also applies to adaptation finance. · Considering its mandates and resources, the GCF is uniquely positioned to finance projects at scale with a high-risk appetite, if appropriate and consistent with country needs. However, the GCF has not clearly defined a specific approach for adaptation programming”. In relation to ‘access and business model’ among the findings were as follows: · “The adaptation portfolio has a large number of small size projects. Only 4 out of 67 funded GCF adaptation proposals are programmes. There is only one large scale adaptation project. · Adaptation projects on average take over two years to concluding the legal agreement. It takes adaptation projects longer than mitigation projects to move to the next stage, for both approved projects and projects in the pipeline. It is particularly challenging for Direct Access Entities (DAEs). It takes, on average, 475 days for national DAEs to conclude legal negotiations for adaptation projects, compared to 208 days for mitigation. · The availability of data, lack of guidance on the concept of climate rationale at AE (accredited entities) and Secretariat level, and the complexity of adaptation projects are key reasons for delays. Adaptation projects require more specific and local high-resolution data to analyse climate risks, have less standardized business models and have complex execution structures. Forty per cent of all registered concept notes for adaptation projects are withdrawn during the review process. Survey respondents identified climate rationale as the single most difficult hurdle for project development in both adaptation and cross-cutting projects. · The GCF has established targets to support vulnerable countries in adaptation, but many vulnerable countries are yet to be reached and per capita figures remains low. Sixty- seven percent of adaptation finance is currently directed to those most vulnerable to climate risks and least ready to adapt. But the GCF still has challenges in reaching the most vulnerable and least ready countries. 59 countries receive no GCF adaptation finance. · International Accredited Entities (IAEs) are overrepresented in the adaptation portfolio: 87 per cent of adaptation finance is committed through IAEs, with more than half of adaptation finance going through six IAEs. Regional DAEs are the most underrepresented in the GCFs adaptation portfolio due partly to capacity, experience and network limitations in originating and implementing adaptation projects. · 96% of committed adaptation financing on pure adaptation projects flows through grants. Regional DAEs use a more diverse set of instruments than national DAEs or IAEs. There is an opportunity to channel more adaptation financing through regional DAEs and by using other instruments such as equity and (first loss) guarantees. High upfront costs of doing business with the GCF are a concern. Programmatic approaches, especially for longer-term and larger-scale interventions, can limit such burdens.” Wael Aboul-magd (Egypt), speaking for the African Group Board members after the IEU presentation, referred to the evaluation report which indicated that “In 2018, GCF commitments of USD805 million constituted about 3 % of the annual global flows to adaptation. However, since 2018, GCF commitments to adaptation have fallen back to USD 349.3 million and USD 535.04 million committed in 2019 and 2020 respectively. The key findings of the evaluation recognize this gap and provide recommendations on how to address it. The GCF has not yet defined a specific approach and vision for adaptation programming, this was identified as a key finding”. Aboul-magd added further that “we have been told that the GCF has the largest availability of resources dedicated to adaptation planning. Nonetheless, after 5 years of COP (referring to the UNFCCC’s meetings of the Conference of Parties) requests for the GCF to support adaptation planning, only 39% of RPSP (Readiness and Preparatory Support Programme) grants have been disbursed, with only one fully disbursed grant.” The Egyptian Board member also highlighted that “GCF has committed USD 2.6 billion to adaptation activities via 67 adaptation and 40 cross-cutting projects. Of this amount, USD 1.69 billion is committed to projects that have a 100% focus on adaptation result areas; USD 937.6 million is committed to the estimated adaptation part of cross-cutting projects”. He also said further that “Mitigation projects are typically of significant scale with 71% of all mitigation projects categorized as large or medium compared to only 34% of all adaptation projects. The adaptation portfolio is mostly and predominantly small size projects. Only 4 out of 67 funded GCF adaptation proposals are programmes. There is only one large scale adaptation project.” “On average, adaptation projects take longer to complete the GCF approval process, compared to mitigation. Adaptation projects on average take over two years, 109 days more than mitigation projects, to conclude the project approval process, including a legal agreement. This is very alarming to African countries, and other developing countries in addition to the delays in disbursement which are additional challenges,” stressed Aboul-magd He also expressed much concern “that 40% of all registered adaptation projects are withdrawn during the review process. This has been as a result of the difficulty (related to) data and legal arrangement”. “The GCF does not have a comprehensive strategy to support developing countries to adapt to impacts of climate change. In our view, it is not acceptable that we continue to deal with this matter in such an ad hoc fashion,” expressed the Egyptian Board member further. He elaborated further that “in Glasgow (referring to COP 26), there was a clear recognition and acknowledgment of the wide adaptation gap. There was a very welcome pledge to double adaptation funding… Nonetheless, the Intergovernmental Panel on Climate Change’s (IPCC) Working Group II report (on ‘Impacts, Adaptation and Vulnerability) presented many alarming facts about the state of adaptation action. The UN Secretary-General described the report as an “atlas of human suffering” and the figures in that report speak for themselves, as do the Adaptation Gap reports of the UNEP (United Nations Environment Programme). The UNEP report estimates adaptation costs in developing countries to be USD 70 billion annually, and expected to reach up to USD 300 billion in 2030, and USD 500 billion in 2050 with the actual costs most likely to be significantly higher than those estimates. This is further confirmed by the IPCC WGII report and … that an ‘overwhelming majority’ of global climate finance has so far been targeted at climate change mitigation. The current public and private financial flows to adaptation are much smaller than needed. It states with high confidence that just 4-8% of climate finance has gone to adaptation efforts in recent years.” “As an operating entity of the financial mechanism of the Convention, the GCF cannot be oblivious to these facts and these realities, and should therefore at the least, have a coherent vision for how to play a role, as mandated by its own Governing Instrument in addressing this alarming adaptation finance gap,” emphasised Aboul-magd. Other Board members also intervened from developed and developing countries to underscore the important findings of the IEU evaluation on adaptation and the need to focus on delivering climate finance to the most vulnerable countries. Karma Tshering (Bhutan) representing the Least Developed Countries (LDCs) said that the IEU findings and recommendations are important to his constituency and that mobilising predictable funding from the private sector remains a huge challenge for LDCs in relation to adaptation. Yan Ren (China) echoed the statement of Aboul-magd and called for stronger efforts by the GCF in enhancing adaptation support. Han Olav Ibrekk (Norway) said that it is a challenge to mobilise private sector engagement in adaptation and called for a strategy and modality in this regard, and the need to give priority to policy gaps. On the issue of climate rationale, he said that the GCF needs to have better guidance on the term, and to also focus on results through adaptation efforts. Mathew Haarsager (United States) stressed the importance of the private sector in adaptation and looked forward to the private sector strategy in this regard. Re-accreditation of DBSA DBSA’s re-accreditation was not possible at the Board meeting in October last year, when Board member, Lars Roth (Sweden), wanted new conditions imposed on the Bank that included a net-zero emissions target no later than 2050 for its reaccreditation, which was opposed by developing countries. At B.31, when the draft decision was presented for approval for DBSA’s re-accreditation, the draft contained a proposal to take note “of efforts of the DBSA to advance the purpose of the GCF including through the DBSA’s Just Transition Investment Framework”. Roth, while welcoming DBSA’s reaccreditation also wanted reflection in the decision of DBSA’s adoption of a net zero policy. Similar views were expressed in support of the Swedish Board by other developed country members which included Stéphane Cieniewski (France), Marta Alcantara (Spain), Stefan Denzler (Switzerland), and Ursula Fuentes (Germany).Nauman Bhatti (Pakistan) supported the DBSA reaccreditation but did not agree to the proposal by Roth to reflect the concept of net zero in the decision, saying that the GCF had no agreed policy approved by the Board on the term and its context. Aboul-magd (Egypt) expressed similar views, adding further that the Board could not “legislate on the go”, and wanted the Secretariat to confirm if there is a policy on applying the concept of net zero, saying that the approach proposed is setting a “precedent without foundation.” He stressed that the Board could not create new conditions which are not included in the GCF’s policies and is not the right path to take. Yan Ren (China) echoed the views of other developing country Board members and said that no new special conditions should be placed on entities seeking reaccreditation. Nadia Spencer-Henry (Antigua and Barbuda) said that no entity would want to be reaccredited to the GCF if new conditions are imposed after having been accredited before and have gone forward with their projects.The Secretariat, in response to calls by developing country Board members for clarity on the Board’s policies, confirmed that the GCF does not have a net zero policy, adding that the DBSA has met all the requirements of the GCF’s existing policies. When the reaccreditation of DBSA was taken up again on the final day, Roth again proposed the addition of further text to incorporate the notion of net zero pathways. Bhatti and Aboul-magd opposed this proposal and suggested going back to the initial draft decision, as it was already a compromise decision. The Board then agreed to reaccredit the DBSA, without further conditions and the final decision took note “of efforts of the DBSA to advance the purpose of the GCF including through the DBSA’s Just Transition Investment Framework and related statements in the context of the UNFCCC and the Paris Agreement.” Aboul-magd in response, provided further remarks saying that the accreditation process is a rules-based process, based on the policies of the GCF. On the issue about the alignment with the Paris Agreement, he said that there is need to have a holistic approach and to also acknowledge the principle of common but differentiated responsibility (CBDR) (between developed and developing country entities) and the reality of the different levels of the entities. He added that an entity wishing to seek funding or get accredited needs to have predictability in relation to the GCF’s policies. Bhatti also expressed similar views saying that clarity and predictability (on the policies) are fundamental, and that any requirement or condition to be imposed by the Board must be consistent with what the Board has approved collectively, adding that the issue of net zero is not consistent with the polices approved, as confirmed by the Secretariat. The Board also approved the updated accreditation framework and discussed other matters including the second performance review of the GCF, strategic planning and programming matters, and the independent evaluation of the relevance and effectiveness of GCF's investments in the small island developing States and in the LDCs conducted by the IEU. The next Board meeting will take place from May 16-19 in Antigua and Barbuda.
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