The latest board meeting of the fund was held in Geneva because of the coronavirus. Margaret-Ann Splawn shares her reflections of the meeting
Due to the outbreak of COVID-19, and the board recognising the extraordinary circumstances, Geneva (rather than South Korea) was the home for the 25th meeting of the board (B.25) of the UN Green Climate Fund.
The Head of the Permanent Mission of Switzerland to the UN, Valentin Zwellweger, presented on the opening day, stating that Switzerland had hosted the first GCF Board Meeting back in 2012 and remarked the noteworthy results and achievements of the GCF eight years later.
There are two new Co-Chairs at the helm for 2020: Sue Szabo from Canada, representing developed nations, and Nauman Bhatti from Pakistan, representing developing nations. Szabo is the first female co-chair and she is calm and measured in her delivery style.
It was the first official board meeting as I start my term as Active Private Sector Observer (APSO) for the developed countries constituency at the GCF. However, I had already met several board members and Secretariat staff when I joined their informal board meeting held in Monrovia, Liberia in February.
During B.25 the board spent the majority of time in 'executive session', which means that their advisors and others attending the meeting, including the active observers, are asked to leave the board room and recording facilities are stopped so that they can speak openly on contentious issues, particularly on one of the major board meeting agenda items, the updated GCF Strategic Plan.
There are only about 6.5 publicly open board meeting hours accounted for during the three-day meeting – so a little over two hours a day.
The majority of my time was spent hovering in the reception area talking to alternate board members, advisors and other stakeholders while waiting to be let back into the board room so that we could get on with the agenda. As such, it was disappointing to be at B.25 and not have the opportunity to publicly comment as Active Private Sector Observer (APSO) on the updated GCF Strategic Plan.
In addition, new travel restrictions due to COVID-19, announced during the course of B.25, caused several attendees to return early to their home country.
Report from the GCF Executive Director
In the opening session Executive Director, Yannick Glemarec, reported on GCF progress, outlining the successful replenishment in 2019 of $9.8 billion in pledges, and he stated that 50% of the donors had doubled their 2014 contributions.
Glemarec said that the board "can be ambitious for portfolio development". One of the main objectives of the GCF is to create what they refer to as a "paradigm-shifting portfolio", which means to create impact at scale for developing countries to reduce their greenhouse gas emissions and fundamentally enhance their ability to respond to climate change in a permanent manner.
Glemarec said that a draft Programming Manual is being developed by the Secretariat to be shared with the board by B.26 that will outline what the GCF means by climate rationale, incremental cost reasoning, and define what they mean by a paradigm-shifting project. The Secretariat is hoping to pilot this with a few select entities between now and B.26.
Results from GCF Requests For Proposals:
In order for the fund to meet targets for various sectors and countries, with specific funding targeted at Least Developed Countries (LDCs) and Small Island Developing States (SIDS) for example, the GCF often issues Requests for Proposals (RFP) which target projects in these countries.
According to Glemarec, the RFP for the pilot program for REDD+ results-based payments (RBP) is working, as they were able to allocate the targeted funds to approved REDD+ projects earlier than expected.
However, another RFP issued by the fund, the private sector oriented "Mobilising Funds at Scale" RFP is proving difficult due to the issue that some entities that submitted truly transformative projects do not easily meet the fund's accreditation criteria.
Getting these organisations accredited is proving problematic and thus many of these projects remain on the shelf.
Getting these organisations accredited is proving problematic and thus many of these projects remain on the shelf.
There was a review of REDD+ pilot programme results presented later on the second day by the Secretariat, outlining the positive responses from countries and that six projects are in the pipeline.
However, civil society doesn't agree that the pilot programme should move forward with the additional $500 million set aside. They raised issues of permanence of carbon storage, avoiding double counting between programmes operating at different levels (project, national and transboundary), and verification of engagement of indigenous peoples and local communities.
Much work is being done in the private sector on these issues. For example, Verra, a global standards accrediting body, created the world's first accounting and verification framework for jurisdictional REDD+ programmes and nested projects to address these issues.
Accreditation Master Agreements with the private sector
Only four private sector entities are currently developing projects with the GCF while 20 are accredited and they don't have agreed AMAs in place.
Accreditation Master Agreements (AMAs), which set out the terms and conditions for GCF accreditation of entities and the use of GCF resources, are proving difficult to sign with regulated institutions such as banks.
Only four private sector entities are currently developing projects with the GCF while 20 are accredited and they don't have agreed AMAs in place.
Many agree that this is a difficult stumbling block to mobilising private sector resources at scale and the GCF Secretariat is working tirelessly to overcome these issues. However, this puts into question whether this is in fact a fit-for-purpose accreditation system.
The GCF Secretariat
The GCF Secretariat has grown to a current staff of 232. Thirty five additional positions have been identified and they are currently recruiting for these roles.
Glemarec stated that they are working on obtaining gender balance of the Secretariat and Swiss board member Stephan Schwager later commented that "gender balance is not just about equal numbers but also ranking."
Glemarec also shared that the Secretariat has a relatively low attrition rate and believes that this is due to their ability to articulate a clear meaning of the organisation and to delegate power and tasks to staff.
Glemarec is a charismatic fellow who represents the GCF well, both internally and externally, and he continues to build allegiance with the Secretariat staff to support the mission of the GCF.
The Strategic Plan for the GCF: 2020-2023
The board was here to agree their updated Strategic Plan which sets out their objectives for the next four years and while it was on the agenda for a decision, there were six contentious issues that needed to become resolved before a vote of approval could take place. These issues were:
- Strategic objective and allocation
- Shifting financial flow
- Project prioritisation
- Range of diversifying instruments
- Accreditation prioritisation
- Efficient process management and delegation.
The co-chairs created breakout groups for board members to have discussions on these issues with the view to finding agreement however on-going deliberations continued throughout the three day meeting without achieving consensus.
The board spent the majority of the meeting in these closed door, executive sessions. In order to prepare constructive interventions for B.25, consultations were held with many private sector actors but since the board could not agree among themselves, commenting on their new strategic plan never opened up officially on the agenda.
The private sector has constructive feedback on the strategic plan and more specifically with regards to their strategic priority item 4.3 Catalysing private sector finance at scale that can be found in board document GCF/B.25/09 on their website.
We plan to be actively involved in the construction of their private sector outreach plan and participate in developments.
Funding Proposals
There were only six funding proposals submitted to the Board at B.25 and several board members complained that this was not enough projects. Liberian board member Jeremiah Sokan, who represents developing country parties from Least Developed Countries, pointed out that all six projects came through International Access Entities (IAEs) and none through Direct Access Entities (DAEs).
Having no DAE proposals is inconsistent with country ownership and the GCF is explicit about the importance of country ownership. It falls in the top three distinct features of the Fund, along with a balanced portfolio and unlocking private finance. This notion of country ownership is to ensure that GCF activities are in harmony with national priorities.
Regarding the small number of funding proposals, Glemarec responded that the GCF's Independent Technical Advisory Panel (ITAP) had comments and issues on three projects (one of which was submitted by a DAE) that were in the pipeline for approval at B.25, but could not be resolved before the meeting.
He also stated that there is a healthy portfolio with stronger representation of DAE projects that will be presented for approval at both B.26 and B.27.
$169.7 million approved (FP124 – FP128, SAP 013)
The total GCF funding requested at B.25 for these six projects was $169.7 million, which is to support projects and programmes with a total value of $618.7 million.
Public Sector Approvals (FP124 - FP127)
Four of the six projects were public sector submissions. Three of these are adaptation projects from Sri Lanka, Viet Nam and Zimbabwe representing a total of $96.6 million of requested GCF funding. FP126 ($38.2 million), submitted by the Republic of Cuba through Accredited Entity FAO, was approved with some delay.
It is likely that the US left early because of new US country travel restrictions from Europe announced during B.25 due to COVID-19.
The majority of the board supported this cross-cutting project of increasing climate resilience of rural households and communities through rehabilitation of production landscapes in selected localities of the Republic of Cuba. However, the US said that they could not approve the project due to alleged mismanagement of funds in previous agricultural projects and human trafficking.
The GCF has procedural guidelines, adopted at B.23 last year, on decision making in the absence of consensus and it had to be utilised to approve FP126 on the final day of B.25.
Twenty-two board members voted to approve FP126, zero abstained from voting and the US did not vote against it, only because they were no longer present at the board meeting on the final day.
It is likely that the US left early because of new US country travel restrictions from Europe announced during B.25 due to COVID-19.
Private Sector Approvals (FP128 & SAP013)
There were two private sector projects approved and they were submitted under the RFP for Mobilising Funds at Scale (MFS).
The RFP for MFS was launched in May 2017 and attracted a total of 350 submissions from more than 70 countries at its closing in August 2017.
It was 36 times oversubscribed, with the total amount of requested GCF financing exceeding $18 billion.
The top 30 ideas were shortlisted for further development and the first MFS project, Espejo de Tarapacá, was approved at GCF's 23rd Board meeting in 2019, almost two years after the RFP for MFS submission closed.
Two years is a long time for private sector companies to wait to know if they have been successful or not in obtaining funding. In fact, some companies who have actually been shortlisted using the RFP for MFS, complain about the time lag in information flow, the slowness of response by the Secretariat and lack of guidance as to requirements and processes to take their project forward.
They also face the additional hurdles of finding an Accredited Entity to take them on along with securing Letters of No Objection from the constituent governments. Navigating this system is complicated, it's not transparent and the processes are slow.
Therefore, it is good to see that the two private sector projects approved are coming through this MFS programme.
FP128 Arbaro Fund – Sustainable Forestry Fund
The first private sector project, FP128 for $25 million the Arbaro Fund – Sustainable Forestry Fund, is to provide effective mitigation outcomes through investing in sustainable plantation forestry projects in emerging forestry markets in Latin America and Sub Saharan Africa.
This includes the countries of Ecuador, Ethiopia, Ghana, Paraguay, Peru, Sierra Leone and Uganda.
Many board members had concerns about the sustainability of the fund's forestry investments with regards to how they respect and promote the rights of people living on the land and whether investments will actually contribute to emissions reductions after the lifetime of the project.
The active civil society observer echoed these concerns but we know that forestry finance can be difficult to obtain and that programmes and projects are working hard, and making progress, to address these concerns.
Transparency, integrity of the market and safeguards for forests and human rights are exactly what the private sector wants to see as the forestry market continues to develop.
SAP013 Scaling Smart, Solar, Energy Access Microgrids
The second private sector project, approved for $9.9 million, is Scaling Smart, Solar, Energy Access Microgrids in Haiti.
NEFCO is the AE and submitted this with the Simplified Approval Process Pilot Scheme (SAP). SAP 013 means that it's the 13th project to be approved using this new approach.
It's no secret that the GCF funding approval process is a long, arduous one and the intention of the SAP, which was adopted at B.18 in October 2017, is to facilitate fast preparation, review, approval and disbursement of their category C (low risk), smaller projects (under $10 million in GCF contribution).
The Secretariat aims to have 50% of GCF resources under the SAP targeted at DAEs. Private sector feedback is that the SAP isn't really simplified and it's still a cumbersome process.
It's shorter than the main application and there are templates along with guidelines about what type of information to put in and how to conduct project preparation. However, all the policies that apply for projects through the primary application process still apply to the SAP projects.
Applying many of the same due diligence processes and preparation to low risk, smaller projects as developers would need to apply to high risk, large scale ones isn't effective to simplify things for applicants.
The transaction costs of project preparation, in terms of money and time, remain high with the SAP.
Furthermore, given that the SAP is designed for low risk, smaller projects if the GCF really wanted to increase their disbursement of funds, it would be better if SAP approval was mandated to the Secretariat and Executive Director.
Glemarec and his team could help unlock some of the bottlenecks in the SAP pipeline and approve these smaller projects in a timelier manner, rather than waiting for board approval.
Accreditation
The board could not agree on voting for the approval of new accredited entities, largely due to the late delivery of the board documentation for this. Gaining accreditation takes a long time but several board members, namely Lars Roth from Sweden and Jos Wheatley from the UK, commented that they had not had time to study the documentation delivered only just the weekend before the commencement of B.25 and that they had a duty of care to conduct proper due diligence procedures and protocol.
Conclusion & B.26
The GCF Board remains divided on their strategic plan for the next four years largely due to politics.
Several board members also serve as ministers and negotiators at COP, which can complicate the processes of forming consensus which are in best interest of the Fund.
Yet, board members remain united in advancing and helping the most vulnerable nations and societies impacted by climate change.
The GCF Board remains divided on their strategic plan for the next four years largely due to politics.
The dichotomy of the GCF board will continue to cause ongoing debate. B.26 is tentatively scheduled to be held from 23rd-25th of June in Songdo. However, given the exceptional circumstances of COVID-19, the Co-Chairs and Secretariat will monitor the situation and the dates and venue could be subject to change.
Margaret-Ann Splawn is the Active Private Sector Observer for the developed nations constituency at the UN Green Climate Fund and Executive Director of the Climate Markets & Investment Association. Margaret-Ann thanks Ben Bartle from E Co Ltd for his contributions to this article.
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