Info Service on Climate Change (Mar18/01)
GCF Board agrees on replenishment process
Songdo, 5 March (Indrajit Bose) — The Board of the Green Climate Fund (GCF) agreed on a process for the replenishment of its resources after much wrangling. It also adopted a host of decisions and approved over USD 1 billion for 23 funding proposals at its 19th meeting, held in Songdo, South Korea, from 26 February to 1 March.
The Board also elected Paul Oquist (Nicaragua) and Lennart Båge (Sweden) as its new Co-chairs for 2018.
The matter of the process for the first formal replenishment of the Fund’s resources was among the most contentious issues at the meeting, with developing country Board members wanting a process instituted.
(According to the Board’s ‘Policies for Contributions’, “Once the Fund’s cumulative funding approvals exceed 60 per cent of the total contributions… received during the initial resource mobilisation (IRM), the Fund will initiate a formal replenishment process.” The IRM period was 2015 to 2018)
During the discussions, the Secretariat informed the Board that the replenishment process would take about 18 months, comprised of a preparation stage involving policy decisions and terms and conditions that would take six months, followed by a second stage of meetings and negotiations for 12 months. This would then be followed by a pledging session, informed the Secretariat.
Developing country Board members said they did not want to be in a situation where they arrived at the ‘trigger’ for the replenishment process to be initiated, but without such a process in place. They called for a committee to be formed and the commissioning of a paper based on certain agreed parameters.
Developed country Board members however, were not in favour of the suggestions and wanted the Secretariat to continue to present options to the Board in terms of the replenishment process.
Board members were also divided on the target for the replenishment.
Developing countries referred to the needs of developing countries to be taken into account in the replenishment process. They underscored that the GCF is the financial arm of the UN Framework Convention on Climate Change (UNFCCC) and its Paris Agreement and that developing countries’ contributions under the Paris Agreement were conditional upon predictable financing.
Developed countries, however, said that any replenishment amount would be a political decision and would be the sovereign decision of a country’s Parliament. Following the discussions, the decision proposed to the Board comprised three options.
The first option was that the Secretariat prepare some documents (listed in an annex) for the Board’s consideration at its 20th meeting. The annex comprised three documents: a paper outlining options for the format, structure and governance of the replenishment process; terms of reference for an analysis of needs and the potential for GCF resources to support a paradigm shift towards low-emissions, climate-resilient development in developing countries; and the terms of reference for a review of the performance of the Fund.
The second option was that the Co-chairs oversee preparations of necessary policies and procedures for the replenishment process, including the documents listed in the annex, for the Board’s consideration at its 20th Meeting.
The third option was that the Board establishes an ‘ad hoc replenishment procedures committee’, appointing four members, and for the committee to begin work, with the assistance of the Secretariat, including in preparing the documents in the annex.
The Board members continued to be divided on which option to select, with the United States explicitly saying that there was no need to rush for a decision on the issue.
“There are actual triggers for the replenishment process to begin. Any process now should be consultative in nature,” said Geoffrey Okamoto (US). He further added that a list may be counter productive at this stage and that some countries may not agree with the terms of reference for an analysis of needs.
The Board finally decided to drop the list of documents referred to in the annex, and requested the “Co-Chairs, with the support of the Secretariat, and in consultation with members of the Board, to oversee the preparation of necessary policies and procedures for the formal replenishment process.
In the decision adopted, the Board also decided to “advance work under its 2018 work programme to conclude the essential preparatory arrangements for the first formal replenishment process of the GCF, noting this is without prejudice to the timing of a decision to initiate replenishment”. The Board also reiterated its intention to review the Strategic Plan as part of the formal replenishment process.
Highlights of exchange on replenishment
Zaheer Fakir (South Africa) said that since the Fund was in the final year of the IRM, it would be prudent for it to begin discussions on how to deal with the issue of replenishment. He added that he did not want the Board to be in a situation where they arrive at the trigger but without a process on replenishment. He also said that a lot of work lay ahead in terms of having a discussion on procedures, policies of the Fund and assessment of needs of developing countries before the trigger set in. He also said that the Board should mull over questions on financing requirements, such as should there be a minimum financing requirement for replenishment.
Omar El Arini (Egypt) stressed on agreeing on a process on replenishment and emphasized that the GCF is a fund for developing countries, which need the resources to implement commitments under the Convention and its Paris Agreement. He also said that the Paris Agreement talks about the need of developing countries and for an assessment of those needs. Arini proposed that the Board should commission a study to assess the replenishment amount based on certain parameters, which the Board should discuss and agree on. He suggested that a Board committee be formed to carry out the work.
Ignacio Lorenzo (Uruguay) supported Arini’s proposal of having an indicative understanding of the needs of developing countries.
Jorge Ferrer Rodriguez (Cuba) stressed on the need to speed up the replenishment process, and pointed to projects worth USD 23 billion in the GCF’s pipeline, which the Fund’s existing resources could not meet.
(During the IRM, the GCF had a collective pledge of USD 10.2 billion for the period 2015-2018. However, in 2017, US President Donald Trump, had announced its intention of not contributing to the GCF anymore.)
Rodriguez clarified that the Board was not deciding on the amount of contributions, but the principles and procedures involved, failing which they would be in a situation a year down the line where the Secretariat would not have the money to run GCF projects. He also added that mitigation and adaptation commitments by developing countries in the Paris Agreement had been a great concession for developing economies, which were conditional upon availability of financial resources. Rodriguez also stressed that the GCF is a financial arm of the Convention and if the Fund did not deliver, the Paris Agreement would fall apart, especially in terms of temperatures exceeding thresholds. “Here, it is not a question of charity, but a moral, political and legal obligation of countries,” said Rodriguez.
Ayman Shashly (Saudi Arabia) called for a committee to be established with clear terms of reference with an expected outcome and understanding of how the replenishment system would work. He also called for a concrete replenishment plan and said a number of indicators could be used by referring to the GCF’s project pipeline and the nationally determined contributions (NDCs) of developing countries under the Paris Agreement.
Azimuddin Bin Bahari (Malaysia) also said that there should be a guiding body of the Board to oversee work on the replenishment process.
Tosi Mpanu Mpanu (Democratic Republic of Congo) said that at the 24th meeting of the UNFCCC’s Conference of the Parties to be held later this year, it was important to create a positive momentum, through progress on replenishment. He also said that while developed countries should provide the bulk of the resources, developing countries must have a say in the matter. He stressed that the only way to raise the ambition under the Paris Agreement was for developing countries to be able to access funding that is predictable and sustainable, and called for the instituting of a process for replenishment.
Karsten Sach (Germany) said that if countries wanted to contribute, they would need justification to do so in their Parliaments. In response to Arini’s proposal of a study, Sach said that he did not think such a study would yield any results since the Board members had no competence to decide what Germany or any other country would contribute, since that would be the sovereign decision of Parliaments. “One may like it or not, but that is the fact,” said Sach. He added that the Fund had not disbursed much money and that there were political limitations to see what design was convincing to the outside world (to contribute).
Tamaki Tsukada (Japan) called on the Secretariat to furnish basic information on how other financial mechanisms, both multilateral development banks and other UN systems operate.
Satu Santala (Finland) said that replenishment negotiations are about making a case for taxpayers to contribute to the Fund and added that needs would always be greater than what they could contribute. She added that the performance and capacity of the institution as well as the policy foundation needed to be studied to present where the Fund stands. She also said that they must arrive at a financial package which could include broadening the “donor base” and said that she did not support the idea of commissioning a study.
Cyril Rousseau (France) said he was not sure if the best way to begin work would be by establishing a committee. Esther Gonzalez Sanz (Spain) and Geoffrey Okamoto (US) supported Rousseau. Okamoto further added that it was the job of the Secretariat and the Co-chairs to brainstorm.
Besides the replenishment issue, other contentious matters included matters related to the trustee, policy matters related to funding proposals, such as concessionality, incremental cost and investment criteria indicators. (Further articles to follow on these issues).
The Board also adopted decisions on the Fund’s ‘Environment and Social Policy,’ and the ‘Indigenous Policy’.
Besides these, among some of the Board decisions adopted included the risk management framework, review of the structure and effectiveness of the independent Technical Advisory Panel, revised policy on fees for accredited entities, revised readiness and preparatory support work programme, terms of reference for the independent evaluation of the readiness programme, private sector outreach plan, modalities to support activities enabling private sector involvement in least developed countries and small island developing states and matters related to accreditation.
On funding proposals, the Board approved over USD 1 billion to 23 projects, which brings the Fund’s portfolio to a total of 76 projects and programmes, amounting to USD 3.7 billion in GCF funding. Among the funding proposals approved includes the first project submitted under the simplified approval process.
Following is the list of the funding proposals approved:
· Under the simplified approval process: USD 9.30 million for ‘Improving rangeland and ecosystem management practices of smallholder farmers under conditions of climate change’ in Sesfontein, Fransfontein, and Warmquelle areas of the Republic of Namibia with the Environmental Investment Fund (EIF), as the accredited entity (AE);
· USD 42.16 million for the ‘Climate-Resilient Water Sector’ in Grenada, with Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, as the AE;
· USD 27.61 million for the ‘Water Sector Resilience Nexus for Sustainability’ in Barbados with the Caribbean Community Climate Change Center (CCCCC) as the AE;
· USD 20 million for the ‘Integrated physical adaptation and community resilience through an enhanced direct access pilot in the public, private, and civil society sectors’ of three Eastern Caribbean small island developing states in Antigua and Barbuda, Dominica, and Grenada, with the Department of Environment, Ministry of Health and Environment, Government of Antigua and Barbuda as the AE;
· USD 25.06 million for the ‘Poverty, Reforestation, Energy and Climate Change Project (PROEZA)’ in Paraguay with the Food and Agriculture Organization of the United Nations (FAO) as the AE;
· USD 23 million for ‘Promoting private sector investments in energy efficiency in the industrial sector’ in Paraguay with the Inter-American Development Bank (IDB) as the AE;
· USD 103 million for ‘Promoting risk mitigation instruments and finance for renewable energy and energy efficiency investments’ in Argentina with the Inter-American Development Bank (IDB) as the AE;
· USD 195 million for ‘Financial Instruments for Brazil Energy Efficient Cities’ in Brazil with the World Bank as the AE;
· USD 25 million for the ‘Pacific Resilience Project Phase II’ in the Marshall Islands with the World Bank as the AE;
· USD 9.27 million for ‘Building climate resilience of vulnerable and food insecure communities through capacity strengthening and livelihood diversification’ in mountainous regions of Tajikistan with the World Food Programme as the AE;
· USD 27.05 million for ‘Scaling-up Multi-Hazard Early Warning System and the Use of Climate Information’ in Georgia with the United Nations Development Programme (UNDP) as the AE;
· USD 24.98 million for ‘Enhancing adaptive capacities of coastal communities, especially women, to cope with climate change induced salinity’ in Bangladesh with UNDP as the AE;
· USD 20 million for the ‘Global Clean Cooking Program,’ in Bangladesh with the World Bank as the AE;
· USD 86.30 million for ‘Scaling Up Energy Efficiency for Industrial Enterprises’ in Vietnam with the World Bank as the AE;
· USD 32 million for S’trengthening climate resilience of agricultural livelihoods in Agro-Ecological Regions I and II’ in Zambia with UNDP as the AE;
· USD 32.79 million for ‘Strengthening climate resilience of rural communities’ in Northern Rwanda with the Ministry of Environment of Rwanda (MOE) as the AE;
· USD 22.50 million for the ‘Africa Hydromet Program - Strengthening Climate Resilience in Sub-Saharan Africa: Burkina Faso Country Project’ with the World Bank as the AE;
· USD 5 million for the ‘Institutional Development of the State Agency for Hydrometeorology’ of Tajikistan with the Asian Development Bank (ADB) as the AE;
· USD 40 million for ‘Climate-Friendly Agribusiness Value Chains Sector Project’ in Cambodia with the Asian Development Bank (ADB) as the AE;
· USD 145 million for the ‘Ulaanbaatar Green Affordable Housing and Resilient Urban Renewal Project’ in Mongolia with the Asian Development Bank (ADB) as the AE;
· USD 26 million for the ‘Acumen Resilient Agriculture Fund’ in Ghana, Nigeria, Uganda, with the Acumen Fund Inc as the AE;
· USD 52.50 million for the ‘Zambia Renewable Energy Financing Framework’ with the African Development Bank (AfDB) as the AE; and
· USD 100 million for the ‘Line of Credit for Solar rooftop segment for Commercial, Industrial and Residential Housing sectors’ in India with the National Bank for Agriculture and Rural Development (NABARD) as the AE.
The Board will meet next from 1-4 July, 2018, for the 20th Board meeting in Songdo, South Korea.
(Edited by Meena Raman)