TWN Info Service on Climate Change (Jul19/02)
11 July 2019
Third World Network

Green Fund Board agrees on procedure for decision-making in the absence of consensus

Songdo, 11 July (Indrajit Bose) — The Board of the UNFCCC’s Green Climate Fund (GCF) adopted a key decision on how the Board will make decisions in the event consensus could not be reached at its 23rd meeting in Songdo, South Korea from 6-8 July.

In what several Board members termed as a “historic” decision, the Board adopted the decision at 3 am on 9 July, well past the scheduled close of the meeting after long and intense wrangling.

According to sources who spoke to TWN, the decision was “a condition” for developed countries in order for them to replenish the GCF with additional resources. (The GCF Board launched the process for the first formal replenishment of the Fund which will take place sometime in October or November this year in order to secure additional resources for a four-year period from January 2020 to December 2023).

(The Governing Instrument of the GCF was adopted in 2011 and provides for decisions of the Board to be taken by consensus. It also provided for the Board to develop procedures for adopting decisions in the event that all efforts at reaching consensus have been exhausted).

The decision on the procedures for decision-making includes: (i) the steps to be followed to achieve consensus; (ii) to determine whether all efforts at reaching consensus in respect of a particular draft decision have been exhausted; (iii) the scope of the policy, i.e. areas where the policy would not apply; (iv) the voting procedure; and (v) procedure for confidential balloting.

The voting procedure was most contentious, besides other issues such as how to determine whether all efforts to reach consensus are exhausted and what would be the scope of the policy.

The Board eventually decided that “If at least a four-fifths majority of Board members present and voting, vote in favour of the draft decision, the draft decision shall be considered adopted, unless four or more developed country Board members or four or more developing country Board members vote against it”. (Further detailed article to follow on the issue.)

Besides the decision on decision-making, the Board also approved USD 267 million to be allocated for 10 funding projects and accredited four new entities to the Fund. The Board also adopted a host of important policy decisions.

Funding Proposals approved

The following funding proposals were approved:

  • USD 25.3 million for ‘Supporting Climate Resilience and Transformational Change in the Agriculture Sector’ in Bhutan, with United Nations Development Programme (UNDP) as the accredited entity (AE);
  • USD 35 million for ‘Transforming the Indus Basin with Climate Resilient Agriculture and Water Management’ in Pakistan, with the Food and Agriculture Organization (FAO) as the AE;
  • USD 22.4 million for ‘Safeguarding Rural Communities and their Physical and Economic Assets from Climate Induced Disasters’ in Timor-Leste, with UNDP as the AE;
  • USD 18.6 million for Ecuador for ‘Reducing emissions from deforestation and forest degradation’ (REDD-plus) results-based payments’ for the 2014 results period with UNDP as the AE;
  • USD 35 million for ‘Promoting Climate-Resilient Forest Restoration and Silviculture for the Sustainability of Water-related Ecosystem Services’ in Honduras, with Inter-American Development Bank (IDB) as the AE;
  • USD 18.6 million for ‘Addressing Climate Vulnerability in the Water Sector’ in the Marshall Islands, with UNDP as the AE;
  • USD 23.1 million for ‘TWENDE – Towards Ending Drought Emergencies: Ecosystem-Based Adaptation in Kenya’s Arid and Semi-Arid Rangelands’, with International Union for Conservation of Nature (IUCN) as the AE;
  • USD 20 million for ‘Program on Affirmative Finance Action for Women in Africa: Financing Climate Resilient Agricultural Practices in Ghana’, with the African Development Bank (AfDB) as the AE;
  • USD 60 million for Espejo de Tarapacá in Chile, with MUFG Bank as the AE for an innovative project comprising a pumped storage hydroelectric plant and a photovoltaic solar plant for energy access and power generation;
  • USD 8.9 million for ‘Integrated Climate Risk Management for Food Security and Livelihoods in Zimbabwe focusing on Masvingo and Rushinga Districts’, with World Food Programme (WFP) as the AE. This project was approved under the GCF’s simplified approvals process track.

The Board deliberated at some length on the Ghana project, especially in relation to the financial instrument sought for the project, before approving it.

The AfDB had sought USD 18.5 million in loan and USD 1.5 million in grants from the GCF for the Ghanaian project.  According to the funding proposal, the programme’s objective is to empower those vulnerable women groups in the most vulnerable agro-ecological zone through lines of credit and through technical assistance to participate in low-emission climate resilient agricultural practices in Ghana, where the women-led farmer-based organisations and micro, small, medium-sized enterprises would be given “affordable loans”.

Board members Ayman Shasly (Saudi Arabia), Richard Muyungi (Tanzania) and Jeremiah Garwo Sokan (Liberia) raised questions as to why a project meant for vulnerable women from a highly vulnerable region involved loans and recommended that the project be given grants.

Sue Szabo (Canada), Stefan Schwager (Switzerland), Kate Hughes (United Kingdom) wanted to know if changing the financial instrument sought by the accredited entity would constitute a major change to the project and whether this would require the consent of the national designated authority (NDA) of Ghana. They also wanted to know what kind of precedent the Board was setting by changing the financial instrument in a funding proposal.

Sokan (Liberia) responded that this was not the first time the Board was proposing a change to a funding proposal. He gave a recent example from the 21st meeting of the Board in Bahrain, where developed country Board members had expressed concerns around providing “grant financing” rather than loans to the project and had reduced the USD 9.8 million grant sought by the project and had approved USD 2 million. (See related TWN Update).

Following deliberations, the Ghana project was approved with a recognition that the grant component of GCF funding could be increased and that the options should be explored to benefit the most vulnerable women. In the decision adopted by the Board, it also encouraged the AE to consult with the NDA to consider using the GCF’s policy on restructuring and cancellation to amend the funding proposal accordingly.

Accreditation matters

The Board also accredited the following four entities to the Fund:

  • Banco Nacional de Desenvolvimento Econômico e Social (BNDES, the Brazilian Development Bank), based in Brazil;
  • Ministry of Water and Environment (MWE) of Uganda;
  • Ecobank Ghana Limited (EGH), based in Ghana; and
  • Enabel, based in Belgium

The Board also discussed the updated the accreditation framework where prioritization of direct access entities became contentious.

In accordance with a previous decision, the Board had decided to prioritize entities that fulfilled the mandate on balance, diversity and coverage and those that advanced the objectives of the GCF. This included direct access entities, some private sector entities and entities responding to requests for proposals, among others. It was also decided that prioritization would continue until the 23rd meeting of the GCF Board.

During the discussions in Songdo, the Accreditation Committee informed the Board that the committee had discussed whether to extend the prioritization decision. There was no consensus in the Committee as some members were not in favour of including a proposal to extend the prioritization in the proposal under the updated accreditation framework.

(In relation to the updated accreditation framework, the Board was requested to approve the framework, which according to the GCF Secretariat, contained improvements to the existing accreditation process, established a pilot project-specific accreditation approach (PSAA) as a new and complementary modality of accreditation for institutions to work with GCF as well as steps for the re-accreditation of entities).

Under the PSAA, the focus was on an organisation’s ability to implement a proposed project/programme presented to the GCF rather than a set of “hypothetical” projects or programmes that an entity may bring forward in the future.

During the discussions, several developing country Board members, including Muyungi (Tanzania), Sokan (Liberia), Shasly (Saudi Arabia) and Ignacio Lorenzo (Uruguay), highlighted the importance of prioritizing direct access entities in the updated accreditation framework, but no agreement could be reached in the first round of the discussions. (The GCF channels its lion share of resources through international entities.)

Developed country Board members on the other hand wanted to adopt the updated accreditation framework and said it was urgent to streamline the accreditation process given that it takes a long time for an entity to be accredited to the Fund.

Lars Roth (Sweden), Hans Olav Ibrekk (Norway) and Frank Fass-Metz (Germany) though said they supported the prioritization of direct access entities. However, Esther Gonzalez-Sanz, (Spain) said she was not comfortable including the prioritization of entities in the decision, and that she could at the most go along with extending prioritization until the next meeting of the GCF Board.

Another issue that needed to be addressed was the re-accreditation of entities that were accredited five years ago. (The GCF accredits entities for five years). In the proposed updated accreditation framework, the Secretariat requested that the five-year term begins upon completion of the effectiveness of the accreditation master agreement (AMA) between the GCF and the AE, rather than the current practice of the five-year term beginning upon Board approval of an AE. Not having a decision on the updated accreditation framework at the Songdo meeting would render the Secretariat unable to begin work on the re-accreditation process, which would affect seven entities up for re-accreditation in 2020.

Following further consultations, the Board adopted a decision, addressing matters related to prioritization and re-accreditation of entities. The decision adopted extends the prioritization of entities, including direct access entities, up to the end of the next meeting of the Board and  also states that the accreditation process would be considered complete upon the effectiveness of the AMA, which would be considered as the start-term for an entity, and that this applies to entities accredited previously as well. 

The Board also decided to defer its consideration of the updated accreditation framework and the implementation arrangements and budget for the PSAA until its 24th meeting.

Other decisions approved

Among the other policy decisions approved included decisions on the performance evaluation of the heads of the three independent units viz. the Independent Evaluation Unit, Independent Integrity Unit, and the Independent Redress Mechanism, where the heads of the respective units were reappointed to the GCF.

The GCF Board also adopted decisions on policies regarding ethics and conflicts of interest for active observers; updated policy on the ‘Protection from Sexual Exploitation, Sexual Abuse and Sexual Harassment Compliance Risk’; and ‘Standards for the Implementation of the Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT)’ policy.

In relation to the AML-CFT and compliance risk policies, Ali Gholampour (Iran) wanted to ensure that all developing countries have access to the Fund’s resources and should not be subject to unilateral sanctions and coercive measures.

“Flow of the Fund’s resources should not be denied to any developing country by resorting to unilateral sanctions/embargoes or financial sanctions by the United Nations Security Council, which have been placed and enforced due to political reasons and reasons other than anti-money laundering or anti-financing terrorism. We should exercise our wisdom and diligence to avoid moving in a direction leading to politicizing the GCF and transform the nature of the GCF from being an operating entity of the Financial Mechanism of the UNFCCC and (serving) the Paris Agreement to an implementing body of some specific countries’ foreign policies,” said Gholampour.

In the decision on the AML-CFT policy, the following was reflected to address the concern expressed by the Board member from Iran:

The decision requests “the Secretariat to implement the GCF AML-CFT Policy, the Standards for the Implementation of the AML-CFT Policy, the Policy on Prohibited Practices and other integrity-related matters in a coherent manner while fully respecting the scope and provisions of the respective policies, and further requests the Secretariat to amend the accreditation master agreement template,…to ensure consistency with the scope of the AML-CFT Policy such that…(the GCF) apply its own …AML/CFT, and financial sanctions imposed by the United Nations Security Council,…..”. The decision also states that “…unless prohibited by law applicable to the Accredited Entity, not use GCF Proceeds or Other GCF Funds for the purposes of any payment to individuals or entities, or for the import of goods, if such payment or import is prohibited by a Decision as may be adopted from time to time by the Board or by a financial sanction of the United Nations Security Council.”

The GCF Board also adopted decisions on the performance review of the GCF and the period of the first replenishment, besides having in depth discussions on the Fund’s first replenishment. (Further articles to follow)

The next meeting of the Board will take place from 12-14 November in Songdo. 

(Edited by Meena Raman)