The 5th GCF meeting in Paris

Short description. The 5th meeting of the Green Climate Fund Board took place from the 7th to the 10th of October in Paris, hosted by the French Ministry of Finance. The Board adopted several key decisions regarding the Business Model Framework – on financial inputs, on the pre-requisites for resource mobilisation, on allocation of GCF funds, on initial result areas and performance indicators, on gender-sensitive approaches, on access modalities and on readiness and preparatory support.

The 5th meeting of the Green Climate Fund Board took place from the 7th to the 10th of October in Paris, hosted by the French Ministry of Finance. The Board adopted several key decisions regarding the Business Model Framework.

On financial inputs into the GCF, the Board decided that in the first phase, the Green Climate Fund would accept grants from public and private sources, as well as paid-in-capital contributions and concessional loans. Most developed countries actively called for concessional loans to be accepted as financial input whereas others members recalled that the GCF was a fund and not a banking structure. The Board also requested the secretariat to looking into the risks associated with concessional loans as financial input. Indeed, some countries raised the risk of « cross-subsidization » as the grant money deposited by some countries might help mitigate risks of concessional loans deposited by other countries. There was also discussion on whether to accept “alternative sources of finance” as financial input but there was no agreement. The decision does however open the door to additional types of inputs (such as equity investments or guarantees) at a later stage.

On allocation of GCF funding, the Board decided, for the initial phase at least, to allocate funding respectively for adaptation, mitigation and the Private Sector Facility (PSF). There was some discussion on whether money should be allocated directly to the PSF or whether the PSF should receive funding through the adaptation and mitigation windows. The decision also highlights that there should be balance between adaptation and mitigation, as well as balanced allocation of adaptation finance between countries, particularly LDCs, SIDS and African States. Mitigation finance will only be allocated to countries according to the impact of the project on the paradigm shift. The PSF resources will be allocated according to the mitigation impact but also look at the participation of local business stakeholders and involvement of the private sector in SIDS and LDCs. The next step will be to develop a resource allocation system based on these principles to facilitate country-drivenness, geographical balance, results, cross-cutting approaches.

On core performance indicators, initial result areas and the result management framework, the issue was postponed at the 4th Board meeting where there had been pushback from many countries that it was too early to discuss these issues. At the 5th meeting, it was clarified that these indicators and result areas were an initial menu of options, and non-prescriptive. However, many countries pointed to the fact that some of the proposed result areas are undergoing negotiations under the UNFCCC or too mitigation-focused (this was the case for agriculture and REDD+ for instance). There was also talk to include policy performance indicators to ensure consistency of policies with climate objectives and to include indicators on the co-benefits of projects for sustainable development. There was also a call to link the discussion on performance indicators and result areas with the discussion on the result management framework (RMF). A working group was established to provide guidance – by the end of the Board meeting – on the initial list of result areas and on how to approach the RMF. For the contentious result areas, the Board decided to agree on the list of initial results without specifying which performance indicators to use. The decision calls on the secretariat to develop a detailed operational RMF by the 2nd board meeting in 2014 and also requests the secretariat to develop additional result areas and indicators for adaptation activities by the 1st board meeting.

On resource mobilisation, considered a key issues for the Paris meeting, there were trust-building discussions during a Chatham House dinner for Board members. Some developed countries stated that they saw the GCF as the main channel for climate finance and reaffirmed their willingness to pledge. But all donor countries made it clear they needed some minimal requirements met  – including on the Result Management Framework, result areas and performance indicators, fiduciary standards. Many suggested "interim", "initial" terms and conditions or to "copy" existing international standards for a fast-track approach. Some insisted that in order for the GCF to receive funding, the requirements should be limited to fiduciary standards, accreditation process and administrative structure and policy. Result areas, performance indicators and the result management framework could be agreed later. Developing countries made a strong point that clarity and reassurance on the scale of financing is needed to provide incentive for climate project-building. An LDC Board Member proposed a fast-start-finance pledge to the GCF. In the end, the Board decided on 8 requirements to be met for the Fund to “receive, manage, programme and disburse” finance, including initial result areas, policies and procedures for allocation of the resources, the risk management and investment framework, an initial fund and secretariat structure (including social and environmental safeguards). that needed to be met during the first two board meetings in 2014 in order for donor countries to organise an initial pledging conference. The decision also includes a deadline: the pledging process will be launched no later than three months after the conditions are met. There was confidence that meeting the requirement should not be that difficult by mid-2014 since the Board meeting was moving smoothly and making progress.

On readiness and preparatory support, Many developed countries proposed that readiness funding be channelled through bilat and existing initiatives (that developing countries neither supported or strongly opposed?). Multi-stakeholder engagement was highlighted as a core dimension of country ownership and included in the work programme. The Board decided to provided readiness and preparatory support for country programmes looking at low-carbon and climate-resilient strategies and plans, support institutional capacities in the countries, particularly to developed multi-stakeholder consultation mechanisms, and enable implementing intermediaries and entities to meet the fiduciary standards of the GCF and directly access the funding. The secretariat was asked to prepare a detailed work programme, budgeted needs and a timeline for the 1st board meeting in 2014.

On access modalities, there was discussion on whether to use existing fiduciary standards to save time and accelerate operationalization of the GCF or to take the time to develop best practise standards. A point was made that the accreditation should not duplicate – accredited entities should be naturally accredited by the GCF. A working group of 4 board members, 4 senior experts and the secretariat was established to develop a guiding framework for accreditation, including an assessment of the institutions accredited by other funds, criteria and application process for implementing entities, GCF safeguards and fiduciary principles. This framework should be ready for the 2nd board meeting. On the no-objection procedure that aims to require active endorsement of countries for any GCF activity, there was strong disagreement on the intent of the no-objection procedure. The decision was postponed until February 2014.

Arrangements between the GCF and the COP were adopted, based on the guidance forwarded by the Standing Committee on Finance. Many countries supported a request to the secretariat to develop a paper for the next Board meeting on gender-sensitive approaches for the GCF’s objectives and operations. The Board also adopted its work plan for 2014 – namely around the 8 conditions that need to be met before the initial pledging process. At the end of the meeting, two new co-chairs were appointed to take over from Zaheer Fakir (South Africa) and Ewen McDonald (Australia): Manfred Konukiewitz (Germany) and Jose Maria Clemente Sarte Salceda (Philippines).