The Green Climate Fund - "On track, but keep your eyes on the road"

The Green Climate Fund - "On track, but keep your eyes on the road"

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Date: 31st March 2015
Type: Feature
Tags: climate finance, finance, Green Climate Fund, Green Climate Fund, low emission development, sustainable development

Christina Elvers of CDKN was an observer at the ninth Board Meeting of the Green Climate Fund last week and reports on what the Board achieved - and what major tasks lie ahead.  

Last week, the Board Members of the Green Climate Fund (GCF) headed to Songdo, South Korea for their ninth Board Meeting. This, like other climate meetings taking place this year has been met with much anticipation. Every meeting edges us closer to climate summit in Paris at the end of the year. Participants and observers are following discussion closely looking for signs to tell us whether we’re still on track to deliver a global climate agreement, or not.

The 9th Board Meeting of the GCF was critical for reassuring developing countries that finance would be available to build resilience and advance low carbon development, as well strengthening the trust and confidence between developing and developed Parties which is critical for any global agreement.

2014 pledges paved the way

Encouragingly, over $10 billion were pledged to the Green Climate Fund last year by a number of developed and some developing countries. This was a welcome sign that the developed world would support developing countries in the fight against climate change. However these pledges were just the crucial first step towards channelling climate finance to the developing world. The GCF needs to start financing actual projects and thus be operational by October – but for this to happen this Board Meeting had some heavy lifting to do.

Several obstacles remain ahead

A pledge is not a contribution, and many LDCs are left wondering if the pledges made by developed countries will be honoured.
Not until national parliaments have agreed to sign a binding contract, to transfer the funds to the GCF does the pledge turn in to a contribution. This left many developing countries seeking assurance that donors wold make good on their pledges. And it seemed like they were right to be worried: only around $100m – or 1% of pledges – have indeed been contributed at this stage. Not only might this worry some, it could also have serious operational consequences, as the Fund needs 50% of the pledges to be contributed by 30 April in order to become effective. However, developed world board members did provide some assurance as many of them explained that their countries were indeed close to signing their contracts. If they don’t, this risks damaging confidence between developed and developing countries as it’s then unlikely that funds will flow by October.

Two of the most crucial items on the agenda were the Fund’s Initial Investment Framework and the accreditation of the first seven entities to disburse funds.
Without agreement on these, having the Fund up and running by October would have been close to impossible. The GCF did indeed agree on an Initial Investment Framework (the original version of which is online here). This framework will form the basis for judging applications for funding. It was important to get right as its criteria and benchmarks are to ensure that projects applying for funding work towards the Fund’s ultimate goal:  a paradigm shift towards low-carbon climate resilient sustainable development.

The news that made most headlines however was the fact that the GCF late on Wednesday night accredited seven entities to channel money to programmes and projects in the developing world. The board approved a regional Pacific island fund, national entities based in Senegal and Peru, a social investment fund, and three other international entities. If these seven entities hadn’t been approved, it would have been hard to see how the GCF would have been able to disburse money this year – as funds can only be channelled through accredited entities. The approval of these entities and the establishment of the Initial Investment Framework have eliminated two of the biggest obstacles towards the operationalisation of the Fund.

Shaping the GCF’s policies, smoothing the road

The board also discussed and approved a host of other items, including a Policy on Gender, Legal Terms and Conditions for Accredited Entities and Guidance on the Fund’s risk management framework. While none of these were crucial for funds to flow, they are important to turn the GCF into a smooth operator capable of administering billions of dollars.

Potential potholes on the road to operationalising the Green Climate Fund

However, despite long nights (the meeting went on until 4.20am on Friday morning), the Board did not manage to cover the entire agenda. Items left for the next board meetings include administrative matters such as the Guidelines on the Budget and Accounting Systems and the question around how to make decisions in the absence of consensus. The Board also failed to reach a final conclusion around the Terms of Reference of a Pilot Phase for Enhanced Direct Access (EDA), an innovative idea which hands all funding decisions and the management of funds to recipient countries, thus increasing ownership of developing countries.

This all took place against the backdrop of a growing rift and rising tensions between developed and developing countries. Many discussions went on for hours with board members seemingly stubbornly standing by their positions and not being willing to compromise.

To stay on track and get to the finish line, the Board needs to work together

Overall, the Fund is still on track to meet its October target of dispersing its first actual funds. However, it does have its work cut out with disagreements between some developing and developed board members making decision-making cumbersome, if not impossible. If the GCF wants to meet its ambitious target, the Board Members will need to pull together to find common ground.

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