Despite the Paris Deadline: At its 10th Meeting GCF Board Must Deliver Good Decisions, Not Hasty Ones
With the political acceleration of the international climate negotiations for a new global climate agreement to be reached in Paris as the background, the upcoming 10th meeting of the GCF Board from July 6-9 in Songdo promises to be a breathtaking one – as judged probably less by the quality of the decisions it will have to take then by the pace the meeting has to set to get through a lengthy agenda without having to resort to now seemingly customary “allnighters”. The GCF Board and the Secretariat will have to work feverishly to get all those policies and operational and administrative procedures into (often only “good enough”) shape for decisions, which are needed to allow for the first approval of project proposals by the Board in the fall. This does neither allow for thorough discussion, nor for dissent among their midst.
Working through an quite impressive list of decisions considered “essential-for-the-first-project-approvals” at this upcoming and the next Board meeting is already daunting enough. Added to this are some yearly important requirements, such as the annual report to the Conference on the Parties on how the Fund responded to guidance received at COP20, or the determination of the Fund’s administrative budget for next year. Stir in some leftovers from last year’s work plan, such as dealing with administrative guidelines on procurement and human resources that are necessary for the Secretariat to be able to run the Fund on a day-to-day basis, and it is clear that a number of issues warranting the Board’s full attention but not needed right away to wave the “open for business” sign in Paris are shoved as “non-essential” further down the road.
Already, as one of the decisions to be taken at the 10th GCF Board meeting, the Norwegian and Peruvian Co-Chairs propose to push the dates of the 11th Board meeting further back from late October to late November and thus literally just days before COP21 convenes in Paris. This is supposed to give the Secretariat and supporting expert panels more time post-Songdo and before the next Board meeting to work through an ever larger stack of accreditation applications (close to 100 now) as well as to consider and review the most promising of the 120 project ideas and concepts that the Secretariat has already received. According to the Executive Director speaking at the UN Secretary General’s High Level Event on Climate Change on June 29th, project ideas worth US$500 million -- primarily submitted by the7 entities accredited for project implementation at the 9th Board meeting and the 13 to likely approved by the Board at this upcoming meeting– could be developed further with a Board approval at the 11th Board meeting in November in mind. The basis of any funding relationship between the GCF and accredited entities however are a set of legal and formal arrangements. How fast the first accreditation master agreements with accredited institutions can be finalized – and if the process can be sped up and facilitated -- will thus be part of the discussion in Songdo and one determinant of the ability of the Board to deliver the first approved GCF projects to the Paris COP.
This tight time-table, of course, is dependent on the approval of a set of other key decisions scheduled for the July Board meeting in Songdo. The provisional agenda lists close to 30 agenda items, some of them extremely complex and contentious, that the Board will tackle over four meeting days. Each of these key decisions is crucially important to keep on track for Paris; failure to decide on either of them could put the whole plan to approve the first projects in November in jeopardy.
Several elements linked to developing the initial proposal approval process further (which currently stops with the approval but has not yet articulated post-approval procedures) will be discussed in Songo. Of key importance is the appointment of the six experts for the Independent Technical Advisory Panel (ITAP), which the Board must confirm at next week’s meeting, so that the ITAP can get to work. These experts are supposed to review the project and program proposals that implementing agencies accredited to the Fund or developing countries’ focal points or national designated authorities have already begun to submit. Of course, these experts need to have clarity on the methodology according to which they are supposed to rate proposals. Proposed is a scale indicating proposal’s likelihood of success (“low”, “medium”, “high”) in delivering against the Fund’s six main investment criteria, taking over thirty coverage areas and even more sub-criteria and assessment factors into account. The Board had a hard time agreeing on a scaling approach at the last meeting. It might be hard for them to agree on what subset of projects a scaling pilot approach should apply to.
To ensure the right financial instruments (which according to the GCF Governing instruments could cover “agreed full and agreed incremental costs”) are used for the right projects and programs, in Songdo the Board still has to finalize the terms and conditions for the provision of GCF grants and concessional loans, including guidelines on how the right financial instrument(s) for use with public and private sector activities can be determined case-by-case. In the case of using these instruments to bring in private sector projects, the Board has yet to decide on the best approach to mobilize private sector resources “at scale”. In Songdo, the Board will look at recommendations of its Private Sector Advisory Group (PSAG) on this key issue for making the Fund’s Private Sector Facility operational. In Songdo, expect also highly charged discussion about what role and weight grant financing should have in the Fund’s financing arsenal as it starts to deploy the US$ 10.2 billion over four years it has collected so far (and confirmed for more than 60 percent of this sum in the form of contribution agreements) as pledges from 34 countries. The Secretariat’s proposal to the Board on how concessional the terms of GCF funding for the public sector could be, seems to suggest that grants should be used sparingly. This will not go over well with many developing country Board members, who see grants as the primary instrument for adaptation approaches, especially for the most vulnerable countries. Clarity on the terms and conditions of using GCF financing will be also important for the private sector.
Of course, the risk the Fund is willing to take in handing out its money, aka the GCF’s “risk appetite” and how it will be determined, is also still far from clear. Board members in previous meetings have said they want a GCF risk appetite matching the risk of failing to address climate change and go higher than existing climate funds. The Board meeting in Songdo will attempt to agree on a methodology via a proposed “risk dashboard” (which does look incidentally like a multicolored checker board of risk factors), so that the Secretariat post-Songdo can come up with various models and the Board at its 11th meeting can issue a statement on how risky the Fund’s initial business is allowed to be – meaning how many non-performing loans or busted guarantees the GCF can absorb. This is relevant especially in the aftermath of Paris, if a new climate agreement will not ensure a significant ramp up of resources pouring into the GCF Trust Fund.
In Songo, Board members look at accrediting 13 entities, likely as a package instead of with an individual vote on each. A balanced package is the goal, but what makes the accreditation applicant package balanced is up to the interpretation of the two Board constituencies. Developing countries like to have as many national and regional developing country bodies accredited for direct access as possible, seeing this a the best guarantee for true country ownership of GCF funding. Developed countries look for the accreditation of private sector entities and “multiplier” international finance institutions, including commercial banks (and don’t mind a few of their own bilateral development banks and agencies thrown into the mix). With already 20 implementing agencies accredited by the end of this Board meeting (and the possibility that a batch of the same size might be prepared for the November meeting), in Songdo, the Board must at least start with thinking about how all those entities are monitored and held to account and how it can be assured that the programs and projects they implement not only “do no harm”, but actually do a lot of good.
A comprehensive monitoring and accountability approach for the GCF includes items that are on the agenda for the 10th Board meeting, such as a proposed narrowly defined M&A framework which suggests regular self-reporting by the implementing agencies and spot-checks by the Secretariat and third parties as well as procedures for their suspension and removal if things go wrong. Or the terms of reference for heads of the three independent accountability mechanisms of the Fund dealing with evaluation, integrity and redress, which the Board needs to approve in Songdo so that these important bodies can be up and running in time for the first projects being implemented.
However, a broader understanding of monitoring and accountability must also have urgent progress on issues NOT on the agenda of the 10th Board meeting. For example, the Fund has yet to develop its own environmental and social management system – although it requires one from applicants seeking GCF accreditation. The issue might come up at the earliest in November, but possibly only next year and this despite the fact that some of the entities already accredited, like the Asian Development Bank or the German KfW, are allowed to submit high social and environmental risk category A projects for the Board’s consideration. International civil society groups and networks, with more than 100 having just signed a letter to the Board and Secretariat, have also pushed prominently to update the Fund’s interim information disclosure policy to address current shortcomings, which affect the integrity of the accreditation process and the engagement of stakeholders and Fund observers negatively. As it stands, the policy does prohibit the public disclosure of names of organizations seeking accreditation with the Fund until after Board confirmation. This does not allow stakeholders from the countries, in which those organizations have a track-record of implementing projects, to share their experiences and concerns – and maybe critically challenge a glowing self-review of these applicants. Likewise, the issue of observer participation has been pushed off the agenda by a GCF Board and Secretariat pre-occupied with the “essentials” repeatedly. It hurts civil society representatives in developing countries, who cannot afford to attend the Board meetings, even worse that the interim disclosure policy currently prohibits the webcasting of GCF Board discussions. By the way, on both counts, disclosing information on accreditation applicants after a successful expert panel review but before a board decision, as well as in webcasting their Board meetings, the Adaptation Fund, not the GCF – yet – is showing a real effort to be transformational.
In Songdo, the Board will also try to come to agreement on how to advance two pilot initiatives, one looking at devolving funding decision-making within larger GCF programs for individual projects to national entities under an enhanced direct access approach and one on how to incorporate recommendations by the Board’s Private Sector Advisory Group for the establishment of a pilot phase on supporting domestic micro-, small- and medium-prized enterprises in developing countries in their efforts to gain access to financing for climate-relevant investments. Both are crucial first implementation tests for the GCF’s brand new gender policy approved at the last meeting. Under both pilot approaches proposals should be included for a gender-responsive small patient loan program or a small grant facility which would be ready to serve needs of MSM women entrepreneurs and local communities respectively. The Board can make progress by mandating that the requests for proposals for both pilot approaches, likely to be opening later in the fall, stipulate the integration of gender considerations in proposals financed under the two new programs.
Lastly, with all the backlog from past meetings and lots of homework still to be done, the Board must improve its capacity for and the efficiency of its own decision-making, for example by agreeing on a methodology for taking Board decisions on a no-objection basis between Board meetings. The 10th Board meeting will also take another stab at trying to agree on procedures for decision-making (through a voting system) in the absence of consensus and will attempt to go boldly where previous attempts have failed, primarily because developed countries in the Board insist on establishing a link between the size of a country’s contribution to the GCF and the weight of its vote (although the GCF is a part of the UNFCCC financial mechanism with the Convention’s “one-party, one vote” consensus-based decision-making and not a Bretton Woods institution).
All these really important decisions and the serious considerations of their backgrounds provide more than enough reasons to advise the Board and the Secretariat to “hurry slowly” forward: Don’t forget in the haste to deliver against the political deadline set by the Paris COP21 that the GCF has to deliver not only fast, but more importantly well. Only then can it assure the world that it will not only “open for business” on time, but is ready to support developing countries with activities and projects “beyond business as usual.”