CSO Update: GCF Board Meeting 27 Day 3

Co-chair Sue Szabo opened Day 3 with a brief welcome and recognition of the replacement of the BM from Germany. Heike Henn was replaced by Sebastian Forsch as the former had to attend to other matters in her office. A clarification was raised by the BM from Pakistan regarding the replacement, which required consultation with the Fund’s general counsel. The general counsel confirmed that there will be no breach on the rules of procedure so long as the replacements is done before a Board meeting session. With this, the Board proceeded to continue the Consideration of Funding Proposals.

For Day 3, the Board deliberated 3 remaining FPs that were unopened. Those that were suspended from Day 2 were put on hold to allow further consultations between respective BMs and entities involved. Summary of the discussions and status whether each proposal is approved or not is below:

FP 151 and FP 152: Global Sub-national Climate Fund (SnCF Global)
Accredited Entity: IUCN, and Pegasus Capital Advisors
Total Project Financing: USD 778 million
Total GCF Funding Requested: USD 150 million (junior equity), USD 18.5 million (grants)
Co-financing: uSD 600 million from PCA (Junior Equity), USD 9.5 million from IUCN (grant)Many of the Board Members raised concerns regarding the actual mitigation potential of the project as no information is made available at this point about the nature of the subprojects the FPs intend to implement. BM from Senegal is worried about coordination needed as there are a number of countries involved in the project.While the BM from Denmark is supportive of the FP, he noted that there must be clear coordination mechanisms between IUCN and PCA to make monitoring and accountability easier.

BM from Albania shared how the FP will benefit countries in the Balkan region, while BM from Bahamas requested for more time to look at the FP closely to understand how it will benefit countries in the Caribbean. He registered that an additional condition should be in place to ensure subprojects comply to GCF standards and policies. He then asked the co-chair to hold the approval of the project to allow further consultations, thus prompting the co-chair to suspend the approval of the FPs for later.

In our intervention delivered by Erika Lennon, the Active Observer from the developed country CSOs, we highlighted issues around the proposed “blind pool” that undermines transparency and accountability of the FP, the fact that participant countries have not been identified (and No Objection Letters were not secured), thereby undermining country ownership, as well as the FPs’ insufficiency to comply with the GCF Gender Policy.

Our intervention about not securing the No Objection Letters (NOLs) from participant countries was responded to by the Active Observer from the Private Sector, Margaret-Ann Splawn by saying that obtaining NOLs are burdensome. She the appealed to the Board to approve the project because not doing so will lead to further drop in the Fund’s equity portfolio.

As to our concerns about the “blind pool” approach, the PCA explained that the said approach, particularly the investment criteria that will be used, have undergone rigorous consultations with the Secretariat. They also said that the investment fund approach is the only way to reach LDCs and SIDS easily and that involving a number of countries would lower risk and improve diversification. They added that the subnational and international scale of the FP can also attract potential investors.

On the issue raised about securing NOLs for participant countries, IUCN explained that a technical assistance program is part of the FP to raise awareness and provide capacity building. They also assured that a set of criteria, aligned with GCF standards on adaptation and mitigation, will be developed and the GCF Secretariat will chair the oversight body, to make sure the subprojects are worthy of the GCF Funding.

Due to the reservations and requests for further consultations by some BMs, the approval of FP151 and FP152 was suspended.

 

SUSPENDED FOR FURTHER DELIBERATION
FP 153: Mongolia Green Finance Corporation
Accredited Entity: XacBank (LLC)
Total Project Financing: USD 49.654 million
Total GCF Funding Requested: USD 26.654 million (2 million grant, 20 million loan, and 4.654 million equity)
Co-financing: Government of Mongolia through Senior Loans (USD 13 million) and Equity (USD 5 million), and Participating Financial Institutions in Equity (USD 5 million)BM from Germany shared that they have been discussing with XacBank and agreed to comply with the suggested conditions for the approval of the project. The conditions shared with Board include the prioritization of energy saving potential of technologies used and capacity building of project beneficiary businesses.In the intervention of CSOs, delivered by Wanun Permpubil, Alternate Active Observer from developing country CSOs, we noted the inconsistencies in the narrative of the proposal with the actual planned financial allocation, as the majority of the funding is now reserved for on-lending for large scale energy users which are neither the SMEs nor the ger households the proposal highlights. We believe this limits direct benefits for those business and population groups (i.e. local small businesses and households) which will form the backbone of a green transition in Mongolia. We also proposed several conditions for the approval of the project, including no funding should be channeled for support all forms of mining operations and land grabs.

Hearing no objections from members of the Board, FP153 was approved.

APPROVED

The Board also adopted the requests for extension of funding proposal compliance of the following approved projects:

  • FP027 Universal Green Energy Access Programme (Deutsche Bank AG)
  • FP116 Carbon Sequestration through Climate Investment in Forests and Rangelands in Kyrgyz Republic (CS-FOR) (FAO)

The Board also adopted the decision to approve the additional participant countries to FP099 Climate Investor One (FMO). The countries are Ecuador, Ethiopia, Mauritius, Philippines, Senegal, Tunisia, and Zambia.

This was followed by the Board discussion on Consideration of Accreditation Proposals. The Secretariat introduced the document by starting with a report that showed the status of accreditations as of 31 October 2020. So far, there are 120 entities seeking accreditation, of which 72 are at the final stage that involves securing legal arrangements. The Secretariat also shared efforts to accelerate direct access accreditation by providing technical support to 227 DAEs nominated by their respective NDAs even amid the pandemic. Additionally, the online accreditation self-assessment tool, intended to assess preparedness for accreditation process, helped speed up the process.

For this Board Meeting, 4 new entities are for consideration by the Board. Of which, 3 are Direct Access Entities (DAEs), and an International Access Entity (IAE). Some of the entities need to fulfill a number of conditions set by the Accreditation Panel, such as the development of grievance mechanisms, compliance with the Fund’s ESS, among others. The 4 entities that were considered are:

  1. APL102 Kemitraan bagi Pembaruan Tata Pemerintahan (Partnership for Governance Reform) (Kemitraan) – DAE from Indonesia
  2. APL103 National Trust for Nature Conservation (NTNC) – DAE from Nepal
  3. APL104 KCB Bank Kenya Limited (KCB Kenya) – DAE from Kenya
  4. APL105 Camco Management Limited (Camco) – IAE

BM from Philippines was happy to support the approval of the applications, especially the accreditation of 3 DAEs. However, she underscored the fact that the applications coming from 3 DAEs are relatively low compared to the number of IAEs coming in to the Fund at almost every Board Meeting. She added that the process remains tedious and time consuming for DAEs with an average of 30 months completion, compared to the 21 month completion of the IAEs.

BM from Finland raised that while he is not objecting the accreditation of the entities, he wanted to make sure they are complying with the Fund’s updated Gender Policy and Action Plan, as well as the rest of the Fund’s policies on ESS and Indigenous Peoples.

Wanun Permpibul, the Alternate Active Observer from developing country CSOs, raised our concerns in the accreditation of this batch of applicants. First, the review conducted for the period including calendar year 2019 included eight entities whose AMAs became effective in 2016, indicating the AEs were in their fourth year before the review was conducted. This untimely mid-term review, with results just now being reported as entities are due to begin their re-accreditation process, results in a significant missed opportunity for any reflection and learning.

We also raised that there was no mention of the Indigenous Peoples Policy, and only two ESS synopses included any reporting on AEs’ practices regarding Indigenous Peoples. Since the entities were only assessed against the Gender Policy in place at the time of their accreditation, we then question what insight at all is to be had on how AEs are complying with the IP Policy adopted in 2018, and through what mechanism that compliance is being assessed.

The Board then moved to the discussion about the Fund’s Updated Strategic Plan for years 2020-2023. To quickly recap, in B21, the Board was asked to submit inputs for compilation, towards achieving a primary draft for the Updated Strategic Plan (USP). At the next Board Meeting, the Board adopted to update the Strategic Plan, hence, the start of the formulation of a draft. In B24, the draft, “Zero Draft” formulated by the Secretariat, under the guidance of the co-chairs, was presented to the Board. It was then followed by an informal meeting in Monrovia, Liberia to further develop the USP. During B25 in Geneva, the Co-Chairs’ draft was tabled and further consultations were done through informal working sessions on the “six sticky issues.” The said issues were further discussed post-B25 through the small group process facilitated by the BMs of Ecuador and UK. Under this small group process, 9 co-facilitated small group sessions among selected BMs, and 2 virtual consultations with the Co-Chairs, were conducted.

At this Board Meeting, the small group process was presented by the co-facilitators, focusing primarily on the challenges and resolutions encountered. The BMs of Ecuador, UK, and Germany emphasized that logistical issues due to the COVID-19 pandemic, the online and virtual nature of the small group sessions and consultations, exacerbated the conflicting views of several Board Members. Nonetheless, they assured the co-chairs that the entire process ensured transparency and inclusiveness to reconcile the “six sticky issues”

The Co-Chair from Pakistan also manifested that the developing countries were already prepared to adopt the USP at B25 but due to the quick turnaround of events brought by the COVID-19 lockdowns, the side meetings and informal consultations did not push through. This led to the deferral of the USP to the next Board Meeting.

On the small group process, BM from Ecuador recalled that the last track was very difficult. There were textual edits that were added recently, which were not major from the documents submitted in the past. Finding a middle ground on acceptable language was also difficult, especially on the topic of mobilizing finance for developing countries without limiting country ownership, and in including specific or other instruments to the funding proposals submitted by the AEs.

He also expounded the “six sticky issues,” one of which is the prioritization of accreditation for Direct Access Entities and on how the GCF should maintain past provisions, decisions, and its commitment to deliver country ownership. In terms of project prioritization, the shifting financial flows and the implementation of the Paris Agreement was also a major question. The BM from the UK on the other hand, manifested that the broad base of the USP is already covered but minor adjustments such as language and perspective are the only issues needed to be discussed further.

The Board Members were divided in the adoption of the USP presented. While many believe the process was transparent and inclusive, and that the time it took to develop the document is more than enough, there were still a number of contentious points raised. These revolved around language, conflict with previous work plans, consistency of the USP with the Fund Governing Instrument, and the options presented in the proposed decision text that will shape the Fund portfolio.

The BM from Egypt thanked the BMs who led the Small Group Process and apologized for not being able to attend some of the sessions due to the logistical challenges brought by the COVID-19 pandemic, of which he also manifested as the reason why other BMs were not able to attend. As for the version of USP presented, he reminded the Board that the main purpose of the USP is to guide the operations and program of the Fund based on available resources under GCF-1. The USP should ensure that the objectives, core principles, and character of the Fund is based on COP guidance, and that they should be maintained that way. He added that the current USP presented failed to address the issue of favoring International Access Entities (IAEs) and preference to the private sector, both of which are far from the nature of the Fund. He emphasized that the Governing Instrument clearly states that the increased involvement of the private sector refers to local private sector, and not the big corporations and multinational private sector interests, and then urged the Board to revisit the Fund’s Private Sector Strategy.

He also raised objections on the options presented in the decision text, particularly on the use of the minimum allocation floors as a tool in meeting the overall balance between adaptation and mitigation programming of the Fund. He believed this will lead to a misrepresentation of the provisions in the governing instrument regarding adaptation spending on African States, Least Developed Countries (LDCs), and Small Islands and Developing States (SIDS). He motioned to redraft the entire Paragraph 13 (b) and submitted proposed textual edits to the Secretariat. His last point was echoed by BM from Bahamas, who suggested to exclude the options in the suggested decision text with regards to allocation of adaptation funding.

BM from Saudi Arabia furthered and stressed that the purpose of the USP and of the work plan of the Board is to inform, and not guide. He proposed to make further elaboration about the “evolving priorities” stipulated in the draft, that the evaluation reports of the IEU should not be the basis of future priorities, that the term UNFCCC should be referred to as the Convention, that para. 20 should bring back “approval” in consideration of the board for the sectoral guidance policy, and that the language in para. 26 should be changed so that it cannot be construed as overstepping the sovereignty of the recipient country.

Other developing country BMs echoed these points. BM from Tanzania echoed the point on the need to stick to the objective or purpose of the fund, and to be consistent with what is in the governing instrument. He also said that the USP should not try to change any past policies adopted by the Board such as the 4-year action plan. BM from Iran agreed and furthered that there should be no provisions or conditionalities set in the USP that will make it more difficult to access the Fund. BM from China, echoing members of the constituency, reminded the Board that the overall tone of the USP should be always about the needs of developing countries.

The BMs from Spain and the Alternate BM from Germany (Sebastian), in contrast to issues strongly raised by developing country BMs, manifested their support for the current form of the USP. As for the options presented in the decision text, the BM from Spain expressed that she will consider any middle ground on the issue of adaptation funding.

Other comments from developed country BMs focused on strengthening the principles and policies of the Fund. BM from Norway urged the Board to reflect in the USP how the Fund will strengthen country ownership, improve efficiency in the use of Fund resources, and how it will take a catalytic role in leveraging private and commercial investments. He then called for updating the work plan of the Board, including the need to address policy issues of the Fund.

BM from Sweden expressed his disappointment as to how the Fund is not reaching its full potential because of the Board’s inability to agree on crucial documents such as the USP. He also said that due to divergent views, the Fund usually suffers from adopting a watered down version of documents, including the USP. He then registered his objection to the current version of the USP, and added that he would prefer seeing the B24 version.

In our CSO intervention, Erika Lennon, the Active Observer from developed country CSOs, reiterated the  long standing principle of the Fund on adaptation funding. We reminded the Board that the GCF is a Fund that gives equal treatment to DAEs, provides concrete steps in protecting marginalized, IPs, and women’s rights’, and promotes continuous stakeholder engagement. As to the options presented on adaptation funding allocation, the CSOs prefer option 1 since it maintains the momentum of the IRM and ensures 70% adaptation funding for African states, LDCs, and SIDS will be achieved. We also added that the USP should support full-cost grant adaptation finance without prescribed co-financing requirements that can negatively impact smaller non-bank DAEs.

Taking into consideration all the concerns and points raised, the co-chairs requested the Secretariat to present a revised decision text, which will be deliberated again by the Board in the coming days.

The session ended 46 minutes over its initially proposed end time and the agenda item “Review of the Multilateral Organization Performance Assessment Network (MOPAN) was not tackled.

You can catch the proceedings of the GCF B27 at https://www.greenclimate.fund/boardroom/meeting/b27#videos from 9PM – 1:00AM KST.
*Full text of CSO Interventions for B27 can be accessed here.

You can catch the proceedings of the GCF B27 at https://www.greenclimate.fund/boardroom/meeting/b27#videos from 9PM – 1:00AM KST.
*Full text of CSO Interventions for B27 can be accessed here.

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