CSO Update on the 34th Green Climate Fund Board Meeting – Day 1

by the The Asian Peoples’ Movement on Debt and Development (APMDD)

DAY 1 – 17 October 2022

Note: Access the full intervention of GCF Observer Network HERE

The 34th Board Meeting, happening from 17-20 October was opened by the co-chair from South Africa, Tlou Ramaru, with reminders on Covid-19 protocols. He also introduced the new BMs and alternate BMs and congratulated the outgoing members of the Board. However, some BMs noted the lack of GRULAC country representation and how the matter should be addressed especially since more important issues are being discussed by the Board.

The BM from Norway expressed his solidarity with the people of Pakistan, who have experienced recent floods. He reminded the Board of such extreme impacts and how the GCF can help people and communities adapt and avoid further devastation in the future.

The Board then proceeded to adopt the agenda, to which the BM from Switzerland raised his concern about the Board’s failure to comply with the 21-day period rule on document circulation. This was followed by the swift adoption of several reports, including the Report of the 33rd Board Meeting, the Report of the Independent Units, as well as the Board Decisions made in between meetings.

As for the Reports from Board Committees, Panels and Groups, the BMs from Denmark and Switzerland raised concern over the fact that the risk management committee had not convened prior to B34. The Board then proceeded to note and adopt both the Reports from committees, panels and groups of the Board of the Green Climate Fund and the addendum on the appointment of members on the Independent Technical Advisory Panel.

This was followed by the extensive discussion on the agenda item Strategic planning and programming matters: review and update of the updated strategic plan (USP).

The Secretariat presented the document into three parts: long-term vision, mid-term vision, and linkage to other strategies. BMs were invited to comment or ask questions after each part’s presentation.

For the Long-term Vision, the Secretariat presented the major inputs or recommendations from the review of the USP, namely: maintain the Board’s ambitious strategic vision and clarify how it translates into action; draw clearer links between the UNFCCC/Paris Agreement goals and cycle, and the GCF strategic vision, objectives, and actions; better define the Fund’s approach to paradigm shift, including through a theory of change; clarify the GCF value-add in the climate finance landscape and risk appetite.

The update of the USP is aimed to take into consideration the current climate challenges the world is facing today. It seeks to maintain the GCF as the flagship fund for implementing the Paris Agreement and UNFCCC by deploying climate expertise through partnerships to translate country NDCs, NAPs, and long-term strategies into investments and systems change. The GCF is also envisioned to become the developing countries’ “partner of choice” in building institutional know-how for climate investments, which means support for NDAs, DAEs, EEs, and the financial systems.

The proposed updated USP also maintained the Board’s strategic vision from the initial Strategic Plan but now also clarified how GCF will promote paradigm shift and support UNFCCC/Paris Agreement implementation:

“by promoting the paradigm shift towards low-emissions and climate-resilient development pathways in the context of sustainable development and by supporting developing countries in the implementation of the Paris Agreement and UNFCCC within the evolving climate finance landscape.”

The updated USP also asserts that the GCF can promote paradigm shift by mainstreaming climate change capacities and tools into investment decision-making. This involves NDA/Country-driven investment planning, DAE/climate programming capacity, use of climate information and assessments, enabling environments, and national financial systems. Furthermore, paradigm shift can also be accelerated by exercising risk appetite and deploying concessional finance for mitigation/adaptation investments. This involves: aligning plans with NDCs/ACs/NAPs/LTS, pursuing more systematic investment design, and magnifying impact of GCF concessional finance via innovation, scaling up, de-risking.

Majority of the BMs commented on the length of the document, suggesting that the Secretariat could have provided a concise version that clearly identifies priorities instead of attempting to address a long list of issues. There was also consensus among the Board in saying that the USP must be results-oriented with clear actionable and quantitative goals as a guide for future strategies.

Developed country BMs, particularly from Norway, Sweden, Italy, Canada, and Japan, supported the updated USP’s framing of the GCF’s evolution into a fund that catalyzes climate investment by collaborating with larger nodes of finance, especially from the private sector. The BMs from Sweden and Denmark further emphasized that the GCF should set market-driven finance, crowding of private capital, and innovating solutions to transition global financial flows as goals.

Many developing country BMs on the other hand, raised concerns over the “changing” goals of the GCF as reflected in the updated USP document. The BM from Antigua and Barbuda noted that the emergence of language on “bankable projects” vs “impactful projects” will unfairly disadvantage funding proposals from SIDS. She added that the definition of “impactful” should not be divorced from a comprehensive understanding of the concept of adaptation. The BMs from Pakistan and Gabon also flagged that the USP should not change the character of the Fund itself, expressing worry that the catalytic role of the Fund should not be treated as its main role, especially when the Governing Instrument only treats it as a tertiary role.

BM from Pakistan further stressed that the Fund needs to maintain predictability and that the Fund should not be changing goalposts every few years. He urged the Board not to deviate from the original strategic vision of the Fund and raised further concerns that this lack of predictability translates into unpredictability and confusion on where disbursable resources will come from. He then affirmed that developing country Parties from the Asia-Pacific States cannot support the framework of “climate investment ecosystem” that he contends is inherent in the updated USP. Along the same lines, the BM from Gabon further emphasized that instead of focusing on catalyzing the private sector, the USP should include and focus on strengthening NDAs and their access to finance. This was echoed further by the BM from China, who also said that the USP should be more aligned with developing country NDCs.

The intervention from the CSO Observer Network, delivered by Erika Lennon who is the Active Observer for developed country CSOs, also echoed the concerns of Developing Country BMs, arguing that instead of recommitting to the GCF’s fundamental mandate to directly implement people-centred and human rights-based climate finance projects, the updated USP is trying to remove barriers to climate investment, implying a transition from direct implementer for the benefit of countries, people, and communities to indirect influencer of finance and taking an investment bank approach. Without downplaying the importance of catalyzing additional finance, the CSOs assert that failing to recognize the GCF as the largest provider of direct access climate finance and as the largest multilateral fund serving the Paris Agreement, would be a mistake and a failure to fulfill the founding mandate of the GCF. The intervention also urged the Board not to let the private sector strategy become the primary strategy of the GCF and reminded that the Fund has a mandate to deliver direct climate finance particularly to LDCs, SIDS, and African states and expand opportunities to devolve finance to local communities and the most affected.

The Co-Chair from South Africa then said that the summary of the discussion would be consulted with the Secretariat and circulated before the end of the Board Meeting. They will also come back to the Board with a draft decision on a process and timeline for discussion and adoption of the item in B.36.

As for part 2 or the mid-term goals, the secretariat presented it based on the updated USP’s objectives, goals, achievable targets, programming directions, and risk and resourcing implications of any programming directions that may arise from the future USP.

On programming directions, the secretariat reported on the challenges in pursuing several funding outcomes, including the balanced funding for mitigation and adaptation, for private and public sector, and for direct access versus international access. The primary reason is due to the lack of clarity and guidance from the Board, which prompted the Secretariat to recommend strategic prioritization as the Board adopts the next USP.

Developed and developing country BMs who spoke expressed the same view that the GCF should continue to prioritize balanced funding for mitigation and adaptation. The BM from Denmark even suggested that the adaptation finance funding floor for least developed countries (LDCs), small island developing states (SIDS), and other highly vulnerable countries be raised to achieve more adaptation finance for those in need. The Board also believes that the GCF should prioritize funding projects in pursuit of the fulfillment of country NDCs and NAPs.

However, developed and developing country BMs who spoke had different ideas on the details of what the GCF should fund under adaptation, as well as on other priority areas. The BMs of Norway and France both pushed for more “nature-positive” finance on food and land conversion, among others. Others added there should be more financing in areas where the GCF can provide “additional value,” which stems from the developed countries’ pursuit of leveraging private sector finance to the GCF, especially for adaptation projects.

Developing country BMs disagreed and instead asked for concrete, measurable, and actionable mid-term goals. The BM from Gabon insisted that there should be quantifiable outcomes included in the mid-term goals such as a certain percentage of increase in adaptation spending, specifically on climate information and early warning systems. The developing country BMs also asserted that projects focus on the vulnerable and marginalized as this is the priority of the GCF under its Governing Instrument (GI).

The intervention from the CSO Observer Network, delivered by Erika Lennon of the developed country CSOs supported the points raised by developing country BMs and mentioned that the GCF should not focus on risky financial structures and unproven technologies, but rather cultivate locally-led solutions and indigenous peoples’ knowledge, as advocated for under the United Nations Framework and Convention on Climate Change (UNFCCC) and the latest Intergovernmental Panel on Climate Change (IPCC) assessment reports. Lastly, as the support for a just transition was mentioned several times to be one of the goals, the CSOs stressed that it should not be mere lip service but rather be translated into concrete objectives and projects.

After an extensive exchange between the Board Members, the co-chair from South Africa decided to suspend the discussions to break for lunch. Part 3 or the linkage to other strategies will be discussed on a later day at this Board Meeting.

The afternoon session began with the adoption of the decision regarding the Selection of the Head of the Independent Evaluation Unit (IEU). The Board had no objections and adopted the decision to have Andreas Reumann as the new head of the IEU.

This was then followed by the discussion and approval of the Work Programmes and Budgets of the Independent Units for 2023, to which the IEU was the first to present.

The presentation covered the evaluations the IEU plan to undertake in 2023, which include the evaluations to the GCF’s investment in the Energy Sector, the Fund’s Investment Framework and the GCF Readiness and Preparatory Support Programme (RPSP). The IEU also plans to further develop the Learning-Oriented Real Time-Impact Assessment (LORTA) tool that aims to build the capacity for measuring the impacts of GCF projects and investments, as well as present Management Action Reports for past evaluations on Adaptation, Accreditation, SIDS, LDCs and Private Sector. A Peer Review of the evaluation function of the GCF is also earmarked to happen next year.

Considering the amount of work planned, the IEU also presented Capacity Building initiatives planned for Accredited Entities, the GCF Secretariat and experts, which will also include several evaluation needs assessment and capacity building efforts for country partners. They also plan to make the reports and evaluations widely available in various languages (Arabic, French and Spanish) and maximize the IEU website and social media platforms as part of the outreach initiatives of the unit.

The IEU also raised the need to strengthen its own capacity by hiring one additional position under the IEU head and 5 headquarters-based consultants, allowing the unit to have a total of 26 staff members in 2023.

As for the overall budget, the unit is requesting for an annual budget of USD 6.94 million, which is a 7.36% increase from the previous year, primarily due to the costs for professional services and hiring of additional staff members.

While the Board generally supports the requested budget, some developing country BMs sought clarity about the concentration of allocation to professional services and staff costs. The BM from Pakistan questioned the need for additional personnel, particularly a deputy head of the IEU. The BM from Bhutan echoed this and raised the challenge of having limited GCF Funds available, and the need for budget cuts. As a response, the IEU argued that the easement of Covid-19 restrictions was a big factor for the increase of the budget. Items that were considered underspent in the past have slowly gone back to previous spending.

Other BMs were concerned about the evaluation plans and were keen to see more evidence reviews on key issues like Just Transition. The BM from Switzerland urged the IEU to look at the GCF supported projects’ compliance with the Environment and Social standards and how they are aligned with the Paris Agreement.

When the co-chair asked if the Board is ready to adopt the presentation and budget request, the BM from Pakistan requested if he can further seek clarity on the issues he mentioned before adopting the document. This forced the co-chair to suspend the item.

The deputy head of the Independent Integrity Unit (IIU), Albert Lihalakha, then presented the IIU Workplan and Budget in 2023. He started by showing the latest statistics on the number of cases received by the unit. So far, there have been 27 new cases and 16 cases closed. Although there was an increase in case reports against the previous year, many of these are misconduct stemming from the need to have additional training and capacity building. There were also 10 project related cases reported, but the IIU believes as the Fund’s project portfolio increases, it will be inevitable to see an increase in future reported cases.

The IIU then presented the unit’s priorities in 2023, which are very similar to what they did in the previous year. These include the optimization of investigation efficiencies, conduct of proactive integrity reviews, automation, and development of databases of reported cases, oversight of the integrity policy guidance and implementation, as well as awareness raising, communications and enhancement of operation efficiencies. The deputy head also mentioned the need to enhance the engagement with the CSOs.

A total of USD 3.26 million was requested by the IIU, which is 5% bigger than its budget last year. Similar to the IEU, the majority of the budget was allocated to staff and consultants. But unlike the IEU, it was easily approved without objections.

The Board also commenced the initial discussions about the GCF Accreditation Strategy, where the Secretariat presented a list of questions that are aimed to elicit insights from the Board about the Fund’s approach to accreditation.

There was a resounding call for the prioritization of Direct Access Entities as this has been a perennial problem of the Fund. The BM from the US emphasized that Country Ownership is one of the main features of the Fund, hence priority must be given to national institutions that know the realities and are operating closer to the recipient communities.

Many BMs also noted the inefficiencies of the accreditation approach and advocated for the further streamlining of the process. The BM from Germany suggested maximizing the use of the Key Performance Indicators (KPI) to check whether an AE is performing well. However, she clarified that the use of KPIs should not hinder the ability of DAEs to submit funding proposals.

Innovative partnerships were also mentioned several times, mostly by developed country BMs who were also keen to explore extending the partnership to Executing Entities (EEs), and other institutions outside of the GCF accreditation process. Some BMs mentioned the need to enhance the collaboration between the International Access Entities (IAE) and the Direct Access Entities (DAEs), and maximize the capacity and resources of IAEs to support DAEs.

Many developing country BMs raised the issues surrounding the concentration of funding allocation to the IAEs, which the BM from Pakistan said undermines the accessibility of the Fund to rightful recipients from developing countries. The BM from Antigua and Barbuda suggested the Accreditation Strategy must include a mechanism that will track the obligations of the IAEs including their support to DAEs. The BM from Ghana added the fact that despite having more DAEs in the GCF, majority of the Fund remains accessed by IAE, hence a cap must be set to limit the funding allocation for IAEs and give more funding opportunities for DAEs.

There was also consensus among the Board about the need to address the capacity limitations of the secretariat and the Accreditation Panel. Delays in the application, reaccreditation process and signing of AMAs were constant problems, and some BMs believe requesting the AEs to provide their investment platforms and projected plans could help the GCF decipher which among the entities are most likely to maximize the GCF partnership. The BM from France asserted that the GCF need not have to have more partners, but should rather ensure that the current roster of AEs are able to implement their respective projects well. This was however opposed by the BM from Pakistan, who believed requesting AEs to provide future investment platforms and projected plans will only mean more requirements that AEs have to comply with. And given the challenges experienced by several DAE applicants in the past, the proposal may cause further delay or even the denial of their accreditation.

The intervention from the CSO Observer Network, delivered by Erika Lennon of the developed country CSOs, noted that the accreditation strategy should focus on the GCF’s comparative advantages, including its ability to foster a large network of entities that have high standards and capabilities to promote rights based, people centered, gender responsive action and to help deliver on the goals of article 2.1(c) of the Paris Agreement to shift financial flows (including by having a more robust baseline assessment of how entities are shifting their portfolios away from fossil fuel investments). She added that if there was to be a prioritization of AEs for accreditation, it should be biased towards DAEs, including local organizations and local financial institutions prioritizing engagement with domestic MSMEs, and should be based on the elements in which the accreditation process currently falls short.

Since this item was aimed to kick-off the discussions around the GCF’s Accreditation approach, the co-chair decided to momentarily suspend the item and declared the adjournment of the meeting.

You can catch GCF34 via webcast and on demand here: https://www.greenclimate.fund/boardroom/meeting/b34#videos