GCF Board launches 2nd replenishment process for resources

TWN Info Service on Climate Change (Jul22/01)
27 July 2022 | Third World Network

GCF Board launches 2nd replenishment process for resources

Kathmandu, 27 July (Prerna Bomzan): The 33rd meeting of the UNFCCC’s Green Climate Fund (GCF) Board held on 17-20 July in Incheon, Korea, launched the second replenishment of resources for the GCF, with a decision to commence the process from July 2022. It decided that the period of the second replenishment will be from 1 January 2024 to 31 December 2027, and that the replenishment meetings would be open to all potential contributors and Board members. The four replenishment meetings planned include an initial organizational meeting on 30-31 August 2022; a first consultation meeting in the week of 28 Nov-2 Dec; second consultation meeting in the week of 24-28 April 2023; followed by a pledging conference in late September 2023.

(The current first replenishment, with a pledge of USD 9.7 billion, is for the period 2020-2023. The United States [US] did not contribute anything to the GCF’s first replenishment and has yet to provide the USD 2 billion of its pledge of USD 3 billion, which was made during the GCF’s initial resource mobilization period from 2015-2018).

Before the decision was adopted on the second replenishment, developed country Active Observer, Erika Lennon representing the global GCF Observer Network, made an intervention urging developed countries to set the bar higher this time beyond the unfulfilled USD 100 billion (per year goal) and make up for the years of delay and non-delivery of their financial obligations. She highlighted that the first Needs Determination Report 2020 by the UNFCCC’s Standing Committee on Finance reveals a range from at least USD 5-11 trillion needed by developing countries to implement their Nationally Determined Contributions under the Paris Agreement for the period 2021-2030, and which represent only 30 per cent of the identified needs that were costed.

The Board meeting also adopted decisions on long-standing important policy issues for developing countries, notably on ‘Steps to enhance (the) climate rationale (of projects/programmes to be funded)’ and the ‘Guidance on the approach and scope for providing support to adaptation activities’. (See further details below).

In terms of funding proposals by developing countries, the Board approved USD 380.7 million to four projects, all by international accredited entities. Developing countries expressed their concern in relation to lack of proposals by direct access entities at the meeting.

The Board also approved the re-accreditation of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), and the United Nations Environment Programme (UNEP).

The Board also approved an amount of USD 18.0 million for the Project Preparation Facility (PPF) to cover anticipated commitments until the end of the first replenishment period of the GCF and approved an additional amount of USD 166.94 million to be made available for the execution of the Readiness and Preparatory Support Programme (RPSP).

(The GCF provides financial and technical assistance to accredited entities for the preparation of project and programme funding proposals through the PPF. The RPSP supports country-driven initiatives by developing countries to strengthen their institutional capacities, governance mechanisms, and planning and programming frameworks towards a transformational long-term climate action agenda. The Readiness Programme provides grants and technical assistance to National Designated Authorities and/or focal points.)

Discussion on climate rationale

Discussions in the past over the climate rationale of projects/programmes have been very controversial in the GCF Board. Developing country Board members have been expressing concerns over the GCF’s Independent Technical Advisory Panel (ITAP) not endorsing funding proposals on adaptation projects, as the ITAP’s assessment was that the proposals lacked “climate rationale” (see related TWN Update). The developing country Board members did not want a situation to arise where establishing “climate rationale” became an investment criterion, or a condition for approving funding proposals, especially for adaptation projects.

Following a series of closed-door consultations on the issue of climate rationale, in the decision adopted at the 33rd meeting, the Board decided that the “use of best available information and data, including from the Intergovernmental Panel on Climate Change, and from traditional, local and indigenous knowledge and practices is sufficient to form the basis for the demonstration of impact potential for GCF-supported activities, while taking into account the context of the proposal, the different capabilities of accredited entities, and country and regional circumstances.”

The decision does not make any reference to the term “climate rationale”, which developing countries see as a big win in the decision adopted. The decision instead adopts principles for demonstrating the impact potential for mitigation and adaptation activities.

In the decision adopted, the Board requested the Secretariat and the ITAP to take into account these principles “to establish a more transparent and consistent approach in their guidance to accredited entities and in their assessment of funding proposals.”

In the decision adopted, the Board also reaffirmed an earlier decision on adaptation (B.05/05) which stated that resources would be allocated “based on the ability of a proposed activity to demonstrate its potential to adapt to the impacts of climate change in the context of promoting sustainable development and a paradigm shift and the urgent and immediate needs of vulnerable countries, in particular least developed countries, small island developing States and African States”.

The Board also recognized “the significant variation in information and data availability across countries and contexts” and also recognized the “urgent need for: (i) guiding accredited entities in presenting climate-related information needed for establishing the impact potential of funding proposals, and (ii) establishing a more transparent and consistent approach to the review of impact potential as part of the proposal assessment process, with a view to streamlining the proposal development cycle, and leading to improved review outcomes and a more rapid flow of proposals for endorsement to the Board, particularly for adaptation.”

The Board also requested the Secretariat to “provide capacity-building support to accredited entities, especially direct access entities, to enhance the demonstration of the impact potential in GCF-supported activities, and to consider their feedback for future enhancements”.

Guidance on the approach and scope for providing support to adaptation activities

Discussions on guidance on adaptation has had a chequered history in the GCF Board. The issue goes back to the 17th meeting of the Board in 2017, where the Board (via Decision B.17/10) had requested the Secretariat “taking into account best practices from other multilateral funds and other approaches, to develop guidance on the approach and scope for providing support to adaptation activities”.

The matter was important especially for developing countries given the divergences among developing and developed country Board members on the difficulty in distinguishing between climate and development projects, particularly for adaptation and the quality of adaptation proposals (see related TWN Update).

In the meanwhile, in 2021, the “Independent Evaluation of the Adaptation Portfolio and Approach of the GCF” undertaken by the Fund’s Independent Evaluation Unit (IEU), found, among other things, that 40 per cent of all registered concept notes for adaptation projects are withdrawn during the GCF review process, due to the lack of guidance and difficulty in identifying the “climate rationale” of projects, which is viewed “as the single most difficult hurdle for project development in both adaptation and cross-cutting projects.” The findings also showed that adaptation projects took longer than mitigation projects to move to the next stage of the approval cycle, for both approved projects and projects in the pipeline (see related TWN Update).

Following the IEU’s findings, at the 31st meeting of the GCF Board, the members agreed that there is an urgent need to clarify the Fund’s role and vision on climate adaptation and requested the Secretariat to update a draft paper on the Fund’s support to adaptation for the Board’s consideration. Following further consultations, the matter came up at the 33rd meeting, where the Board took a decision on the guidance on the approach and scope for providing support to adaptation activities.

However, the proposed decision proved contentious over paragraphs requesting the Secretariat to elevate or stress the matter of adaptation in policies such as the RPSP, the Accreditation Strategy and the Updated Strategic Plan 2024-2027 of the Board. The US, supported by Spain and Switzerland, objected to the paragraphs because according to them, it would be “prejudicial” given ongoing discussions on the respective issues.  After closed-door discussions and consultations, the original paragraphs were retained in the decision adopted, however, the US made a statement on record that the decision on adaptation would not prejudice discussions in ongoing policy development processes.

The proposed paragraphs read as follows:

“(g) Also requests the Secretariat, in the context of the revised Readiness and Preparatory Support Programme and the accreditation strategy under the Board’s consideration, as well as other relevant policy development processes, to identify additional actions that enhance GCF adaptation investments, including those identified in country and regional adaptation planning processes;

(h) Further requests the Secretariat to consider, as part of the accreditation strategy under the Board’s consideration, the prioritization of accreditation applications from entities, particularly direct access entities and private sector entities, with a focus on adaptation projects/programmes;

(i) Reiterates the need to enhance the private sector contribution towards developing and

implementing National Adaptation Plans (NAPs); and

(j) Requests the Secretariat to further develop, for consideration by the Board as part of the update to the GCF Strategic Plan, proposals on updating the GCF’s strategic objectives and priorities, and requests for proposals or other programming initiatives, to further implementation of the GCF’s strategic approach to adaptation programming, including options for possible adaptation programming parameters and output-based goals for adaptation support”.

Responding to the paragraphs above during the discussions, Kevin Adams (US) said that he did not want the decision to be “quite so prejudicial” with respect to the RPSP, the Accreditation Strategy and the Updated Strategic Plan and suggested to replace the  paragraphs with a new paragraph that was “more open-ended and still references procedures”, which read: “(g) Also requests the Secretariat, in the context of relevant policy development processes, including, inter alia, the revised Readiness and Preparatory Support Programme, the Accreditation Strategy, and the Updated Strategic Plan for 2024-2027, to incorporate actions that enhance GCF support to adaptation activities [replacing former g-j]”.

Marta Mulas Alcantara (Spain)Stefan Denzler (Switzerland) and Ursula Fuentes (Germany) supported the US’s suggestionwhile Karma Tshering (Bhutan)Antwi Boasiako Amoah (Ghana) and Nauman Bashir Bhatti (Pakistan) were opposed to this. Developing country Board members stressed on having specific recommendations from the consideration of adaptation support that talked to a range of other strategic programming processes.

On the final day, the decision was adopted retaining the text of the original paragraphs.

Following the decision’s adoption, Adams made the following statement for the record which was supported by Alcantara (Spain)Denzler (Switzerland) and Fuentes (Germany)“While we underscore the critical importance of scaling up resources for adaptation and enhance the GCF’s effectiveness in this regard, the United States notes for the record of this 33rd meeting of the GCF Board that this decision neither prejudices the deliberations nor prejudges the outcomes of ongoing policy development processes including the review of the Readiness and Preparatory Support Programme, the Accreditation Strategy or the Updated Strategic Plan”.

In the decision adopted, the Board also confirmed “with regard to adaptation activities, in line with paragraph 31 of the Governing Instrument for the GCF, that the Fund will provide simplified and improved access to funding, including direct access, basing its activities on a country-driven approach and will encourage the involvement of relevant stakeholders, including vulnerable groups and addressing gender aspects.”

The guidance on adaptation adopted by the Board states “the GCF’s vision for adaptation programming is to leverage the Fund’s comparative advantages to urgently accelerate adaptation investment planning and the scale-up of adaptation finance to help close the adaptation gap, in alignment with the priorities identified by developing countries in their NDCs, NAPs and long-term strategies, and promoting a gender-sensitive approach. To do this the GCF will aim to deploy its financial support:

(a) catalytically, and by using its significant investment risk appetite, to test and scale up approaches that accelerate the transition from incremental to transformational and systemic adaptation responses; and

(b) inclusively, to continue to meet the urgent needs of the particularly vulnerable countries, people and communities, targeting areas where conventional finance does not reach, and putting in place the building blocks for systemic adaptation investment.

The guidance adopted also states that to support the vision for “promoting transformational adaptation and for catalyzing adaptation finance at scale, GCF follows a four-pronged approach:

(a) Transformational planning: creating an enabling environment for adaptation investment by promoting integrated strategies, planning and policy-making for systematic resilience assessment, to then inform investment planning;

(b) Catalysing innovation in climate adaptation: through investments in new and innovative technologies, business models, financial instruments, and practices;

(c) De-risking high impact adaptation projects: establishing commercial viability for those new adaptation solutions that otherwise would not be feasible, and enable financiers to better assess and price risks; and

(d) Aligning finance with sustainable development: empowering domestic financial institutions and firms in developing countries to originate and finance the widespread adoption of commercially proven adaptation solutions.”

Funding Proposals Approved

The Board also approved USD 380.7 million to the following four projects:

– USD 18.5 million for “Ouémé Basin Climate-Resilience Initiative (OCRI) Benin” by the Food and Agriculture Organization (FAO). The project aims to develop and scale-up adaptive and productive capacity of agro-ecosystems and smallholder farmers in the upper and middle Ouémé Basin. It also aims to build resilience for poor and vulnerable smallholders and to scale up climate resilient agriculture and agroforestry practices in the Ouémé Basin in Benin.

– USD 17.2 million for “Climate Resilient Fishery Initiative for Livelihood Improvement in the Gambia (PROREFISH Gambia)” by the Food and Agriculture Organization (FAO). The project aims to support vulnerable and poor fishing communities building resilience to climate change and in diversifying the livelihoods through technology improvements, processing techniques, climate proofing of the local fishery infrastructure and diversification of local food systems.

– USD 200 million for “E-Mobility Program for Sustainable Cities in Latin America and the Caribbean” in Barbados, Chile, Colombia, Costa Rica, the Dominican Republic, Jamaica, Panama, Paraguay, Uruguay, by the Inter-American Development Bank. The programme aims to act as a market accelerator for EV financing and deployment and has four components: climate-resilient transport infrastructure; increase climate resilience of grid with green hydrogen and vehicle-to-grid pilot projects; electrified integrated urban mobility; and technical assistance and project structuring.

– USD 145 million for “Climate Investor Two (CI2)” in Bangladesh, Botswana, Brazil, Colombia, Cote d’Ivoire, Djibouti, Ecuador, India, Indonesia, Kenya, Madagascar, Maldives, Morocco, Namibia, Nigeria, Philippines, Sierra Leone, South Africa, Uganda,  by the Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO). According to the project document, “CI2 has the mission to develop and construct infrastructure projects in developing countries in the water, sanitation, and ocean sectors that reduce the effects and consequences of climate change by ameliorating greenhouse gas emissions and by increasing resilience”.

Prior to the approval of the funding proposals, developing country Board members expressed their concern over lack of proposals from direct access entities (DAEs).

Pacifica Ogola (Kenya) spoke for the developing country constituency and said that the GCF continues to struggle to abide by the focus on the Governing Instrument provisions to support local private sector actors, local financial institutions and small-medium- micro sized enterprises and there remains a heavy reliance on multilateral development banks to channel GCF funding to developing countries. Ogola also said that at the 31st meeting of the Board, only 1 DAE project was submitted for approval; at the 32nd meeting, only 2 DAE projects were submitted for approval; at B.33, there were no DAE projects. She also said that while she understands from the Secretariat that additional DAE projects are to be submitted at the 34th meeting of the Board, she added that the fact that there is no balance in funding proposal approvals at each Board meeting is a major concern to developing country Board members and representatives of developing countries to the UNFCCC and its Paris Agreement. She also said that developing countries need to see “significant DAE funding targets for the Board’s decisions at B.34, which significantly increases the number of entities that are accessing the GCF” and called on the Secretariat to come back to the Board with “a more ambitious DAEs target and disaggregated information and targets for the various types of DAEs”.

Accreditation Proposals Approved

The Board re-accredited the following three entities: the ADB, EBRD and UNEP.

In relation to the re-accreditation of the ADB and the EBRD, Stefan Denzler (Switzerland) proposed taking note of ADB’s “Strategy 30” and the EBRD’s “Green Economy Transition” in their reaccreditation decision.  The respective paragraphs read as follows:

“Takes note of the efforts of Asian Development Bank to advance the purpose of the GCF, including through the Asian Development Bank’s climate finance commitment in line with its Strategy 2030 and related statements in the context of the UNFCCC and the Paris Agreement;

Takes note of the efforts of the European Bank for Reconstruction and Development to advance the purpose of the GCF, including through the European Bank for Reconstruction and Development’s Green Economy Transition approach and related statements in the context of the UNFCCC and the Paris Agreement.”  

(Under its ‘Strategy 2030’, the ADB makes the commitment that 75 per cent of its committed operations will support climate change mitigation and adaptation by 2030, and it also envisions that climate finance from its own resources will reach USD 80 billion cumulatively from 2019 to 2030.

The EBRD’s ‘Green Economy Transition’ approach outlines how EBRD will support its climate and environmental objectives by aligning its activities with the principles of international climate agreements; enhance policy engagement for the development of long-term low-carbon strategies and greening of financial systems; and scaling up investment by innovating across a set of specific environmental and climate mitigation and adaptation thematic areas such as green digital solutions, just transition, circular economy, natural capital and green value chain financing.)

While the decision was adopted with the language proposed by Denzler, Albara Tawfiq (Saudi Arabia) made a statement for the record that in the future, the Board must avoid picking and choosing policies of accredited entities and that the decision does not create a precedent in this regard.

Next Board Meeting

The 34th Meeting of the Board is scheduled to take place from 17-20 October 2022 in the Republic of Korea.

Author’s Note:

All our content may be republished or reused for free, except where otherwise noted.
This site is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Third World Network, 131 Jalan Macalister, 10400, Penang, Malaysia.tel: +60 4 2266728 / 2266159  email: twn@twnetwork.org web: www.twn.my