Interventions of Green Climate Fund Civil Society Organization Active Observers on Discussions Held in GCF B28 Day 2

On the Independent Technical Assessment Panel (ITAP) Structure and Operations Review

Delivered by Eileen Cunningham, Developing Country CSOs

The Independent Technical Advisory Panel plays a critical role in the GCF as it is important to obtain reviews from independent experts about the funding proposals through both the traditional and SAP routes. Thus, we think it is important to ensure that the ITAP is able to efficiently and effectively do its job in a way that safeguards its independence, including recommending that funding proposals not be considered, and that it has the necessary resources to do so. 

To that end, we welcome  suggestions that  allow the ITAP more flexibility in doing its job, such as its ability to review funding proposals on a rolling basis. We note that this can help ensure timely review and to speed up the proposal process. For similar reasons, we welcome the use of virtual meetings but underscore the importance of allowing required flexibility to tackle virtual setting challenges as determined by ITAP.  These changes are especially critical as the GCF looks to increase funding proposals including through the SAP.  Nevertheless, we question whether a detailed organizational procedure as elaborated in the annex does not undermine some of the necessary independence and flexibility. 

In this context, we have concerns about having smaller review teams pre-determined as having this mandated could hinder the ability of ITAP to ensure that its members with most relevant expertise  for a specific funding proposal are involved in its review. It would also compromise quality and negate consistency in review of  all funding proposals.  It is important that the ITAP remains independent and we believe that the ITAP, rather than the Secretariat, is best placed to determine how it will review funding proposals, including SAP proposals. 

Additionally, we note that it is critical the ITAP has the requisite resources to do its job. As such the Board should take into consideration the letter from the ITAP chair about the amount of time and resources required.  Especially if the Secretariat and ITAP are to be working on assessment standards, an additional workload in addition to proposal review, ITAP members’ time must be not only remunerated, but respected, ensuring continuous high quality output.

A well-resourced independent technical advisory panel is essential to ensuring that the GCF is funding projects and programmes that will contribute to the paradigm-shift envisioned in its mandate. 

On the Consideration of Funding Proposals (Overarching Comments)

Delivered by Eileen Cunningham, Developing Country CSOs

We are concerned that a growing number of funding proposals are being considered for GCF support for existing or new funds or financing facilities and with few  to no articulated projects in the pipeline for implementation, including in the current batch. These FPs that make GCF a “fund of funds” by committing large amounts of GCF resources on vague promises, including for leveraged financing amounts, run major risks of (1) financing sub-projects that are not up to the standards and policies of the GCF, (2) overpromising in particular GHG emissions reductions claimed based on unverifiable assumptions and (3) partnering with institutions that may not be aligned with the goals of the Fund and of the Paris Agreement, such as those involved in dirty energy projects, and whose track record and capacity for complying with procedural GCF requirements of information disclosure and stakeholder engagement is doubtful. 

In this regard, we also want to note that one of these FPs intends to implement a subproject in Myanmar. In light of the military coup and political crisis, including the killing of protesters in the country, we want to express solidarity with the people of Myanmar and believe it is best for the GCF to halt any form of funding to Myanmar until the country reaches democratic political stability.

We have consistently asked for adoption of an exclusion list for the GCF that would preclude GCF funding support for technologies that perpetuate the use of dirty and fossil fuel energy. We are concerned to see two FPs in this batch (i.e. FP 156 and FP164), that include financing for Waste to Energy projects and other unproven technologies aimed to “clean” dirty energy sources, but in fact continue to produce very high concentrations of CO2 emissions and fail to support the transformational shift needed. We strongly urge the Board to decide on excluding such false solutions.

We also note, in this batch as in previous ones, that a number of the FPs indicate AEs and NDAs as the Executing Entities. While this is not against current GCF policies, there should be clear guidelines on accountability, ensuring country ownership, and conflict of interests. International accredited entities, as part of their mandate under decision B.10/06, should rely on (sub)-national entities as executing entities to the maximum extent. With respect to NDAs that assume oversight roles over projects proposed and implemented, we find it counterintuitive, at the very least, to have the same institution overseeing a project that it also approved in the first place. 

The stark imbalance between adaptation and mitigation projects and programmes coming from IAEs and DAEs for this batch, is also worrisome. We reiterate that not only should there be a 50:50 balance between mitigation and adaptation projects, there should also be a 50% floor for adaptation financing for LDCs, SIDS, and African states. We urge the Board and the Secretariat to make decisive actions to enable more adaptation funding proposals, and encourage local institutions like MSMEs and sub-national public entities, to become GCF partners. We would like to emphasize that equity is key to enabling already-disadvantaged developing countries and institutions to access climate finance that is rightfully theirs.

We are again concerned with the extremely low number of funding proposals (only two SAP projects) at B.28 from direct access entities, which will only perpetuate the percentage of the portfolio that is going to IAEs. The GCF must work to prioritize funding proposals from DAEs.  

Lastly, we note with great concern the increasing number of FPs coming in the form of loans where the developing country sovereign will take on excessive risk for promised private sector engagement, including through PPPs. This is alarming as many developing countries are currently embattled with debt, exacerbated by the COVID-19 pandemic. Climate finance is an obligation of developed countries, and should only serve as a response and help, and never as a further burden to people and sectors most vulnerable to the climate crisis. The GCF must strive to ensure more FPs come in the form of grants, and not loans.

On SAP 021: Community-based Landscape Management for Enhanced Climate Resilience and Reduction of Deforestation in Critical Watersheds (East Timor):

Delivered by Erika Lennon, Developed Country CSOs

The civil society welcomes this SAP project that targets a LDC and SIDS country to address the crucial issue of deforestation and forest degradation.

We commend how the FP  focuses on the peoples at the community and village levels through the Community Based Natural Resource Management (CBNRM) approach, which will hopefully enhance the capacity of the villagers to plan, manage and monitor their land and forest in a sustainable and climate resilient manner and improve their livelihoods and well-being.

We also welcome the fact that gender-based violence is addressed as a specific Output in its Gender Action Plan. We hope this will set an example which other AEs/funding proposals should follow. 

However, we are very concerned about Output 2.2 and Activity 2.2.1 in Component 2 on “Development and demonstration of model cases of incentive mechanism based on the carbon offsetting scheme in selected villages.”  We expected that from the 15-year pilot, JICA would have identified incentives to motivate local villagers to change their unsustainable practice, and then incorporated them into this project. However, a carbon offsetting scheme was  not part of JICA’s pilot, and thus, should not be included as part of the outputs and the exit strategy. Considering the volatility and uncertainty around voluntary carbon markets and the numerous examples of how carbon markets often fail to bring benefits to the communities, especially to women who carry out the actual forest restoration and conservation work, we strongly recommend the reconsideration of this output component and the formulation of a different exit strategy.  

On the indigenous peoples, the process the project has gone through is “informed community consent,” which is subpar from Free, Prior and Informed Consent (FPIC) as defined in the GCF’s Indigenous Peoples Policy. We would like to ask for a written report of how FPIC was  obtained for this project.

On FP 157: Coastal Resilience to Climate Change in Cuba through Ecosystem Based Adaptation – “MI COSTA” (Cuba)

Delivered by Erika Lennon, Developed Country CSOs

Civil Society Organizations welcome this funding proposal, which is the second proposal for Cuba, and focuses on one of the areas in the Caribbean that has been most affected by extreme weather in recent years. The focus on restoration of the mangrove and swamp forests will positively impact the health of the seagrass and coral beds, which have been negatively affected by the increase in global sea temperatures, and are an important source for conserving biodiversity, as well as reducing the salinization of water sources in these areas. 

The project is well-prepared and clear, and in addition to the positive long-term environmental impacts, it importantly will also strengthen the joint and collective work of different actors including government institutions, academia and local communities. The proposal also recognizes the critical role of local communities as active participants in ecosystem monitoring processes, which have a key impact on their lives and livelihoods. Further, we have heard from local CSOs who affirmed that this recognition of the importance of community participation has been reflected in the consultations on the development of this project. 

Given the limited possibilities for countries, including Cuba, to fully fund climate change mitigation and adaptation actions, we see this as a critical opportunity for the GCF to strengthen its commitment to support the most vulnerable people and countries, including small island developing states.

On FP 159: PREFOREST CONGO – Project to reduce greenhouse gas emissions from forests in five departments in the Republic of Congo (Congo)

Delivered by Eileen Cunningham, Developing Country CSOs

We thank the AE for the project, especially the conscious effort to include indigenous peoples and women in the overall design and implementation plan of the project. We also appreciate the comprehensive response to our questions as part of the technical session.  However, we have some comments and there remain some clarifications from our side that we seek responses on. As one overarching consideration, we noted somewhat to our surprise that the project has been marked as a hundred percent mitigation project although it has indicated many adaptation co-benefits. We are doubtful that this sends the right message, as mitigation efforts need to be balanced with the requirements to ensure communities dependent on forest have resilient and sustainable livelihoods. This should be considered more than adaptation co-benefits, but speaks to the unbalanced prioritization of expected benefits and outcomes that the prioritization of emissions reductions signals. Furthermore :

  1. We agree with the observation by the iTAP’s comments that the  project has an unclear market strategy and does not link farmers with stronger economic and climate change analysis. We also think that the farmers should not only be planting any type of forest product based on county market demand but should do so with the aim of making the agroforestry climate resilient. It is also not clear in the proposal how emissions from use of fuel wood are accounted for in the long term mitigation efforts of the project. Additionally, it does not take into cognizance transition from wood fuel to other renewable energy sources and it unfortunately does not aim to challenge reliance on wood fuel.
  2. We agree with the recommendations for the AE to develop and submit a restoration and regeneration strategy explaining the rationale of the aggregated project interventions and showing interlinkages of activities within the broader landscape.
  3. The project would benefit from a clear mechanism to reduce or manage conflict arising from remunerations from the project and ensuring that the already delicate relationship between the mainstream and indigenous peoples does not escalate. The project should also carefully take into account how existing local structures, especially of women and indigenous people are interfaced and importantly, included in the local project management.
  4. We note that assumptions on credit are made. Despite working with low income , poor communities, financial institutions will be engaged to pursue low interest credit products that still will need a level of security hence the assumption that individuals will be encouraged to pull together to raise security may not work.
  5. The financial sector is additionally not involved in incentivizing the livelihood actions beyond credit engagement. It is disappointing to see that credit is considered as the only financial instrument – no space for other finance i.e. blended finance.

FP 163: Sustainable Renewables Risk Mitigation Initiative (SRMI) (Central African Republic (CAR), Democratic Republic of Congro (DRC), Kenya, Mali, Namibia, Uzbekistan)

Delivered by Erika Lennon, Developed Country CSOs

Civil society has a number of remaining concerns with the program regarding the integrity of reduced emissions reductions: these are premised on the assumption that the publicly funded infrastructure for solar and wind parks will result in an additional USD 3 bn of private sector investments. The emissions reductions calculated are for those USD 3 bn in private sector investments which at this point are highly speculative and far from assured. The claimed emission abatement is the best-case scenario outcome, but far from certain. In contrast, there is no minimum guarantee provided for emissions reductions.  Additionally, the CO2 emissions reductions calculation fails to account for the CO2 emissions for building the infrastructure.

We also want to see, if approved, a provision in the Funded Activity Agreement between the World Bank and GCF for the SRMI Facility that Executing Entities (EE) will be prohibited from converting the GHG emissions reduction directly attributable to GCF support into offset credits.

As currently constructed the risk mitigation component in this program would solely benefit private sector engagement. There is no commensurate risk protection component to cover the sovereign loans a number of the countries under this program are taking, including for the risk that they indebting themselves further at times where COVID-related debt-burden are already high for the construction of renewable energy/wind and solar parks that could remain underutilized if the expected private sector investments don’t materialize.

The program, including all sub-projects are categorized A, because of the likelihood of land acquisition with related  (including involuntary) resettlement. Given that some countries involved in the program in the past have not acknowledged Indigenous Peoples’ right for self-determination, we are worried about the full application of the GCF Indigenous Peoples Policy. While the World Bank has assured us that the criteria for recognition of Indigenous People are on paper the same for the GCF Indigenous Peoples Policy and ESS7, the procedure the World Bank described makes it sound uncertain, whether FPIP is going to be followed.  In this respect it is important to point out that “may consult”, the formulation in the Word Bank’s provision, is not substantially equal to seeking the free, prior and informed consent of Indigenous Peoples and that the AE must use the GCF Indigenous Peoples Policy as the standard in identifying and screening Indigenous Peoples.

Lastly, given the high risk of the proposed sub-projects, the likelihood that they will affect Indigenous Peoples and an unclear commitment to FPIC, it is vitally important that the disclosure of related ESS information, as well as the project risk assessment reaches GCF stakeholders.  We would like to see Board provisions to ensure that the World Bank will provide links to the relevant environmental and social disclosure documents 120 days prior to WB Board decision for category A and 30 days for category B to the GCF  to disclose it promptly to Active Observers and the Board in line with the  GCF Information Disclosure Policy.

FP 164: Green Growth Equity Fund (India)

Delivered by Erika Lennon, Developed Country CSOs

  • We welcome the fact that FMO and EverSource have addressed CSO concerns that carbon capture should remain outside of the investment mandate of the programme, and have also clarified that subprojects will be disclosed via the websites of both FMO and the GCF, with inputs from external stakeholders considered prior to funding approval. We would like these commitments to be put on the record of the Board meeting so that they can be formalized in the Funded Activity Agreement if the programme is approved.
  • We have a range of other concerns, however. The claimed emissions reductions potential of FP164 is highly speculative ex ante, while most of the claimed reductions will not be subject to an ex-post assessment. Typical investments would be 4 to 6 years, but the GHG emissions reduction claims are based on the assumed productive life of the assets, extending far beyond this period of ownership, after which the GCF would have no legal means to monitor emissions reductions. This is of particular concern in the area of waste-to-energy, since the high moisture content of municipal solid waste in India means that the energy recovery claims made for incinerators in theory are likely to be far lower in practice.
  • We further note that waste-to-energy has direct CO2 emissions that are even higher than those of conventional gas power generation, and constructs infrastructure that would lock-in high emissions over a 20-30 year operational life. Waste incineration is also a major source of toxic air pollution. For these reasons, the waste sector funding under this programme should explicitly exclude incineration and should focus on truly low-carbon residuals management instead such as biological treatment and material recovery facilities.
  • The Technical Assistance grant includes support for Eversource-owned companies lobbying ministries and state-level regulators, while Eversource itself will engage in policy advocacy via businesses lobby associations. This seems inappropriate, and is a particular reputational risk given that a multinational oil company is joint-part owner of Eversource. The Technical Assistance grant should be modified to exclude this element of lobbying on regulatory frameworks.
  • GCF will hold class B shares, assuming some of the risk of private investors who hold class A shares, but FMO itself will also be a class A shareholder. FMO states that this arrangement has passed its own “conflict of interest committee”, but has it also been explicitly approved by the GCF Ethics and Audit Committee? What assurances has the GCF sought that a conflict of interest can be avoided? What is the rationale for GCF protecting FMO investments in this way?
  • The criteria identified as part of the exit strategy are not well defined, which is of particular concern because the programme intends to take a majority stake in companies, and because Eversource has no significant investment track record. The exit strategy should be revised to ensure that there is a formal commitment that the  “optimization” of the exit strategy takes full consideration of ESG [Environmental, Social and Corporate Governance] factors and is not simply based on profit maximization. 
  • Regarding the provided gender assessment and gender action plan, we are concerned that there is no clarity on the scale of the budgetary provision. Given Eversource’s current lack of capacity, a condition should be attached that subproject approval only takes place after the Eversource Gender policy is adopted, and staff resources and budget are provided.
  • Regarding the proposed Environmental and Social Governance Management System (ESGMS) in Annex 6a, there are several items of concern, which we will share in a written submission. These include inadequacies in the proposed grievance mechanism (currently just an email address on Eversource’s website) and the need for more explicit commitments on Indigenous Peoples rights, with Free, Prior and Informed Consent and the GCF Indigenous Peoples Policy applicable to ALL cases when a project affects Indigenous Peoples, even if the impact is presumed to be positive. The mapping section of the “stakeholder engage framework” (APPENDIX M) should also be amended to include Indigenous Peoples.