by Kashmala Kakakhel WEDO Climate Finance expert Kashmala Kakakhel provides a break-down of the issues/ decisions taken up at the latest Board Meeting of the Green Climate Fund, held from March 7-10, 2016. Meeting Update and Key decisions The 12th meeting of Green Climate Fund Board was held in Songdo, Republic of Korea, from 8 to […]
by Kashmala Kakakhel
WEDO Climate Finance expert Kashmala Kakakhel provides a break-down of the issues/ decisions taken up at the latest Board Meeting of the Green Climate Fund, held from March 7-10, 2016.
Meeting Update and Key decisions
The 12th meeting of Green Climate Fund Board was held in Songdo, Republic of Korea, from 8 to 10 March 2016. Before the official meeting, the Board held a full-day informal meeting on Monday, 7 March. The objective of the informal meeting was to allow Board Members, Alternate Board Members and active observers to exchange views on some of the key issues that were scheduled for decision at the 12th Board Meeting.
The meeting came at the start of a defining year for the Fund, following the first approval of funding proposals at the end of 2015 and striving to make funding decisions worth USD 2.5 billion by the end of 2016. During the meeting, the Board approved close to 34 agenda items, while setting another 52 for its 13th Board Meeting. This meeting did not consider any new funding proposals, but rather focused on addressing and closing remaining internal policy gaps that needed proper closure before the GCF continues to entertain funding proposals. The only ‘external’ agenda item was the accreditation carried forward from the last Board meeting.
Following are some of the highlights from the Meeting:
The Strategic Plan
As was agreed at the 11th Board Meeting of the GCF in Zambia, a draft Strategic Plan was prepared by a group of six Board Members/Alternates through an informal Board dialogue held in Cape Town, South Africa, in early February.
Now that the GCF has becoming fully functional by approving its first set of projects last year, this Plan is designed to communicate clearly the vision the Board has for the Fund and, based on that, identify operational priorities and an action plan that can guide the Fund over several years.
When the draft Plan was shared with the full Board, the general consensus was that the proposal from the small group provides a great basis, but also listed during the course of the meeting in various sessions the following issues that should be strengthened in the Plan.
While some of these concerns have now been reflected in the slightly revised Strategic Plan, it has now been adopted by the Board at this meeting, but also stressing that the plan should be considered a living document that can be updated or revised at any time. The Secretariat is now mandated to implement it as well as adjust the Board’s work plan for 2016 accordingly.
Consideration of Accreditation Proposals
For this Meeting, a set of 13 entities were put forward by the Accreditation Panel (AP) and the Secretariat for accreditation. Of these, nine had already been on the agenda at the last Board meeting in Zambia, but not been considered due to time constraints. The Board has serious concerns about the limited number of direct access entities in the package (four national and one regional out of thirteen), as well as the regional imbalance.
Several Board Members referenced the criticism civil society groups have been raising regarding the accreditation of the two commercial banks, Credit Agricole and HSBC. The general view was that by engaging with large financial institutions, the GCF could reinforce a shift in its portfolio. While the accreditation was supported overall, they stressed the need to consider the development of an entities’ total portfolio over time. Regarding HSBC in particular, there were concerns about its compliance with anti-money laundering standards. An additional conditionality to monitor this aspect has been added to the decision.
The Board adopted the decision, accrediting the 13 following entities: Agency for Agricultural Development of Morocco(ADA), Ministry of Finance and Economic Cooperation of Ethiopia (MOFEC), National Environment Management Authority of Kenya (NEMA), Development Bank of Southern Africa (DBSA), Crédit Agricole Corporate and Investment Bank, HSBC, African Development Bank (AfDB), European Investment Bank (EIB), International Finance Corporation (IFC), Unidad Para el Cambio Rural Argentina (Unit for Rural Change, UCAR), International Union for Conservation of Nature (IUCN), World Food Programme (WFP) and World Meteorological Organization (WMO).
Accreditation Strategy: Considering the issues that are continuously surfacing with the accreditation now that the Fund has ample experience to draw upon, the Board decided to develop an Accreditation Strategy that will help guide future Board decisions, spelling out how principles such as country ownership, potential to contribute to the GCF’s mandate of supporting a paradigm shift, balance and diversity, efficiency in terms of cost, time and resources, fairness, effectiveness and transparency can be achieved. A draft Strategy will be shared at the next Board Meeting.
Pipeline and Project Preparation Facility
The status of the pipeline of funding proposals was presented. As following:
The numbers: 34 funding proposals and 90 concept notes with a total GCF funding of USD 6.2 billion. 22 of these proposals, with a total requested GCF funding of USD 1.5 billion, have a greater than 50 percent chance of being ready for Board approval in 2016. Among the 22 projects there are two direct access private sector proposals and not a single one in the public sector. Private sector proposals worth over one billion and public sector proposals worth around 440 million
Missing direct entities: Several common gaps that explain why there are few proposals from national and regional entities in the pipeline, including the absence of quality feasibility studies, environmental and social impact assessment, economic analyses, stakeholder consultations, and other preparatory work. This will need to be addressed by stronger readiness support and in the accreditation strategy.
Clearing the mitigation/adaptation balance: Since 66 percent of the 22 projects are classified as “cross-cutting” rather than mitigation or adaptation, Board Members also said that at one point this classification would need to be worked out in order to be able to ascertain that the targets for balanced allocation are being reached.
Project Preparation Facility (PPF): One way to improve the balance in the pipeline is the PPF that was established at the 11th Board Meeting, a facility that will target small-scale activities and the direct access entities. Many questions on the design and operations are still open: Area 4 of the Readiness Programme also supports pipeline development and the relationship between this readiness area and the PPF should be clarified or the two should be merged, also whether the PPF should serve accredited entities with direct access only.
Although the operational modalities are still to be ironed out, the GCF has already received its first request for funding under the PPF from the Ministry of Natural Resources (MINIRENA) of Rwanda. Many felt that before deciding on the approval of a proposal, the details of the PPF should be defined in order not to set a wrong precedent. Other Board Members, however, argued that the proponent should not be punished for a lack of diligence by the Board and therefore decided to approve the proposal.
Development of Indicators in the Performance Measurement Framework: A decision on this has been deferred to the 13th Board meeting, inviting submissions from Board members, Alternates, as well as active observers. In addition, the Secretariat will also facilitate a technical consultation on this prior to the Board’s consideration of this matter at the next meeting.
Proposal approval process: The Board considered the progress report on the review of the initial proposal approval process, presented by the secretariat. After a brief round of comments, the Board decided to request the Secretariat to review the initial proposal approval process and present the outcome and recommendations for consideration and decision to the Board at its 15th meeting. The co-chairs will oversee the review of the proposal approval process. The Board also decided to invite submissions from Board and Alternate Members, observers, accredited entities, national designated authorities and focal points and delivery partners to be received no later than 10 April 2016.
Readiness and Preparatory Support Programme
Progress achieved in providing readiness support:
While there was appreciation of the efforts, it is clear that disbursing readiness support is a very slow process and therefore there is a need to simplify access to readiness funds, particularly with regard to the necessary legal agreements. It is also critical to hire full time staff for the coordination and facilitation of readiness activities, particularly at the regional level. The new decision on the matter instructs the Secretariat to provide advance payment up to a limit of USD 50,000 to countries or their delivery partners that have concluded readiness grant agreements where lengthy domestic processes are required to satisfy all of the Fund’s requirements.
Comprehensive Information Disclosure Policy
While there was a general consensus on almost all aspects of the information disclosure policy, there was a serious divide on the issue of webcasting Board meetings. A simple method for additional audiences, including national designated authorities and implementing entities, to be able to follow the Board’s proceedings. Those with smaller delegations, also suggested that this would allow them to access additional remote support and advice from home. Finally, it was agreed to approve the webcast of formal Board meetings until the end of 2017, with a qualitative and quantitative review of the webcast considered no later than March 2018.
The comprehensive Information Disclosure policy has also set rules for the disclosure of different types of GCF documents, mainly through the website and based on the presumption that everything will be disclosed, except where confidentially is required for certain reasons defined in the policy. The new website has now become more accessible to users. Gradually it should move away from not only serving negotiators and experts, but also country-level stakeholders, such as governments, accredited entities, national designated authorities and civil society.
The Budget Committee and Staffing
The Board has now established a Budget Committee, mandated to review and make recommendations to the Board on matters related to the administrative budget of the GCF, inter alia by reviewing and making recommendations on the GCF’s proposed annual administrative budget, including the budget implications of the staffing structure and staff remuneration. As a first task, the Committee was requested to develop options for a proposed increase in staffing.
Staffing of the Secretariat: The Secretariat presented two proposals to the Board to increase the number of staff, especially for those areas that are urgently needing human resources, including country programming and portfolio development/management, in order to achieve the target of approving USD 2.5 billion worth of projects. The two options would be to either bring the total staff to 140 or 180 positions. There was general consensus among Board members that increase in staffing was needed. Board Members also called for a strategy for staff retention and for diversity and balance in recruitment.
The Budget Committee reported back from its deliberations and suggested a decision to increase the staffing of the Secretariat and increase the budget accordingly, which was adopted. The committee had considered issues such as the role of consultants, the role of the trustee and the ability to recruit and absorb new staff. It also noted that the Board will need to provide additional guidance to the Secretariat on some of its functions and opportunities to streamline them. The decision is to increase the staff to 100 positions at the end of 2016 and 140 positions at the end of 2017. The administrative budget will increase to USD 35.8 million, also reflecting the cost of holding a fourth Board Meeting this year.
Appointing a new Executive Director: The current ED, Hela Cheikhrouhou, has announced that she will not seek a second term after her initial term ends in September 2016. The Board considered matters in a closed executive session, including the Performance Review of the ED and the Process for the Appointment of a new ED.
Policy Gaps – Accreditation Master Agreements and Risks
While the Fund has already approved its first set of projects, policy gaps remain; particularly the legal agreements the fund needs to conclude with accredited entities, known as the Accreditation Master Agreements (AMAs), and risks.
AMAs can be contentious and take a lot of time, holding up the implementation of approved activities. Since some aspects of the agreements are confidential, and were therefore discussed in a closed session. Details will emerge subsequently.
On risks, a paper was produced which includes a risk register and interim investment guidelines with caps for certain types of investments in order to reduce concentration risk. There were serious concerns about the proposed caps- rigidity can prevent the Fund from being flexible enough to invest where it can be most impactful. Many concerns were raised regarding limitations to the financing available for public sector grants and regarding co-financing requirements for loans to the public as well as private sectors. Ultimately, only a revised risk register was adopted but a decision on the proposed risk investment guidelines have been differed to the next Board meeting.
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