GCF Board discuss policy issues on funding proposals

Apia, 21 December 2016 (Indrajit Bose)

Delhi — Several crucial policy matters in relation to funding proposals, aimed at enhancing their quality were discussed by the Board of the Green Climate Fund at its 15th meeting held recently from 13-15 December in Apia, Samoa.

The discussions focused on aspects such as simplifying policies of the GCF, what is meant by proposals which are cross-cutting, the need to step up proposals from direct access (DA) entities, the number of grant-projects coming to the GCF for approval as well as projects involving the private sector for adaptation projects.

The Board also discussed the conditional approval of projects and whether this was an appropriate practice for the GCF to continue.

Some developing country Board members also expressed that any concessionality given to the funds provided by the GCF should benefit the project and not the accredited entities.

Another common concern of all the Board members was in relation to the Funded Activity Agreement (FAA), which the GCF is supposed to sign with an accredited entity before funds are disbursed to a project. The Secretariat informed the Board that only one FAA has been signed thus far.

Jorge Ferrer Rodriguez (Cuba) stressed that a lot of people were complaining, including the Secretariat, that the policies of the GCF were very complex and extensive. He suggested that in one of the forthcoming meetings, the Secretariat should bring a document comparing GCF policies with other climate change funding institutions’ policies. He called for simplification of templates.

He was also concerned that only one FAA had been signed and wanted to know why. He called on the Secretariat to review the type of agreements that other Funds were using to build relationships with their accredited entities and suggested that long and complex legal drafts should be avoided.

Rodriguez also said that the imbalances in the pipeline of projects between international and DA entities needed to be corrected. He called for a decision on the matter and said that if no decision was taken on the issue, this matter would lag behind again as the issue has been discussed at several Board meetings.

He added that several projects were being presented with very long periods of implementation running into 22 years in some cases. “That means freezing millions of dollars for years. We want to see a condition to ensure that the concessionality of the Fund goes to the real destination, which is the underlying projects,” he said, adding that it should be a standard condition for all the projects.

Omar El Arini (Egypt) expressed unhappiness with the conditions imposed by the Board when approving projects, and said that he had repeatedly asked the Secretariat and the Independent Technical Advisory Panel (ITAP) to identify issues while reviewing projects that require policy decisions to be taken by the Board. “It does not make sense to have conditions and no mechanism to follow up on the implementation of the conditions,” he said further.

Ayman Shashly (Saudi Arabia) said that he was not comfortable with projects that are referred to as “cross-cutting” (covering both mitigation and mitigation) since this was a grey area. He said that even if a project only had a 7 per cent adaptation component and the rest mitigation, the project was classified as “cross-cutting”. He recommended that projects should be simply classed as either mitigation or adaptation.

Tosi Mpanu Mpnau (Democratic Republic of Congo) said of the 29 proposals in the pipeline that would come to the Board in the next 12 months, 25 were from international access entities. “Only 4 are presented by DA entities. On the contrary, 17 remaining proposals to be presented in more than 12 months will be from DA entities. The Secretariat should communicate with National Designated Authorities (NDAs) and national focal points to nominate DA entities for accreditation and provide readiness support so that they meet the GCF standards,” said Mpanu. He also expressed concern that only 1 FAA had been signed thus far and called for this to be urgently addressed.

Azimuddin bin Bahari (Malaysia) also wanted clarification on what are ‘cross-cutting’ projects.

Carlos Raul Delgado Aranda (Mexico) wanted to know if the Secretariat was adequately staffed to carry out the work related to the Accreditation Master Agreements (AMAs) and FAAs.

Anton Hilber (Switzerland) said there were only 2 applications to the project preparation facility (PPF) in the pipeline, and wanted an explanation of that. (The PPF is to help support developing countries in preparing their funding proposals).

May Gicquel (France) was concerned about the quality of the projects coming to the Board and said that GCF should fund paradigm-shifting and transformational projects. The GCF should prioritise projects that have a big impact on climate, she said.  She also found it “surprising” that a lot of the funding proposals had very low amount of co-financing. On concessionality, she said that while the GCF should provide grants and risk mitigation for projects that the others would not do,  grants were not always the right instruments.

Karsten Sach (Germany) also said that AMAs and FAAs need to be expedited. He said that while the funding proposals show variety, some deficiency was leading more and more for the provision of grants. Sach also said that there should be more proposals from DA entities and for the Board to get clearer on what it wants the accredited entities to put forward.

Sally Truong (Australia) wanted to know if the Fund could encourage private sector involvement in adaptation.

Caroline Lecrec (Canada) said she was concerned that having a portfolio of projects layered with conditions was affecting the GCF’s ability to spend money. She also said that the GCF needs to raise the bar on the quality of projects and that she was anxious to see progress on FAAs.

The Secretariat in its response to Board members said that many of the problems with the legal documentation, particularly on AMAs and FAAs had been unlocked and that the Secretariat was working with the Board’s Risk Management Committee on that. The Secretariat said that the point on complexity of documents was perhaps true for some proposals, but not for all.

On the cross-cutting issue, the Secretariat said that it had asked the accredited entities to indicate the level of adaptation and mitigation components when they submit cross-cutting proposals henceforth.

On international entities versus DA entities, the Secretariat said it was trying to accelerate its own capacity. The Secretariat said that the international entities should also play a role in getting the DA entities to put forth funding proposals to the GCF. It added that the Secretariat was using readiness support for DA entities but said that the situation would get more complicated as more DA entities get accredited. The fact that DA entities are getting accredited does not mean they are ready to bring proposals to be analysed, said the Secretariat further.

The Secretariat also highlighted internal capacity issues and added that they were in the process of hiring more staff. Capacity issues at the Secretariat also had a bearing on the reason for the PPF not moving fast enough, the Secretariat said.

In relation to a project under consideration at the 15th Board meeting (the Vanuatu project, titled ‘Climate Information Services for Resilient Development’) that was approved, Leo Martinez-Diaz (United States) raised a policy concern about the GCF Funds being used for scholarships, which the proposal requested. Martinez Diaz said he was uncomfortable with the concept.

(Upon the concern raised by Martinez-Diaz, the following condition was imposed on the project: “The approval of the funding proposal shall be conditional on the inclusion in the Funded Activity Agreement of a covenant that GCF proceeds will not be used to finance scholarships.”)

In this regard, El Arini (Egypt) added that even though the project was approved with that aforesaid condition, he suggested that there be a policy decision on this at the GCF.

The Board also decided that the policy issues would be taken up at the 16th meeting of the Board, scheduled in April 2017. In the decision on funding proposals, the Board requested “the Co-Chairs to compile a list of policy matters arising from the consideration of funding proposals at the fifteenth meeting of the Board for inclusion in the report of the meeting” and “…to present a proposal to address these matters for the Board’s consideration at its sixteenth meeting”.

Edited by Meena Raman

UNFCCC / Green Climate Fund / 15th GCF Board meeting
13 December - 15 December 2016, Apia, Samoa
by Indrajit Bose
Apia, 21 December 2016