The Green Climate Fund (GCF) Board at its ninth meeting agreed to a process on how funding proposals from developing countries might be reviewed.
The Board met in Songdo, South Korea, from 24 to 26 March.
The issue was discussed under the agenda item on the ‘further development of the initial investment framework: sub-criteria and methodology’ and proved to be one of the most contentious issues during the Board meeting. A decision was finally reached in the wee hours of the morning at around 4 am on Friday, 27 March, well over the deadline for the meeting.
The major disagreement primarily between developed and developing country Board members was over the “initial assessment methodology” to be followed by the Secretariat and the independent Technical Advisory Panel (iTAP) to conduct technical assessments of funding proposals from developing countries for the Board’s consideration.
The Board was asked to consider two options: Option A – where the Secretariat and the iTAP will assess a funding proposal’s expected performance against a set of “indicative benchmarks” based on the investment criteria such as impact potential, paradigm shift potential, sustainable development potential, needs of the recipient, country ownership and efficiency and effectiveness; Option B – where the assessment will be done without reference to any benchmarks or assessment scale, indicating a more flexible approach.
While developed country Board members preferred Option A, developing country Board members generally expressed a preference for Option B. Given the differences, the Board member from China proposed the possibility of going for an Option C, which could be a middle-ground. A small group was tasked to work out a way forward, which was still not found to be acceptable to some developing country Board members and this led to further consultations on the sidelines which finally led to a conclusion early morning on Friday.
It is learnt that the main concern for some developing country Board members related to how the Secretariat could use a scale of “low/medium/high” in order to assess the relative expected performance of projects/programmes, when the assessment of the proposals would mainly be subjective, resting on the discretion of the assessors who have to screen complex proposals. In issue was also whether the Secretariat has the capacity to judge proposals.
This led to a proposal by the Board member from India to consider a “pilot”-based approach in relation to a subset of proposals, to be recommended by the Investment Committee (which comprises Board members), so as to enable the Board to “test the system”, as described by the Indian Board member. This proposal was accepted by the Board.
A related concern was on how the assessment of proposals takes into account the needs of those developing countries particularly vulnerable to the adverse effects of climate change. There were differences of views among Board members as to which countries were “particularly vulnerable”, a notion that was also contested in relation to a decision on which developing countries would be eligible for highly concessional loans.
The final compromise decision that was reached in this regard was as follows: The Board decided “to use indicative benchmarks, in accordance with investment policies as decided by the Board, to ensure projects and programmes demonstrate the maximum potential for a paradigm shift towards low-carbon and climate resilient sustainable development.”
The Board also requested “the Secretariat to present for consideration of the Board at its 13th meeting, minimum benchmarks in order to: (i) encourage ambition; and (ii) take into account the needs of those developing countries particularly vulnerable to the adverse effects of climate change, in particular LDCs, SIDs (small-island developing states) and African States, according to project size, mitigation/adaptation, and local and sector circumstances.”
The Board also requested “the Secretariat and the iTAP in the application of the indicative minimum benchmarks to be flexible and take into account country circumstances and country ownership.”
The Board also decided “to use a scale of low/medium/high in order to assess the relative expected performance of a subset of projects and programmes based on the initial investment criteria. The Investment Committee will recommend to the Board to which subset of proposals this will apply. In the event the Board is unable to agree (on) an appropriate subset of proposals by the 10th meeting, the scaling pilot will automatically apply to all medium and large projects.”
Below are some highlights of the discussion around this issue, which began on day two of the meeting on 24 March.
Highlights from some interventions
Dipak Dasgupta (India) said that one of the core areas is the need for guidance and clarity to developing countries as they prepare projects for funding. He said that many of the criteria, sub-criteria and factors attempt to be quantitative, but are in fact qualitative, which is an imprecise basis (for any assessment). He also stressed that no other funding institutions use quantitative factors; they all rely on qualitative factors. He went on further to say that it is the developing countries who have the greatest stake in the projects that come to the Board which they will have to implement.
Dasgupta, in asking who is to make judgement on whether that proposal is low medium or high, said that it is the Secretariat with two professionals and two junior professionals and it is they who are going to be make the judgment calls. He added that projects are coming from complicated areas.
As for the iTAP, he said the members are not in the business of ranking project proposals but will be reviewing them. On the issue of fairness (the fair treatment of all developing countries), he said the higher the standard and the bar (which he said “is set by trying to pin down artificial criteria”), the less will be the possibility of resources going to those who need it most. He also emphasised that as a learning institution, there is no capacity to judge proposals coming from sovereign countries.
Tosi Mpanu-Mpanu (Democratic Republic of Congo) preferred Option B as it was more flexible. However, if scoring is to apply, he wanted more clarity on how LDCs, SIDs and African states would be treated, adding that different treatment is needed for these countries compared to the rest of world. He recalled the experience of the Clean Development Mechanism where the bulk of the investments went to countries that had high emissions, and called for this not to be repeated.
Yingming Yang (China) said he preferred Option B but suggested that a middle-ground could be found in having an Option C. He said that the nature of the assessment factor could be indicative. He said further that a great lesson is “not to let the perfect be the enemy of the good”. “The GCF is a new institution and there is a learning curve”, Yang said. The system should encourage the supply of funds and not discourage its use, he added, calling for a “right balance”.
Ayman Shasly (Saudi Arabia) said that the Fund is for developing countries and if conditions and benchmarks are imposed, developing countries will not have access to it. He called on Board members not to be “overly driven by unscientific and unproven benchmarks” and to complicate the process. He warned that if the “bar is set very high”, countries will not be able to access Fund and they would not be able to put forward their intended nationally determined contributions (in reference to on-going negotiations for the Paris agreement under the UN Framework Convention on Climate Change).
Jorge Ferrer Rodriguez (Cuba) said access to the GCF needs to be easier and that benchmarking will make it more difficult. He preferred Option B. When the final decision was tabled for consideration, Ferrer said that he dissociated himself from the decision but did not want to block the consensus.
Patrik McKaskie (Barbados) wanted assurance that there would be fair and equal treatment of all developing countries. Any benchmark cannot put small countries at a disadvantage, he said.
Newai Gebre-ab (Ethiopia) said having benchmarks for adaptation is difficult, and urged its use flexibly. He also expressed concerns over insufficient resources in the Fund.
Nojibur Rahman (Bangladesh) stressed the importance of taking into account the needs of LDCs.
Ingrid Gabriela Hoven (Germany) said that Option B was not in line with the Board decision to develop a minimum benchmark and she could not support it. On Option A, she said that the minimum benchmark (as set out in the proposed decision) was weak and needed more improvement. She asked what is meant by “low, medium and high” and called for more guidance on the assessment, and expressed serious doubts about whether the approach was going to promote a paradigm shift. She was also concerned if SIDs and LDCs would be disadvantaged.
Leonardo Martinez (the United States) explained why “this exercise” was needed. He said that Board will need to make tough choices over what to fund as “demand will outstrip supply”. There was need for tools to guide the Secretariat and the iTAP, he said. He added further that countries, national designated authorities and intermediaries need to know how they design projects that have a chance to go through the Board. If there are no benchmarks, decision-making would be subjective and political, said Martinez. The Board needs to say how the proposal is rated and weighted. He proposed a 5-point scale, beyond high, medium and low that does not give one number and one rank but gives more room for the assessment. It has to be fair, not to keep projects out, but those which are the best get money faster and comparable proposals can be compared to one another.
When the final decision was tabled, Martinez expressed disappointment that his call for a 5-point scale was not accepted.
Jan Cedergren (Sweden) said the Board needs to tell the outside world what the Fund wants in the use of its resources and about its ambition. He added that tools are needed to be able to make priorities and the right choices in the investments, which have to be transparent and objective, so that they can be defended. He supported the need for having benchmarks.
Jacob Waslander (the Netherlands) preferred Option A and said that a scoring system should be mandatory (in relation to assessing the funding proposals).
Andrea Ledward (the United Kingdom) expressed support for having minimum benchmarks and for high ambition. She said a sufficient option was within reach, noting the concerns of Mpanu-Mpanu for country circumstances, and Yang’s call for the GCF to be a learning organisation.
Ludovica Soderini (Italy) also preferred Option A and said there is need for qualitative and comparable assessment.