Green Climate Fund: Course correction needed?

Originally posted on Reuters

The Green Climate Fund (GCF) is meant to be a new, innovative institution that will directly support climate action in developing countries, with a particular focus on the poorest and most vulnerable who thus far have had little access to climate finance.

Further, the GCF is to do this through projects and programmes that also address sustainable development and bring social, environmental, economic and gender benefits. But last week, at its penultimate meeting before the major United Nations climate summit in Paris, the GCF Board took decisions that flew in the face of this vision for the Fund.

In a thoroughly non-transparent process, the Board approved Deutsche Bank and several other problematic institutions as GCF “accredited entities”, meaning they are among the first 20 institutions allowed to channel GCF resources to projects and programmes in developing countries.

The GCF is supposed to have rigorous environmental, social and fiduciary standards, with zero tolerance for money laundering. Yet Deutsche Bank – the German investment giant with a well-known, deeply flawed track record on human rights, environment and financial integrity – seemed to sail through the GCF’s accreditation process.

Not only is Deutsche Bank among the planet’s top coal financiers, it has been probed, charged or heavily fined multiple times in the past year alone for money laundering, tax evasion and Libor manipulation.

Long before the establishment of the GCF, its proponents – which included throngs of civil society activists and social movements and numerous developing countries – were driven by the need to find a real alternative to the World Bank and other multilateral development banks.

In other words, they did not want an institution whose direction was dictated by wealthy countries and corporations. Now these GCF backers – including ourselves – are unsure if they’re getting what they bargained for.

Already, the GCF has accredited the World Bank, Asian Development Bank, Inter-American Development Bank and European Bank for Reconstruction and Development. While the GCF is supposed to be “paradigm shifting”, these international financial institutions represent the status quo – as largely donor-driven organisations that tend to build capacity for themselves rather than for recipient countries.

The GCF did make some strides in accrediting a number of national and regional entities based in developing countries, such as the Environmental Investment Fund of Namibia and the Caribbean Community Climate Change Centre.

It also launched a pilot programme on “enhanced direct access” to devolve decision-making power to the recipient country level. But because massive institutions like the World Bank and Deutsche Bank are already well-heeled and well-staffed, they are likely to get the lion’s share of GCF money over smaller national entities, which have less capacity and are generally accredited only to manage small-scale projects and programmes.

Instead of backing big multilateral institutions over national and subnational ones because of capacity concerns, the GCF should be prioritising capacity-building and readiness support for these smaller entities to ensure larger sums of money can flow directly to developing countries in the near future.

UNTRANSPARENT DECISIONS

Part of the problem is the accreditation process itself. An accreditation panel composed of a limited number of experts performed a desk review of applicants, with a high reliance on official documents and little critical assessment of the entities’ track records.

According to the GCF secretariat’s interpretation of its interim information disclosure policy, the identity of all accreditation applicants must remain confidential until the Board approves them. This precludes NGOs and communities from sharing their vast on-the-ground experience and expertise.

The secretariat and panel apparently rely heavily on applicants’ own self-reporting to analyse track records, hardly an unbiased source. Moreover, as a result of the confidentiality policy, the actual discussion of individual applicants at the Board level was done in executive session, barring all observers.

The result: the Board approved all 13 applicants in a single package, including problematic ones like Deutsche Bank, undoubtedly based on political horse-trading involving tit-for-tat approval of applicants despite serious reservations.

Pushing through the accreditation of large international private entities and multilateral development banks via a non-transparent, politically fraught process leaves the GCF vulnerable to losing all credibility. While many of us really want to see the GCF succeed, we will not blindly support it and are demanding a change in direction.

The Board must put the GCF on a more progressive, people-centered path starting at its next meeting in Zambia this November.

At a minimum, the Board should fix its information disclosure policy so the accreditation process is fully transparent; vigorously support domestic entities in developing countries to seek accreditation and build capacity to implement ambitious projects and programmes; and approve an initial set of projects that truly meet the needs of poor and vulnerable people and the environment, rather than delivering returns for already wealthy investors.