Financing partners face criticism as UN’s climate fund meets

The Green Climate Fund (GCF) board meets from 30 September- 2 October in Cairo, Egypt. Board members are expected to approve 16 funding proposals and accredit 5 new entities that will then be able to distribute funds. The GCF is under pressure to get on with the job of disbursing the 10 billion US dollars it has mobilized so far, however ensuring quality and sustainability of the funding is critically important.

The Green Climate Fund was established as a new channel to leverage and disburse international climate finance. Its goal is to promote a paradigm shift by providing financial help to developing countries reduce emissions and adapt to climate change. Civil society, however, say that the fund lacks rules to avoid supporting harmful technologies, including fossil fuels and large hydro projects.

To date, 43 projects have been approved, 16 more are in the pipeline to be decided on in its upcoming meeting. Three large hydro projects worth $136 million have already been approved for funding this year, despite concerns raised by civil society about the potential negative impacts of those projects.

In Egypt, a wide mix of project types will be up for debate, ranging from energy efficiency, climate smart agriculture, rural resilience to adaptation projects.

Careful selection of accredited entities

The GCF funds are channelled by “accredited entities” that carry out the approved activities.

The fund has accredited 54 institutions so far, including multilateral development banks, national ministries and UN agencies, development banks and NGOs.

A large number of accredited entities also have made large investments in the UN’s offsetting measure, the Clean Development Mechanism (CDM) projects. A report by environmental groups released on the eve of the next meeting criticized the dominant role of big development banks as distributors of finance, which the groups say risks undermining the fund’s original purpose.

These entities have quite a bit of freedom to disburse funds and to guarantee that they are only channelled towards truly transformational projects. Close monitoring is essential to track what kinds of projects money is actually flowing to. Observers were particularly concerned about the recent accreditation of two new entities: the Bank of Tokyo-Mitsubishi UFJ (BTMU) and Japan International Cooperation Agency (JICA). Both provide large amounts of financing for fossil fuel projects.

The board ignored objections of observers and approved the banks in a group with several others. The accreditation decisions will have a huge impact on the future direction of the GCF as well as on what projects money will flow to. It cannot be stressed enough that the board must carefully consider the applications and listen to any concerns raised before taking its decisions.

Important policy issues delayed until next year

Due to the high number of funding proposals to be decided on at its last meeting, the board decided to postpone debates on the indigenous peoples policy and the Environmental and Social Management System (ESMS) until 2018.

In order for the GCF to deliver on its promise of a paradigm shift, sustainable development policies must be put in place that guarantee robust social safeguards and effective stakeholder consultations. An open and inclusive debate on these two key policies is urgently needed and should not be postponed any further.

Juliane Voigt