Green Climate Fund: A Performance Check, launched ahead of the 18th meeting of the GCF Board in Cairo, Egypt, found that only seven percent of the $2.2 billion in funds already allocated to projects and programs will pass through national or subnational (“direct access”) developing country institutions.

“The Green Climate Fund was supposed to learn from the failures of big development institutions like the World Bank, not channel most of its funds through them,” said Oscar Reyes of Institute for Policy Studies. “There’s plenty of evidence that devolved decision-making is the best way to meet the needs of vulnerable communities at the frontlines of climate change. The GCF has already supported some excellent ‘direct access’ projects, but these should become the rule not the exception.”

The GCF, established under the UN Framework Convention on Climate Change, is intended to be the world’s leading international channel of public climate finance.

“The Green Climate Fund must do better to meet developing countries’ needs as they face the climate crisis, especially when it comes to the most vulnerable communities,” said Karen Orenstein of Friends of the Earth U.S. “If the Board puts science, justice, and the needs of ordinary folks at the center of its approach, the GCF could still be the fund that so many of us fought for.”

Over half of allocated GCF funding is managed by just three international partners: European Bank for Reconstruction and Development, United Nations Development Programme and European Investment Bank. The European Bank for Reconstruction and Development alone manages over a quarter of all GCF funds.

Just seven of the 43 activities funded so far account for over half of the allocated funds. All of these are managed by international development banks.

This concentration comes despite the fact that “country ownership” (through devolved decision-making) was one of the main reasons for setting up the GCF in the first place.

The report also revealed mixed results as regards the Fund’s ability to meet the climate adaptation and mitigation needs of developing countries.

Just 27 percent of GCF funds are allocated toward adaptation, well short of its 50 percent goal. There is also evidence of bias against adaptation projects addressing the underlying socioeconomic factors that make marginalized populations more vulnerable to the impacts of climate change.

The GCF is also missing the mark in other areas measuring the GCF’s reach of those more vulnerable to climate change. Only 4.7 percent of the total GCF funds allocated so far have energy access as a primary focus. And the GCF has yet to live up to its potential as a global pioneer in integrating gender responsiveness into all its financing.

Read the full report here.

Expert contact: Karen Orenstein, +1 (202) 640-8679, KOrenstein@foe.org; Oscar Reyes, +34 626 216 311, oscar@ips-dc.org
Communications contact: Erin Jensen, +1 (202) 222-0722, ejensen@foe.org

The post Big development banks dominate Green Climate Fund, new study finds appeared first on Friends of the Earth.

Though the subject matter might at first seem a bit dull, a recent monitoring report of the financial sector lending of the International Finance Corporation (IFC) is a doozy for the warnings it provides to the Green Climate Fund (GCF).

The International Finance Corporation (IFC), the World Bank Group’s private sector lending arm, had a financial intermediary (FI) portfolio of $20.4 billion at the end of the 2016 fiscal year. In March 2017, the Compliance Advisor Ombudsman (CAO), the independent watchdog of the IFC, put out its Third Monitoring Report of IFC’s Response to: CAO Audit of a Sample of IFC Investments in Third-Party Financial Intermediaries. In the sample of FI investments the CAO reviewed, it found systemic non-compliance with IFC policies throughout the investment process.

Techno-mumbo-jumbo, yes. But this bank jargon actually has real-world importance for people living in poor countries. To put it in regular-person-speak, there are major problems with IFC-financed activities channeled through financial intermediaries (like commercial banks and private equity funds), as many in civil society have repeatedly noted. Detrimental environmental, social, and development impacts have taken a toll on people’s lives and livelihoods throughout the developing world. Inclusive Development International has even begun keeping a database to track just a portion of IFC FI investments in harmful sub-projects, along with a four-part investigative series done in collaboration with several other groups, Outsourcing Development: Lifting the Veil on the World Bank Group’s Lending through Financial Intermediaries.

What’s the GCF connection here?

On many levels, the GCF is modeled after the IFC, especially in its reliance on FIs to do the actual implementation of projects and programs. But the GCF has significantly less actual oversight capabilities and far fewer resources. To give a sense of scale, the IFC had 3,757 staff in 2016; the GCF had 76 staff as of December 1 of that year. The CAO report should thus be viewed as a flashing “hazard” sign for the world’s premier multilateral climate fund, especially with regard to the GCF’s mushrooming reliance on FIs.

NUMBER 1: Doing financial intermediation the right way. Though it has magnitudes more capacity than the GCF to monitor its financial sector lending and compliance with environmental and social safeguards, the IFC is doing a very poor job of it. The CAO found that the “IFC does not, in general, have a basis to assess FI clients’ compliance with its E&S [environmental and social] requirements.” That’s an extremely troubling finding for an institution mandated to improve the lives of poor people in developing countries, especially since many of the sub-projects are higher risk and thus have the potential to cause serious environmental and social harm.

Now imagine the situation for the GCF and its staff-strapped Secretariat. Already-approved GCF funding proposals that are reliant on FIs could result in many hundreds of sub-projects worth hundreds of millions of dollars. If the GCF Board and Secretariat don’t take course-correcting measures, the IFC’s FI experience could represent just a tip-of-the-iceberg scenario for the GCF.

This chart includes approved GCF projects dependent, in part or in whole, on financial intermediation.

I am not proposing that none of these projects is worth doing. Some of them are very worthwhile, while others will likely be riddled with problems. But the point is that, based on reams of experience accumulated by the IFC and other development banks, the deployment of FIs requires an abundance of oversight and due diligence which the GCF is not yet set up to provide, nor does it seem likely to be prepared to do so in the near term.

Ways forward:

• The GCF needs to scale down its financial sector investments so as to match its ability to actually make sure sub-projects are in compliance with GCF safeguards and advance sustainable development.
• Another option would be for the GCF to rule out support for higher risk sub-projects until such oversight capacity is in place.
• The risk categorization of a particular funding proposal should be based on the highest level risk sub-project possible that could be financed by the proposed program. In other words, if it’s possible that a program would finance a Category A (i.e. high risk) sub-project, then the entire program should be assigned the risk category of A. (This is not currently the case. Medium risk Category B programs could potentially finance Category A sub-projects.)
• All Category A and B sub-projects should come to the GCF Board for approval.

NUMBER 2: Safeguards tailored to the GCF. Rumors have been circulating that some on the GCF Board and Secretariat are pushing to make the IFC’s Performance Standards (i.e. the IFC’s environmental and social safeguards), now used on an interim basis, the GCF’s own permanent safeguards. But the Performance Standards, in principle and implementation, fall short of what is needed to actually meet the sustainable development mandate at the IFC?—?both for projects financed directly by the IFC and indirectly through FIs. If the IFC is struggling heartily to implement their safeguards, then the GCF?—?a far less-resourced institution?—?is prone to faring even worse.

Further, the IFC Performance Standards were designed for an institution with a singularly private sector focus. The GCF has both a private sector and a public sector focus. The same safeguards are most certainly not fit for purpose at the GCF, and are not adequate for long-term use. Moreover, the Performance Standards do not represent international best practice in multiple areas and have themselves been long-criticized for a plethora of shortcomings. For example, their interpretation of the right of Indigenous Peoples to Free, Prior and Informed Consent is problematic, and they don’t have a commitment to a human-rights-based approach. This is particularly salient given that the GCF serves the Paris Agreement, which calls on countries to “respect, promote and consider their respective obligations on human rights, the right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity.”

A way forward:

• The IFC Performance Standards should be replaced in a timely manner with the GCF’s own environmental and social safeguards grounded in a human-rights-based approach, developed through a process involving international best practice stakeholder consultation.

NUMBER 3: Taking a break to get the GCF’s house in order. There are many other GCF policies that still need to be developed, approved, or revised. These include the long-delayed simplified approval process, a much-needed review of the proposal approval process, the establishment of a full-fledged GCF environmental and social management system with the development of the GCF’s own environmental and social safeguards, a review of observer participation, the full establishment of the GCF’s Accountability Mechanisms, an accreditation strategy, an Indigenous Peoples Policy, etc., etc., etc. (to quote the King and I).

A way forward:

• The GCF needs to put a pause on further approvals of funding proposals and accreditations and focus its July meeting solely on addressing much-delayed fixes to GCF policies and practices.

The post International Finance Corporation Flashes Warning Signs for Green Climate Fund appeared first on Friends of the Earth.

The United Nation’s Green Climate Fund (GCF) is the world’s premier multilateral fund to help vulnerable women, men, and children in developing countries confront the climate crisis.Trump’s venomous attack on the Green Climate Fund spewed lies and ignorance.

We need to correct the record:

Trump said: The Green Climate Fund is a $100 billion fund.

Reality: The GCF is a $10.3 billion fund. Trump’s $100 billion figure comes from the amount that developed countries have collectively committed to mobilize annually for developing countries by 2020 through a process un-related to the GCF. There has never been an intention for the GCF to be a $100 billion fund.

Trump said: U.S. funding for the GCF represents a major portion of our country’s already massive foreign aid payment.

Reality: The U.S. contribution to the GCF represents 0.00559% of U.S. GDP. In total, poverty-alleviation focused foreign aid represented just 0.8% of the federal budget over the past several years.

Trump said: The budget for the so-called war on terror was raided to pay for the U.S. contribution to the Green Climate Fund.

Reality: When a statement is so far from any basis in fact, it is hard to rebut. Funding for the Green Climate Fund comes from U.S. taxpayers, who overwhelmingly support action on climate change. U.S. contributions have come from the Department of State’s Economic Support Fund.

Trump said: The U.S. is the largest contributor to the GCF.

Reality: Sweden, for example, contributes far more per capita than the U.S.

Trump said: The GCF could obligate the U.S. to commit tens of billions of dollars.

Reality: All contributions to the GCF are voluntary.

The post Five things Trumps Paris Climate Speech got wrong in his attack on Green Climate Fund appeared first on Friends of the Earth.