Addressing a crisis of confidence at the Green Climate Fund

by Jacob Waslander | World Resources Institute
Thursday, 27 September 2018 12:50 GMT

ARCHIVE PHOTO: A man comes out of a shelter house before Cyclone Mahasen approaches in Chittagong, Bangladesh, May 16, 2013. REUTERS/Andrew Biraj

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With the world's leading climate fund facing questions about its effectiveness, now is the time for a shift

Storm season is a natural time to count the cost of a changing climate. The storms came thick and fast this year as Hurricane Florence dumped as much as 30 inches of rain in parts of the eastern United States while Super Typhoon Mangkhut whirled across the Philippines, causing chest-high flooding in rice fields.

That was just a few days after a new estimate of the death toll in Puerto Rico from 2017’s Hurricane Maria -- nearly 3,000 – and following an unusually heavy monsoon that claimed hundreds of lives in Kerala in southern India. Climate change likely exacerbated these disasters; the fast-improving science of attribution will soon be able to tell us by how much.  

One thing is certain: these kinds of global problems require global solutions. That’s why virtually all countries signed up to the 2015 Paris Agreement that aims to reduce greenhouse gas emissions to keep global temperature rise well below 2 degrees C (3.6 degrees F) compared to pre-industrial levels, strengthen communities’ resilience against the effects of climate change and align financial flows with climate goals.

The Green Climate Fund (GCF) would be an important channel of innovative funding to developing countries so they can take bold action.

The Green Climate Fund aspires to enable a paradigm shift in developing countries, making climate-resilient economic growth possible through renewable energy and other technologies.

So far, the GCF has committed $3.5 billion to 74 projects in 79 developing countries, many of them among the poorest and most vulnerable on the planet, including small island states where sea level rise is a growing threat.  Projects funded by the GCF range from constructing storm shelters in Bangladesh and securing drinking water supplies in Fiji to building wind and solar power in Egypt that reduce the country’s reliance on fossil fuels.

But after five years of operation, the GCF – the world’s biggest multilateral climate fund -- faces a crisis of confidence.

Representatives from developed and developing countries, the private sector and non-governmental organizations are deeply concerned about the effectiveness and efficiency of the fund’s governance, and particularly about how its board functions. They point to a lack of policy guidance, insufficient communication with stakeholders, and overly politicized board meetings.

Rather than a dynamic global center for climate finance, the GCF board has been mired by ineffective decision-making in an atmosphere of distrust, making it challenging for the fund’s secretariat to act.

A key problem is that, currently, the board works on the basis of unanimity—any board member can block any decision for any reason. This is not what GCF’s founders envisioned when they spoke about bold climate action.    

Another concern relates to the coffers of the fund, which in 2019 will need fresh financial support through what is known formally as a “replenishment.” Predictable, multi-year funding is essential so that the GCF can be forward-looking and finance innovative climate investment plans.

Beyond the dollars and cents, though, replenishment will be a critical indicator to developing countries about whether developed countries are serious about holding up their part of the Paris Agreement bargain. At the same time, contributors need to feel confident that the GCF is an effective mechanism to support developing countries.

While the United States has announced that it will no longer financially support the fund, other contributors that have shown admirable leadership —including Japan, Germany, France, the United Kingdom, Norway, and Sweden — can keep the GCF going and ensure that it does a lot of good at a critical time. This element needs to be addressed simultaneously with the concerns over governance.

The GCF is essential for global climate action, and it must succeed. This will require the engagement of senior leaders in each country to ensure that the GCF’s crisis of confidence is addressed decisively.That means fulfilling the mandate of the GCF’s charter, which requires that the board put in place a mechanism for decision-making in the absence of consensus.

To stimulate debate, my colleague Patricia Quijano and I have suggested how this mechanism could be designed in a recently-published paper, “Setting the Stage for the Green Climate Fund’s First Replenishment.”

Board members should be selected in a more transparent manner, so that it is clear which interests are represented by each board member and to whom board members are accountable when taking positions in board deliberations. Predictability of funding requires the design of a funding framework, based on objective, transparent criteria, so that contributors can better apportion the financial effort among themselves. 

To start the conversation, our paper also contains suggestions on how this framework might be developed.    

The time for addressing the GCF’s crisis of confidence is limited, and the time to act is now. Member states must make sure that GCF can deliver on what its founders envisioned: funding bold action, sharing risk to catalyze private sector investment and making sure that successes are scaled up quickly.

Reflections and debates in a board are a good thing, but what matters is getting the job done. That’s why global leaders must focus on addressing the GCF’s governance bottlenecks and the funding challenge. Fixing the GCF will help ensure that the Paris Agreement can deliver on its promise. 

 

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