Green Fund Board wrangles over decision-making procedures

2021-07-06, 12:27pm Climate

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Delhi, 5 July (Indrajit Bose) — The 29th meeting of the UNFCCC’s Green Climate Fund (GCF) Board was occupied in an intense wrangle from the 28 June to 1 July over the interpretation of the rules of procedure related to decision-making in the absence of consensus in the Board.
The meeting which was held virtually saw intense disagreements especially among developing country Board members, the Co-Chairs Jean-Christophe Donnellier (France) and Jose De Luna Martinez (Mexico) and developed country Board members.
The controversy was over a decision on the GCF’s ‘Integrated Results Management Framework’ (IRMF), that saw divergences among developed and developing countries, which was eventually resolved after a rather long wrangle on the final day.
The Board did manage however to approve USD 501.1 million to four projects and approved the accreditation of 10 entities who can access the Fund’s resources.
IRMF Procedural Issues
There were major divergences between developed and developing country Board members over the IRMF document, which led to procedural issues over the GCF Co-chairs’ determination of whether efforts to reach consensus had been exhausted or not (in resolving the divergences), the rules of which were agreed to at B.23 on ‘Procedures for adopting decisions in the event that all efforts at reaching consensus have been exhausted’.
Confusion also arose over the GCF Secretariat Office of the General Counsel’s (OGC) interpretation of the decision, and the Co-Chairs following the OGC’s advice in spite of points of order raised by developing country members. (A point of order is typically raised to object to violations of procedures but do not deal with the substance of the matter at hand.)
On the first day of the meeting, both developed and developing country members expressed that they could not go along with the IRMF document (separate article on the substance of IRMF to follow).
Mathew Haarsager (US) raised a point of order, saying that all efforts to reach consensus had been exhausted and asked Co-Chairs to determine whether the Board had exhausted all efforts to reach consensus. The Co-Chairs said they would respond to the point of order and determine the next steps. Referring to the point of order raised by Haarsager, Ayman Shasly (Saudi Arabia) clarified that a point of order is meant to be on a procedural issue rather than a substantive one. A Board member is not supposed to decide whether efforts to reach consensus had been exhausted, as it is for the Co-Chairs to decide, clarified Shasly, adding that the point of order was wrong, and the Co-Chairs’ response in entertaining the point of order was also wrong.
The Co-Chairs however, continued to address the point of order raised by the US and proposed a new round of consultations on the IRMF document to resolve the divergences, with six representatives from developed and developing countries. The representatives included Wael Aboulmagd (Egypt), Nauman Bashir Bhatti (Pakistan) and Ornela Cuci (Albania) from the developing countries and Lars Roth (Sweden), Heike Henn (Germany) and Marta Mulas (Spain) from the developed countries. Co-Chair Martinez requested the small group to report on whether consensus was reached on the document, based upon which the Co-Chairs would decide on the next steps.
Following the small group consultations, the developing country members reported that while there had been progressing, all the issues could not be covered due to lack of time and they looked forward to further engagement to resolve matters during B.29. On the other hand, developed country members said that the task was to reach a consensus and this was not achieved. After the report-back, the Co-Chairs consulted with each other and said that they had determined that all efforts to reach consensus had not been exhausted, meaning that there was room for more discussions and sought Board members’ views on their determination.
Developed country Board members objected to the Co-Chairs’ determination (that all efforts to reach consensus had not been exhausted), implicitly wanting the Board to vote on the IRMF policy. Some developing country members said that the Co-Chairs had made a statement of fact that efforts to reach an agreement had indeed not been exhausted and supported their determination. They also pointed to the Co-Chairs that they were not adhering to the decision adopted on procedures for adopting decisions.
Aboulmagd (Egypt) explained the procedure saying that “there must first be a determination from the Co-Chairs indicating that all efforts to reach consensus are exhausted. We are seeing the reverse here. You as Co-Chairs have come to the conclusion that we still have the chance to pursue consensus, and this is being challenged (by developed country Board members). The B.23 decision (paragraphs 8 and 11 of the procedures under decision B.23/03) was made for cases where you have made the determination after consulting every single board member and then perhaps remains the chance for a Board member to challenge the determination, not the reverse.”
(Paragraph 8 of the procedures: The Co-Chairs, acting jointly and in good faith, shall determine whether all efforts at reaching consensus in respect of a particular draft decision have been exhausted, following consultations with all Board members and alternate members.
Paragraph 11 of the procedures: If a question arises as to whether all efforts at reaching consensus in respect of a particular draft decision have been exhausted, in accordance with these Procedures, the Co-Chairs will acting jointly, make a determination. If there is an objection to such determination, the determination as to whether all efforts at reaching consensus have been exhausted shall be put to a vote in accordance with the voting procedures and shall be deemed to be confirmed if at least four-fifths of Board members present and voting vote in favour of such determination.)
Co-Chair Donnellier responded that feedback from the GCF’s OGC was that whatever the determination by Co-Chairs (not necessarily that all efforts to determine consensus are exhausted, since the language in paragraph 11 is “open”), it could be objected to and come under the voting procedures. The Co-Chairs said they had consulted with their respective constituencies.
In response to Donnellier, developing country Board members led by Saudi Arabia, Pakistan, Egypt, Liberia, Argentina reiterated their understanding of the rules of procedure and said paragraphs 8 and 11 were linked and just focusing on paragraph 11 was narrow and expressed concerns regarding the selective interpretation by the Secretariat.
Meanwhile, the Co-Chairs stuck to the interpretation offered by the GCF Secretariat and called for a vote on their determination. At this stage, Shasly raised a point of order and said that the Co-Chairs were in violation of paragraph 8 of the procedures, stressing that the Co-Chairs need first to consult with Board members and alternates that consensus was not reached first, after which the Co-Chairs make their determination. Co-Chair Donnellier said he disagreed with Shasly’s interpretation and that the Co-Chairs had respected the rules of procedure.
Abouldmagd also registered his disagreement with the Co-Chair’s interpretation and said the intention of paragraph 11 was to avoid the veto power but was being done now was to allow a veto, wanted his objection registered. Similar views were expressed by Jeremiah Sokan (Liberia), Bhatti (Pakistan), Shasly (Saudi Arabia) and Richard Muyungi (Tanzania), who also did not agree with the interpretation of the OGC.
Co-Chair Donnellier responded that as Co-Chairs they have to respect the views of the OGC and requested the Secretariat to initiate the voting process. The vote resulted in twelve members in favour of the Co-Chairs’ determination and eight against it. Four members abstained. After the results were announced, Aboulmagd said he did not agree to the interpretation provided that led to the vote.
Co-Chair Donnellier said that the vote had demonstrated that the Board was divided on the issue and it would be good for the Board to come together as one Board and that the small group should continue deliberations on the IRMF document. In the end, the small group managed to resolve the differences and the decision on the IRMF document was adopted on the last day of the Board meeting.
Following its adoption, the Aboulmagd spoke for the Africa Group and made a statement regarding the application of the procedures for exhausting consensus from B.23 as well as the rules of procedure of the Fund. Their statement was as follows: “We once again wish to register our firm view, that the legal advice provided by the General Counsel was incorrect, did not reflect the context of the text of the procedure in decision B.23/03 and had the effect of the Co-Chairs, acting on this advice leading this Board down a futile and illogical road and wasting valuable time at the expense of substantive consideration of crucially vital issues.”
The group also highlighted that the Co-Chairs had ignored paragraph 12 of the GCF’s rules of procedure (RoP), “when two members raising points of order objected to the Co-Chairs ruling to confirm the legal advice of the Council”. “Rather than proceeding, the Co-Chairs should have properly applied the RoP and sought the Board’s advice on the course of action to be taken,” said Aboulmagd. (Para 12 states: The Co-Chairs will rule on points of order and any such determination will be final unless a Board member objects. In that case, the Board will consider the course of action to be taken.)
“In insisting that the legal advice was correct, the Co-Chairs did more than ignore the RoP. Of more concern, is that by so doing, they accepted the erroneous interpretation that the procedure outlined in B.23/03 applies to both positive and negative determinations on the issue exhausting consensus,” said Aboulmagd. “This was never the intention of those drafting the decision. That decision which all of us who tirelessly worked to agree on can attest, and as its very title clearly states…was negotiated and adopted to address and regulate situations where all efforts in pursuit of consensus have been exhausted. No one imagined that they were adopted to address and regulate challenges to a determination that efforts have not been exhausted. Now that these provisions have been wrongly applied to address a matter other than what they were intended for, we have seen the absurd outcome, which, as we warned beforehand, was taking us back to square one,” he added further. “To avoid repeating this error, which leads to wasting valuable time for no tangible outcome, we believe that the Board must confirm that the intent contained in paragraph 11 is only to be used in cases of positive determinations. As African Group of Negotiators, this will continue to be our interpretation in any future eventuality where this issue arises,” stressed the Egyptian Board member further.
“Finally, we wish to express concerns regarding the pre-determination phase of the Procedures in B.23/03 that relate to consultations with Board members. In our view, before making any determination the Co-Chairs must utilize the suite of options available to seek consensus, particularly, but not limited to, making a determination. The language of paragraph 8 of the B.23/03 decision is quite clear. Raising issues in a constituency meeting do not in our view, meet the test required by the rules nor does it represent compliance with them. We assert in the future that both Co-Chairs do such consultations with all Board and alternate members,” he emphasized.
Funding Proposals Approved
The Board approved four funding proposals, of which two were mitigation projects, one was crosscutting and the other was an adaptation project. During the discussion on funding proposals, developing country Board members raised several concerns in relation to the lack of balance between mitigation and adaptation projects and the lack of proposals by direct access entities (DAEs).
Richard Muyungi (Tanzania) expressed the Africa Group’s concerns regarding the lack of balance in the GCF portfolio, as well as the decline in the number of direct access proposals and adaptation proposals. “At B.27 (27th Board meeting), we raised concerns with the Secretariat’s work plan and proposed portfolio balance for 2021. The Executive Director assured us that there were enough staff resources and budget to support direct access entities. At B.28, we again complained about the lack of direct versus international access. At B.29, we are again seeing a problem with the portfolio as well as the numbers of projects submitted by the Secretariat to the Independent Technical Advisory Panel (ITAP),” said Muyungi further.
He added that the Fund requires a new strategy to “engage and support national designated authorities/focal points and their DAEs in developing country programmes, concept notes and funding proposals that have the potential to yield an impact at scale and contribute to the implementation of countries’ priorities as identified in nationally determined contributions (NDCs) or other national strategies and plans”.
The Africa Group also called for a new proactive and strategic approach to programming for direct access and country-led programming. The group pointed out that the current portfolio preference for the GCF for large-scale multi-country projects with a concentration of projects in the multilateral development banks (MDBs) was not acceptable. “It is not clear how much of this support is responding to the needs of developing countries versus the priorities of the MDBs,” said Muyungi adding further that the Secretariat should present a “comprehensive approach as part of their work plan for consideration at B.30 for balancing the portfolio, scaling up resources for DAEs, and scaling-down large programmatic funding for MDBs and replacing this with programmatic funding for countries”.
Wael Aboulmagd (Egypt) said that there was a heavy emphasis on energy projects which came at the cost of others and the Board needs to see how to regain the balance between adaptation and mitigation projects. Jin Lu (China) stressed approving projects by DAEs and called on the GCF to provide enhanced support to DAEs.
Josceline Wheatley (United Kingdom) said the UK looked forward to the resumption of approving USD 1 billion (worth of funding proposals) per Board meeting, adding that the Fund’s safeguard policies, including labour, must be ensured in GCF-funded projects.
Disagreements also arose on the assessments of funding proposals by the ITAP. The Secretariat had endorsed 7 proposals for the Board’s consideration at B.29. However, the ITAP had endorsed only 4 of the 7. This led to several questions on the manner in which ITAP assesses proposals, especially those relating to adaptation. (Separate article on ITAP will follow).
Following discussions, the Board approved USD 501.1 million to the following projects:
— USD 25.1 million for “Building Climate Resilient Safer Islands in the Maldives”, with Japan International Cooperation Agency as the accredited entity (AE);
— USD 271.3 million for “Light Rail Transit (LRT) for the Greater Metropolitan Area, Costa Rica”, with the Central American Bank for Economic Integration (CABEI) as the AE. According to the project document, the project is a “modern, fast, convenient, safe, and environmentally sound electric LRT…in San José with 85 km of double tracks on 5 lines transporting annually 63 million passengers and benefitting…52% of Costa Rica’s population”.
— USD 33.8 million for “Transforming Eastern Province through Adaptation, Rwanda”, with the International Union for Conservation of Nature (IUCN) as the AE. The project’s objective is to achieve a “paradigm shift in land management practices from landscapes that are degraded, fragile and unable to sustain livelihoods in the face of climate change to restored ecosystems and landscapes through building community resilience to enhance livelihoods, food and water security of the most vulnerable rural population”.
— USD 170.9 million for “Leveraging Energy Access Finance (LEAF) Framework” in Nigeria, Kenya, Ghana, Tunisia, Ethiopia and Guinea, with the African Development Bank as the AE. The LEAF framework aims to deliver distributed and decentralised renewable energy solutions to tackle the energy shortfall–sub-sectors considered for LEAF financing include solar home systems, solar solutions for commercial and industrial use and mini-grids. (The United States though did not join consensus on the decision to approve the project. Mathew Haarsager, Board Member from the US, said the ongoing humanitarian crisis in Ethiopia was concerning and while the US did not want to block consensus, it was not in a position to support the proposal due to its legislative mandate for countries that did not adhere to human rights.)
Accreditation Proposals
The Board accredited 10 entities and reaccredited 2 entities during the meeting as follows:
— The Development Bank of the Philippines (DBP);
— The Development Bank of Zambia (DBZ);
— The Infrastructure Development Bank of Zimbabwe (IDBZ);
— The Moroccan Agency for Sustainable Energy S.A., (Masen);
— The Vietnam Development Bank (VDB);
— The Korea International Cooperation Agency (KOICA);
— Nacional Financiera, S.N.C., Banca de Desarrollo (NAFIN);
— The Joint Stock Company TBC Bank (TBC);
— The Inter-American Institute for Cooperation on Agriculture (IICA);
— Sumitomo Mitsui Banking Corporation (SMBC).
The following entities were reaccredited:
— Agency for Agricultural Development of Morocco (ADA)
— Secretariat of the Pacific Regional Environment Programme (SPREP)
Following the accreditation of SMBC, Lars Roth (Sweden) said he welcomed the announcement by SMBC on a full phase-out of coal. He also said it is important for the GCF to work with international private banks because it is a way for the GCF to shift overall financial flows. “Accreditation to the GCF comes with obligations as well as expectations. Obligations to work in line with the mandate of the GCF and expectations that by the time of reaccreditation, investments into fossil fuel would have decreased,” he said.
(SMBC had withdrawn its application at the 26th meeting of the Board amid concerns over SMBC being a coal financing entity. Stringent conditions had been imposed in relation to phase out of coal and shifting its overall portfolio for its re-application.)
Marta Mulas (Spain) added that it is important that the entities accredited to the GCF have a strong track record and clear commitment of decarbonization of the economies. No accredited entity should have fossil fuel-based projects in their portfolio, she added.
Ayman Shasly (Saudi Arabia) in response said that there is nothing in the accreditation framework that suggests that entities accredited to the GCF would have to phase out their fossil fuel investments.