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Updated On: Tuesday, 25 September 2018

At the UN's Green Climate Fund, the honeymoon is over

Content by: Devex

NEW YORK — At the United Nations Green Climate Fund, the honeymoon is over. What started out in 2010 as a promising marriage with equal partnership between developed and developing countries at the world’s largest international climate fund has resulted in a breakdown of its board meeting held last week in Songdo, South Korea.

GCF failed to approve almost a billion dollars in proposed projects during a critical year for climate action with the rule book of the Paris Agreement on climate change expected to be finalized by the end of the year. Then its executive director, Howard Bamsey, resigned in a shock announcement, the effects of which are still reverberating across the international climate change community.

Much media attention has been allotted to the absence of Paul Oquist of Nicaragua, the developing country co-chair of GCF, who allegedly could not attend due to political turmoil in his home country. Oquist was in Europe during the calamitous board meeting and gave several media interviews in London — word has it that he was working on his country’s peace deal while in the region.

Insiders say that discussion surrounding Oquist’s absence was overblown. GCF co-chairs are meant to serve the entire board, so even if Oquist was not there, the developed country co-chair, Lennart Båge, could have consulted with the developing country board members — which did not happen. However, the fund’s rules of procedure state that the co-chairs are to act in the best interest of the fund — so Båge may well have been waiting for Oquist, who is not expected to attend any board meetings in the foreseeable future, to respond and consult before taking any action.

Regardless of whose actions were right or wrong, the inability to choose a new co-chair, mixed with the lack of consultation with developing countries on the agenda, resulted in a delay of almost half of the four-day meeting.

It’s easy to chalk up the situation to a lack of communication that could be fixed by the next board meeting in October. After all, GCF board members disagreeing is nothing new, while ultimately developed and developing countries have more or less been able to achieve consensus at every board meeting. This time, however, the crux of the problem goes much deeper.

At the center of this tangled web is the high-stakes replenishment process. “It appears that some donors are no longer comfortable with the scenario of having a board of equals, where the board still has the authority over the replenishment process in the sense that it has the authority over the policies of the fund,” Zaheer Fakir, the developing country board member for South Africa and a former co-chair of the fund, told Devex.

“Now [they] want to change from what they view … as dysfunctional and toxic to a functional and toxic fund” that the donors control — “Where developing countries are only interested in their projects, but not worried about the strategic policies of the fund.”

The fund is in a precarious position and running out of money fast. Although frustrating, it is generally accepted in the climate change community that U.S. President Donald Trump will not pay the remaining $2 billion out of the original $3 billion that his predecessor, Barack Obama, pledged to the fund in 2014. Obama paid out $1 billion before he left office.

What is less known is that the fund has lost another $1 billion due to the devaluation of the euro and British pound, tied to the anxiety caused by Brexit and a slew of other political risks at the time. For instance, pre-Brexit in 2014, the United Kingdom committed £720 million ($954 million) to GCF — but instead of providing cash, which could have been converted into U.S. dollars when the pound was stronger, the U.K. issued promissory notes, meaning that the U.K. promises to pay the money when it is needed.

Those two factors alone come up to a total loss of roughly $3 billion out of the $10.3 billion that the fund still claims to have. To date, the fund has already committed some $3.7 billion. If it had approved the roughly $1 billion worth of projects at the board meeting last week, and another $1 billion or so at the next meeting in October, it could very easily be left with a budget of less than a billion dollars when heading into the annual U.N. Conference of the Parties, which will be held in Katowice, Poland, this December.

As a result, many developed countries wanted financial management, as they wanted to stretch the few billion left until 2019 — and even if the replenishment process was initiated now it would take a year. Part of what Bamsey was doing was trying to raise “bridging money” to tie the fund over until then. This may have been the reason that the agenda item on philanthropic organizations suddenly appeared.

Agreeing on a financial plan to manage the commitment authority of the fund was one of the few positive things to come out of the meeting. But, Fakir said that developed countries were not as vocal about it until after he staged an intervention on the matter. He explained that the executive director and the co-chairs made an argument about running out of money and lobbying people, so he decided to intervene and talk about better fiscal management.

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“They jumped on that and used that to get the financial [plan passed],” said Fakir. Yet during his intervention, Fakir clearly stated that this should not impact the portfolio as the fund is programming on the basis of its $10 billion plus budget, and developing countries are counting on all of that money for much needed climate change adaptation and mitigation projects. Still, none were approved at the meeting.

Developed countries want two key things when it comes to replenishment. One is to tie it to the review of governance and policies, and the second is to reduce the role of the board in this process. They know that the board determines the fund’s policies but that governance is set by the COP. It is very difficult to push anything through at the COP however, because there, everybody has to agree to it.

“So, if we have all these elements being done by the people who contribute money — the donors — it’s much easier to get consensus among themselves,” explained Fakir. “That’s what they wanted to do without launching the replenishment process.”

Developing countries were not opposed to a review. It is already mandated within the governing instrument of the fund. Their concern was that the review should not be dealt with under the agenda item of replenishment, because then all future replenishment will be conditional under the review. As the text wasn’t ready, developing countries asked that, while advisers were working on that, the board move on to approving projects and accreditation. The answer from the board was a resounding “no.”

Brandon Wu, director of policy and campaigns at Action Aid USA who was present at the GCF board meeting, told Devex that part of the problem could be the inexperience of the new board members, many of whom come from developed countries. “Many of these people did not know how to navigate the minefield and the dynamics of the board, so there were a lot of little things that triggered people — and then those things spiraled into an hour long argument that could’ve been very easily avoided,” he explained.

“There were a lot of Board members who were saying, ‘we can’t go past 6 p.m.’ Even if those comments were made in good faith, they were just denying the reality of what a democratic decision-making process looks like.”

In the midst of this, Bamsey resigned, citing “pressing personal issues” in his resignation letter, which was read aloud during the board meeting. Several people who were in Songdo last week told Devex that, prior to the start of the meeting, board members were not made aware of the personal issues, and did not know about Bamsey’s resignation in advance. Yet the board members appointed Bamsey, so they should be the ones to accept his resignation, not the co-chair, Båge.

For his part, Båge is rising fast at GCF. Apart from facilitating the fund’s initial resource mobilization about four years ago, there hasn’t been much mention of him at GCF. He wasn’t a board member last year, yet in that short period of time has risen to the position of co-chair. It shouldn’t be lost on anyone that Båge, who has a storied career in Swedish diplomacy, the U.N., and the Swedish International Development Agency, specializes in replenishment. Only time will tell how high he will rise at the fund.

Ultimately, it seems GCF’s developed and developing country board members have two options. Either head toward divorce and figure out how to share the joint estate; or, to the hope of many in the climate change community, find a common ground and rebuild the relationship.

The fight over replenishment and the future direction of the fund seems unlikely to be resolved any time soon, and the real negotiations will continue behind closed doors. As stakeholders mull GCF’s future, Meena Raman, climate change coordinator for the Malaysia-based nonprofit Third World Network, who was present at the board meeting, urged all to remember that a donor-driven process for replenishment is antithetical to the fund’s spirit and why it was created in the first place.

“Such views take us backward instead of moving forward in the right direction to address climate change urgently,” she said.

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