Board agree on risk framework, one of six ‘essential elements’ that will allow GCF to become operational
Solar panels in Mauritania (Pic: Masdar/Clement Tardif)
By Ed King
The UN’s flagship climate fund appeared to take a step closer to finally opening for business after the board agreed its financial risk management framework on Tuesday.
Full details are expected to emerge later on Wednesday, but the progress was hailed by observers in Songdo, South Korea, where a four-day meeting is taking place.
The board need to agree on six issues relating to the fund’s governance before it can start accepting cash from donors, and is under intense pressure to conclude discussions this week.
#GCF takes decision on fin risk mgmt framewk. Only 0.5 of 1 essential element (other half: investment framewk). 5.5 left+resource mobilizatn
— Brandon Wu (@brandoncwu) May 20, 2014
Speaking from the sidelines in Songdo, Marcella Jamarillo from UK thinktank E3G said most board members were confident the other five items could be agreed tomorrow.
“We’re looking at getting a fairly balanced package out of this. Board members have been open to discussions and keen to move forward – the feeling is quite positive,” she said.
Jamarillo added that even if issues are signed off when the meeting concludes, the finer details will need to be agreed at the next gathering of the board, scheduled for October.
ActionAid finance expert Brandon Wu told RTCC many NGOs are also concerned over what they say are weak environmental ‘safeguards’ governing investments.
In the short-term these are likely to be based on those used by the World Bank’s private-sector lending arm, the International Finance Corporation (IFC), which Wu said raised “red flags” for many observers.
Earlier this year the IFC was accused of investing $15m in a company linked to the deaths of 132 peasant farmers in Honduras, after protests from civil society.
Other sticking points include the role of the facility which will deal with private sector funds, the types of organisation that will help the GCF distribute cash, and the level of ‘ownership’ individual countries will have over investments.
Will the #GCF Resource Mobilisation be thorniest issue? Timing of initial pledges and policy for future pledging to #GCFund on the table.
— Amal-Lee Amin (@AmaleeAmin) May 20, 2014
The GCF is seen as a critical piece in the construction of a global emissions reduction deal, which is set to be signed off at a UN summit in Paris next December.
But a lack of financial support to help poor countries invest in low carbon energy systems and adapt to climate impacts is one of the main reasons why progress towards this agreement has been slow.
In an interview with the Responsible Investor website on Tuesday UN climate chief Christiana Figueres said she hoped the capitalization of the fund could start at the Secretary General’s summit on September 23 in New York.
“It has become the political testing role of confidence between developed and developing countries on both sides,” she said.
“For developing countries it is that industrialised countries will make capital available, and for developed countries that the capital is allocated to high impact opportunities with a lot of transparency.”