The Green Climate Fund (GCF), which the UN created in 2010, seeks to marshal pledges of $100 billion per year by 2020 from wealthy nations (which have been disproportionately and primarily responsible for the world’s carbon emissions), as well as other private and public sources, to finance climate change mitigation and adaptation projects in developing nations, which bear the greater share of adverse effects from those emissions. Last March, the United States delivered $500 million to the GCF, the first installment of the $3 billion pledge the United States made as part of the COP 21 UN Climate Summit last December. Climate and development advocates hope that the GCF will support development that is both “low-emission” and “climate-resilient,” helping countries limit greenhouse gas emissions and adapt to impacts of climate change. The GCF operates principally through so-called “accredited entities”—private and public sector subnational, national, regional, and international entities, which will implement climate change programs using GCF funds. These entities are selected through an accreditation process (hence the name), which assesses their ability to manage resources against the GCF’s fiduciary principles, environmental and social safeguards, and gender policy. Specific projects are assessed against investment criteria, including impact potential, sustainable development potential, responsiveness to recipients’ needs, promotion of country ownership, and efficiency.
As with many humanitarian or development aid efforts, the GCF is not without corruption risks. Recognizing this, the GCF Board approved an Initial Monitoring & Accountability Framework for the accredited entities that manage and implement GCF projects. Yet the GCF should do more to ensure that its basic accreditation mechanisms themselves rigorously evaluate entities for their capacities not only to disburse climate funds but also to monitor and address corruption. This up front assessment would complement efforts to ensure that entities, once accredited, remain faithful to the Fund’s fiduciary principles. The following aspects of the GCF accreditation process raise potential corruption risks, and the GCF should take steps to address them:
- The Role of National Designation Authorities (NDAs) or Focal Points. Broadly, two modalities categorize accreditation-seeking entities: direct access and international access. The direct access modality pertains to regional, national, and sub-national entities, whereas the international access modality applies to international entities such as UN agencies, development banks, and international financial institutions. Direct access entities must include in their accreditation applications a nomination letter from the given country’s National Designated Authority (NDA) or focal point, which is a body selected by national governments of recipient countries to interface with the GCF. Generally, NDAs are countries’ relevant ministries, such as ministries of environment or finance. Information on how NDAs are selected appears limited. While the GCF has approved initial best-practices guidelines for the selection and establishment of NDAs and focal points, the guidelines focus primarily on capacity related to national development strategy and coordination. In accordance with the GCF’s country-driven approach and focus on strengthening country ownership over projects, the GCF’s Governing Instrument notes that countries “should have flexibility in relation to the location, structure, operation and governance of NDAs or focal points.” However, because the NDAs play a direct role in facilitating the accreditation process for the direct access modality, the GCF should also take care to provide clear guidelines to ensure that the NDAs selected are themselves accountable, do not restrict or limit civil society or local participation, and follow anticorruption principles. To the extent that the anticorruption community appears concerned that countries receiving funds may have weak governance structures, the GCF should work to ensure that its accreditation process accounts for those risks. One potential improvement relates to participatory review. Currently, with respect to accredited entities’ project reviews, the GCF’s Monitoring & Accountability framework “encourages” NDAs and focal points to organize annual participatory review for local stakeholders, but does not require it. In order to increase mutual accountability for accredited entities, projects, and NDAs, the GCF’s initial accreditation framework should more clearly prioritize participatory mechanisms.
- The Fast-Track Accreditation Process. The GCF offers a “fast-track” to accreditation for entities that have already gained accreditation under the Global Environment Facility (GEF), Adaptation Fund, or the development aid program of the European Commission (EU DEVCO) and meet certain prerequisites. GCF documentation suggests that a significant number of applications proceed under this track. Under this fast track, which may take half the time as the full process, the review focuses on the “gaps” that have not been assessed in other accreditation processes. While this could be beneficial for rooting out corruption risks that fall in the “gaps,” there’s a risk that corruption-related fiduciary standards will be assessed by a fund other than the GCF, which may be counterproductive. The GCF should more clearly avoid importing deficiencies related to corruption risks from other funds’ accreditation processes. For example, the GEF accredits members permanently; Lisa Elges from Transparency International has criticized that system for lacking procedures to punish or suspend activities in case of wrongdoing, even while the GEF requires that agencies have accountability systems and respond to concerns. Given the framework the GCF Board has approved, which relies on the accredited entities as primarily responsible for monitoring and evaluation of its funded activities, it’s not clear that a fast-track review for entities accredited by other funds (which themselves may be susceptible to corruption risks) is advisable, as opposed to fresh and independent consideration of applications, at least from the corruption, if not efficiency, perspective.
- Unaccredited entities. Unaccredited entities cannot directly access GCF funds, but they can request funding for specific projects done in conjunction with accredited entities, which can develop and submit proposals for financing to the GCF. Although under the GCF’s Monitoring & Accountability Framework, accredited entities would presumably be evaluated with reference to their work with unaccredited entities, unaccredited entities remain a step removed from the self-monitoring and ad hoc reviews, and may require additional oversight. The GCF should promulgate additional guidance to ensure that accredited entities implement accountable and rigorous processes for working with non-accredited entities that receive project-based financing.
One of the main reasons that corruption risks in the GCF accreditation process deserve greater attention is that the GCF’s Monitoring & Accountability framework, as it stands, relies primarily on self-monitoring and self-reporting (a feature that has attracted criticism from civil society organizations). Suggestions to improve the Monitoring & Accountability framework are well-documented and appear well-advised. In the meantime, however, the current policy’s reliance on self-monitoring illustrates the importance of the process by which entities become accredited in the first place. While it’s possible that simply improving the Monitoring & Accountability Framework can address corruption concerns satisfactorily at the back-end, as of now the GCF should do more at the front-end to ensure that its partner entities adhere to anticorruption principles.