Climate cash for poor raises red flags
Critics cite lack of transparency, question why funds for vulnerable communities being led by global firms, writes Hiroko Tabuchi
Alandmark pledge seven years ago by the world’s richest nations to spend billions to help developing countries tackle climate change seemed like a godsend for Kiribati, the Pacific island nation threatened by rising seas.
The result of that promise was the Green Climate Fund. But Kiribati — like many of the poorest countries that are most vulnerable to climate change — has yet to see any project funding.
Instead, many of the projects that have won early backing were approved despite concerns raised by current and former observers on the fund’s board over whether officials had done enough vetting of the proposals — especially on those involving the private sector, which make up half the approximately US$2.6 billion in project financing authorised so far.
“We raised our objections, but the gavel just came down,” said Liane Schalatek, one of two civil society observers on the fund’s board and associate director at the Heinrich Böll Foundation North America, an environmental group associated with the Greens party in Germany.
“There’s a real lack of transparency,” she said.
The observers took issue, for example, with a proposal that would hand out $265 million in equity and grants to Geeref Next, a Luxembourg-based investment fund that would finance renewable energy or energy efficiency projects in about 30 countries — with no explicit plan to disclose what those projects would be.
The fund’s 24-member board approved the proposal.
The board observers have also asked why the fund’s finances, set up to back locally controlled projects that would reach the most vulnerable communities, were going to private-sector enterprises led by global investment firms — like $110 million in loans and grants for solar projects in Kazakhstan led by London-based United
Green Energy and the investment arm of Kazakhstan’s sovereign wealth fund.
Those concerns also went unaddressed.
According to funding proposals for the 54 projects approved so far, as well as a record of objections raised by board observers, other projects that have raised red flags include:
— $25 million i n equity and grants administered from Mauritius, a corporate tax haven, for off-grid solar power in Kenya, Rwanda and Uganda;
— $50 million in loans and grants to repair a Soviet-era dam in Tajikistan, even though experts have warned that hydropower there is vulnerable to the retreat of the snow melt that feeds dams;
— $9 million in loans to a renewable energy project in rural Mongolia that many observers expressed concerns this would be used to power coal mining.
The Green Climate Fund also faces challenges in fundraising.
This year, President Donald Trump said the United States would no longer pay into the fund — a snub that accompanied the Trump administration’s decision to withdraw from the Paris climate accord.
The United States had promised to contribute $3 billion — more than any other country, though less than other donors on a per capita basis — of which the former Obama administration delivered $1 billion.
Industrialised nations have pledged to generate $100 billion a year by 2020 to help developing countries reduce their greenhouse gas emissions and address the effects of climate change. The fund has so far secured $10.3 billion in financing.
To be sure, the climate fund has also enjoyed some notable successes, private projects among them. The off-grid solar projects in Rwanda and Kenya, for example, have been praised for their focus on reaching remote communities.
But the board observers’ concerns underscore the challenges facing the fund, now a pillar of the Paris climate pact, as negotiators gather this week at United Nations climate talks in Bonn, Germany.
Critically, the early mix of approvals has meant less than a tenth of the funding has gone to the kind of projects that make up the fund’s mandate: those controlled by the poorer nations themselves.
“There’s little enough, as it is, of public funds for climate, and so much of it is going toward sweetening returns for the private sector,” said Lidy Nacpil, coordinator of the Asian People’s Movement on Debt and Development and another observer on the fund’s board.
The fund’s growing pains reflect the competing pressures — from its donors, from the private sector, and from the countries it is meant to assist. Eager to show taxpayers back home that the fund is being put to work, donor countries have put pressure on the fund to speed up its disbursements. Similar pressures arise from the fund’s need to attract private investment to make up for the expected shortfall in contributions from industrialised countries.
The fund’s secretariat did not respond to multiple requests for comment. But in response to some of these criticisms, the fund has adopted a monitoring framework meant to strengthen transparency. It also recently set up an independent evaluation unit to assess the effectiveness of its projects.
“I hope we can learn, and learn fast, about what works for climate change action,” Jyotsna Puri, the head of the new unit, said in an interview posted on the fund’s site last month. “Otherwise, just imagine the waste of resources.”
For places like Kiribati, the stakes couldn’t be higher. Much of the country, a string of atolls and reef islands that straddles the equator, lies no higher than six feet above sea level. The prospect of rising seas and more extreme storms threatens “the very existence” of large segments of the population, the government has said.
Officials in Kiribati have said they desperately need funding for desalination plants to provide safe water for the 110,000 residents, as much of the groundwater supply has become contaminated by seawater. The government is also seeking to elevate land on its main atoll and invest in renewable energy to end the country’s almost complete reliance on fossil fuels.
But with little diplomatic and financial heft, officials have struggled to secure funding.
“We can’t do it alone,” the president of Kiribati, Taneti Mamau, said in a video message before the Bonn meeting. “We need the hands of our partners and those who are ready to assist.”
The fund has pledged to improve the quality of its projects. It is also working to improve access for countries applying for projects of less than $10 million.
“Unfortunately so far, we have not taken the observers’ comments into consideration for our decision. That is true,” said Omar El-Arini, a member of the climate fund’s board. He stressed that his personal views were not representative of the entire board.
He added: “But we just started. There are competing interests — from countries, from the private sector, and we are trying to wade through this maze of conflicting interests. We will get there.”
Kiribati scored a small victory this year when it qualified for a $586,000 grant to help it prepare an application to the fund.
The island nation, however, has also taken some heart-wrenching measures.
In 2014, Kiribati bought 21 square kilometres of land in Fiji, more than a thousand miles away, as an insurance policy against the rising oceans.
“The idea is to build Kiribati’s resilience,” said Mr Mamau, dismissing the idea of migrating. “We don’t believe that Kiribati will sink like the Titanic.”