The first projects of the Green Climate Fund have been approved. But the Fund’s credibility has been tarnished by agreements with commercial banks involved in coal projects, like Deutsche Bank. EURACTIV France reports.
Some 20 institutions have already been accredited by the Green Climate Fund (GCF), and 60 others have requested accreditation, according to Hela Cheikhrouhou, the Fund’s executive director. A further 29 institutions have been recommended for examination by the GCF’s board.
This mechanism will allow financial institutions to access funds to launch climate-friendly projects in developing countries.
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The French Development Agency, Rwanda’s Minister of Natural Resources, and the European Bank for Reconstruction and Development (EBRD) have all been given the go-ahead by the administrative council of the GCF.
But the Fund has dealt a blow to its own credibility by accrediting a number of commercial banks whose environmental records are anything but exemplary. These include Deutsche Bank, which has been roundly criticised by civil society organisations for its investments in fossil fuels, particularly coal.
Deutsche Bank invested $13.84 billion in the coal sector between 2009 and 2014, according to a report published in December by a group of NGOs. And it is yet to commit to any kind of divestment.
“The accreditation of institutions is an ongoing process,” explained Romain Benicchio, from Oxfam France. “Apart from Deutsche Bank, Crédit Agricole and HSBC have also submitted requests for accreditation,” he added.
Between 2009 and 2014, Crédit Agricole put up close to $9.5 billion for coal projects, followed by HSBC, which invested more than $7 billion in the most polluting fossil fuel.
“The debate is still open over what kind of institution should be allowed to be accredited by the Green Climate Fund, particularly over commercial banks that are leading fossil fuel projects,” Benicchio said.
Difficulties for small states
While certain big commercial banks have been given the thumbs up by the GCF, other actors are having more trouble accessing the mechanism.
The lack of environmental expertise, and the necessary government structures, in many small island states, as well as certain African countries, has blocked access to the Fund. Benicchio explained that “the accreditation procedure for the GCF is fairly arduous, and this issue has obviously been raised by many African countries and small island states.”
Another problem is that the Green Climate Fund currently has no clause to exclude the financing of so-called “clean coal” projects. This could leave the door open to the Fund being used to finance coal-fired power stations which employ experimental carbon capture and storage technology in the Global South, for example.
“Not all the rules are written yet, as the GCF is young and there is still a lot to put in place,” the Oxfam representative said.
The first projects financed by the Green Climate Fund have largely been oriented towards projects such as supporting vulnerable communities in the Maldives ($23.6 million), and the construction of cyclone shelters in Bangladesh ($40 million).
A slow start
With promised donations of $10.2 billion from Japan, the United Kingdom, the United States, Germany and France among others, the GCF is a great source of hope for the countries of the Global South.
This new financial instrument announced at the Copenhagen climate conference in 2009 should bring them access to new resources. But so far, the capitalisation effort, launched in October 2014, has not reached the objective of set by developing countries of $15 billion.
And if the first projects are approved, only half of the grants promised since October 2014 have been signed off. COP21 also failed to inspire the necessary donations, with only a few small contributions added to the $10 billion already recorded.
Over the two weeks of negotiations in Paris, the Green Climate Fund achieved symbolic donations from the city of Paris (€1 million), from Vietnam ($1 million) and from Norway. The Scandinavian country, which has already provided $258 million to the fund, has promised to double its contribution by 2020.
This addition looks rather pathetic considering the sums needed to fund the climate adaptation of developing countries. That need is estimated at between €50 and €100 billion.