According to UNFCC, climate finance is critical in addressing climate change because large-scale investments are required to reduce emissions and to make a systematic transformation to a more sustainable future.
In addition, financial resources are required to allow countries to adapt to the adverse effects and reduce impacts of climate change.
Article 4 of the UNFCC requires developed countries to provide new and additional financial resources to meet the costs incurred by developing countries in implementing climate projects and programs.
It is important to note that this climate finance is not considered aid or assistance but rather an obligation upon developed countries and part of their fair share of global climate actions.
“This is in recognition that developed countries are largely responsible for climate change and its impacts on peoples of the developing countries who have contributed the least to the problem yet bear the brunt of its devastating consequences,” according to a report by Corporate Accountability.
Even by doing the utmost domestically, developed countries would still not meet their fair share of reductions due to their huge historical accumulated emissions, it elaborates.
To ensure that developed countries fulfill this obligation, the Green Climate Fund (GCF) was established in 2012 as the operating entity of the financial mechanism of the UNFCC.
While the GCF is still in the process of fully developing its policies and programs, the fund has been operational since 2015.
GCF is, essentially, tasked with resource mobilization as well as allocation and disbursement of these funds and central to the delivery of climate finance.
Thus it is crucial to ensure that the GCF plays this role in the best interest of the people and communities in the developing world.
“Unless these funds find their way into the hands of the national and local climate actors that need them and know how to make the best use of them, countries enduring the realities of the climate crisis risk their very survival,” adds the report which extensively details how conflicts of interest are creating obstructions in climate talks.
Only five large international entities manage nearly 75 percent of the GCF’s funds
There are huge challenges to this and a significant one is to prevent the GCF from becoming an instrument of corporate interests.
Civil society groups engaging around the fund’s activities say that corporate influence on decision-making in the GCF is definitely not limited to what happens during decision-making sessions, which include the presence of corporations and industry groups as ‘observers’, nor done mainly through what is conventionally considered lobbying.
As of now, only five large international entities manage nearly 75 percent of the GCF’s funds.
“The sheer economic power of corporations and the pervasive and insidious hold of the neoliberal ideology of free-market push decision makers to go towards particular policy positions that favor the private sector and big business at the expense of communities and people on the frontlines of climate change impacts,” according to Corporate Accountability.
In addition, an extremely controversial feature, the Private Sector Facility (PSF), was approved into the GCF in 2011 at COP17 despite vigorous objections from several developing countries, civil society organizations, and activist groups.
PSF actively promotes and seeks out private sector projects to fund both directly and through intermediaries and allocates available funds away for public programs for people, communities, and other local actors on the ground to private sector projects and private corporations including multinational firms and big banks.
Because of PSF, public funds are allocated to private entities that are not publicly accountable, most of which are solely motivated by profit and are major contributors in worsening the climate crisis.
Institutions have to be accredited by the GCF to submit project proposals, channel funds (financial intermediaries), or receive funds (implementing entities) and GCF accreditation rules allow private entities to be accredited, further exposing climate finance to the risk of corporate seizure.
According to the report, to date, 27 of the 59 accredited entities of the GCF are international institutions.
Four of these are transnational banks engaged in fossil fuel financing, including HSBC, Deutsche Bank, Crédit Agricole, and the Bank of Tokyo-Mitsubishi (BTMU).
And at least eight are multilateral banks, like the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, and the European Investment Bank explicitly subscribe to private-sector-led growth’ and have major programs for private sector development.
As of October 2017, the GCF had approved 43 projects across developing countries. Thus far, the GCF has approved fewer private sector projects— just 17—but more than 50 percent of the allocated funds are for these 17 projects, totaling $1.74 billion. The allocation for the public projects is only $1.3 billion.
Many activist groups and movements have been actively engaged in challenging and shaping the design, policies, and operations of the GCF.
Collective efforts have led to some successes but it is a continuing fight to assert, defend, and expand civil society voice and participation.
The solution is creating a GCF policy and guideline that are fully transparent
However, in July 2017, for the first time, the active civil society observers were not allowed to speak before a decision was taken on the accreditation of entities to the GCF board during a meeting.
“The board knew that civil society would express vigorous objections to two of the entities up for consideration—the Bank of Tokyo-Mitsubishi and Japan International Cooperation Agency—both of which have a track record of financing fossil fuels,” says the report by Corporate Accountability.
“When finally allowed to speak after all applicants were approved including these two institutions, the civil society observer’s representative was not allowed to say the names of these institutions.”
Obstruction such as this in the transparency of the fund caused by corporate capture hinders the effective mobilization of climate finance being used for the interest of people and communities and for decisive, effective, just, and equitable climate solutions.
“Five years after the Green Climate Fund was established, climate justice activists are still fighting and will continue to fight for a financial mechanism that will effectively serve people and the planet before profit,” says the report.
According to Corporate Accountability, the solution is creating a GCF policy and guideline that are fully transparent, rigorous, “critically scrutinize the applicants for accreditation” – including keeping banks and entities with conflicts of interest, such as the funding of fossil fuel projects, from being accredited – and ensuring that private banks are held to the highest levels of accountability in terms of financing and implementation of projects.