Bank wrestling for control of climate finance

20 November 2009

With much awaited climate talks in Copenhagen in December, the World Bank and its supporters are positioning the institution to play a significant, if not dominant, role in future climate finance.

While interim UN climate negotiation meetings took place in Bangkok in October, senior Bank officials at the Bank’s annual meetings in Istanbul emphasised that they would wait to see the outcome of the Copenhagen climate talks to decide what role the Bank would play. However, in a panel discussion, Michele de Nevers, senior manager of the Bank’s environment group, asserted that the institution is best placed to manage climate finance because of its ability to leverage funding and its strong fiduciary, procurement and safeguard policies.

G77 countries and civil society organisations argue that all funding should be under the authority of the UN process and the Conference of Parties (COP) responsible for climate negotiations on decisions to be made in Copenhagen in December. De Nevers took a different view. “Lawyers have to look over what ‘under the authority’ of the COP really means. However, we would be happy to be ‘under the guidance’ of the COP.”

the Bank is actually lobbying behind the scenes for a central role in future climate finance

In an address at the Bank annual meetings, Yvo de Boer, Executive Secretary of the United Nations Framework Convention on Climate Change highlighted the importance of the sunset clauses and encouraged the Bank to show sensitivity to the UNFCCC process as it unfolds. While acknowledging a role for multi-lateral development banks, he called attention to critiques of the World Bank and said that, “developing countries are by and large dissatisfied with the existing governance system. They have pointed out … that it doesn’t safeguard their needs; they don’t have an equitable voice in it; disbursement is too slow; and the international financing system is fragmented.”

NGO reports also cast doubt over whether the Bank is up to the job. A new report from the World Resources Institute argues that the “The structure of the Bank remains unchanged, and this will shape the relationship between [Bank administered] funds and recipients. If these funds are to meet new standards of legitimacy, then the Bank’s governance will also need to be reformed.”

A report from international NGO ActionAid calls into question the competencies of the Bank for managing adaptation funds. It highlights among other findings that the Bank has a poor track record on community participation with a 2003 report by the Independent Evaluation Group of the World Bank estimating that 75 per cent of World Bank projects did not involve community participation. ActionAid also highlighted studies that show poor results for the Bank’s development projects even in areas of core competencies. “One must ask whether developed countries should continue to pour new funding into an institution that has failed to deliver in its supposed core competencies,” concludes the report.

Big donors bat for the Bank

New climate finance proposals from the US and Japan in October support a central role for the Bank. The Japan proposal explicitly names the Bank, while the US proposal replicates the 50-50 donor-recipient governance model that has been used in the climate investment funds (CIFs) housed at the Bank. This leads many to worry that the CIFs will be rolled over after a decision in Copenhagen rather than phased out as promised (see Update 61).

Climate meetings in Bangkok and Barcelona in the run up to Copenhagen have also drawn significant attendance from senior World Bank officials. “Whilst the Bank is trying hard to publicly play down its role, it is actually lobbying behind the scenes for a central role in future climate finance through its bilateral negotiations with developed and developing countries,” said Kit Vaughan of WWF-UK. “This does not play well with many of the G77 and developing countries that want finance to be entirely under the authority of the UN COP and for these decisions to be made by the COP in December.”

A rush to put forward Bank’s best face

As African delegations staged a one day walk out of climate talks in Barcelona over developed countries’ failure to make firm commitments on climate finance and emissions cuts, the World Bank announced that $1.1 billion of committed CIFs money would be channelled to Africa. This includes adaptation projects in Mozambique, Niger and Zambia provided through both grants and loans to the countries. Plans have also been approved to channel funds for energy sector projects to South Africa and Morocco through the Clean Technology Fund, the largest CIF (see Update 60), and further plans are under consideration for the Ukraine, Vietnam and the Middle East and North Africa region.

“For low-income countries like Zambia, Niger and Mozambique to firstly receive adaptation support through a top-down institution like the World Bank, and secondly through a system that will continue to use loans, means policy and adaptation support are being driven by the priorities of donor countries at the expense of developing countries,” said Humphrey Mulemba of Zambian Catholic Aid agency Jesuit Center for Theological Reflection.

With a rush to draw lessons from the CIFs and prove the capacity of the Bank to manage climate finance, a number of new projects are up for approval and a set of new reports are to be released following decisions made at CIF trust fund committee meetings at end of October.

The Bank will publish its first CIFs annual report before the Copenhagen talks. It will also finally release the criteria which were used to select the countries for adaptation funding under one of the CIFs, the Pilot Program for Climate Resilience. However, the eight countries which have already been selected for the programme differ from the countries put forth by an expert panel as being the most vulnerable, according to civil society sources. Civil society observers in the trust fund committee meetings also expressed concerns about the lack of independent reporting and disclosure of multilateral development banks’ activities in the pilot project countries and budgets for the pilots. This has led to worries that policy conditionality will be applied to the pilot projects without the public’s knowledge.

In March 2010, a second Partnership Forum is to be held in Manila to facilitate civil society inputs into the CIFs, despite initial criticism that no clear links were made between their recommendations and revisions to the climate funds. A report is to be published before the forum to highlight lessons learned from the CIFs. However, concerns remain as to how lessons outlined in the forthcoming paper, will translate into concrete reforms.

“Failing to take into account the adaptation implementation expertise of national and international organisations in CIF planning, risks seriously undermining both its effectiveness and the accountability to the most vulnerable and severely affected,” said Richard Ewbank of international NGO Christian Aid. “We have no indication that, despite the Bank highlighting the importance of civil society involvement, any consultation has actually taken place in country.”