Faulty systems at the Bank’s Forest Carbon Partnership Facility

20 November 2009

As the Bank seeks to position itself as the vehicle of choice for future climate finance, the experience of the Forest Carbon Partnership Facility (FCPF) calls its competence into question.

The FCPF is a trust fund for providing grants to enable countries to reduce emissions from deforestation and land degradation (REDD, see Update 65). The World Bank serves as a trustee and secretariat for the FCPF. Funding through the FCPF requires recipients to write readiness preparation proposals (R-PPs), which should be subject to two streams of due diligence; those of the Bank as well as those of the FCPF (see Update 65, 60). However, political pressure to ensure that funding is disbursed quickly has left civil society observers concerned that the application of the Bank’s internal safeguards will be patchy and that affected communities will be denied the opportunity to influence the proposals.

The FCPF is bound by its charter to meet both its own internal policies and procedures, and to respect the rights of indigenous peoples in accordance with a given country’s international obligations. A new briefing by UK NGO Forest People’s Programme (FPP) suggests that internal due diligence and the effective application of Bank environmental and social safeguards to readiness planning under the FCPF has proven extraordinarily difficult. These have yet to successfully materialise in any proposed recipient country after 18 months of operations. Additionally, according to Helen Tugendhat of FPP, “The Bank has no review process in place to check FCPF compliance with international rights obligations to indigenous peoples, so it seems near impossible that this will actually happen.”

In theory R-PPs would go to the FCPF’s decision making body, the Participants Committee (PC), which on finding them satisfactory would move them on to the Bank for due diligence. Finally, they would go to the Bank executive board to be approved. In June the PC reviewed the first R-PPs from Guyana, Indonesia and Panama. Despite an advisory panel finding areas of weakness that should be revised, the PC authorised the Bank to complete its due diligence on the proposals with the aim of entering into grant agreements with these countries. Without an agreed process for handling flawed plans, there is concern that there will be no second sign-off by the PC and the plans will only be reviewed by the Bank before beginning disbursement of funds, which will amount to up to $3.6 million per country.

Twelve NGOs sent a letter to the PC ahead of its October meeting calling for clear standards and criteria to be developed to assess the progress on addressing the weaknesses of the R-PPs, and for progress to be clearly linked to grant disbursement. They also called for the PC to demonstrate that funding decisions will only allow the implementation of proposals that meet the World Bank’s environmental and social safeguards.

Far from being a model, the activity of the FCPF so far leaves doubt about the effective application of agreed principles and standards in the Bank’s climate facilities, as well as its fiduciary responsibility.