Donor governments join critical chorus on the CIFs

13 September 2011

The Bank-housed Climate Investments Funds (CIFs) are facing increasing criticism from donor governments and civil society groups, while concerns remain that the Bank’s role in the new Green Climate Fund (GCF) constitutes a conflict of interest.

The governing committees of the CIFs (see Update 76, 75, 73, 68) met in Cape Town in June, and approved a range of new projects and programmes. It was decided that the Clean Technology Fund, one of the CIFs, will attempt to attract new donor pledges to expand operations in new countries, with a scoping mission for India approved. At the meetings the UK government, which was instrumental in establishing the CIFs and is a major donor to them, released a document outlining areas where it feels the CIFs are not providing results. It calls for: more attention to be given to development impacts and gender outcomes; increased evidence that implementing multilateral development banks (MDBs) are securing country ownership and consulting with civil society; increased transparency of decision making processes and investment planning; and a stronger focus on results frameworks and knowledge sharing.

The UK parliament’s environmental audit committee released a report in July that questions the decision of the UK government to direct the majority of international climate finance contributions towards the CIFs. It concluded that “the World Bank is not the most appropriate channel for future UK climate finance. It undermines our low carbon objectives. The UK should utilise a variety of climate finance channels appropriate to the respective funding objectives. All future major decisions on climate finance should be transparent, highlighting the criteria used in determining the most appropriate funding mechanisms.”

Climate loans will only lock our countries into further debt, and further impoverish our people

In June, 49 civil society organisations, networks and communities from recipient countries of the Pilot Programme for Climate Resilience (PPCR), one of the CIFs, released a statement imploring the UK government not to offer loans for adaptation through the programme. Signatories included NGO Haiti Survive and the Ngati Hine tribe of Polynesia. It argues that: “Climate loans will only lock our countries into further debt, and further impoverish our people. … The World Bank is dominated by rich countries, and has a long history of failed projects and imposing harmful policy conditions. It is also responsible for pushing projects and policies that have caused climate change through deforestation, supporting harmful extractive industries, and providing financing for fossil fuels.”

At the CIF committee meetings the PPCR endorsed five new country and regional investment programmes, and said that as well as grants each could also access loans of up to $36 million each, which is the limit of available loan resources currently pledged to the PPCR. However, these programmes will also include loans from implementing MDBs. A June report by UK NGOs World Development Movement and Jubilee Debt Campaign, Climate Loan Sharks: how the UK is making developing countries pay twice for climate change , argues that through its granting of loans for adaptation projects the PPCR, one of the CIFs, is a vehicle for developed countries that have emitted the lion’s share of greenhouse gases to avoid their responsibility to help poorer countries cope with the effects of climate change (see Update 75). It finds that the PPCR’s “creation and governance lack legitimacy, it is not designed to meet local needs nor build local ownership of projects and lacks transparency. It fails to consistently consider key issues such as gender in its country plans, or meaningfully engage civil society, and over-rules national governments’ funding priorities … the PPCR appears to be a model designed entirely around the interests of rich countries and development banks rather than the needs of those affected by climate change in urgent need of finance.”

In June the Bretton Woods Project released a report evaluating the adequacy of the CIFs as a model for the GCF (see briefing). The report highlights a raft of concerns by civil society groups on how governance arrangements at the CIFs prevent meaningful participation by affected communities and civil society observers, and over the level of country and community ownership of projects. It highlights critical views on claims by the CIFs to leverage large amounts of private finance. It also notes that the CIFs overwhelmingly favour mitigation and, contrary to the polluter-pays principle, offer loans for adaptation, and highlights the lack of developmental impact in CIF projects. The report concludes that “the results indicate that any affirmation of the CIFs as a model for the GCF should be regarded with deep scepticism … from their inception and design, to the planning of investment strategies and the rolling out of projects, the CIFs have also illustrated numerous problems that put in doubt any notion that they are a model for effective climate finance.”

Conflict of interest at the GCF?

Developing country participants at the Tokyo meeting of the transitional committee tasked with designing the GCF remained concerned about whether the fact that the Bank will be both trustee and have a role in the design of the fund constitutes a conflict of interest (see Update 76). The issue was again raised by Nicaragua, supported by Egypt and the Philippines, who argued that this contravenes international fiduciary standards, although in the face of opposition by developed countries, including the USA, it remains unclear whether the committee will seek further legal clarification on the issue.

Worries about conflict of interest could be bolstered by a recent concept note for the review of the Bank’s infrastructure strategy (see Update 77). Discussing other sources of finance for future Bank infrastructure projects, including the GCF, the concept note asks: “How can the [World Bank Group] package and act as a ‘preferred implementer’ of these large-scale climate-related projects?”

Civil society groups are continuing to strongly warn against any role for the Bank in the GCF. In June 58 civil society groups from across the world, including the Indian Social Action Forum and the Kenyan Debt Relief Network, sent an email to members of the GCF transitional committee. It argues that the Bank’s lack of transparency and democratic accountability, its track record in exacerbating debt in developing countries, its continued support for fossil fuel projects, and its privileging of “private capital markets over public interests”, mean that it “should not be given a place in the regular structures and operations of the Fund.” This sentiment was echoed in a June statement by the Philippines-based Global Alliance of Incinerator Alternatives on behalf of Climate Justice Now, an international network of over 700 NGOs and social movements campaigning on climate change issues, announced the Tokyo meeting. It said that “an institution that is undemocratic, exacerbates indebtedness, and continues to massively finance fossil fuels should not have a role in a fund to fight climate change.”