Letter to The Transitional Committee on the private sector and green climate fund (GCF)

Jumat, 09 September 2011 14:24

Ditulis oleh WALHI Eknas

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September 9, 2011

Dear Members of the Transitional Committee,

In establishing the Green Climate Fund (GCF), you are tasked with designing an institution that makes the most effective use of climate finance for developing countries.

The core contributions to the GCF should be predictable, additional and public. To ensure that such money supports a country-driven approach its use should be determined by developing countries, informed by sovereign, participatory planning processes. The GCF should not channel money directly to multinational investors and corporations or through financial intermediaries, which would be incompatible with this goal.

We call on members of the TC not to establish a stand-alone private sector window, nor to provide finance or incentives directly to the private sector. Such action may pose serious risks to the achievement of a country driven process. Private sector participation is best decided, managed, regulated and incentivized at the national level, in the context of a national strategy.

The proposal for a private sector window in the GCF is worryingly reminiscent of the World Bank Group’s International Finance Corporation (IFC), which performs poorly in relation to the Bank’s stated mission of alleviating poverty and promoting sustainable development. Almost two-thirds of IFC investments go to companies based in the richest countries. In 2011, the Bank’s own Independent Evaluation Group found that less than half of the IFC projects it reviewed were designed to deliver poverty reduction outcomes.

In addition, the IFC model emphasizes the use of financial intermediaries (FIs) to leverage private sector finance. But money that passes through FIs is difficult to track and poses a significant barrier to ensuring transparency and accountability, since the IFC does not ensure that sub-projects and businesses financed through FIs comply with safeguards. For example, in 2009 more than fifty per cent of IFC financial sector investment went toward projects with a high or medium risk of causing harmful social and environmental impacts. The GCF should not disburse money through Financial Intermediaries.

Finally, the TC should explicitly exempt the use of speculative and other instruments to raise capital on financial markets. For example, the parceling of bonds into derivatives, and investments in carbon markets, are excessively risky from a financial and environmental perspective. The volatility that we are currently observing on the world’s stock exchanges provides a clear reminder, should one be needed, that such tools are hardly a basis for the kind of stable, sustainable approach to financing that the GCF requires if it is to meet its aims.

We call on you to ensure a decisive shift beyond business as usual and onto a transformational path to sustainable development and resilient communities.

Sincerely,
cc.Technical Support Unit

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