Image - Flickr/Dongho Kim

A New Job Spec for the Next GCF Head?

28/08/2018

Several weeks on from the resignation of the GCF’s Executive Director following the collapsed Board meeting in July, silence appears to reign on the appointment of a successor.  Deputy ED Javier Manzanares stands in, and has said that though events at the last Board were “something of a setback for the fund,” nonetheless “the GCF’s role as a key channel for climate finance remains critical to the success of international climate action.”  

Similar sentiments have been expressed by two other figures key to both the past and future of the GCF, in pieces in the Thomson Reuters Foundation blog.  France’s chief climate diplomat at COP21, Laurence Tubiana, said that “the potential of the GCF and multi-billion funding commitments from the developed world opened the door to the 2015 Paris Agreement on climate change … In a fragmented landscape of over a hundred funds, the GCF was seen as both increasing and co-ordinating funding flows. It is viewed by many developing countries as critical to their future in a warming world. A fund that they have a stake in, a voice on the board, an ability to set a strategic direction.” “Now is the time,” she went on, “to invest in the GCF’s board, to ensure it finds a new – strong – executive director – to ensure it gains the funds it needs to thrive, to ensure its governance is effective and decisive.”

It’s time for finance ministries to get involved 

UNFCCC head Patricia Espinosa also called for political will to help solve the governance problems at the fund. Noting that she didn’t “have a specific formula or suggestions for its reform,” what is nevertheless “indispensable is to get a higher level of attention, a political level of attention, to make this institution work.” She urged “finance ministries to get involved in the discussions”.

It’s impossible to disagree with any of these statements, and let’s hope the overall governance of the GCF can indeed be sorted out in due course.  More immediately, though, the fund needs to appoint a new head, and we would suggest that no one competent (or perhaps even sane) would take on the ED role as the GCF is currently set up.  Managing that setup was clearly beyond the skills and patience of even the most experienced, discreet and long-suffering of diplomats such as the previous ED Howard Bamsey.

A Statement of Intent

What changes could then be made to the ED job spec and the powers of the Secretariat, to attract in a top new head for the GCF, and while the overall governance of the fund is reviewed and hopefully reformed?

First, the GF could make a huge statement of intent simply by specifying that the main qualification sought in the new ED would be fund management experience, not diplomacy or climate negotiations.  That experience would ideally include experience in the private as well as the public fund management spheres. Seeking such experience would make clear that the Fund principally regarded its new head not as a conciliator between rival factions but as a professional and effective manager of money flows.

Any ED with such experience and with ambition to move the GCF on would then surely demand one immediate change to procedure – a change which, by the way, would also hugely promote  the interests of the ultimate clients of the GCF, namely developing countries and their climate-vulnerable populations.

This change is the separation of project approvals from Board politics. It can (and must) simply never again be the case that projects on which, collectively,  hundreds or even thousands of person-days have been spent are not approved when they are due to be, as happened at the failed Board in July. That’s especially the case when some of these projects could actually be a matter of life or death in communities threatened today by climate change.

Unfortunately, project approvals have been ‘weaponised’ at the Board level – a development that has been facilitated by the insistence on consensus at the Board, which effectively gives every member a veto on every decision.  This insistence is a hangover from the GCF’s establishment as part of the UNFCCC process, but a way of working that may be appropriate for climate negotiations is completely inappropriate for the management of investment decisions in a modern and effective fund.

Separate Projects from Politics

This separation of projects from politics would be best effected by establishing an Investment Committee (IC), made up of people with experience of the various types of finance that the GCF provides, from grants and concessional loans through to equity.  (Indeed, if the GCF was ultimately reorganised to have separate teams for adaptation and mitigation projects – as has been suggested by climate finance expert Saleemul Huq – there could be two Investment Committees, one for each category.)

The IC (or ICs), as the name suggests, would be a committee of the Board itself, working to an investment strategy and policies set by the Board, but with properly devolved powers to make independent investment decisions based on that strategy and those policies.  As happens in other funds and in DFIs, only projects having major implications for the GCF, whether as a result of size or risk, should come to the Board itself for decision.

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Ideally, as again happens in other funds, smaller projects could be approved by the Secretariat itself.

Look at the Dashboard

Next, the new ED must equip her or himself with the tools to measure how the fund is performing, and the staff positions to run it effectively and at the lowest possible cost and risk.  Much the most dispiriting aspect of watching GCF Board meetings play out has been the complete lack of attention to basic metrics, a topic this blog has raised numerous times.  

For example, at every Board, a report is written on the status of projects that haven’t yet received disbursements, usually because they have been able to fulfil the numerous conditions attached to Board approvals. As far as I can recall, this report has never been debated by the Board.  As a result, the July Board simply didn’t now what it’s likely disbursement schedule was going to be, with the result that it probably wildly underestimated the amount of money it has available, since many of these projects will likely never, in fact, get funded. (South African Board member Zaheer Fakir said as much in a recent Q&A session with Devex Newswire.)

It also came as a surprise to the Board that no one had apparently thought to manage exchange risk on the GCF’s resources, with the result that it had lost $1 billion due to currency movements.  This in turn revealed the somewhat astonishing fact that a $10 billion fund didn’t appear to have a treasury function (that is, a person or team responsible for managing its financial resources, including consideration of things like currency risk).  

The list goes on, but the essential point is clear – that the GCF needs to create (and systematically use) a ‘dashboard’ of KPIs that give a true picture of its progress and problems.

If every challenge is also an opportunity, then the GCF has a great opportunity in appointing its new ED to make some changes to its working practices that could immediately increase its effectiveness as a channel for vital climate finance.  Much else would need to follow, regarding general governance arrangements – not to mention the mad accreditation system – but picking an experienced fund manager and giving her or him, plus an experienced investment committee, the kind of powers they would normally have in a well-managed fund, would be great signals that the GCF is moving forwards.


NDCi.global has covered all the Board meetings since November 2016 in some detail.  Here are our reports:

B16:  Paradigm Shift Needed for the GCF?

B17:  Incheon Forward?

B18:  The GCF – A Car without a Dashboard

B19:  Slalom in Songdo

B20:  GCF in Meltdown

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