MANILA, Philippines – The Transitional Committee of the United Nations Framework Convention on Climate Change (UNFCCC) held its third meeting this week, in Geneva Switzerland. Two key concerns raised by civil society observers who were given a chance to take the floor and deliver statements were on the role of the World Bank in the Green Climate Fund (GCF) and the GCF's engagement with the private sector.

One of the major decisions of the Cancun meeting of the Conference on Parties (COP) of the UNFCCC last December 2010 was to establish the Green Climate Fund. Hundreds of billions of dollars in climate finance are needed by developing countries annually to cover the cost of climate adaptation and mitigation programs. The Climate Convention points to the obligation of developed countries to provide this finance because of their historical responsibility for causing the climate crisis. The GCF is the international institution that will be responsible for the management and disbursement of this climate finance. The Transitional Committee was formed to prepare the proposed design of the GCF, to be approved in the next COP which will be held in Durban, South Africa in December 2011.

The role of the World Bank in the GCF has been a contentious issue in the Transitional Committee. Many developing countries are against giving the World Bank a role in its regular structure and operations. This is a position that is strongly echoed by climate campaigners from all over the world. In a statement distributed to members of the Transitional Committee, civil society groups decry the long track record of aggressively promoting fossil fuel projects and other programs that "exacerbate climate change and harm the environment." They assert that "An institution that actively promotes the causes of global warming should not be given a role in global climate finance."

"The World Bank's undemocratic structures and lack of full transparency and accountability is opposite to how we expect the Green Climate Fund to be governed and managed. Its operations as a lending institution stand in contradiction to what should be the principles of fair and effective climate finance. Climate finance must not come in the form of loans or other debt-creating instruments" the groups further add.

The GCF's relationship with the private sector is another controversial issue in the Transitional Committee negotiations. Several members of the TC from developed countries that GCF funds have been insisting that funds from the GCF be used to "leverage" private investments in climate finance and that the GCF should have a special window or facility for the private sector.

Addressing the TC at the first day of its meeting, Lidy Nacpil, Vice President of the Freedom from Debt Coalition and speaking in behalf of the Climate Justice Now network, urged the Transitional Committee to exercise great caution on the question of engagement with the private sector.

"Private sector participation is best decided, managed, regulated and incentivized at the national level, according to national strategies that were identified through the participation of people who are most impacted by climate change" Nacpil said. "We urge the Transitional Committee not to establish a stand-alone private sector window, nor to provide finance or incentives directly to the private sector. The establishment of a private sector window would most certainly be a boon for rich country-based multinational corporations, but it would most certainly circumvent the interests of developing countries."

Nacpil pointed out that the 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 in developing countries. According to a study conducted by the Friends of the Earth International, almost two-thirds of IFC investments in low-income countries go to companies based in the richest countries.

Nacpil reiterated one of the calls of an online petition addressed to the Transitional Committee and signed by hundreds of climate justice advocates from various countries – that the GCF "not use speculative and other instruments to raise capital on financial markets."

According to the petition, "the parceling of bonds into derivatives, and investments in carbon markets, are excessively risky from a financial and environmental perspective. The current volatility of the world's stock exchanges provides a clear reminder that such tools are hardly the basis for the kind of stable, sustainable approach to financing that the GCF requires if it is to meet its aims."

On the role of the private sector as source of climate finance, Nacpil added that for the GCF to truly serve its purpose in accordance with the principles of historical responsibility, equity and justice, the core contributions to the GCF should be "predictable, additional and public." "We welcome private donations, but the corporate private sector should not expect a return on investments because this is contrary to the principles and purposes of climate finance," said Nacpil, also the Coordinator of Jubilee South – Asia Pacific Movement on Debt and Development.

The Transitional Committee comprises 40 members, with 15 members from developed country Parties and 25 members from developing country Parties, with members having the necessary experience and skills, notably in the area of finance and climate change.

Of the 25 members from developing country Parties:

  • Seven (7) are from Africa: Gabon, Egypt, Morocco, Ethiopia, South Africa, Democratic Republic of the Congo and Burkina Faso;

  • Seven (7) from Asia: Saudi Arabia, Singapore, Republic of Korea, Pakistan, Philippines, India and China;

  • Seven (7) from Latin America: El Salvador, Mexico, Argentina, Peru, Belize, Nicaragua and Brazil;

  • Two (2) Least Developed Countries: Zambia and Bangladesh; and,

  • Two (2) Small Island Developing States: Samoa, Barbados.

The 15 members from developed country Parties are Japan, Russian Federation, United States of America, Norway, Australia, Switzerland, Canada, Denmark, Sweden, Poland, United Kingdom of Great Britain and Northern Ireland, Germany, Italy, Spain and France.