Climate Justice Now! Presentation at the Transitional Committee Workshop on the Transformational Agenda, Engaging the Private Sector and Engaging Civil Society
(This statement was delivered by Lidy Nacpil of JSAPMDD.)
On the question of engagement with the private sector, we urge the members of the Transitional Committee to proceed with great caution.
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.
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. This is also the message recently delivered in a letter to all transitional committee members by 140 international networks, regional networks, and NGOs from every continent.
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 poorer countries.
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. Alarmingly, almost two-thirds of IFC investments in low-income countries go to companies based in the richest countries.
The over-emphasis on leveraging private investment could lead to a fund that depends heavily on financial intermediaries. As demonstrated by the IFC, the greater the use of financial intermediaries, the more intrinsically difficult it will be for the Green Climate Fund's board and beneficiaries to ensure implementation of and compliance with environmental and social standards.
Similarly, the financial sector's desire for less disclosure, less liability, and less accountability for environmental and social outcomes will pose a significant challenge for global efforts to promote sustainable development and climate stabilization. Therefore, the Green Climate Fund should not disburse money directly through financial intermediaries.
The Transitional Committee should design the Green Climate Fund in a manner that ensures the GCF steers clear of excessively risky investments from a financial or environmental perspective. The parceling of bonds into derivatives, and investments in carbon markets are examples of these excessively risky instruments.
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. Moreover, a strict firewall must be enacted between financial flows resulting from international offsetting schemes and the provision of climate finance for, and the use of climate finance by, developing countries.
Thank you very much.