Vestine sees the light

WHEN Vestine Mukeshimana bought electric lights last month from BBOXX, an off-grid solar company, it helped her spot snakes in her garden and stopped thieves making off with her cow. In her Rwandan village she and her neighbours now cook after dark and their children study in the evenings. They have never heard of the Green Climate Fund (GCF), a UN initiative to bring climate finance to developing countries. But last month such household solar schemes became its first disbursed investment.

Understaffed and buffeted by politics, the GCF is struggling to define itself. It started operations last year after coaxing $10.3 billion from governments. Raising money was hard; spending it is proving even harder. Its board meets on October 12th in Songdo, South Korea, to weigh up proposals. It will also have to mull appointing a new boss. Héla Cheikhrouhou, the old one, has left, warning that the wrong projects are being financed.

The debate goes to the very purpose of the GCF. It was set up in 2010, part of a pledge to transfer $100 billion of climate cash a year by 2020. Developing countries had long lamented that they bear the brunt of climate change, having done little to cause it; the GCF gave them equal board representation and promised that half the money would be used to deal with the impacts of climate change (not just reducing emissions). Rich countries, which pay, wanted a role for the private sector, too.

The talk is of “paradigm shifts”. But of the 17 projects approved so far, few are transformational. In June, for instance, the board approved $49m to plonk more solar panels in a Chilean desert so baked in solar energy that some suppliers had been giving it away. Over 90% of the money is being funnelled through the usual suspects, such as multilateral development banks and UN agencies. Many of them, says one observer, have been pulling old proposals out of drawers. National authorities are puffing to keep up.

Part of the problem is politics. With one eye on future fund-raising, the board has set an ambitious target of approving $2.5 billion of investment by the end of the year (the total now stands at $257m). So far it has waved through every proposal put to it, from wastewater management in Fiji to weather-warning systems in Malawi.

A deeper issue is who leads the management of the projects. Rather than running its own, the GCF channels money through “accredited entities”. A decision to accredit big commercial banks, Deutsche Bank and HSBC, has stirred controversy. Yet the process stretches the capacity of smaller institutions. The GCF should do more to understand local contexts, says Alex Mulisa, who heads Rwanda’s own climate fund. Another developing-country technocrat grumbles “we’ll be under water” by the time his project is considered.

But good ideas are out there—like Ms Mukeshimana’s solar panels. The GCF is putting $25m into a fund raised by Acumen, an impact investor, to be invested in off-grid solar firms in east Africa (it bought equity in BBOXX in August). Private co-financing will magnify the impact and money is put aside for consumer protection, like keeping the lights on if the firm servicing the system goes bust.

Or take a scheme in El Salvador, which will give small businesses greater certainty about investing in energy efficiency, by insuring against the risk that the cost savings are less than promised. By being bolder itself—through offering insurance or partial guarantees—the GCF can reassure private firms nervous of new technologies and unpredictable markets.

If it is to have any point, the GCF must go where the World Bank or private money dare not. It must also sort out its own processes. Beefing up the secretariat is one step; devolving some smaller decisions from board level would help too. The GCF (which turned down The Economist’s requests for an interview) still has a lot going for it. It is young. It has rare political legitimacy. It has moved further, faster, than other climate funds (like the Adaptation Fund) had at a similar stage.

But now is the moment when precedents are set. “The GCF is under pressure to be everything to everyone,” says Niranjali Amerasinghe of the World Resources Institute, a research organisation. Bankers want to lure investment from pension funds; the World Bank is promoting dam projects; civil-society groups demand “locally driven” development. The GCF cannot give them all a green light.


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