Increasing accountability and safeguarding billions in climate finance

In December 2015, governments from around the world came together to sign the Paris Agreement, agreeing to tackle climate change and keep global warming under two degrees centigrade.

They committed to spend US$100 billion annually by 2020 to help developing countries reduce their greenhouse gas emissions and protect themselves against the potentially devastating effects of climate change.

But Transparency International is worried that the billions could be misspent, undercutting much-needed efforts.

Much of the money is managed by the Green Climate Fund (GCF), a body set up by the United Nations Framework Convention on Climate Change, that finances a wide range of projects carried out by accredited organisations. Since 2015, the GCF has already approved funding of over US$3.7 billion for 76 projects in around 50 countries.

Many of the projects are infrastructure-heavy - such as retention basins and lock gates to protect against flooding - so a large proportion of that funding is likely to be spent on procurement of construction services and goods.

The evidence suggests that the corruption risk of fraud, embezzlement and rigged bidding processes in infrastructure-related procurement is extremely high.

A new report from Transparency International and the Open Contracting Partnership (OCP) assesses the procurement processes used by the Green Climate Fund. It recommends putting in place strong safeguards to avoid mismanagement and increase transparency and availability of information to ensure the committed funds are spent effectively and are accounted for.

The GCF has some requirements for the organisations, such as national authorities, regional development banks and global programmes, it accredits to carry out projects. However, our study reveals that they are not enough. They are limited in scope and do not cover the whole procurement cycle.

Once an organisation has been accredited by the GCF and funding is approved, the accredited entity uses its own procurement processes. There are also very limited provisions for the GCF to follow up on compliance; the GCF has no way to know if the organisations are complying with transparency and disclosure commitments.

Additionally, provisions about consulting with the public, who are the ultimate beneficiaries of these billions in funding, and supporting civic engagement during procurement processes are extremely limited. Yet, citizen involvement in big public projects is vital. It helps to reduce the risk of corruption or irregularities. And when citizens trust that their money is being spent correctly, projects also have more legitimacy.

The report looked at two case studies to better understand effective procurement systems: the Menengai Geothermal Project in Kenya, and the Efficient Lighting and Appliances Project in Mexico.

In Kenya, the current national procurement laws need to be strengthened, so international support and standards from bodies like the GCF can help increase transparency and accountability. In Mexico, as a good practice example, tendering and contracting procurement systems are more advanced and offer a higher level of transparency and public participation. This suggests that some national systems might be more effective than the standards applied by the GCF.

So, here’s what we suggest the GCF can do to ensure that the billions of dollars flowing into climate finance aren’t lost to corruption:

• actively identify, support and promote the highest levels of disclosure and participation around procurement processes for GCF accredited entities
• adopt the Open Contracting Data Standard and promote related best practice every step of the way
• allocate sufficient financial and human resources to ensure adequate follow up with accredited organisations to make sure they are applying accreditation standards correctly

Governments, civil society and progressive businesses have an important role to play to safeguard climate finance in their countries. When all parties promote stronger safeguards to avoid mismanagement and achieve better transparency and availability of information, all of society benefits.

For more detailed recommendations, see the full report: Safeguarding Climate Finance Procurement: National-Level Procurement of the Green Climate Fund.