How Well Can the UN Development Program Manage Global Climate Funding?
The United Nations Development Program is still facing calls for accountability regarding the reported mismanagement of a project that aimed to mitigate climate change and was funded by a primary entity in the UN system. The project ran from 2010 to 2017 and was meant to improve energy efficiency in Russia, but internal reviews reveal that the financing was mismanaged, and the $7 million project to reduce greenhouse gas emissions was not successful.
A document submitted to the UN Development Program and an overview of the UN’s system to address concerns raised by whistleblowers generally indicate that there has been little progress in ensuring that funding earmarked for climate change is allocated effectively.
The UNDP is the foremost implementing agency for the Global Environment Facility and the Green Climate Fund, two of the most important climate-finance programs originating through the UN Framework Convention on Climate Change. Based in Bonn, Germany, the UN body, abbreviated as UNFCCC, provides the global community a framework to stabilize greenhouse gas emissions and recognizes that rich countries bear the most responsibility for climate change worldwide.
In 2009, the organization formalized a pledge by rich countries to contribute to a $100 billion a year fund toward mitigating and adapting to climate change for five years, starting in 2020. The 2021 Conference of State Parties session (COP26), held last fall to advance the UN-led work on climate change through the 2015 Paris Agreement, delivered disappointing news: the $100 billion annual goal to help poorer countries manage global warming wouldn’t be reached in 2021 or even 2022. Instead, the delivery plan expressed “confidence that it will be met in 2023,” halfway into the five-year commitment.
As the need for climate funding grows, so does the complexity of the UN-led global climate finance system, including the difficulty of ensuring money is spent properly.
“It’s a complex and fragmented system of delivering climate finance to developing countries,” said Timmons Roberts, a professor of environmental studies and sociology at Brown University, in Providence, R.I., who has studied the flow of climate finance. “There’s very little coordination. There’s not good data, even on what’s been promised; there’s even less good data on what’s actually arriving in the developing countries and being put to use.”
The UNFCCC provides one of the few central points in what Roberts calls the climate finance “nonsystem,” and it has accredited the Global Environment Facility (GEF) and the Green Climate Fund (GCF) to gather and administer the money. The GEF was established in 1991 as part of the World Bank, which still provides administrative services for the facility even though it now operates autonomously. The facility also administers several other UNFCCC-accredited funds and is run by Carlos Manuel Rodríguez, a former environment and energy minister of Costa Rica.
The Green Climate Fund was created in 2011 and operates independently out of South Korea. It’s the larger of the two funds and is led by Executive Director Yannick Glemarec, a Frenchman who has held leadership roles at the Global Environment Facility, UN Women and the UN Development Program. Both funds rely on third-party entities, usually referred to as “implementing agencies,” to establish the projects to which they allocate funding. In total, the funds have disbursed just under $35 billion toward climate projects to date, according to their websites.
“What we need is in the trillions of dollars” to meet the goal of limiting future warning to 1.5 degrees Celsius, said Charlene Watson, a research associate at ODI, a British think tank that researches climate risk and resilience. “The effectiveness of these various workflows driving finance for climate action needs to be huge.” According to Watson, proving the impact of the funding that has already been pledged is critical to “unlock the trillions” that can be invested in climate action by the private sector.
“If we don’t see this mobilization of private finance from the use of public and concessional finance, we will never meet . . . the 1.5 degrees Celsius temperature target,” she said in an interview with PassBlue on Jan. 18.
Jim Wasserstrom, an anticorruption consultant who has worked with several whistleblowers in the UN system, said, “Yes, all that money’s been spent, but has it been effective?”
A close look at the UN Development Program, which allocates much of the funding coming through the UNFCCC, suggests a lack of full accountability, according to documents seen by PassBlue and a staff member who is familiar with several of the projects where corruption has been alleged and who asked to remain anonymous for fear of retaliation. “The money goes into a black hole,” the person told PassBlue in an interview.
What happened in Russia
In 2010, the Global Environment Facility approved a $7.8 million project to improve energy efficiency labeling for lighting and household appliances, from air-conditioners to fridges, across Russia. By the project’s end in 2017, according to its terminal evaluation, the program achieved no reduction in greenhouse gas emissions. The project was scrutinized heavily, particularly after the publication of a 2019 Foreign Policy article reporting allegations of corruption in the operation.
The UNDP’s final review of the project, released publicly in 2021, notes that by the time the Foreign Policy article was published, it was clear for years that the project, called Standards and Labels, had serious problems. A 2017 report by the UNDP noted that money spent between 2010 and 2014 “could not be matched with ‘useful outputs to advance the objectives of the S&L project.’” The final evaluation of the project shows roughly $4 million in “friends and family contracting.”
“The failures were not caused due to a lack of warnings but despite the warnings,” wrote Amitav Rath, who was contracted to author the 2021 UNDP review. Rath now runs Policy Research International, an Ottawa firm that specializes in program evaluation and implementation with a focus on climate change and development. The Standards and Labels project went through two evaluations — the norm for GEF projects carried out by the UNDP — which noted “the project was incoherent” and there were “strong indicators of deliberate misappropriation of funds.”
Rath’s report concluded that a lack of due diligence and “surprising lack of concern by some individuals” enabled conflicts of interest to persist and that the project’s deficiencies “required coordinated management.” He also noted that investigations into allegations of whistleblower retaliations were “lengthy” and appeared “unsatisfactory.”
In 2019, Achim Steiner, the administrator of the UNDP, said in an address to its executive board: “If I don’t spend a lot of time speaking to you perhaps about things that are going wrong here, it is because I’m trying to provide the big lines with which UNDP is trying to address the future of development.” He added that the problems amounted to just one of more than 4,500 projects administered by the agency.
A broader look at its operations reveals that the Russian project’s problems reflect an overall trend. One confidential memo seen by PassBlue that was anonymously submitted to the UNDP, titled Broad Misconduct 2, alleges wrongdoing in at least 18 projects funded by the Global Environment Facility and Green Climate Fund that were implemented by UNDP across Eastern Europe and Central Asia. It notes “a culture of covering up fraud” and an “unrealistically high bar” for proof required to hold accountable UNDP insiders involved in fraud.
The memo states that whistleblowers reporting fraud were typically removed from projects rather than having their claims heard, and it lists nine countries where UNDP employees were either hired despite conflicts of interest or let go after trying to draw attention to funding mismanagement. The memo is largely based on “a primary whistleblower source.” Where possible, PassBlue verified information in the memo by cross-referencing the details with public documentation.
“A network of persons within UNDP (at the international level) appear to be supporting each other in carrying out and covering up fraud,” the memo notes.
“Whistleblowers are the number one tool to combat fraud and corruption,” said the UNDP staffer who spoke to PassBlue and asked to remain anonymous. “But if you come forward, you get no support.” The person added that the threat of becoming unemployed has created a “culture of fear” for people in the organization seeking to address mismanagement.
Wasserstrom, the anticorruption consultant, told PassBlue that “there are hundreds, if not thousands of people who complain to [the UN’s] ethics office,” but that few complaints are acted on.
A December 2018 recording of Ben Swanson, an assistant secretary-general in the Office of Internal Oversight Services, says that of 24 complaints from whistleblowers passed into his office between 2016 and 2018, only two resulted in disciplinary action.
“This whole thing of retaliation has got the potential to cause us massive, massive problems,” Swanson tells an investigator in the recording, adding that some cases are “horribly complicated” and “not worth investing any time in.” In the recording, Swanson remarks about the office’s intention to “get the Americans off our backs, which means they don’t reduce their contribution.”
In an email to PassBlue in response to these allegations on Jan. 24, 2022, the UNDP media team said that the organization “underwent a comprehensive audit by UNDP’s independent Office of Audit and Investigation,” and that the GEF and GCF portfolios have been reviewed by outside audit firms. The email also notes more than 30 country-level audits, more than 120 project-level audits and over 100 midterm and terminal reviews of the projects like the one that found Standards and Labels failed to cut greenhouse gas emissions.
“Significant progress and change have occurred at different levels of the organization . . . UNDP is confident that the rigorous steps we are taking will further strengthen our position as a committed partner of the GEF and GCF,” the email response said. The media team did not comment on a question about the Broad Misconduct 2 memo.
Peter Gallo, a former investigator for the UN Office of Internal Oversight Services, said, “The problem is you’re leaving it to the organization to police itself, and we have 75 years of solid proof that self-regulation does not work.”
What’s the alternative to the current financing system?
“All of us working in this area know there are faults and failings,” said Watson of ODI, the think tank where she researches climate finance delivery. “We’ve said for 10 years that this architecture is broken. . . but nothing has changed, right?”
She added: “What is it that we need to have in the new principles of climate finance?”
Joe Thwaites, an associate at the World Resources Institute, a research organization that specializes in sustainability, points to the direct-access projects carried out by the Green Climate Fund as a potential model to mitigate the risk of corruption. Meant to be the “fund of funds,” according to Watson, it was created almost two decades after the Global Environment Facility was set up. Thwaites said it was “designed in a way to take the best practices and innovate and change the rules.” One way it did so was by sending money directly to institutions in developing countries, such as local governments, nongovernmental organizations or companies rather than through third parties, like the UNDP.
“If you give . . . recipient communities greater ownership over projects and funding, they tend to know their [own] needs much better than international entities,” Thwaites said. He cited a Green Climate Fund project in Mongolia, carried out by the national XacBank.
Fifteen months after an $8.7 million loan was approved for the Mongolia project, a 10-megawatt solar plant was inaugurated in the country’s central region, a big step in moving away from coal. “It was fantastic in terms of how fast they got it done,” Thwaites said. “For a local institution, even if it’s only ten million dollars, which in development project terms is pretty small, that’s a lot of money to them, and they don’t want to sit around letting that go to waste.”
The Green Climate Fund has 113 accredited entities, almost two-thirds of which are local or regional organizations as opposed to aid agencies in rich countries or international agencies like the UNDP. Yet according to a GCF document outlining financing proposals in late 2021, local groups account for only 20 percent of its funding.
Direct-access organizations typically handle smaller projects than their international counterparts, and, according to Thwaites, are held to higher standards on accounting and anticorruption measures. Watson of ODI explained the kinds of questions that local organizations face when they are trying to access international climate funding: “How much money can they absorb, and why?. . . Do you have grievance mechanisms for the people you’re trying to represent?”
“It’s a bit of a dichotomy,” Watson said, “because you need to do your due diligence . . . but at the same time, if you did all of that due diligence, most of these groups wouldn’t be eligible for finance. But we know that we need to get them financed.”
One solution may lie in reconsidering the risk tolerance for different kinds of implementing agencies. “The balance is maybe not right at the moment, and there should be on the international organizations,” Watson noted, because they handle bigger projects with more funding. Projects carried out by developing country organizations, on the other hand, “tend to be quite small and lower risk . . . so even if something does go wrong, there’s less at stake.”
She added: “We absolutely need to get money into local hands, but it’s happening too slowly.”
Author: Anna Bianca Roach.
Anna Bianca Roach is a Simon and June Li Center for Global Journalism Fellow who focuses on climate reporting. She has an M.S. in investigating reporting from the Columbia University Graduate School of Journalism and a B.A. in conflict studies from the Munk School of Global Affairs and Public Policy at the University of Toronto. She has written for OpenDemocracy, The Washington Post and Deutsche Welle.
This article by passblue.com/ is published here as part of the global journalism collaboration Covering Climate Now.
