The UN’s flagship climate fund has suspended payments to a $117 million forest protection project in the Central American nation of Nicaragua over human rights concerns, the first such decision since its creation in 2010.
An investigation by the fund’s independent complaint mechanism found a series of failures that could “cause or exacerbate” violent conflict between indigenous people and settlers.
The Green Climate Fund (GCF) will not provide any money to the project managed by Nicaragua’s authoritarian regime until it fully complies with the fund’s rules, its board ruled at an annual meeting in July.
This marks the first time the GCF board puts on hold an approved project over human rights concerns. The decision comes at the end of a process that took more than two years since a coalition of local and international NGOs filed a complaint.
But the fund stopped short of entirely scrapping the project, as local activists requested. The Nicaraguan government now has the chance to make it compliant with the GCF rules.
A GCF spokesperson told Climate Home that the matter “has received, and continues to receive, its highest attention”. They added that the fund reserves the right to exercise its legal rights in case the issues are not addressed to its satisfaction.
Human rights abuses
The project, which was approved in 2020, aims to reduce deforestation in the Unesco-designated Bosawás and Rio San Juan biosphere reserves in the Caribbean Region of Nicaragua.
The region is gripped by an increasingly violent conflict between indigenous communities and settlers, who are grabbing land to exploit the forest’s resources and farm cattle.
Independent legal observers have documented repeated attacks against indigenous people in the area with dozens of people murdered, kidnapped or raped over the last few years.
A report by the internal redress body said the complainants’ concerns that the project may fuel further violence were justified.
It also found the project had been approved even though it did not comply with a series of GCF’s policies and procedures. Investigators highlighted the failure to carry out due diligence on conflict risks and human rights violations and to conduct free and informed consultations with indigenous communities before the project’s approval.
These failures “may adversely impact the complainant(s) and other indigenous communities in the project areas”, the report said.
A GCF spokesperson said the fund was not aware that the development of the funding proposal was not in compliance with its policies at the time of the project’s approval. New evidence brought to light subsequently through the independent investigation showed that some of the information presented by the project proponent, as part of its due diligence, was not accurate or correct, the GCF added.
Nearly a year after the investigation was concluded, the board has now requested the GCF Secretariat, its administrative arm, to put the project on hold until it respects the fund’s policies and procedures.
The ruling’s summary does not specify if all of the issues raised through the complaint mechanism will need to be addressed.
The result is bittersweet for the groups behind the complaint.
Florencia Ortuzar, a lawyer at the Interamerican Association for Environmental Defense (AIDA), says that, even if the outcome may ultimately be positive, the decision gives no clarity as to what process the Secretariat will follow. “We do not know which specific issues of non-compliance will be looked into nor how they will aim to fix them”, she added.
Calls for cancellation
Amaru Ruiz, director of the Nicaraguan organisation Fundación del Río, says the ruling validates indigenous populations’ concerns, but he believes the programme should be axed rather than simply improved.
“A project that violates human rights, consultation processes and a series of procedures should be cancelled”, he told Climate Home News. “The problems are substantive, not just formalities”.
The GCF Secretariat will now need to work with the Nicaraguan state apparatus and the Central American Bank for Economic Integration, its funding partner on the project, to resolve the issues.
The government led since 2007 by president Daniel Ortega has been responsible for “widespread and systematic human rights violations that amount to crimes against humanity”, according to the United Nations Group of Human Rights Experts on Nicaragua.
Ruiz claims the Nicaraguan regime does not have the political goodwill to play within the rules. “It is only after the financial resources, so I believe it will try to show on paper that the project is now compliant even if that is not the case”, he added. “We will see if the Secretariat acknowledges its previous mistake and will make sure regulations are properly applied now”.
Lack of transparency
The complainants’ worries are compounded by what they described as a lack of transparency during the lengthy redress mechanism.
Investigators concluded the reviews in August 2022 but their findings have only been made public now following the completion of the complaint process. The GCF’s board members discussed the report during three separate meetings before making a final decision nearly two weeks ago.
The discussions happened behind closed doors and public updates on the case were limited. This prompted some complainants to criticise the process as “unfair, non-transparent and deficient”.
Aida’s Ortuzar told Climate Home News “this is especially concerning as it is the first time a complaint reached the board and it sets a worrisome precedent”.
The report by the redress mechanism also raised concerns over the way the GCF relies heavily on information submitted by project proponents to make decisions on whether to fund them.
“This leaves the GCF extremely vulnerable to policy and safeguards non-compliance that can result in huge reputational risks to the fund”, the investigators wrote.
The article was updated on 27/07 to include comments from the Green Climate Fund received after publication