In the first such decision since its creation, the Green Climate Fund pulled out of a project in Nicaragua after developers failed to address environmental and social compliance issues
The UN’s flagship climate fund has pulled out of a forest conservation project in Nicaragua after local community groups complained about a lack of protection in the face of escalating human rights violations in the area.
It is the first such decision the Green Climate Fund (GCF) has taken since its creation in 2010.
The GCF said on Thursday it had terminated its agreement with project developers after their failure to comply with its rules on environmental and social safeguards resulted in “legal breaches”.
In 2020, the fund committed $64 million to the programme run by the Nicaraguan government and the Central American Bank for Economic Integration (CABEI), which aimed to reduce deforestation in the UNESCO-designated Bosawás and Rio San Juan biosphere reserves.
The GCF said it had not paid out any funds before terminating its support for the project and no activities had yet taken place.
Community groups warned that the project was going to be carried out in reserves being deforested by a massive invasion of settlers that use violence against Indigenous people with impunity due to weak law enforcement action. They worried that the programme – which was to be overseen by state authorities – would worsen those conflicts and fail to protect the rights of Indigenous communities.
Amaru Ruiz, director of the Nicaraguan organisation Fundación del Río, which supported the affected communities, welcomed the decision by the GCF.
“This sets a precedent globally for the functioning of the fund,” he said. “It is also a recognition of the struggle and resistance of the Indigenous people and Afro-descendant communities of Nicaragua, and it shows that there is a window of opportunity to insist on the fact that climate projects must not violate human rights.”
Fuelling conflicts
The decision concludes a grievance process that has lasted nearly three years since a coalition of local and international NGOs filed a complaint with the GCF. They accused the project of fuelling a violent conflict between Indigenous communities and settlers who were grabbing land to farm cattle and exploit resources, as well as failing to consult local people.
The Bosawas Reserve in Nicaragua has been hit by illegal mining and logging despite protected status. Photo: Rebecca Ore
Independent legal observers have documented repeated attacks against Indigenous people in the area with dozens murdered, kidnapped or raped over the last few years.
An investigation by the GCF’s independent complaint mechanism deemed their concerns justified. It found a series of failures with the project that could “cause or exacerbate” violent conflict. The probe also highlighted a lack of due diligence on conflict risks and human rights violations and the absence of free and informed consultations with Indigenous communities before the project’s approval.
The GCF said it was unaware that the project was not in compliance with its policies at the time of its approval and that new evidence had subsequently been brought to light.
Late-stage consultation
Following the internal investigation, the GCF board agreed last July to suspend the project until it addressed local concerns and fully respected the fund’s policies and procedures. It effectively gave the project developers one last chance to fix the problems.
In an attempt to remedy the issues, CABEI carried out a consultation and engagement process with local communities between August and September. The project developer said a total of 5,550 people participated in 69 events across the region.
Fossil fuel firms seek UN carbon market cash for old gas plants
But NGOs criticised it as a “sham”, saying participants were only provided with a brochure in Spanish – a foreign language for many Indigenous people – and were given limited freedom to debate the proposal.
“There’s been an increase in militarisation in the territory,” said Ruiz. “At least eight Indigenous community forest guards were detained after they had denounced the situation of encroachment on their territory”.
China steps away from 2025 energy efficiency goal
Since 2007, Nicaragua has been ruled by an authoritarian regime led by President Daniel Ortega. His administration 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.
CABEI detailed in a report sent to the GCF in October the steps that had been taken to make the project compliant with its rules. But the fund’s secretariat, its administrative arm, found the issues were not addressed to its satisfaction and decided to terminate its participation in the programme.
It communicated the decision to its board members at a meeting in Kigali, Rwanda, this week.
Lesson for the future
The GCF secretariat says it is now committed to working collaboratively with CABEI and the Nicaraguan government to “develop a clear strategy to conclude the project in an orderly and responsible manner”. That will include informing people on the ground and “managing the expectations” of the potential beneficiaries.
CABEI did not immediately respond to a request for comment.
Florencia Ortúzar, a lawyer at the Interamerican Association for Environmental Defense (AIDA), said she hoped the GCF would learn a lesson from this case.
“It is a reminder of the importance of including local communities from the very beginning of project design”, she told Climate Home. “The GCF policies and safeguards exist to prevent those regrettable situations and must be implemented rigorously and consistently.”
