Avoid our mistake: Don’t let World Bank host loss and damage fund

At talks in Abu Dhabi today, the US and EU are pushing for the new loss and damage fund to be hosted by the World Bank.

As a board committee member of a fund hosted by the World Bank, I want to warn them. Being hosted by the World Bank is expensive and it erodes your independence and identity.

I’m the civil society representative on the board finance committee of the Global Partnership for Education (GPE), which channels around $5 billion of funding to education projects in low and lower-middle income countries.

The fund has been hosted by the World Bank for about 20 years. For over twelve of those years, there have been recurrent board discussions about moving the fund out of the World Bank and the board will discuss this again next month.

Expensive

The costs of being hosted by the World Bank are one of the most significant concerns. In recent years, the core administrative charge paid to the World Bank for hosting the GPE secretariat has been rising.

At one point, the bank charged an administrative fee for hosting the secretariat that amounted to 12% of the GPE secretariat’s costs.

A few years ago, this went up to 17% and then the bank tried to increase it to 24%. This provoked outrage from the GPE board who negotiated it down to 20.5%.

GPE are told this is an exceptional arrangement and that all other fund secretariats hosted by the World Bank are being charged an administrative fee of 24%.

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This figure could go up at any time. Once you agree to be hosted, it seems the World Bank can change the rules and increase the levies.

One of the main reasons the World Bank’s fees are going up is because because of a wider financing crisis in the World Bank owing to the cost of its final salary pension scheme from the 1970s to 1990s.

In effect some GPE funds, raised in the name of education, are paying for luxurious retirements for ex World Bank employees who left work before GPE was even created.

These direct costs are exacerbated by other costs. The GPE has to follow the excessive and hierarchical salary structure of the World Bank – with all staff being employees of the World Bank – and effectively having to pledge loyalty to the Bank.

The costs of having the main office in Washington DC are considerably higher than most other locations. The travel, security and insurance costs are also high – with most staff flying business class and staying in five-star hotels.

Not independent

In 2012, an independent review of the GPE’s hosting arrangements raised the problem of having a GPE secretariat serving two masters.

The GPE board is relatively democratic and it should be able to develop its own strategy, policies and procedures. Being hosted by the World Bank limits this.

When the GPE board agreed to expand the staffing of the GPE secretariat, this was directly blocked by the World Bank who had a recruitment freeze in place.

These issues of independence were partially addressed by a 2019 memorandum of understanding between the GPE and the World Bank relating to staffing issues but there are still challenges.

Being hosted by the World Bank “means operating within the business model of the host” (as flagged in the 2012 review). This includes following very heavy procurement and recruitment processes.

While some see it as a benefit that funds can draw on the World Bank’s expertise, this is not always neutral and it often comes with a certain perspective and even ideological baggage.

For example, the GPE has a strong position about not supporting any for-profit education provision – but agreeing this position was difficult when the World Bank itself was supporting one of the most problematic for-profit actors.

Loss of identity

Being hosted by the World Bank takes away a fund’s identity it country level. Many see the GPE as just another World Bank project.

This seems to be a view also held by some World Bank country managers. One particularly problematic dimension of this is that when countries want World Bank funds for education, they are encouraged to use the GPE pot – displacing other funds for education.

Something similar could happen with loss and damage or wider climate finance. The World Bank could see itself as absolved of any wider responsibility if it takes on the loss and damage fund. 

It is not a surprise that the US and Europeans are keen to see the loss and damage fund hosted by the World Bank.

It would give them more control. It would fit within their business model and comfort zone for such structures.

But it would be a disaster from the point of view of effective action on loss and damage. We must avoid the mistakes made by the GPE.

David Archer is Action Aid’s head of programmes, a former civil society representative on the board of the Global Partnership for Education and a current member of the board’s finance committee.

Correction: This article was updated on 6 November to clarify that the World Bank takes a percentage of the running costs of a fund’s secretariat on a cost recovery basis. It is not correct to say, as this article originally did, that if the loss and damage fund gets $100 billion a year, $24 billion would go to the World Bank. For the GPE, the combined cost of having the World Bank as host of the Secretariat and trustee of the fund amounts to around 1.5% of annual income.