Forest Investment Program (FIP)

CIFs Monitor 8

23 October 2013

Read a pdf version of CIFs Monitor 8

Private sector proposals recommended

Decisions are due to be made on funding for proposals under the FIP private sector set-asides at the sub-committee meeting in October. This follows discussions earlier this year on the procedures for how the $56 million fund to engage the private sector on reducing emissions from deforestation and forest degradation (REDD) and sustainable forest management will work (see CIFs Monitor 7). The proposals will be assessed on their coherence with country investment plans, level of innovation and feasibility.

A total of 11 proposals were received from Brazil, Burkina Faso, Democratic Republic of Congo (DRC), Ghana and Mexico and one region (Africa), which have been assessed by an August appointed independent expert group. The group has recommended four proposals from Brazil, Burkina Faso, Ghana and Mexico, totalling $20.3 million in loans, to be discussed further in the October meeting. Furthermore, proposals from Burkina Faso, Brazil and two from DRC, totalling $31 million in loans, were also recommended, subject to further information.

A March CIF report Incentivising the involvement of the private sector in REDD+ identified key lessons learnt to date including that: the FIP’s added value is to focus on advisory services; the private sector is a key source of REDD+ finance and private sector engagement is dependent on demonstrated profitability of sustainable forest management.

Results monitoring and reporting framework

At the November 2012 FIP sub-committee meeting there was disagreement on a ‘simplified’ results framework with a decision taken to include a broader set of indicators (see CIF Monitor 7). At the May meeting it was decided to request the CIF administrative unit to hold a session at the October 2013 FIP pilot countries meeting for further discussion and recommendation on the proposed core indicators. A final version of the core indicators will be presented for approval at the FIP October sub-committee meeting. In addition, the October FIP sub-committee meeting will discuss the reporting proposal which sets out the areas to be reported on biannually by FIP pilot countries including: common themes (GHG emissions reductions/ enhancement of carbon stocks, and livelihoods co-benefits); other relevant co-benefit themes (biodiversity and other environmental services; governance; tenure, rights and access; capacity development); and a narrative report on common topics to be agreed.


Forest Investment Program (FIP) explained

The FIP is a financing instrument aimed at assisting countries to reach their goals under reducing emissions from deforestation and degradation (REDD+). It aspires to provide scaled up financing to developing countries to initiate reforms identified in national REDD+ strategies, which detail the policies, activities and other strategic options for achieving REDD+ objectives. It anticipates additional benefits in areas such as biodiversity conservation and protection of the rights of indigenous people.

The FIP covers eight pilot countries, out of which seven investment plans have been endorsed (Brazil, Democratic Republic of Congo, Laos, Mexico, Burkina Faso, Ghana and Indonesia). Peru is expected to finalise its plan by end of 2013.

As of end June, $639 million had been pledged to FIP, and funding for three projects for a total of $73 million ($45 million in grants and $28 million in concessional loans) had been approved. Cumulative funding decisions by the FIP sub-committee total $89 million.

Graph 1: Funding for the Strategic Climate Fund. Covers the Pilot Program for Climate Resilience (PPCR), Forest Investment Program (FIP) and Scaling up Renewable Energy Program in Low Income Countries (SREP).

Dedicated grant mechanism for indigenous peoples

The aim of the dedicated grant mechanism for indigenous peoples and local communities (DGM) is to “provide grants to indigenous peoples and local communities in country or regional pilots to support their participation in the development of the FIP investment strategies, programmes and projects” (see CIFs Monitor 7, 6, 5). According to the annotated provisional agenda for the October FIP sub-committee meeting the DGM has now “moved into the preparation stage for the projects implementing the mechanism at the country level.” The October FIP semi-annual operational report states that “seven of the eight FIP pilot countries have requested the World Bank to implement the DGM in their countries”.  The final framework operation guidelines were endorsed and published in mid-September. They set out how the DGM will be implemented and provide information on: governance, review, safeguards, grievance and complaints procedure. At the May meeting the sub-committee approved funding for IBRD preparation and supervision services to Brazil (first tranche of $300,000, total budget $700,000) and Ghana (first tranche of $155,000, total budget $500,000).

A total of $6.5 million has been requested to establish the DGM in Brazil. This funding is proposed to cover several components under consideration including increasing indigenous peoples’ and local communities’ capacity for investment preparedness in relation to forest investments, payment for environmental services and carbon payments; funds for indigenous peoples to manage “small-scale activities for sustainable development and natural resources”; and communication, monitoring and evaluation and reporting.

Project funds requested for Ghana total $5.5 million to cover community capacity building; small grants “to support the implementation of community level activities related to economic activities and rural livelihood practices that enhance climate change mitigation and adaptation, investments in sustainable management of forest landscapes, development of alternative and sustainable livelihoods”; and communication and coordination.

Table 1: DGM country programme indicative allocation


Country MDB responsible Indicative allocation of DGM resources (mill.US $)
Brazil IBRD 6.5
Burkina Faso IBRD 4.5
Ghana IBRD 5.5
Indonesia IBRD 6.5
Lao PDR IBRD 4.5
Mexico TBD* 6.0
Peru TBD* 5.5
Global IBRD 5.0
Total 50.0

Programme updates

Lao PDR: rehabilitation project approved

In June the sub-committee approved $3 million in grant funding for advisory services provided by the IFC for a smallholder forestry programme. The aim of the programme is to “rehabilitate degraded forests and grasslands”, to reduce emissions of greenhouse gases and improve rural community livelihoods (including training 15,000 farmers in farming and business practices).

Prior to approval the US and the UK raised a number of issues, including that there was no clear theory of change or sufficient information on how funds would be spent. Both countries also asked if the programme could lead to perverse incentives to clear additional land. The IFC responded that the “programme will be implemented on lands that have already been deforested and settled, and are unlikely to be reforested by natural means. Additionally, the programme aims to prevent further conversion of forests to agriculture.” The UK also asked “why the company that is likely to be the client in this project cannot be named?” The IFC responded that it was engaging with “one of the largest international forestry companies by sales” but could not reveal a name for confidentiality reasons. Furthermore, the UK asked if the planned plantations are “going to result in extensive areas of monoculture? What are the implications for biodiversity and for livelihoods reliant on other forest products that are currently available from ‘degraded areas’?” The IFC replied: “The plantation compartments of mainly acacia and eucalyptus trees are being established in a mosaic of planted and natural vegetation.”

Peru: plan strongly contested by indigenous groups

At the May FIP sub-committee meeting the co-chairs invited Peru to submit by mail its draft investment plan, which could be for up to $50 million. The plan will be presented for endorsement at the October FIP sub-committee meeting.

Earlier in February the Peruvian Indigenous Peoples Association AIDESEP (Inter-Ethnic Association for the Development of the Peruvian Amazon) wrote to the FIP sub-committee and the Peruvian government to ask that approval of the investment plan be delayed until agreements made with FIP consultants were included (see CIF Monitor 7). AIDESEP says the indigenous groups it represents own 13 million hectares of Amazonian land. The IDB responded in an April letter saying the investment plan was still in draft form and would be made publicly available for consultation with stakeholders including AIDESEP and indigenous peoples organisation Confederation of Amazonian Nationalities of Peru (CONAP). AIDESEP wrote to the IDB again in July to express its strong disagreement with the draft investment plan because there has not been sufficient consultation and it did not comply with indigenous rights, territories and safeguards. Furthermore, the letter strongly criticised the investment plan’s bias in favour of private sector interests such as logging, plantations and palm oil. They also raised concern that priority was being given to “offsets” instead of the Amazonian indigenous REDD+ proposal.

A fourth joint mission by the IDB, World Bank and IFC visited Peru in September to meet stakeholders and prepare the investment plan. However, following the joint mission AIDESEP and CONAP sent a letter to the FIP sub-committee, Peruvian government, IDB and World Bank criticising the final version of the investment plan for including new text they had not seen and also failing to include certain prior agreements. As a result AIDESEP and CONAP said they should be allowed to attend the October sub-committee meeting as observers. They expressed particular concern that the new investment plan text referred to indigenous peoples as a cause of deforestation and that it did not include their proposal for public funding for REDD+ and not only “private markets for environmental services”. AIDESEP did acknowledge some of its key demands had been included such as $14.5 million for land titling, safeguards, community forestry management and the Amazonian indigenous REDD+ proposal.

Burkina Faso: approval delay after queries on forest roads and alternative livelihoods

Two projects are currently under consideration in Burkina Faso. In August $11.5 million was requested for the participatory forest management project for REDD+ with support from the AfDB. The objective of the project is to contribute to improving the carbon sequestration capacity of “gazetted forests” and reducing poverty in rural areas. It will cover 284,000 hectares in 12 forest reserves in four regions of the country. It is projected to capture 4.7 million tons of CO2. The project approval has currently been postponed.

The US and the UK both asked how building 2,487 kilometres of forest roads “will lead to reduced deforestation and forest degradation?” The AfDB responded that the “roads are rather forest (paths) roads built to facilitate the management, maintenance and protection of forest. These forest roads will be maintained by the communities”. The UK also asked “to what extent are households in the project areas dependent upon the gazetted forests (unregulated activity) for their livelihoods? In the event of a reduction in these activities in the gazetted forests, to what degree will households lose?” They also asked for clarity on what would happen to communities living in the gazetted areas saying “we assume that they are NOT to be removed from these areas” and requested additional analysis on the potential winners and losers under the project. The US asked for clarification on the nature of “compensation to those who will no longer have access to forests after the project is implemented” and whether there is “any resettlement activity planned in this project?” The AfDB replied: “there is no displacement in any forest of the project.”

Furthermore, the US asked “what particular activities do you expect the PES [Payment for Environmental Services] will be required in order to incentivise, and to what extent is the rationale for the PES system to compensate for reduced incomes caused by the adoption of alternative livelihoods?” The AfDB responded that the objective of the forest co-management section of the project was “to make the communities responsible for forest and infrastructures including forest roads maintenance in return for payments for environmental services”. Moreover “in the longer term, this PES will rely on resources derived from the sale of carbon after the operationalisation of REDD+ in Burkina Faso. The project is expected to contribute to establishing the REDD+ strategy in Burkina Faso. It will therefore be used to prepare the country for future environmental service payments based on duly measured GHG reduction efforts.”

Following further correspondence with AfDB in September the US and the UK requested more information about project implementation before it goes ahead. They particularly asked for clarification on how feasible alternative livelihood strategies are in practice and more analysis on the impact of reduced access to fuel wood: “we are still not convinced that the fuel wood issue has been adequately addressed.”

A decentralised forest and woodland management project with a budget of $16.5 million, as well as $325,000 for AfDB project preparation and supervision services (second tranche of $650,000 total) was due to be approved in mid-September but has been delayed by donor queries. The US and the UK queried what consultations had already been carried out with communities with the US stating “communities must be involved in decisions on alternative livelihoods”. The UK requested more details on how the project would protect biodiversity and ecosystem services that are under threat because “there are no details provided on activities to do this, and no indicators in the logframe.” Furthermore, in reference to both project proposals the UK said “it is evident that they rely one upon the other to meet their objectives” and for this reason requested “a reworking of both proposals” to show how the projects would fit together and to address questions previously raised on livelihoods, PES, biodiversity and project calculations.

Tropical rain forest stream.Oliver van S.

Democratic Republic of Congo: project approved despite questions on capacity and poverty targeting

In August the sub-committee approved $21.5 million in grant funding for an integrated REDD+ project in the Mbuji-Mayi/Kananga and Kisangani basins with support and supervision services of the AfDB (for which it will receive a final tranche of $300,000, total budget of $900,000). The project’s “goal is to contribute to the reduction of greenhouse gas (GHG) emissions from deforestation and forest degradation while helping to reduce poverty among the populations” in three regions. Specifically, the project aims to: (i) decrease the rate of deforestation and forest degradation; (ii) promote the sustainable development of the wood energy sector; (iii) promote land security and the promotion of alternatives to the slush-and-burn agricultural practices. The main beneficiaries are claimed to be local communities, indigenous peoples and the local private sector.

Prior to approval several donors asked for clarification on the project design. The UK, US, Australia and Japan all queried whether there was sufficient government capacity to implement the project. The UK asked for more detail on how the PES schemes would work. The AfDB replied that payments to communities would be dependent on “compliance with the land use plans” including investment and “compliance with the zoning (which means compensation for maintaining carbon stocks)”. Several donors also wanted clarity on whether the project would be financed by voluntary carbon markets and how this would affect calculations for emissions savings. The AfDB responded that “the project is not designed for seeking immediate carbon payments” but later added the aim was for PES funding to come from carbon revenues “generated at the national level through the sales of REDD+ carbon credit”.

The UK asked: “Will there be any groups (especially the poorest) that currently rely on degraded areas targeted for reforestation that might ‘lose’ in terms of access once these areas are designated for tree planting?” The AfDB replied “plantations should respect the land use plans, which in turn integrate the needs of the poorest as well as the designated areas to fulfil such needs. Furthermore, appropriate mitigation measures recommended by the environmental and social safeguards will be applied where plantations would actually create restrictions of access for the poor.” The US asked: “will the project support industrial scale logging in primary tropical forests?” The AfDB replied, “The project will not support any industrial logging activity and … FIP interventions are outside the forest concession areas”.

Ghana: REDD+ project approved

In September the FIP sub-committee approved $9.75 million for a project to engage local communities in REDD+ and enhancement of carbon stocks.  The AfDB will receive $200,000 for project implementation and supervisory services (total cost $400,000). With a total cost of $15.8 million, the project will be implemented over five years. The project will cover two regions with an objective to “contribute to the increase of carbon stocks and poverty reduction in the off-reserve areas of the high forest zones by engaging communities in land management approaches that generate direct financial and environmental benefits.” The project forms part of a coordinated investment plan to be co-financed through basket funding with the World Bank and the IFC. This will lead to emission reductions and the protection of carbon reservoirs as part of the REDD+ agenda. The Bank-financed portion of the investment plan supports (i) restoration of degraded agricultural landscapes, (ii) climate-smart agriculture, (iii) livelihoods improvement and (iv) capacity building.

The UK agreed to the project but asked for clarification on compensation to cocoa farmers to reduce deforestation and sources of income for communities working on tree plantations. The US also accepted the project but asked for more information on the selection of plantation locations and how credit would be accessed.

Indonesia: civil society protests of FIP

Protest against FIP in Indonesia September 2013Although controversial, the $70 million investment plan was endorsed at the November 2012 FIP sub-committee meeting (see CIFs Monitor 7, 6, 5). In late September, the Alliance of Yogyakarta Civil Society Against the Forest Investment Plan criticised the FIP in Indonesia “due to non-transparent information and non-inclusive to peoples’ participation, furthermore, due to its direction that strengthens tenure conflicts, violence, corruption and gender injustices”.  In a letter addressed to the FIP sub-committee, World Bank, ADB and IFC, the Alliance wrote “FIP Indonesia will bring benefits to private businesses in forestry sector only. For example, FIP Indonesia includes 750,000 hectares, majority-owned by the forest concession holders, wood plantations and also oil-palm plantations. Hence FIP Indonesia will strengthen expropriation and marginalisation of rights of indigenous and local communities and women in the governance of forest resources.”  The Alliance requested to attend the FIP pilot country meeting held in Indonesia in late September as observers. The meeting covered the FIP reporting framework, Indonesia’s experience of FIP and the role of the private sector. As the Alliance received no response they held a protest outside meeting.

Brazil: forest information project approved despite complaints on due diligence

In mid-October $16.45 million was approved by mail for the project Forest information to support public and private sectors in managing initiatives. An additional $250,000 was approved for IDB supervisory services (the final tranche of a total of $500,000). The project aims to “contribute to the promotion of sustainable programmes aimed at mitigating GHG emissions in the Cerrado biome”. The UK said it was finding it difficult to access “social, environmental appraisals, theory of change, operational manuals and additional annexes” without which “it is difficult for us to fully assess this project”. Neither the CIF administrative unit nor the IDB had replied at the time of writing.