Forest Investment Program (FIP)

CIFs Monitor 10

12 November 2014

Read a pdf version of CIFs Monitor 10

Controversy in Indonesia, World Bank responds to civil society

Indonesia and international civil society groups have repeatedly protested about the FIP in Indonesia with complaints focused on the lack of consultation, particularly the lack of fulfilment of free, prior and informed consultation with indigenous peoples, fears of militarisation of forest projects leading to human rights abuses, and concern about a planned industrial logging project (see CIFs Monitor 9).

In September the World Bank published a detailed response to a June letter sent by 50 Indonesian groups and international organisations. The Bank responded that “all consultations are in line with the FIP design document” and that “financing will only be provided where free, prior, and informed consultation results in broad community support to the project by the affected indigenous people” while noting “there is no universal definition of consent”.

In its response to the same June civil society letter the IFC said: “where indigenous peoples are among affected communities, IFC performance standard on indigenous peoples will apply, which is consistent with the FIP consultation guidelines”. It also noted that it had not yet selected any companies for FIP projects and when it did this would “include consultation with affected communities, including indigenous peoples in prospective project locations.”

On a potential 700,000 hectares industrial logging project in natural forests, which civil society criticised as a “violation of FIP safeguards which forbid FIP support for industrial logging”, the IFC said, “there is no IFC proposal to support industrial harvesting of natural forest”, adding that “sustainable forest management is a recognised element of REDD+ and does not violate FIP requirements.” It said: “to date, IFC has not invested in natural forestry in East Asia” and that “IFC’s focus has been to promote planted forests on degraded lands.”

On whether there would be any military involvement in FIP project areas (for example to resolve land use conflicts or disputes with communities), the World Bank said it would not fund or support any military involvement, while the IFC said it “performs a rigorous due diligence analysis of prospective enterprises for both investment and advisory services.”

With regards to civil society groups concern about the World Bank and IFC commitment to doing no harm, within the context of FIP, the World Bank replied that its “safeguards are set up for this purpose; to prevent communities from being harmed by investments provided from World Bank projects”, while the IFC said its performance standards “will be followed to ensure environmental and social sustainability in IFC projects.”

According to the FIP schedule of project approvals the IFC-supervised Strengthening forest enterprises to mitigate carbon emissions project worth $34.7 million, that was due to be approved in July, has been delayed until December: “given significant concerns raised by some stakeholders about the support of FIP for private enterprises in the context of Indonesia, IFC is taking additional steps to develop a consultation plan with relevant stakeholders as it identifies project concepts to be pursued with the support of FIP.”

Slow disbursement of funds

The June sub-committee meeting noted “its concerns about slow disbursements” of funds and urged the MDBs, recipient countries and the CIF administrative unit to “explore additional ways to expedite project implementation.” The June FIP semi-annual operational report, covering September 2013 to March 2014, presented at the meeting, revealed that by December 2013 “about two per cent of FIP resources has been disbursed, indicating that to meet current disbursement targets, the FIP would have to disburse 98 per cent of its funds in the next six years.”

According to the October FIP semi-annual operational report, covering April to September, by end September FIP funding for a total of 16 projects and programmes has been approved by the FIP sub-committee, totalling $267 million ($191 million in grants and $75 million in near-zero interest credits). These resources are expected to leverage a total of $843 million in co-financing. The report noted that, “Currently, there are 12 projects which have been in the FIP pipeline for more than 18 months. In addition, for five projects, MDBs did not provide an estimated date FIP funding approval would be requested. Reasons for the delays include finalising project implementation arrangements at both national and provincial levels, uncertainties and delays in counterpart staff and budget allocations, prolonged stakeholder consultations, changes in FIP focal points, national elections and delays in consultant recruitment.”

The sub-committee meeting requested the CIF administrative unit to assess private sector set-asides at the next sub-committee meeting in November. Out of the 24 projects planned under FIP five are private set-aside projects. The June FIP semi-annual operational report revealed that as of March the only project to receive funding was the $15 million Brazil: commercial reforestation of modified lands in the Cerrado (IFC) for $15 million (see CIFs Monitor 9).

Use of potential new funds

It was decided in the June meeting that further discussions on options for the use of potential new funds take place at the November meetings, but that it “should not prejudice a decision on the CIF sunset clause and recognising that the sub-committee will consider an assessment of the FIP set-aside at its next meeting”. An October report presented three options for the use of potential new funds based on a figure of $100 million. The first option is to increase the number of FIP countries. To date 42 countries have expressed interest, of which twenty three are participating in REDD+ readiness programmes supported by the Forest Carbon Partnership Facility and the UN-REDD Programme. Eligible countries must receive overseas development assistance (ODA) and have an active MDB country programme. Under this option, selected countries would have to submit their expressions of interest by February 2015 and the FIP sub-committee would take a decision in June 2015.The criteria for the inclusion of new countries are: 1) potential to contribute to mitigation of climate change through REDD+; 2) country readiness; 3) potential for private sector engagement, and 4) potential implementation capacity. The second option is to finance dedicated set-aside funds to address emerging issues related to REDD+ and/or innovative private sector investments. Funding could be provided to either private sector clients working through MDB private sector arms or public sector entities working through the MDB public or private sector arms. The third option is to increase funding to existing FIP countries.

Results monitoring and reporting

In March the CIF administrative unit finalised a first draft of a FIP monitoring and reporting tool kit. The CIF administrative unit held a workshop in May, with representatives from Brazil, DRC, Ghana, Indonesia, Mexico and Peru, to discuss the draft toolkit and common reporting format. It was decided to modify the toolkit to reflect the various country circumstances, including technical and human resources capacities for monitoring and reporting. The new version will be shared in November with the FIP pilot country representatives for a final no-objection approval. As a first step the FIP pilot countries agreed to develop a work plan for FIP monitoring and reporting which will capture next steps, deadlines, roles and responsibilities and needs for technical and financial assistance. Countries reported on the reporting themes relevant to their FIP investment plans in August. The CIF administrative unit is developing a synthesis report to be reviewed and discussed during the November sub-committee meeting. The first results report will be shared with the FIP sub-committee in June 2015.


The June FIP semi-annual operational report noted that the FIP is “often referred to as the link between REDD+ readiness and performance-based payments. However, even though FIP’s objectives overlap with the three phases of REDD+, practical experience shows that providing investments sequentially as suggested by the phased approach to REDD+ does not match the reality in countries. FIP investments are supportive of REDD+ but should be justified on their own merits as a contribution to scaling up actions addressing the drivers of deforestation and forest degradation, manage forests sustainably and enhance forest carbon stocks. The sustainability of FIP results can be but should not necessarily depend on performance-based payments.”

The report concluded that “linking FIP investments to performance-based payment mechanisms raises several key concerns and questions: (a) to what extent the sustainability of FIP results should depend on future carbon payments that may or may not materialise; (b) the challenge of ascribing GHG emission reductions achieved with FIP finance to be included in payments for performance through other REDD+ programmes – the issue of ‘double funding’; and (c) contributor concerns around financing the same results in the FIP that would be reported in a performance-based mechanism as their results – the issue of double results reporting.” The November FIP meeting will review reports on the linkages between the FIP and REDD+ performance-based mechanisms.

A presentation at the June CIF meetings by the consultancy firm Climate Focus stressed the importance of funding for the bridge between “REDD+ readiness and results-based payments.” This funding is needed to “provide a pull mechanism for REDD+ countries by incentivising them to progress under their grants from REDD+ readiness funds” and to “provide a push mechanism, by developing relevant capacity and experience for countries aiming to progress to receive results-based payments.”

Dedicated grant mechanism for indigenous peoples and local communities

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 CIF Monitor 9). In June, the sub-committee endorsed the programme framework for the DGM as a basis for the development of the DGM global component and DGM projects in each FIP pilot country. It noted the total requested funding of $50 million in grant funding. The sub-committee approved $4.72 million of the global component DGM project for the DGM to be implemented by the World Bank and approved a further $695,000 for preparation and supervision services by the World Bank. Another $6.5 million was approved for the DGM project in Brazil, with a further $640,000 approved for preparation and supervision services by the World Bank.

The UK raised questions about the global component, including on the risks of “elite capture”, stating that “since a ‘democratic’ process is to be pursued in selecting members for the national steering committees (NSC), this might not help to get traditionally marginalised groups represented. Will affirmative action or other approaches be employed to ensure that particularly marginalised/voiceless groups get representation?”

The IBRD responded that “affirmative action is not mandated in the DGM guidelines”. Furthermore, “lack of access to information is often a key reason some communities may be excluded from such processes” and proposed that outreach before and during the process of NSC formation be used to address the concern. In Indonesia the IBRD shared information via meetings, websites and YouTube whilst acknowledging that “access to the internet is not uniform in all the pilot countries and the internet will not be the only mode of information dissemination for the programme”.

The UK said that NSC membership should be driven by representatives of indigenous peoples and local communities, and in the case of Brazil it “may not always be ‘appropriate’ for government representatives to have full decision making powers.” The IBRD justified the prominent role for the Brazilian government saying it would facilitate positive outcomes. Furthermore, the UK asked: “How will the participation of the most marginalised groups on the NSC be assured?” The IBRD replied that, “The NSC agreed composition assures the participation of self-selected representatives of indigenous peoples and traditional communities as requested by the DGM framework operating guidelines” and explained that “component 2 will support activities to outreach, build capacity and engage the most marginalised groups increasing their skills and qualification to be part in broader dialogues on the issues at hand and component 1 will prioritise through one of its windows grants to the most vulnerable and marginalised groups. In other words, the whole DGM process might contribute to levelling the playing field and to increase engagement of the most vulnerable and marginalised.”

In August funding of $348,500 was approved to take forward the DGM project in Mexico. The UK approved the funds and commented that the Mexican government should work on the project design to establish, “how project beneficiaries will be included in the design and implementation phases”. Since the last CIF meetings in June there have been two DGM consultations in Indonesia, at the end of June and start of July. Records of meetings between World Bank and indigenous peoples in Peru in September show that Peruvian indigenous people’s organisations AIDESEP and CONAP are jointly preparing the DGM project in Peru.

Selected project updates

Brazil: impact of land titling queried

Project name Amount and date approved MDB services Key project documents
Environmental regularisation of rural lands in the Cerrado of Brazil $32.48 million (loan)12 June 2014 IBRD $750,000 DecisionProject document


Project details

“The proposed project scales up the actions to reduce deforestation, forest degradation and greenhouse gas emissions. The implementation of environmental regularisation of rural landholdings through the rural environmental register enables a more effective supervision and monitoring of deforestation and degradation of natural vegetation.”

Key donor questions and concerns prior to approval

The UK: “It is important that the social and environmental safeguards the project documents make reference to have the correct measures in place to ensure the socio-economic benefits arising from the registry reach the project’s direct and indirect beneficiaries. In particular we would have liked to see more detail on the potential negative impacts, and how the project will set out to mitigate these. Even though the scope for activities targeted specifically at women is limited in the project, it is good to see that, where possible, efforts will be made to encourage their participation and ensure their capacity development.”

The IBRD and Brazilian government responded: “Based on the assessment of small landholders who are direct beneficiaries, it was estimated that 10 per cent of small landholders are female. It is worth noting that women overall hold a critical role in family agriculture.”

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 with investment plans endorsed for Brazil, Democratic Republic of Congo (DRC), Laos, Mexico, Burkina Faso, Ghana, Indonesia and Peru.

As of September 2014, $639 million had been pledged to FIP, and $8.5 million have been disbursed. Cumulative funding decisions by the FIP sub-committee total $197 million. Funding for a total of 16 projects and programmes had been approved, totalling $267 million.

Donors: Australia, Denmark, Japan, Norway, Spain, Sweden, UK, US