Read a pdf version of CIFs Monitor 10

Funding options and constraints

The June sub-committee meeting discussed options for the use of potential new funds for the PPCR. It was agreed to further develop option three, to “demonstrat[e] and further incentivis[e] innovative private sector investments in climate resilience and adaptation by expanding activities to all CIF countries”. However, the sub-committee noted that “this decision should not prejudice a decision on the CIF sunset clause” (see Introduction). It was therefore agreed that options one and two, on selecting new pilot countries and on expansion to multi-country or regional programmes, may be discussed in the November meetings, following the CTF and SCF joint committee meeting on the sunset clause.

An October paper explored option three in further detail. Based on lessons learned from phase one and two of the private sector set-aside, the paper concluded that while “new approaches are required to support additional private sector investments in adaptation under the PPCR … there are promising examples available … in non-PPCR countries which might stimulate interest and replication opportunities in the PPCR.” It described the purpose of the expanded facility as “to explore market opportunities for the private sector to engage in climate resilience and adaptation activities by including a wider range of countries”, and thereby also “enhance the competitive scope of the set-aside”.

The paper clarified that the facility “would continue to function as a competitive allocation of available PPCR resources and concepts continue to be reviewed based on assessment criteria agreed by the PPCR Sub-Committee.” It outlined a proposed process, including funding drawing on an annual envelope for the expanded facility. The paper gave two alternatives for expansion, either to “eligible low and lower middle income CIF countries” or to “all SCF countries and low and lower middle income CTF countries”, to be decided in the November sub-committee meeting.

Options one and two were also explored in an October paper, with a proposal to combine them, where “the MDBs work with relevant country governments to express interest in a PPCR regional programme for new PPCR countries to benefit from the experiences current PPCR pilot countries have made”. It recommended that the November meeting decides that eligible countries be invited to apply to become a PPCR pilot country. The paper listed 121 eligible countries, and proposed that the eligibility criteria remain largely the same as those used in the original selection of pilots, with some amendments.

Meanwhile, the October semi-annual PPCR report projected a shortfall of $21 million for projects scheduled for approval between April and May 2015, adding that “projects submitted from August 2015 will not be able to receive PPCR funding approval.” The report warned that “the uncertainty about when PPCR resources become available could potentially result in delays in the design and implementation of PPCR projects and programmes and jeopardise the programmatic approach which is the core part of the PPCR.”  Additionally it noted that “in the case of the private sector, given the reputational risks associated with lack of funding certainty, projects anticipated for sub-committee submission after March 2015 might not be pursued any further.”

Learning lessons from the PPCR

A review of the effectiveness of phase one financing for the Strategic Program for Climate Resilience (SPCR) was submitted but not discussed at the June sub-committee meeting. The review found that “a preparatory phase can greatly assist in setting the stage for implementation of large-scale and diverse investments through a well-planned programmatic approach.” In terms of challenges for operational efficiency, it noted that “lack of familiarity with MDB safeguards and procurement processes, the need to meet multiple MDB and national requirements, and limited administrative capacity were probably one of the greatest challenges for phase one implementation.” On positive aspects of phase one, the review added that “many countries cited the availability of experts and good teamwork between experts, stakeholders, MDBs and government agencies as a key strength of phase one. This created a cohesive programme, enabled challenges to be overcome, and expedited the preparation of SPCR.”

On developing readiness to implement a programmatic approach to resilience it was noted that countries needed different levels of support: “The limited readiness, not only technical but also administrative, of many countries meant that a substantial investment of time was needed to hire consultants, carry out studies, establish institutions, build stakeholder consensus, and create enabling conditions for private sector investments. For the regional programmes, which had to coordinate across a number of governments, this was especially true.” Furthermore: “Countries’ readiness also correlated with the level of country ownership of the Phase 1 process and, in some cases, the extent to which the SPCR aligned with national priorities.” Shortcomings identified by the review included “the need for more extensive and accessible data and analysis, particularly for diagnostic purposes, the need for greater attention to M&E [monitoring and evaluation] from the outset of the process, and the need to further increase stakeholder capacity, most particularly in civil society and the private sector. Continued investments in these areas will be essential for a successful implementation phase.”

A case study identifying key lessons from Samoa, conducted by the CIF administrative unit, was also submitted. On country ownership it concluded “that for successfully absorbing large-scale climate finance an enabling environment needs to be put into place by the government” and that “strong and sustained leadership” by the government is essential. On the programmatic approach it noted: “Mainstreaming climate finance into core development planning requires the leadership of a ministry with a cross-sectoral mandate” and that “conduct[ing] a thorough review of policies and plans combined with consultations during Phase 1, proved critical in identifying priorities of investments for the PPCR.” On building partnerships, lessons included that “by having the Ministry of Finance coordinate the PPCR, it was possible to collect, organise and discuss the priority needs of each stakeholder group in the country” and that “communicating solutions to key stakeholders can shift the dynamics of collaboration and strengthen long-term outcomes”. 

Private sector projects

A report by the private sector set-aside expert group on the second round of the selection process (see CIFs Monitor 9, 8) was discussed in the June sub-committee meeting, including challenges and lessons learned from the first round. The report found that the proposals for the second round were “definitely better presented” than in the first round, however, they “seemed to have weak links into the national SPCRs [Strategic Program for Climate Resilience].” It recommended that the CIF administrative unit scans concepts for minimum requirements before accepting them as submissions. It also noted the low amount of submissions, which only included three countries, adding that this needs to be examined, and included recommendations for making the set-aside more appealing to the private sector.

Furthermore, according to the report: “Most of the proposals at this point are lacking replication or scale-up strategies, and pay little explicit attention to needed changes in markets and enabling environments.” It also concluded that most (if not all) proposals would require “serious and effective technical assistance and training” and recommended that grant funding for this should be a component of the funding. Finally, it found that few of the recommendations from round one had been taken up, including on sustainability plans.

Out of eight proposals submitted for the second round, four project concepts were endorsed for further development:

• Bolivia: Financial risk management for climate resilience in the agriculture sector, and Microfinance and climate resilience for smallholder farmers (IDB)
• Cambodia: Integrated climate-resilient rice value chain community project, and Rainwater harvesting and drip irrigation for high-value crop production (ADB)

The MDBs were asked to revise and resubmit the concepts, taking into account comments from the expert group and sub-committee members, for approval by mail in September.

Selected project updates

Mozambique: adaptation benefits questioned

Project details

“The project consists in the plantation and maintenance, during a first phase (2014-2018), of a sustainable 24.000 ha forest plantation in an area 126.000 ha through a land lease agreement entered between the government of Mozambique (GoM) and the sponsor in the Nampula region. Further to the plantation, the project will encompass the design, construction and operation of: (i) a wood chip mill, and (ii) a medium density fiberboard (MDF) Mill.”

Key donor questions and concerns prior to approval

The US (seconded by the UK): “We understand that monoculture plantations and processing plants are often financed on a purely commercial basis; what are the unusual adaptation benefits of this project that justify PPCR funds? … Is there any land being planted that is not degraded or agricultural land? … With respect to the wood chip mill and the MDF mill, where will raw materials come from until the plantation can supply raw material? Will these mills possibly draw from natural forests?”

AfDB responded: “AfDB disagrees with the comment that often these types of projects are financed on a purely commercial basis … It is important to note that plantations require a significant amount of time … to mature and provide the required yields in wood that lead to the generation of sufficient cash flows to cover debt repayment, operational costs and equity distributions.” On land the AfDB stated that: “Given the total estimated planted area (44.000 ha), AfDB is in no conditions of ensuring that trees will be planted entirely in abandoned agricultural and/or degraded land”, but outlined reason for why they believe this to be the case, including that “any concession given to the development of forests needs to be preceded by public consultations in and around the selected areas”. It also confirmed: “None of the mills will draw raw materials from natural forests.”

The US responded that they would not object to the project’s approval, but reiterated concerns that “the adaptation benefits of the project do not appear central to the project” and also raised concerns “that monoculture plantations provide a model that should be significantly scaled up to confer adaptation benefits in Mozambique.” It also sought “clarification on how this project fulfills PPCR requirements for the use of concessional funds by the private sector”. Finally, the US noted that: “we would like to see a detailed discussion of the application of environmental and social safeguards, including with respect to safeguarding any native forest areas within the concession area and enforcing other actions required to mitigate possible negative environmental impacts. We would also appreciate clarification of whether any resettlement will be required, and further information on community consultations regarding the use of land for plantations.”

The UK also reiterated “some major concerns about the underlying rationale for use of PPCR funds for this concept as there is not sufficient evidence that the main component of the project (the forestry plantation) will itself confer climate resilience or adaptation benefits.” It also agreed to approve the proposal, subject to the concerns being satisfactorily addressed.

Cambodia: questions on safeguards

Project details

This project forms part of the Greater Mekong subregion biodiversity conservation corridors project. It aims to strengthen adaptive capacity and reduce climate vulnerability of ecosystems and communities in the Koh Kong and Mondulkri provinces through interventions, such as rainwater harvesting and irrigation, and bioengineered sea barriers to avoid salt water intrusion.

Key donor questions and concerns prior to approval

The UK: “It will be important to ensure that … ADB’s safeguard procedures are employed to ensure the most appropriate design and to mitigate the risk of potential negative impacts arising from sea defences.”

Germany: “we recommend outlining if and how the proposed project is aligned to the Cambodia climate change strategic plan … and to one or more of the sectoral climate change strategic plans.”

The ADB confirmed that “technical, social and environmental due diligence requirements were applied at the prefeasibility stage to determine technical and economic feasibility, and potential social and environmental impacts” and that the project “will contribute to two of the three goals” of the plan.

Project details

This project is part of the integrated urban environmental management in the Tonle Sap Basin project. It aims to “improve urban services and enhance climate change resilience in Kampong Chhnang and Pursat municipalities through urban area environmental improvements; community mobilisation and environmental improvements; strengthened sector coordination and operations; and strengthened capacity for project implementation, and operations and maintenance.”

Key donor questions and concerns prior to approval

The US approved the project, but “with the understanding that the limited resettlement activities in the context of this project will be implemented according to the Asian Development Bank’s safeguards policy statement … There should be no deviation from this policy.”

Niger: call for gender mainstreaming

Project details

The programme responds to the advisory services/technical assistance component of The sustainable management and control of water resources project, and will test and implement recommendations from a 2012 market study on opportunities for private sector investment in improved irrigation systems and climate resilient seeds in Niger.

Key donor questions and concerns prior to approval

The US questioned how identified market barriers of costs and access to finance would be overcome by the project. It urged that “gender issues be mainstreamed into the programme as it is developed” and questioned “how the target of 20 per cent for women’s participation was selected. What percentage of farmers in these areas do women make up?”

The IFC pointed out that this is an advisory programme and that the research showed that the technologies are “viable business opportunities for Nigerian farmers”. Farmers are expected to pay back capital investments in three years and “suppliers will be able to assess the risks and be able to take investment decisions as to whether they should expand their operations in Niger.” On gender it referred to a 2004 study concluding that men headed 85 per cent of farming households.

Jamaica: questions on mainstreaming

Project details

“The general objective of the project is to generate information on approaches to address climate challenges, help mainstream climate change into development planning and processes and disseminate results across sectors.”

Key donor questions and concerns prior to approval

The UK: “We would be keen to know more about what the team thinks ‘mainstreaming’ will actually look like – what will the result be? Having climate change integrated into plans should not be a measure of success – we need to know whether the decision making process has actually changed.”

The US: “How will stakeholder engagement be sustained throughout the pilot program? … How will the project operationalise the gender considerations listed”?

The IDB responded: “On the issue of mainstreaming, the team has been careful not to over-reach on this issue because of the limited nature of this pilot programme … there is the issue of how much or how far mainstreaming can be achieved”. On stakeholder engagement it noted that a project steering committee (PSC) will be set up and “As long as the PSC is functioning properly, it is expected that stakeholder engagement will be sustained during the operation.” On gender: “as measures are implemented, the team has to ensure that some portion of the intervention involves women or vulnerable groups in order to achieve the target”.