Environment

Analysis

Pilot Program for Climate Resilience (PPCR)

CIFs Monitor 12

4 November 2015

Photo: C Schubert (CCAFS)

Read a pdf version of CIFs Monitor 12

New pilot countries

Following the November 2014 decision to invite eligible countries to express interest in joining the PPCR (see CIFs Monitor 11), in the May sub-committee meeting 10 out of 33 countries that applied were selected as new pilot countries: Bhutan, Ethiopia, Gambia, Honduras, Kyrgyz Republic, Madagascar, Malawi, Philippines, Rwanda and Uganda. It was agreed that up to $1.5 million would be provided to each new pilot country in order to develop the Strategic Program for Climate Resilience (SPCR), however, the sub-committee emphasised “that at present there is not sufficient funding under PPCR to finance the projects and programmes that may be proposed in the SPCRs”. Supplemental budget requests for MDB support to develop the programmes will be considered by mail. It noted “its expectation that there will be climate finance available to fund high-quality projects and programmes”, and asked the MDBs and new pilot countries “to design the SPCRs to attract funding from other sources, including the GCF, in addition to any resources that may become available in the PPCR.” It also encouraged “further collaboration between PPCR pilot countries, MDBs, the GCF and the CIF administrative unit on the development of SPCRs to facilitate compatibility with GCF’s future investment criteria.”

The sub-committee also requested that the CIF administrative unit review and provide an update on “resource availability”, in order for the sub-committee to “consider approval of the inclusion of an additional five to six countries.” A June paper by the CIF administrative unit, in collaboration with the trustee and the MDBs, recommended that no more countries should be invited to join the PPCR until further resources become available. The paper noted that the PPCR faces a $79.5 million deficit, given indicative resources available and the projected demand for funds. A release of funds set aside to manage currency exchange rate risk of outstanding pledged funds could reduce the deficit to $31.3 million. However, this calculation takes into account a provisional pledge of $70.9 million in new funds from the UK. Without these pledged funds the deficit would rise to $102.1 million.

 

Private sector set-aside

The May sub-committee meeting noted “the low conversion of concepts to approved [private sector set-aside] projects thus far”, and called on the MDBs to submit endorsed project concepts “with good prospects for approval as soon as possible.” Following the November agreement to expand invitations to the PPCR private sector set-aside to “eligible low and lower middle income countries” (see CIFs Monitor 11), it asked for future set-asides “to be open to proposals for new private sector projects … from all CIF countries, with concepts to be submitted “on a rolling basis (without a call for proposals and expert group review)”. It was agreed that MDBs “can submit requests to support technical assistance … for projects in all CIF countries”, however, priority will be given to projects in PPCR countries and low-income and lower middle-income CIF countries.

Furthermore, the proposals must meet the following criteria:

  1. “The investment will be made in a region or industry sector that faces demonstrable adaptation challenges and can act as a demonstration pilot for low income countries by being replicable and sharing relevant experience and learning;”
  1. “The investment must demonstrate significant direct benefits by (A) making the livelihoods of small-scale private actors more resilient to climate change, or (B) providing the co-benefit of increased community resilience, for example, by reducing pressure on scarce water resources, increasing food security, or increasing the resilience of the local community to extreme weather;”
  2. “Other countries will only be allowed to receive non-grant financing for private sector operations, including through MDB public sector arms. For private operations the minimal concessionality principle applies. Grants for technical assistance can be accessed as described above;” and
  1. “A cap will be set on funding investments in such countries to ensure adequate resources are available for PPCR and low-income CIF countries.”

The CIF administrative unit was tasked with proposing levels for the cap “once a funding envelope becomes available.” It was also agreed that low income countries will be able to access both grants and concessional finance.

 

Selected project updates

Bolivia: dam safety concerns

 

Project name Amount and date approved MDB services Key project documents
Multipurpose drinking water and irrigation program for the municipalities of Batallas, Pucarani and El Alto $42.5 million (grant)
14 October 2015
IDB
$250,000 (final tranche of $500,000)
Decision
Project document

 

Project details

The project aims to “increase the climate resilience of the water supply system for the benefit of the people living in the metropolitan area of La Paz and El Alto and in the municipalities of El Alto, Batallas y Pucarani. The specific objectives are to: (i) increase drinking water service coverage and continuity for the municipalities of El Alto, Batallas and Pucarani; (ii) create experiences and lessons for the integration of the climate change approach into the planning, design and implementation of water projects in high mountain areas; (iii) start the preparation and implementation of a multi-purpose, participative, sustainable, resilient and gender-focused pilot plan for integrated watershed management; (iv) lay the groundwork in order to have a climate change-resilient water supply system for the metropolitan area of El Alto; and (v) reduce climate change vulnerability of productive irrigation systems located in the project area by improving water resource use and distribution efficiency.”

Key donor questions and concerns prior to approval

The UK noted that “a number of environmental and social risks have been raised by the review against IDB safeguards”, and asked for details of responsibilities for implementation. It also asked how gender will be mainstreamed in the programme design. The US raised several questions of clarification, including on plans for the 13 households that require resettlement. It also asked whether a safety panel had been convened to assess the two dams to be built by the project. Moreover, it requested further information on critical habitat analysis, specifically the loss of 70 hectares (ha) of bofedales (wetland).

On gender the IDB explained that “public consultations have specifically targeted women’s groups in order to further develop social programmes which will directly benefit women in the area.” It clarified that no physical resettlement will take place, but that economic displacement due to temporary loss of agricultural or grazing land will affect 13 households. Furthermore, according to the IDB no safety panel was in place due to the low risk and the fact that downstream communities are located above the potential flood area. It further responded that its safeguards unit has classified the bofedales as ‘natural habitats’ rather than ‘critical natural habitats’. This requires a cost-benefit analysis, which it confirmed was ongoing. Moreover, it confirmed that the bofedale losses will be offset by the restoration of at least 70 ha of bofedales in the surrounding area. A community engagement process will identify which areas will be restored.

The US responded that it “does not join the consensus to support this project, but does not block the decision to award PPCR funding. We are concerned that safety considerations surrounding the dams to be constructed by the project have not been adequately explained in the documentation available to us. We would like to flag the need for a fuller discussion of this issue before the project moves forward to the IDB board.”

 

Cambodia: questions on resettlement and climate impacts

 

Project name Amount and date approved MDB services Key project documents
Climate resilient rural infrastructure in Kampong Cham Province (as part of the Cambodia: Rural roads improvement project II) $7 million (loan)
$9 million (grant)25 September 2015
ADB
$390,000
Decision
Project document 

 

Project details

The project aims to “rehabilitate about 1,200 kilometres (km) of rural roads in ten provinces to paved condition. The rehabilitated roads will provide poor rural provinces with a safer, cost-effective rural road network with all-year access to markets and other social services.” In addition the project will support other programmes, including a community-based road safety programme, HIV/AIDS and human trafficking awareness and prevention programme, and climate change adaptation measures. The project is expected to improve access to markets, jobs, and social services in nine provinces.

Key donor questions and concerns prior to approval

The UK commented: “We are aware of resettlement problems that have been experienced in other infrastructure programmes within Cambodia. … we would like reassurance that the ADB will be ensuring similar problems are not faced as part of this rural road improvement project, and that all lessons from the previous programme are being incorporated (including the need to base resettlement plans on up-to-date data).” The US seconded the concern about resettlement issues.

Germany asked for clarification on “how exactly climate change is taken into consideration when improving ‘rural roads to climate resilient paved condition’ and how the ‘climate resilient paved roads’ will be different from regular paved roads.” PPCR civil society observer LEAD Pakistan asked for detail of the community engagement strategies, to ensure local buy in.

On resettlement issue, ADB responded that all the roads already exist, and “only roads that do not trigger resettlement have been included”. On climate change considerations, it explained that “climate resilient paved roads integrate design features that reduce the vulnerability of the road to the expected wetter conditions, more extensive and longer flooding and other future climate changes”. On community engagement, the ADB responded that “close consultation with affected communities will be conducted throughout.”

 

Project name Amount and date approved MDB services Key project documents
Private sector set-aside:Rainwater harvesting and drip irrigation for high-value crop production $5 million (loan)
8 September 2015
ADB
$300,000
Decision
Project document

 

Project details

The project is part of a larger package of assistance by the ADB, targeting the spice value chain. Its objective is to “introduce rainwater harvesting and drip irrigation technologies coupled with high-value crop production to improve the climate resilience of Cambodia’s agricultural sector, reduce drought-induced crop failures and to improve productivity and income for small scale farmers. Using drip irrigation fed from harvested rainwater, farmers will be able to irrigate year round and improve yields of high-value crops such as spices without having to extract water from rivers, lakes, or groundwater reserves. To enable farmers to purchase these technologies, a line of credit to farmers using ($4 million PPCR funds) would be provided to approximately 1,000 farmers through a local bank.” The expected outcomes include “the introduction of a financially sustainable private sector agri-business model that promotes export-oriented, high revenue-generating agricultural activity.”

Key donor questions and concerns prior to approval

The UK raised concerns, including: “There may be a risk that the focus on higher-value crops as part of this programme will mean that farmers will switch entirely from the subsistence crops necessary to feed themselves and their families, so that they need to buy in these products. Assurance as to how this will be mitigated would be useful. Also, we understand that rubber has undergone some considerable price fluctuations in recent years – will there be any mitigation of this risk to the farmers’ income if this is one of the crops to be distributed?” It also noted “that a risk has been raised within the proposal around the ability of farmers to pay back the loan after three years”. Both the UK and US raised questions around possible resettlement: “We understand that there may be certain risks around land use attached to the project – could ADB please confirm that there will not be any risk of evictions as a result of this programme of work?”

PPCR civil society observer LEAD Pakistan commented: “A significant number of high efficiency irrigation projects have failed in the region due [to] various social, economic and technical constraints. It is advised that this project should take adequate cognisance of these initiatives to avoid the same fate.”

ADB responded that the project has been designed “to help diversify local farmers’ income rather than to shift entirely to high value crop farming.” On the ability to repay the loans it noted that previous experience in the region has been “very positive with an almost zero nonpayment rate to date”. On resettlement risks, the ADB confirmed “that there will be no resettlement activities as a result of the project”, however, it pointed out that “In Cambodia, very few farmers have ‘formal’ land titles.” It “noted” the concern raised by LEAD Pakistan.

 

Nepal: hydropower and risks concerns

 

Project name Amount and date approved MDB services Key project documents
Expansion of IFC-PPCR strengthening vulnerable infrastructure project $14.4 million (loan)
12 June 2015
IFC
$440,000
Notification
Project document

 

Project details

The project relates to Investment project-2: Climate proofing vulnerable infrastructure under the IFC programme Building climate resilient communities through private sector participation. According to the documentation related to the expansion of the project: “To date, IFC has invested in one hydro project under the IFC-PPCR project, and based on IFC’s engagement and business development in the sector, there is a need for additional investments to strengthen vulnerable hydropower plants in Nepal against climate change impacts. IFC is, therefore, proposing to access additional PPCR concessional finance for Nepal that remains unused ($14.40 million) from Nepal’s endorsed SPCR to expand its investments and meet the demand for financing climate resilience in Nepal’s hydropower sector … thereby increasing total allocation for this project from $3 million to $17.40 million (with the addition of $14.40 million).”

Key donor questions and concerns prior to approval

The UK noted “that there was no risk assessment within the programme proposal.” It also asked for the indicators to be streamlined with the indicators in the PPCR results framework. The US commented that “given the potential environmental and social risks associated with the hydropower sector, we would encourage the IFC … to conduct thorough due diligence with respect to risk assessment and mitigation of identified risks, ensuring effective engagement with affected peoples and stakeholders, and requiring transparency and timely public access to information on environmental and social impact assessment and management plans.”

Germany asked for clarification on why the funds had been reallocated from another project. It also asked for the timeline to be revised in light of the recent earthquakes. It added: “The project intends to finance up to five hydropower projects … However, the proposal does not mention if site-specific vulnerability assessments and other climate-related information have informed the selection procedure … Moreover, the proposal does not seem to elaborate in sufficient detail on the social and environmental risks of the foreseen hydropower projects.” It also asked for gender considerations to be reflected in the results framework “by adding additional indicators or disaggregating existing indicators by gender.”

The IFC responded that it was unable to provide risk assessment reports at the time of proposal submission due to it being “at a fairly early stage” in the project cycle, but that they will be made available “on a project-by-project basis” after sub-committee approval. It clarified that the former project allocated with the fundswas a public sector project that would require the government of Nepal to use the concessional finance available for it as a loan. As a low income country faced [with] debt distress, it did not seem prudent for the public sector to take on additional debt, and therefore, the funds have remained unused.” Furthermore, the IFC referred to its performance standards, clarifying that “social and environmental risk assessment and vulnerability assessment for infrastructure is a standard requirement of IFC’s operations”, which include gender provisions.

 

Mozambique: PPCR relevance and costs questioned

 

Project name Amount and date approved MDB services Key project documents
Smallholder irrigation feasibility project $575 million (grant for advisory services)
1 May 2015
IFC Decision
Project information document

 

Project details

The overall objective of the project “is to promote private sector investments in irrigation in Mozambique and consequently increase smallholder farmers’ agricultural productivity and strengthen farmer’s resilience to climate change. The project aims to demonstrate the technical and financial viability of multi-purpose irrigation schemes that will benefit smallholder farmers. This objective will be pursued through working with and leveraging the investment of a leading agroforestry firm operating in Mozambique and a current IFC client. Once the technical and financial viability of multi-purpose irrigation schemes is demonstrated under this project, the client will explore the possibility to invest in the construction of appropriate infrastructure for irrigation to scale up project impact and scope.”

Key donor questions and concerns prior to approval

The UK commented that the proposal “does not provide evidence as to how this project fits into the PPCR results framework/core indicators.” Furthermore: “The project management fees are 8.7 per cent of the investment, which seems higher than other projects we have seen – it would be helpful to understand why this might be.” The US noted: “the three components of the project do not seem to include an expectation of community engagement in decisions about the water reservoirs … or consideration of possible social issues … that may be relevant.” Questions on how the learning would be shared were also raised, including by Germany, which noted that the project “ does not indicate how it intends to disseminate relevant learnings within key stakeholder groups in Mozambique nor in the region”.

The IFC acknowledged that the project “will not directly contribute to the PPCR core indicators”. It argued that the project management fees “is consistent with other IFC operations”. On community engagement the IFC confirmed “that the client has already engaged in extensive consultations at household and community level to obtain access land for its operation (planting trees). The water points described in this proposal would be part of the overall land access process.” It added that “the client has engaged IFC in a separate advisory services programme to support their work on stakeholder engagement and community development … The activities described in the PPCR proposal will be an integral part of this comprehensive programme.” On learning the IFC noted that “the results of the feasibility assessments are expected to feed into the design and development of multi-purpose irrigation facility projects that will contribute to the learning and knowledge on these types of irrigation schemes.”

 

Pilot Program for Climate Resilience (PPCR) explained

The PPCR aspires to demonstrate how climate risk and resilience can be integrated into core development planning and implementation. PPCR funding is disbursed in two phases to support two types of investment: first, technical assistance to allow developing countries to integrate climate resilience into national and sectoral development plans, resulting in a Strategic Program for Climate Resilience (SPCR); and second, funding for the implementation of this programme.

PPCR is piloted in 19 countries and two regions. In 2009, nine countries (Bangladesh, Bolivia, Cambodia, Mozambique, Nepal, Niger, Tajikistan, Yemen and Zambia) and two regional groupings (six Caribbean island countries and three Pacific island countries) were invited to participate in the PPCR. All SPCRs of the original pilot countries have been endorsed. In addition, of the regional groupings Papua New Guinea’s SPCR was approved in the November 2012 and Haiti’s in May 2013. In May 2015, ten new pilot countries were invited to join phase II of the PPCR: Bhutan, Ethiopia, Gambia, Honduras, Kyrgyz Republic, Madagascar, Malawi, Philippines, Rwanda and Uganda.

As of end June 2015, $1.2 billion had been pledged to the PPCR. A total of $1.1 billion had been allocated for 74 projects and programmes. Out of this $863 million has been approved for 51 projects.

Donors: Australia, Canada, Denmark, Germany, Japan, Norway, Spain, UK, US