Ndf newsletter 2 2014

NEWSLETTER Development

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Photo: Aage Jørgensen

Nordic

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NAMA financing within NDF Nationally Appropriate Mitigation Actions (NAMAs) represent a valuable opportunity for developing countries to participate in the greenhouse gas emission mitigation efforts while at the same time taking into account their national priorities and sustainable development plans. Many countries have already prepared, or are in the process of developing, their NAMAs. NAMAs provide a good opportunity for NDF to support mitigation actions where new and innovative climate solutions are desired, and increasingly the private sector’s role has been acknowledged to be crucial.

Currently, NDF is supporting NAMA development in several projects in various countries. In Vietnam, the Nordic Partnership Initiative is a NAMA pilot project in the cement sector, aiming to improve Vietnam’s readiness to benefit from international climate financing by sup-

porting scaling up mitigation actions in the sector.

In Vietnam, the Biogas Expansion under the Low Carbon Agricultural Support Project aims to reduce pollution from agricultural waste in ten target provinces and includes development of a waste management NAMA. In the Greater Mekong region, NDF is supporting countries to develop mitigation actions in the agricultural sector through two projects: Climate Resilience and Low Carbon Strategies in GMS and Improving Nitrogen-use Efficiency for Climate Change Mitigation in the GMS. The Transport NAMA support facility, a collaboration between the Asian Development Bank (ADB) and NDF, is a way to strengthen transport NAMA development and to promote NAMA financing in Asia. This cooperation will also explore the possibilities for supporting the reform and gradual

phasing out of fossil fuel subsidies in countries showing interest. The transport NAMA support facility can also assist countries in eliminating fossil fuel subsidies by supporting public transport modes. Lower-income populations are perceived to be initially affected by the subsidy reductions, so better public transport alternatives are necessary. The fossil fuel subsidy reform process has also been identified as a priority area for Nordic cooperation.

In Latin America, the Emerging and Sustainable Cities Initiative includes NAMA development in the action plans of three cities: Cochabamba, Bolivia, Managua, Nicaragua, and Tegucigalpa, Honduras.

Under the Nordic Climate Facility, NDF is supporting an innovative energy optimisation project in the steel sector in Bangladesh. The project will develop a draft NAMA proposal which will

elaborate on the most appropriate and least costly lowcarbon initiatives in the steel sector and propose suitable scaling-up actions to improve the environmental sustainability and cost-effectiveness in the sector.

The total NDF support to projects with elements of NAMA development exceeds EUR 21 million.

Host Country Agreement entered into force on 11 May 2014 The new Host Country Agreement between the Government of Finland and NDF has been approved by the Finnish Parliament and accepted by the President of the Republic of Finland. The agreement was signed in October 2013.

NDF Focus on Partnerships NDF has been working with the Inter-American Development Bank (IDB) for more than 20 years and the current grant portfolio covers projects of up to over 50 million euros.

NDF discussed with Julie Katzman, Executive VicePresident and Chief Operating Officer at IDB, about the co-operation between the IDB and NDF.

Julie Katzman

How well do you think the climate change considerations are mainstreamed in IDB’s operations? In addition to the partnership NDF has with the Bank today, do you see other ways for how a co-financier like NDF could assist the Bank in a systematic way towards this goal?

We operate in a world of increasing climate risks and opportunities. Many of our clients are vulnerable and lack the means to protect their assets, families and livelihoods from these risks, while many others miss promising opportunities related to climate change.

Consequently, the IDB is increasing its climate change related lending to 25% of total loan operations, in order to reduce greenhouse gas emissions, better promote sustainable development, and expand access to a better life for millions.

Climate change drives our thinking on everything from energy to transportation, from agriculture to tourism.

Climate change leads us to seek new ways of reducing emissions, helping beneficiaries adapt to and protect themselves from climate risks, and promoting incentives that help governments spur climate solutions in the marketplace, such as our support for regulatory reform related to climate policy in Mexico.

I cannot overstate how transformational our partner-

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IDB-NDF - a partnership that goes beyond co-financing ship with the NDF continues to be. Consider just one country, Nicaragua, where the Bank has partnered with the NDF and others to expand electricity access from 65 to 85 percent of the population. This operation transforms the country’s energy matrix, reducing dependence on fossil fuels and improving energy efficiency. More than 1.7 million Nicaraguans will receive lower cost electricity and a better quality of life – with lower emissions and greater efficiency. The NDF’s partnership with the IDB ’s Multilateral Investment Fund (MIF) in Nicaragua’s biogas market is helping small farmers turn a source of methane gas into a clean, affordable source of energy. This project aims to help over 7,000 small farmers while expanding the market for biogas and reducing 410,000 tons of CO2 equivalent emissions. Or the EcoMicro Initiative which will help MFI’s develop at least 13 sustainable green financial products and mobilizing $3.25 million in financing for the development of energy efficiency and clean energy products and services including those at the base of the pyramid.

There are many opportunities for a more systematic partnership going forward. One such opportunity is in building green schools and health centers. We have just launched an initiative with the Green Building Alliance to explore this in the Andean Region.

We also see countless possibilities in the climate resilience market, or the products and services needed to protect property, businesses and households from expected extreme heat, wind, flooding and other climate risks. Consider new models for assessing climate risks in the portfolios of financial institutions, value chains, or infrastructure and related public-private partnerships. In the world of innovative finance, “social impact bond” type structures (also known as “payment for success” models) show promise for the public sector in helping communities rebuild after extreme weather events.

These and other areas are good candidates for a large programmatic approach.

Our mutual challenges include uncertainties over the timing and the magnitude of climate risks, as well as the

direction climate policies will take. But our partnership’s success has long been rooted in joint learning and experimentation in brokering new climate related methodologies, business models and frameworks.

From the IDB point of view, what are the key strengths in co-financing with particularly the NDF? Does NDF have value added to IDB and its operations?

Our partnership is the outcome of two decades of mutual learning in an impact-driven relationship that continues to improve many lives across Latin America and the Caribbean. The NDF and the IDB work together on 20 ongoing projects and counting, worth a total of €53 million where the IDB has provided over USD$100 million in technical assistance and financing operations. We expect NDF participation in our deals to result in a significant leverage of private sector resources.

Consider the IDB Energy Efficiency Finance Facility,

to our private sector operations. Experience has taught us that engaging governments on climate change is tough, but that challenge pales in comparison with the daunting task of encouraging private sector companies to invest in mitigation and adaptation (perhaps with the exception of a few very large players).

The NDF has facilitated our efforts to green our portfolio and create risk sharing facilities to finance energy efficiency, allowing us to make more clients bankable by balancing our risk tolerance.

How could lessons from these projects be shared and replicated elsewhere in the world and how could the IDB and NDF together support this?

The best partnerships incubate, hatch, and release ideas into the world, helping them to thrive, scale and replicate. Climate change is global, and new ideas and new models must also be shared globally. Our partnership already does this through,

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our partnership’s success has long been rooted in joint learning and experimentation in brokering new climate related methodologies, business models and frameworks

which is supported by a generous $10 million provided by the NDF. This Facility is expected to leverage total private investment of up to $100 million in energy efficiency upgrades and self-supply renewables – delivering an attractive 10 to 1 leverage ratio for NDF capital. A key strength of this partnership is that the NDF and the IDB both believe that climate change is simultaneously a threat multiplier and a major opportunity. Take the PROADAPT facility, which aims to create business opportunities while strengthening climate resilience in smaller firms. This is just the latest example of the NDF’s assistance in testing new models and expanding knowledge in critical areas. The NDF’s global reach has been an important factor in helping the IDB learn more about responses to climate change in other regions. The NDF is also adding great value

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for instance, the Helsinki Seminar on Innovative Climate Change Financing Mechanisms that the NDF chaired. This requires an innovative approach that leverages information – a challenge in an age of information overload. Creative and visually captivating means of broadcasting results will be utilized. However, we see even greater opportunities – and the necessity – to share more, better and faster given the urgency of the issue. Putting our heads together to think of an innovative approach that leverages visually captivating information and, engages all the relevant players, would be a worthwhile endeavor.

Ultimately, climate change is a systemic, multi-sectoral challenge and opportunity.

Having a committed partner, like NDF, with a global footprint allows an institution like the IDB to leverage capability and resources to try to leap forward to address it.

NDF

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Twelve project proposals on inclusive green growth selected for contract negotiations under the fourth call of the Nordic Climate Facility Altogether 96 pre-qualification proposals were submitted by Nordic organisations with their local partners in response to the fourth call for proposals under the heading “Inclusive green growth projects con-

tributing to private sector development”.Twentyfour proponents were invited to present the final proposal, and finally twelve proposals were selected for further negotiations.

The evaluation team consisting of Nordic climate experts and representatives of the African Development Bank and an African NGO had a challenging task to select the most innovative

projects responsive to this call’s theme among several high quality proposals. The final outcome of the Fourth Call will be announced later this year.

The Nordic Climate Facility, which is funded by the Nordic Development Fund (NDF) and administered by the Nordic Environment Finance Corporation (NEFCO), provides grants with co-financing requirements for innovative climate related projects in low-income countries in Africa, Asia and Latin America. The focus of this call was particularly in Africa and on inclusive green growth.

Links between climate and development to be strengthened in African countries NDF has long been in discussions with the African Development Bank to join forces in mainstreaming climate change information into climate-resilient development programmes in African countries. In May 2014, an agreement was signed by which NDF contributes five million euros to the ClimDev Special Fund established for these purposes. The lack of appropriate climate information, for example in data-collection and early warning systems, are a major obstacle to addressing the challenges of climate change. Strengthening the institutional capacities of national and subregional bodies will increase the countries’ ability to plan more effective climate-sensitive policies and projects.

Urgent need for geothermal capacity building in Africa NDF participated in a Geothermal Donor Collaboration Meeting, hosted by the African Union Commission (AUC) and the Icelandic Development Agency (ICEIDA) in Reykjavik in May 2014.

The meeting gathered representatives from the East Africa Rift Valley countries, the donor community and private power producers to discuss geothermal development in Africa.

The meeting concluded that there is an urgent need for geothermal capacity building in the Africa region and donor coordination needs to be addressed properly at both national and regional

Climate-resilient roads in Zambia

Emeli Möller, NDF, and Abdou Mohamed Houmed, Djiboutian office of the Geothermal Energy Development.

levels to avoid duplication and to ensure harmonisation. NDF, together with ICEIDA, is supporting the Geothermal Exploration Project which aims to assist countries in East Africa to enhance geothermal knowledge and capacity in order to enable further geothermal utilisation in the respective countries.

NDF is co-financing with the World Bank a project that supports capacity development in Zambia to plan for a climate-resilient road transport sector. Zambia’s infrastructure is underdeveloped due to poor maintenance, construction quality and standards, and the increase of extreme weather events.

NDF’s financing to the Government will lead to an increased emphasis on the systematic integration of climate change adaptation needs throughout the transport sector design and management process at the policy level. The project has benefitted from NDF’s similar efforts in road transport programmes in Cambodia, Vietnam and Nicaragua.

NDF is building up considerable knowledge on climateresilience and roads, and it has shared its experience with other development and climate financiers in various international events.

NDF

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Inspiration from Nordic countries to climate challenges in fast-growing Latin American cities Nordic cities demonstrate positive examples of technologies, methodologies and models for reducing CO2 emissions and increasing local climate-resilience.

NDF’s new support to IDB’s Emerging and Sustainable Cities Initiative (ESCI) reflects this success. Previously, NDF has, through ESCI, supported climate profiles and action planning for three Latin American cities: Cochabamba,

Bolivia; Managua, Nicaragua; and Tegucigalpa, Honduras.

NDF will now provide an additional four million euros to support further work based on the three cities’ action plans.

The NDF support will include a specialist with responsibility for networking, knowledge sharing and outreach regarding Nordic models and approaches to low carbon development

and climate-resilience.

The support will also finance pre-investment studies to turn identified priorities into bankable projects. Some of these interventions will be structured as public private partnerships in order to mobilise additional private capital.

Latin America and the Caribbean have the fastestgrowing urban population

rate in the world. The ESCI program addresses fastgrowing intermediate (0.52.0 million inhabitants) cities’ environmental, urban and fiscal sustainability in a changing climate. ESCI began in 2011 with a grant from IDB to support five pilot cities in Latin America and at present, ESCI has become a multi-donor effort planned to reach 50 cities in 2015.

Integrity matters

Photo: ESCI/IDB

NDF is committed to working proactively to prevent fraud and corruption. Its co-operation with other international financial institutions within this area has been intensified in recent years.

NDF aims at raising general awareness on integrity issues and finding practical tools to use in different phases of NDF’s operations. On 12 May 2014, Anders Agerskov, Head of the Preventive Services Unit and Shaun Moss, Lead Procurement Specialist from the World Bank, visited Helsinki and gave a fullday training session for NDF, NEFCO and NIB on how to spot red flags in the process of selecting consultants. The session was a good way to share and compare experiences between the World Bank and the three Nordic institutions.

FINANCING FOR CLIMATE CHANGE PROJECTS IN LOW-INCOME COUNTRIES The Nordic Development Fund (NDF) provides financing for climate change interventions in low-income developing countries. NDF is the joint development finance institution of the Nordic countries—Denmark, Finland, Iceland, Norway and Sweden—and finances projects in cooperation with other development institutions.

Nordic Development Fund NORDIC DEVELOPMENT FUND, P.O. Box 185, FIN-00171 Helsinki, Finland (Visiting address: Fabianinkatu 34), Tel: +358 10 618 002, Fax: +358 9 622 1491, E-mail: info.ndf@ndf.fi, www.ndf.fi NDF Newsletter presents NDF's operations. The newsletter is published as needed. Layout Kubik, print Libris Oy.