Ndf newsletter 3 2014

NEWSLETTER Development

Fund

3

/ 2014

EcoMicro wins UN Climate Convention award EcoMicro, the USD 7 million programme, co-financed by the Inter-American Development Bank’s Multilateral Investment Fund (MIF) and the Nordic Development Fund has been selected as a winner of the UNFCCC Momentum for Change - Lighthouse Activity Award 2014.

In spite of demonstrated need and demand throughout Latin America and the Caribbean, many micro, small, or medium-sized enterprises are not able to access funding for clean energy or energyefficient technologies that could reduce energy costs and improve competitiveness. In addition, smallholder farmers cannot access finance for adaptation activities. EcoMicro seeks to bridge this gap.

The introduction of green microfinance in Latin America is a ground-breaking innovation because it enables these enterprises to access climate finance for the first time.

Thanks to EcoMicro, the region’s microfinance institutions (MFI’s) will have the appropriate tools and knowhow to develop and offer sustainable financial products to address climate change.

The innovative programme offers solutions not only for microfinance institutions’ clients, but also for the institu-

tions themselves. EcoMicro enables microfinance institutions to green their operations and to reduce the vulnerability of their loan portfolios to climate change impacts.

Funds are used to develop, market and launch green finance products in each participating microfinance institution, and they leverage the MFI’s balance sheets – unlocking private funds that would not otherwise be available for climate activities. Demand for EcoMicro has been high: 150 applications in the region have competed for the 12 grants, demonstrating that the region sees green finance as a growth area. The focus on adaptation-related activities has also grown steadily during the course of the programme from 31% to more than 80% of applicants seeking to develop adaptation products.

Seven projects are already under way and five other projects are being developed. The participating institutions are commercialising green finance products for clean and efficient energy solutions, developing green loan and micro insurance products to support small farmers in adapting their crops, irrigation and product mixes to climatic effects, and hedging against future losses.

Real results: • EcoMicro is training 12 microfinance institutions to develop green financial products for climate change mitigation and adaptation activities.

• Each microfinance institution receives a USD 280,000 grant from EcoMicro for technical assistance, which is matched with funds from the MFI’s itself.

• The microfinance institutions in Mexico and Peru are expected to mobilise an additional USD 5.9 million in financing to provide clean energy and energy-efficient solutions for more than 5,000 micro, small and mediumsized enterprises in poor areas of Mexico and Peru, enabling them to cut greenhouse gas emissions by up to 20%.

• More than 800 smallholder farmers in Bolivia, Nicaragua

and the Dominican Republic are receiving technical assistance and finance as part of projects testing different models for adaptation financing.

These models aim to help farmers maintain or increase their income in spite of climate change threats.

• In Bolivia, a USD 1 million concessional loan from the Climate Investment Funds has been endorsed to scale-up the product and reach more than 1,000 smallholders farmers.

Momentum for Change is an initiative spearheaded by the UN Climate Change secretariat to recognise and highlight activities across the globe that are moving the world toward a highly resilient, low-carbon future. Momentum for Change recognises innovative and transformative solutions that address both climate change and wider economic, social and environmental challenges.

Also another NDF-funded project receives recognition In October 2014, the Association of Energy Engineers (AEE) awarded the Energy Efficient Stove Program of Activities (PoA) in East Africa with the 2014 Innovative Energy Project Award. The programme makes improved cooking stoves more accessible to low-income households by providing distributors access to carbon finance. By replacing traditional stoves, the greenhouse gas (GHG) emissions are decreased and deforestation reduced.

They will also have positive impacts as they reduce respiratory illnesses and create employment opportunities in the stoves industry. The programme has received financing from the first NCF Call for Proposals.

Photo: Aage Jørgensen

Photo: EcoMicro

Nordic

3

NDF Focus on Partnerships

With a grant portfolio of 17 projects amounting to almost 36,4 million euro, the Asian Development Bank (ADB) and NDF continue to cooperate on a solid basis. The two institutions have worked together since the 1990s.

From 2007 on the collaboration has focused on climate change related projects.

During a visit to the ADB headquarters in Manila in autumn, NDF’s management met with Bindu Lohani, Vice President for Knowledge Management & Sustainable Development to discuss his views on the collaboration between the ADB and NDF.

How do you view the longstanding cooperation and cofinancing between ADB and NDF? The partnership with NDF is important as it leverages additional resources and expertise in a top priority area of ADB operations.

NDF's focus areas on climate change and development are closely aligned with ADB's priorities for action on climate change. Working closely with NDF during project design stage often proves to be useful as projects can benefit from NDF's expertise/knowledge from other regions. Moreover, an increasing demand from our DMCs for climate change related capacity building, NDF's co-financing will remain important when DMCs respond to climate change challenges in the region.

Climate change adaptation is an area where ADB needs to expand its operation. What are possible areas for partnership with ADB? Where could NDF add most value?

In the next three years, we aim to more than double our adaptation investments (to around $2.6 billion, or 7% of sovereign operations, and even exceed our mitigation investments).

NDF can work with ADB to develop capacity to anticipate and manage climate risks in the region. Early identification of climate risks and designing adaptation measures needed to address them is important in developing infrastructure projects. Technical skills not directly related to climate change such as financial management, moni-

Newsletter

3

/

2014

NDF helps ADB meet Asian climate finance demand toring and evaluation, and safeguards will be increasingly important to enable access and effective use of climate finance.

We are investing in country readiness through policy dialogue, project implementation, and technical assistance. Since 2009, we have worked in 29 developing member countries to strengthen country safeguard systems. We are strengthening monitoring and reporting systems for adaptation results through our work in the Pilot Program for Climate Resilience (PPCR) pilot countries and the GEF funds. We are also working with DMCs to identify priority investments for funding under the Green Climate Fund.

Another area for NDF support is improving climate information in the DMCs. NDF can add value by supporting the development of quality climate information. Managing climate risks requires a sound understanding of the likely impacts of climate change in specific locations and on specific types of investment. Scientifically sound, high-resolution climate projections are not yet widely available, and this can constrain the quality of adaptation responses.

This is an area for knowledge collaboration between ADB and NDF.

How could NDF improve or enhance its approach and the effectiveness of its collaboration with the ADB?

blend concessional resources with private sector operations for climate change mitigation and adaptation in developing Asia. NDF may want to consider this. Moreover, a closer dialogue with Private Sector Operations Department may be explored as it is expected to be increasingly enhanced.

ADB has recognized that knowledge underpins development effectiveness and has made “knowledge solutions” an integral part of its longterm mission. How do you see that NDF could best support ADB’s long-term mission in the light of the Strategy 2020 review? In which specific themes and questions could NDF add most value to strengthen the development impact?

With Asia and the Pacific facing serious environmental and climate change challenges, under its Midterm Review of Strategy 2020, ADB has committed itself to strategic priorities on the environment and climate change. As indicated earlier, ADB will scale up climate change adaptation. Based on a concrete pipeline, ADB will also support clean energy investments, increase assistance for sustainable transport, strengthen integrated disaster risk management, promote natural resource management, strengthen policies and capacity and facilitate access to global and regional funds.

Under the Midterm Term, ADB will also put more focus on knowledge solutions. NDF has a track record in the areas

mentioned above, as well as experience working with institutions in other regions. As such, NDF can work with ADB, through partnerships with centers of excellence and knowledge hubs, perhaps in Nordic countries, in developing new and world-class knowledge solutions. This may include exploring joint programs and knowledge products that capture and communicate the latest global insights to stakeholders in our region. NDF can also collaborate with ADB in pilot-testing new innovations.

ADB is also in the process of strengthening our sector and thematic communities of practice, and we would need external partners like NDF and the Nordic countries. Finally, ADB can work with NDF in establishing knowledge sharing platforms and mechanism to share of global and regional best practices, including those in mitigation and adaptation.

ADB is keen to advance knowledge on innovative financing, particularly involving the private sector. Learning about what has worked in other contexts, keeping in mind the characteristics and circumstances of countries in our region, it would be particularly important in the partnership with NDF. In addition to the knowledge work, one approach to support dissemination could be to consider work for knowledge sharing on climate finance issues in Asia. This could bring together stakeholders from government, the private sector, development partners, climate funds, and civil society to discuss the evolving climate finance landscape and how to successfully access it.

One area for NDF consideration is on working with ADB to climateproof our infrastructure projects. NDF may consider the support cover the incremental cost of adaptation, which may not be always large. For example, climate-proofing costs for transport projects cab ranged between 0.5% and 8.7% of the project cost, with an average of 4.6%.

There may also be additional opportunities for NDF to partner with our private sector operations. Getting the private sector involved in financing climate change and environmentally sustainable projects is critical. In developed countries, the private sector contributed 89% of climate finance, but only 57% in developing countries. Clearly, much more has to be done to scale up private climate finance in developing countries. Other donors have started to work with ADB to Bindu Lohani, Vice President for Knowledge Management & Sustainable Development

NDF

Newsletter

3

/

2014 Ecosystems help adapt to climate change

Mangroves, Honduras Photo: VideoVik Creative Commons Licence

Two new NDF projects support ecosystem-based adaptation to climate change.

Together with the World Bank and Ministry of Fisheries in Mozambique, NDF will pilot an aquaculture outgrower model in partnership with a private company. The aim is to produce high-value products and create local jobs while reducing illegal fisheries and maintaining the existing mangrove ecosystem. In Honduras, NDF and IDB address mangrove degradation and loss through enhancing knowledge of existing mangrove ecosystems for policy action and strengthen resilience of local communities through income generation and sustainable use of mangroves.

Much of the world’s population lives on or near the coast. It is important to understand the role of coastal ecosystems and their services in adaptation and mitigation to climate change and how to use these services for increasing local resilience.

NDF provides financing to develop a renewable energy strategy and investment plan for the Bay Islands in Honduras. The islands depend on fossil fuel for electricity generation by private utilities, which use inefficient thermal units burning diesel fuel transported from mainland Honduras. Fuel handling, oil spills and leaks are threats to the fragile ecosystem. The present situation leads to very high electricity prices and many poor families remain without access to electricity. The islands have strong potential for increasing the use of renewable energy sources.

Challenge funds for water and climate projects In partnership with the African Water Facility (AWF), NDF is aiming to increase water security and build climate resilience in Africa.

The African Water Facility has recently launched a call for proposals for projects

focused on the “preparation of water and climate change investments” aimed at building resilience to climate change in Africa. This AWF initiative has received special support from NDF, and the call is expected to support clever, effective and innovative project ideas that combine attention to water and climate change.

Climate finance readiness Sub-Saharan Africa receives the least amount of climate finance of all regions in need. This is mainly due to the region’s lack of readiness and capacity to access international climate finance, the cumbersome procedures of some funds, as well as the limited capacity of African countries to negotiate international climate deals that could benefit the continent. NDF, together with the World Bank and GIZ, is financing a project to build climate readiness and develop individual countries’ capacity to gain access to international climate financing.

First agreements signed under NCF’s fourth Call for Proposals

Photo: Dennis Hamro-Drotz Alleco

Renewable energy for the Bay Islands

The first three agreements have been signed for climate change mitigation and adaptation projects under Nordic Climate Facility’s fourth Call for Proposals on inclusive green growth. The agreements are the first batch of 12 approved projects that have been selected for funding under this call. The agreed projects will improve food security in Tanzania, give access to energyefficient appliances in Ethiopia and support water economy in Kenya. The total budget for the three new projects is EUR 1.3 million with a 60% share of NCF financing.

All in all, NCF now has 51 projects in various stages in 18 low-income countries.

Nordic Climate Facility is funded by the Nordic Development Fund (NDF) and administered by the Nordic Environment Finance Corporation (NEFCO). It promotes exchange of technology, knowledge, know-how and innovative ideas through partnerships between Nordic and partner country actors to build resilience to and combat climate change in low-income countries. A new call for proposals is to be launched in December 2014.

NDF

Newsletter

3

/

2014

Results of NDF-ADB project in Vietnam to be used in cement NAMA development The NDF-ADB co-financed project Support to the National Target Program on Climate Change with a Focus on Energy and Transport (C18) is the first project that has been completed in Vietnam under NDF climate change grants. This is also the first addressing mitigation and adaptation simultaneously for two sectors which are major contributors to greenhouse gas emissions. The project has contributed to providing a credible scientific base upon which mitigation and adaptation policy, investment and planning recommendations will be established in the climate change action plans in Vietnam. “The project has been instrumental in identifying and highlighting a number of national and provincial assets of which some of these are under risk to climate induced threats, and others are priority areas for further investment,” says Rehan Kauser, Task Team Leader, ADB.

Two important outputs have been developed under NDF C18 that could be used in the cement NAMA development work in the ongoing project Pilot Programme for Supporting Up-Scaled Climate Change Mitigation Action in Vietnam‘s Cement Sector (C34), also called the Nordic Partnership Initiative (NPI).

First, two demographic/ economic development scenarios have been defined to reflect different pathways of the energy sector of Vietnam until 2030. The Business-AsUsual (BAU) scenario projects the situation without strong government support of low-carbon development and the Green Growth scenario projects the situation with strong support from the government. These scenarios can be used for modelling work in the NAMA pilot project in the cement sector.

Second, a Long-range Energy Alternatives Plan-

ning (LEAP) model has been built to track energy consumption, production and resource extraction in all sectors, as well as to account for both energy sector and non-energy sector greenhouse gas emission sources and sinks. The result shows that in the BAU scenario energy demand for cement production could increase rapidly from 174 million GJ in 2010 to 401 million GJ by 2035. These results can be used to crosscheck data obtained under the project C34.

“The two projects are also excellent examples of projects benefiting from Nordic expertise as the Danish consultancy company NIRAS has won the consultancy contracts under both projects through an international bidding process,” says Martina Jägerhorn, Country Program Manager, NDF

Focus on urban resilience in Dar es Salaam tal of Tanzania.

The main focus will be on strengthening the capacities of the relevant ministries and local authorities in as-

pects related to urban planning, flood protection and transport arrangements, all relevant to climate change adaptation and mitigation.

Photo: Dominic Goode

NDF supports the World Bank financed Dar es Salaam Urban Development Project. The project aims to strengthen the urban resilience in the capi-

Knowledge sharing and outreach NDF participates and contributes regularly to various, selected international discussions and events focusing on financing for sustainable development and climate change. In October, at the Global Green Growth Forum (3GF) in Copenhagen, NDF’s participation was focused on exchanging experiences and information related particularly to scaling up green off-grid energy solutions. NDF has also recently officially become an observer to the Green Climate Fund (GCF).

NDF is currently supporting a number of climate finance readiness activities in cooperation with other development banks, and these activities will directly assist countries to access climate financing also from the GCF. In the area of geothermal energy development, the focus has been on Africa and on cooperation with other organisations supporting geothermal development. NDF has recently contributed to discussions and future plans, for example, at the African Rift Geothermal Conference hosted

by Tanzania in partnership with the UN Environment Program, and also in the second Global Geothermal Development Plan roundtable, which is led by the World Bank and its Energy Sector Management Assistance Program (ESMAP).

NDF-funded geothermal projects in Africa cover a dozen countries in the eastern and central parts of the continent.

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.