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Forest Investment Program

Forest Investment Program

Summary

The Forest Investment Program (FIP) is a targeted programme of the Strategic Climate Fund (SCF) within the Climate Investment Funds (CIF). The FIP supports developing countries’ efforts to reduce deforestation and forest degradation (REDD) and promotes sustainable forest management that leads to emission reductions and the protection of carbon reservoirs. It works towards this goal by providing scaled-up financing to developing countries for readiness reforms and public and private investments, identified through national REDD readiness or equivalent strategies. The FIP is active in 23 countries.

Basic Description

Name of the Fund Forest Investment Program (FIP)
Official Fund Website https://www.climateinvestmentfunds.org/topics/sustainable-forests
Date Created
Date fund proposed: February 2008.
Date fund made operational: July 2009.
Proposed Life of Fund The FIP is subject to the CIF ‘sunset clause’ which proposes the closure of the CIF once a new financial architecture becomes effective under the UNFCCC regime. The implementation of the CIF ‘sunset clause’ has been suspended repeatedly and in 2019 indefinitely. Until such time, donors and recipients operate under the existing framework.
Objectives The FIP is designed to support developing countries’ REDD efforts and promote sustainable forest management through four main objectives:

  1. Initiate and facilitate transformational change in developing countries’ forest related policies and practices
  2. Facilitate the leveraging of additional and sustained financial resources for REDD, including through a possible UNFCCC forest mechanism, leading to an effective and sustained reduction of deforestation and forest degradation, and enhancing the sustainable management of forests
  3. Pilot replicable models to generate understanding and learning of the links between the implementation of forest-related investments, policies and measures and long-term emission reductions and conservation, sustainable management of forests and the enhancement of forest carbon stocks in developing countries
  4. Provide valuable experience and feedback in the context of the UNFCCC deliberations on REDD.

31 million hectares of forest landscape are expected to benefit from improved management. The stated targets are:

  1. GHG emission reductions: 28.7 tCO2e.
  2. 1.5 million people with livelihood co-benefits.
Financial inputs and fund size Contributions to the FIP total USD 785 million. The contributors include Australia, Denmark, Japan, Norway, Spain, Sweden, United Kingdom and the United States.

The application of all CIF finance can be classified as ODA by the partner multilateral development banks (MDBs) acting as implementing entities for the CIFs including the FIP if:

  • It meets the criterion of promoting economic development and welfare.
  • The grant element is at least 25%.
  • The funds are to be used in a country included in the OECD-DAC list of ODA eligible countries.
Activities Supported The FIP is currently active in 23 countries; these are Bangladesh, Brazil, Burkina Faso, Cambodia, Cameroon, Congo Republic, Cote d’Ivoire, Democratic Republic of Congo, Ecuador, Ghana, Guatemala, Guyana, Honduras, Indonesia, Lao People’s Democratic Republic, Mexico, Mozambique, Nepal, Peru, Rwanda, Tunisia, Uganda, and Zambia.

The activities supported by the FIP include:

  • Investments that build institutional capacity, forest governance and information
  • Investments in forest mitigation efforts, including forest ecosystem services
  • Investments outside the forest sector necessary to reduce the pressure on forests such as alternative livelihood and poverty reduction opportunities.

FIP investments also mainstream climate resilience considerations and contribute to multiple co-benefits such as biodiversity conservation, protection of the rights of Indigenous Peoples and local communities, and poverty reduction through rural livelihoods enhancements.

Administrating Organization

Secretariat or Administrative Unit The CIF Administrative Unit supports the work of the SCF Trust Fund Committee and other committees, including the FIP Sub-Committee. It provides recommendations and reporting on operational and financial matters to the CIF governing bodies.

The Unit is housed in the World Bank Group’s Washington DC offices and is comprised of a small professional and administrative staff.

Trustee The World Bank (International Bank for Reconstruction and Development) acts as Trustee for all Climate Investment Funds, including the FIP.

Fund Finance and Access Modalities

Conditions and Eligibility Requirements For a country to be eligible to receive funding from the FIP, the following is required:

  • ODA-eligibility (according to OECD/DAC guidelines)
  • Existence of active multilateral development bank (MDB) country programmes.
Accessing the Fund
Access Modalities – FIP funding is only accessible through MDBs (the World Bank Group, the Inter-American Development Bank, the African Development Bank, the European Bank for Reconstruction and Development and the Asian Development Bank) acting as implementing partners.

Eligibility to receive FIP funding is established through assessment of FIP investment strategies, programmes and projects. They are supposed to deliver transformational change and go beyond business-as-usual, and are assessed according to:

  • Programme potential to contribute and adhere to FIP objectives and principles
  • Country preparedness and ability to undertake REDD initiatives
  • Climate change mitigation potential
  • Demonstration potential at scale
  • Cost-effectiveness
  • Implementation potential
  • Integrating sustainable development (co-benefits) safeguards.

Pre-Programming Phase

  1. FIP Sub-Committee (SC) to agree upon number of country or regional pilots and criteria for country selection
  2. CIF Administrative Unit, through MDBs to inform countries and invite expression of interest which has to be submitted by governments
  3. Selection of country or regional pilots by FIP-SC based on Expert Group Report
  4. Selected countries invited to confirm interest to participate (and identify a focal point and establish their national-level multi-stakeholder steering committee).

Programming Phase

  1. Country-led joint MDBs mission to assist the development of Investment Strategy
  2. Endorsement of Investment Strategy by FIP-SC followed by further development of programmes/projects concepts
  3. Preparation of FIP investment programmes and projects
  4. Decision(s) on financing for programmes and projects by FIP-SC.

Further processing of projects in accordance with MDB procedures, including final approval.

Financial Instruments – The FIP can offer grants, concessional loans, guarantees, or equity as detailed in its Investment Criteria and Financing Modalities. The FIP Sub-Committee decides which type of financing is suitable for a specific project or programme; it either approves the proposed financing modality (grant or concessional loan) or approves a range of proposed financing modalities (grant, concessional loan, guarantee and/or equity).
Accreditation process – There is no accreditation process for the CIF as only the MDBs can access and implement CIF funding, including for the FIP.
Overview of implementing entities – The World Bank Group, the African Development Bank, the Asian Development Bank, the European Development Bank, and the Inter-American Development Bank are the implementing agencies for FIP investments.
Nature of recipient country involvement – FIP programmes are country-led and country–owned, by building on, enhancing and strengthening existing nationally prioritised REDD efforts, and respect national sovereignty.
Allocation criteria – The maximum total FIP preparation grant allocation for an investment strategy is USD 250,000. There is however no maximum allocation for a project preparation grant.

There does not seem to be a financing cap for a single FIP project, although most are in the range of up to USD 10 million.

Safeguards, Gender and Indigenous Peoples
Safeguards – One of the FIP’s investment screening criteria outlined in the design document of the FIP is the safeguarding of natural forests and the prevention of support for industrial logging, conversion of natural forests to tree plantations or other large-scale agricultural conversion. Guidance on safeguards is mostly related to the inclusion of relevant stakeholders in the development of country level FIP investment strategies, as well as to the transparency of the process and the need to make available all documents related to proposed programmes/projects for public review and comment. The safeguards included at the project level under the FIP depend on the partner MDB implementing the project.
Gender – FIP falls under the CIF Gender Policy and the CIF Gender Action Plan. While the Gender Policy provides a governance framework for gender integration in the CIF, the Action Plan is “committed to mainstreaming gender in CIF policy and programming, in support of gender equality in climate resilient, low-carbon development investment across the CIF portfolio”. The CIF Gender Action Plan is currently in Phase 3 and has two main aims:

  1. to deepen upstream support to MDBs and countries on gender technical assistance for Investment Plan and project design,
  2. to enhance gender monitoring and reporting, and knowledge and capacity.
Indigenous Peoples – FIP is subject to CIF governance which treats Indigenous Peoples as a core stakeholder group. While there is a separate CIF Gender Policy, there is no equivalent CIF Indigenous Peoples Policy. Instead the existing policies and approaches of the MDBs implementing FIP projects and programmes apply.

Indigenous Peoples are granted representation in CIF governance. With their status as active observers, IPs have the opportunity to advocate on behalf of their constituents in the CIF Trust Fund Committees and the FIP Sub-Committee.

The USD 80 million Dedicated Grant Mechanism for Indigenous Peoples and Local Communities (DGM) is designed and led by representatives of Indigenous Peoples groups and local communities. This mechanism under the FIP seeks to increase the capacity of Indigenous Peoples and local communities to actively participate in national REDD+ and FIP processes in a meaningful way.

The DGM is the largest global REDD+ initiative created “solely for and by Indigenous Peoples and local communities”; it serves as a good practices example of efforts to devolve climate finance and to make it directly accessible to local communities and marginalised populations groups.

Fund Governance

Decision Making Structure The FIP is part of the governance arrangements for the SCF, which includes a SCF Trust Fund Committee, a FIP Sub-Committee, and an MDB Committee.

SCF Trust Fund Committee
The SCF Trust Fund Committee is in charge of overseeing the operations and activities of the SCF, which includes the FIP. It gives equal weight to representatives from donor and recipient countries. The composition of the SCF Trust Fund Committee consists of representatives from:

  • Eight recipient countries
  • Eight contributor countries
  • Select Observers, namely one each from Green Climate Fund (GCF), Global Environment Facility (GEF), United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP), United Nations Framework Convention on Climate Change (UNFCCC), United Nations Permanent Forum on Indigenous Issues (UNPFII), four from Civil Society Organisations, two from the private sector, and two from Indigenous Peoples.

The list of actual SCF Trust Fund Committee members is available at: https://www.climateinvestmentfunds.org/cif_enc

FIP Sub-Committee (FIP-SC)
FIP Sub-Committee is established by the SCF Trust Fund Committee to oversee and decide on the operations and activities of the FIP.

The FIP Sub-Committee is composed of:

  • Up to six representatives from donor countries to the FIP
  • Six representatives from eligible recipient countries, selected through consultation with the recipient countries
  • Select Observers, namely one each from the Forest Carbon Partnership Facility (FCPF), GCF, GEF, the United Nations REDD-Programme, UNFCCC, UNPFII, four from Civil Society Organisations, two from the private sector, and two from Indigenous Peoples

Decisions are made by consensus. Members of the FIP Sub-Committee serve for one-year terms, and may be reappointed.

The list of actual FIP Sub-Committee members is available at: https://www.climateinvestmentfunds.org/cif_enc

MDB Committee
The MDB Committee facilitates collaboration, coordination and the exchange of information, knowledge, and experience among MDB partners. The list of MDB focal points is available at: https://www.climateinvestmentfunds.org/cif_enc

Accountability Mechanisms CIF
The May 2011 FIP Results Framework has not yet been revised and it does not contain core indicators, but discussions towards agreeing on a few core indicators are ongoing. Some 32 indicators are included in the current framework. Its main purpose is to establish a basis for monitoring and future evaluation of the impact, outcomes and outputs of FIP-funded activities. In addition, it states that: “It is designed to guide pilot countries and MDBs in developing their results frameworks to ensure that FIP-relevant results and indicators are integrated in their own M&E systems at the country or the project/programme level”.

An Independent Evaluation of the CIF experience was requested by the CIF Trust Fund Committees and completed in 2014. The evaluation was conducted by a consulting firm selected and supervised by a joint working group of the independent evaluation offices of five MDBs: ADB, AfDB, EBRD, IDB, and the World Bank.

Among the findings are the following:

  1. “The lack of a strategy with respect to CIF’s sunset clause is causing uncertainty in operations”.
  2. “Efficiency and effectiveness has been hindered by the CIF’s complex architecture, consensus decision rule and lack of a secretariat with strong executive function”.
  3. “Some projects are plausibly transformational; other lack a convincing logic of transformation and impact”.
  4. “Aside from this report, there is no provision for independent evaluation at the national, Programme, or Fund level, or for a summative evaluation of the CIF”.

The CIF administrative unit has also been working with partner countries to understand their domestic frameworks for monitoring and evaluation. A strategic assessment of the environmental social and gender impacts of the CIF was completed in 2010, and IUCN conducted a Gender Evaluation of the CIF in 2012. More recently, a report evaluating the engagement of women and gender-related groups in the CIFs was released in 2020.

FIP
In 2018, the FIP adopted a revised Monitoring and Reporting Toolkit. The FIP monitoring and reporting system (M&R) is “structured to enable annual tracking and reporting on the progress of FIP investments at multiple levels – from project to country to global programme”. The system rests on the foundation of the FIP results framework, which serves as “a basis for monitoring and evaluating the impact, outcomes, and outputs of FIP-funded activities”. It incorporates four categories of reporting themes reflecting the expected transformation process-taking place in FIP countries:

  1. reducing greenhouse gas emissions from deforestation and forest degradation,
  2. enhancing institutional capacity,
  3. improving land tenure and
  4. reducing biodiversity loss.
Participation of Observers and Stakeholders In designing the CIFs, consultations took place with potential donors and recipients, the United Nations family, other multilateral development banks (MDBs), civil society organisations, and the private sector. The CIFs were created on agreement from some 40 developing and industrialised countries.

Regional consultative meetings amongst Indigenous Peoples and local communities
Regional consultative meetings with Indigenous Peoples and local communities were conducted in FIP pilot country regions between November 2010 and April 2011.

Representatives from all FIP pilot countries, members of the MDB Committee and the Trustee may attend the FIP-SC as active observers. Active observers for the FIP-SC also include representatives from:

  • Four civil society representatives (from Asia, LAC, Africa and developing countries respectively)
  • Two private sector representatives (one from a developed country and one from a developing country)
  • FCPF secretariat
  • GEF secretariat
  • UNFCCC secretariat
  • UN-REDD technical secretariat
  • Two Indigenous Peoples representatives.

In addition, state and non-state stakeholder groups come together every year for a scoring workshop to assess FIP progress on MDB-approved projects.

Partnership Forum
The Partnership Forum serves as an annual gathering, which enables stakeholders to engage in dialogue on the CIF’s strategic directions, results and impacts. Forum stakeholders include representatives of donor and eligible recipient countries, MDBs, UN and UN agencies, GEF, UNFCCC, the Adaptation Fund, bilateral development agencies, NGOs, Indigenous Peoples, private sector entities, and scientific and technical experts. The Partnership Forum is co-chaired by the World Bank’s Vice President for Sustainable Development and a country representative elected by countries participating in the Partnership Forum.

Transparency and Information Disclosure Pledges, deposits and funding decisions for SCF and its subsidiary funds (PPCR, SREP and FIP) are reported to the SCF Trust Fund Committee in bi-annual trustee reports. Details on individual projects are made public and available at: https://www.climateinvestmentfunds.org/projects

Disclosure Policy
With respect to information disclosure, the CIF largely rely on the public information polices of the partner MDBs which implement CIF projects and programmes. They can be found here. In addition, in May 2009, the Trust Fund Committees approved a disclosure policy supporting in-country disclosure of country-owned investment plans and strategies (developed under each of the Trust Funds) prior to their submission to a CIF Committee for approval.

Proposed plans are also posted on the CIF website no later than three weeks prior to review of the proposal by a Committee. In the case of proposed programmes and projects, an information document describing the proposal is to be made public at least two weeks prior to a decision on the funding of the proposal.

The policy recognises that a country or a project proponent may have justifiable reasons for not publicly disclosing all information in an investment plan or project.

Other Issues Raised Civil society and private sector observers have expressed concerns that the FIP criteria for country selection, which are almost exclusively technical, fail to take into account recipient countries’ governance or absorptive capacities. Some groups, such as the Rainforest Foundation, have raised concerns that FIP activities are no more than ‘business as usual’ World Bank forest sector lending – particularly in relation to plantations and ‘sustainable forest management’ (industrial-scale logging of natural forests).

A composite of critical civil society perspectives on the FIP is compiled by REDD Monitor. Although the FIP’s operational guidelines were revised to reference the UN Declaration on the Rights of Indigenous Peoples (UNDRIP), specific criteria to comply with UNDRIP and/or to include free, prior and informed consent of affected Indigenous Peoples have not been incorporated. Furthermore, recommendations by civil society observers that FIP guidelines should comply with relevant international environmental and human rights agreements were rejected.

Global Witness has pointed out that FIP’s safeguard policies may result in a lack of coherence as different MDBs enforce different policies and procedures. The Forest Peoples Programme has raised concerns that the development of FIP investment plans by government-hired consultants in certain countries has not involved the promised level of stakeholder engagement, particularly of indigenous communities.