Forest Investment Program

Forest Investment Program


The Forest Investment Program (FIP) is a targeted program 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 achieves this by providing scaled-up financing to developing countries for readiness reforms and public and private investments, identified through national REDD readiness or equivalent strategies.

Basic Description

Name of Fund Forest Investment Program (FIP)
Official Fund Website
Date Created Date fund proposed: February 2008.  30 May 2008 (design and creation agreed).
Date fund made operational: July 2009.
Proposed Life of Fund The FIP is subject to the CIFs ‘sunset clause’ which enables closure of funds once a new financial architecture becomes effective under the UNFCCC regime. Pending final agreement on the future of the climate change regime, the FIP will provide financing to pilot new approaches with potential for scaled-up, transformational action aimed at a specific climate change challenges or sectoral responses.
Administrating Organisation The World Bank is the Trustee and Administrating Unit of the FIP.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.
Objectives The FIP is designed to support developing countries’ REDD efforts and promote sustainable forest management through four main objectives:

  • Initiate and facilitate transformational change in developing countries’ forest related policies and practices, by:
  • 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;
  • 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.; and
  • Provide valuable experience and feedback in the context of the UNFCCC deliberations on REDD.
Activities Supported Activities supported by the FIP include:

  • Investments that build institutional capacity, forest governance and information;
  • Investments in forest mitigation efforts, including forest ecosystem services; and
  • 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.

Conditions and Eligibility Requirements Country access requires:

  • ODA-eligibility (according to OECD/DAC guidelines); and
  • Existence of active multilateral development bank (MDB) country programs.

Criteria for FIP Investment Strategies, Programs and Projects

FIP Investment strategies, programmes and projects should deliver transformational change and go beyond business-as-usual, and are assessed according to:

  • Climate change mitigation potential;
  • Demonstration potential at scale;
  • Cost-effectiveness;
  • Implementation potential;
  • Integrating sustainable development (co-benefits); and
  • Safeguards.

Criteria for Pilot Programme Selection

Transformational impact through a few programs should be prioritised over limited impact across numerous programs. The selection of pilot programs is based on:

  • Programme potential to contribute and adhere to FIP objectives and principles;
  • Country preparedness and ability to undertake REDD initiatives; and
  • Existing pilot programme distribution across regions and biomes, ensuring that pilot programs generate lessons on scaling up activities.

Eight pilot countries were identified from 45 expressions of interest. The selection of pilot countries was based on a set of criteria developed by an expert working group, who then reviewed expressions of interest from potential recipient countries.

Accessing the Fund Pre-Programming Phase

  1. FIP-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;
  3. Selection of country or regional pilots by FIP-SC based on Expert Group Report; and
  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 programs/projects concepts.
  3. Preparation of FIP investment programs and projects.
  4. Decision(s) on financing for programs and projects by FIP-SC.
  5. Further processing of projects in accordance with MDB procedures, including final approval.
Monitoring and Evaluation  Framework 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. 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/program level’.

An Independent Evaluation of the CIF experience is underway, and due to be completed in 2013. In September 2012, the Trust Fund Committee approved the Approach Paper for the Independent Evaluation of the Climate Investment Funds carried out by Independent Evaluation Departments of the MDBs.

The principal purposes of the evaluation are:

(a) To assess the development effectiveness and the organizational effectiveness of the Climate Investment Funds to date.

(b) To document experiences and lessons for the benefit of the Green Climate Fund.

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 was commissioned to complete a Gender Evaluation of the CIF in 2012.

Fund Governance

Decision Making Structure FIP Sub-Committee (FIP-SC)
The SCF Trust Fund Committee established a FIP Sub-Committee to oversee and decide on the operations and activities of the FIP. Composition of the FIP Sub-Committee:

  • Up to six representatives from donor countries to the FIP.
  • Six representatives from eligible recipient countries, selected through consultation with the recipient countries.

Decisions are made by consensus. Members of the FIP Sub-Committee serve for one year terms, and may be reappointed.Observers
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;
  • Global Environment Facility;
  • UNFCCC; and
  • UN-REDD technical secretariat; and
  • Two indigenous peoples representatives.

Expert Group
An Expert Group was established by the FIP-SC to make recommendations on the selection of pilot programs for the FIP. The Expert Group includes eight individuals, acting in their personal capacities, chosen on the basis of their expertise, strategic and operational experience and diversity of perspectives, including knowledge of scientific, economic, environmental and social aspects of conservation and sustainable use of forest ecosystems and climate change, governance and institutional and development planning.

Non-Government Stakeholder Participation In designing the Climate Investment Funds, consultations took place with potential donors and recipients, the United Nations family, other multilateral development banks (MDBs), civil society organizations, and the private sector. The CIF were created on agreement from some 40 developing and industrialized countries.A dedicated initiative for Indigenous Peoples and Local Communities  has been established under the FIP. This programme seeks to increase the capacity of indigenous and local communities to actively participate in national REDD+ and FIP processes in a meaningful way.

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, including meetings in Ghana, Lao PDR, Peru and Australia between November 2010 and April 2011.

Information Disclosure Pledges, deposits and funding decisions for SCF and its subsidiary funds (PPCR, SREP and FIP) are reported to the Sub Committee in bi-annual trustee reports.

Disclosure policy

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 programs 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 recognizes that a country or a project proposer may have justifiable reasons for not publicly disclosing all information in an investment plan or project, and in exceptional cases, subject to Committee approval, certain information may be kept confidential.

Safeguard Policies
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 multilateral development bank implementing the project.

Global Witness has pointed out that this approach 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, for example, in Indonesia and Peru.

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.

Relationship with Official Development Assistance

Inclusion as Official Development Assistance  Yes.The application of all CIF finance (concessional loans, grants, and guarantees through the MDBs) can be classed as ODA by MDBs if:

  • It meets the criterion of promoting economic development and welfare;
  • The grant element is at least 25%; and
  • The funds are to be used in a country included in DAC list of ODA eligible countries.
Financial Instrument/ Delivery Mechanism Used (e.g. grant, loan)  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 financing for a specific project or program, 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).

Grants to indigenous peoples and local communities are an integral component of each pilot project and linked to the Forest Investment Strategy.  The FIP Design Document proposes a dedicated grant mechanism to be established under the FIP to provide grants to indigenous peoples and local communities affected by pilot programmes to support and enable their participation in the development of FIP investment strategies, programs and projects.

Nature of Recipient Country Involvement FIP pilot programs are intended to be country-led and country–owned, by building on, enhancing and strengthening existing nationally prioritized REDD efforts, and respect national sovereignty.