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United Nations Development Programme

Blending Climate Finance Through National Climate Funds
A Guidebook for the Design and Establishment of National Funds to Achieve Climate Change Priorities

UNDP is the UN’s global development network, advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. UNDP has a presence in 176 countries and territories, working with them on their own solutions to global and national development challenges. As they develop local capacity, they draw on the people of UNDP and our wide range of partners.

September 2011 Copyright © United Nations Development Programme All rights reserved. This publication or parts of it may not be reproduced, stored by means of any system or transmitted, in any form or by any medium, whether electronic, mechanical, photocopied, recorded or of any other type, without the prior permission of the author or the United Nations Development Programme. The views and recommendations expressed in this report are those of the authors and do not necessarily represent those of UNDP, the United Nations or its Member States. The boundaries and names shown and the designations used on maps do not imply official endorsement or acceptance by the United Nations. Sole responsibility is taken for errors of omission or commission. Design: Anvil Creative Group (NY, www.anvilcreativegroup.com) Production: A.K. Office Supplies (NY)
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National Climate Funds: A Guidebook for Decision-Makers

Contents
FOREWORD OVERVIEW
Purpose of Guidebook Target Audience Structure of Report

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CHAPTER 1: OVERVIEW OF NATIONAL CLIMATE FUNDS
1.1 Climate Finance Landscape 1.2 Key Goals of a National Climate Fund 1.3 Common Functions of a National Climate Fund

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CHAPTER 2: DESIGNING A NATIONAL CLIMATE FUND
2.1 Common Components and Structural Overview of a National Climate Fund 2.2 Key Decision: Defining the Objectives 2.3 Key Decision: Identifying Capitalization 2.4 Key Decision: Instilling Effective Governance 2.5 Key Decision: Ensuring Sound Fiduciary Management 2.6 Key Decision: Supporting Efficient Implementation Arrangements 2.7 Key Decision: Facilitating Effective Monitoring, Reporting and Verification 2.8 Consolidating Inputs into Term Sheets

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CHAPTER 3: UNDP TRUST FUND ADVISORY AND MANAGEMENT SERVICES
3.1 UNDP Administered Trust Funds 3.2 UN Multi-Donor Trust Funds 3.3 UNDP Trust Fund Implementation Services 3.4 UNDP National Climate Fund Advisory Services

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CHAPTER 4: CONCLUSION CHAPTER 5: SAMPLE TERM SHEETS OF 5 NATIONAL CLIMATE FUNDS
Indonesia Climate Change Trust Fund Bangladesh Climate Change Resilience Fund China CDM Fund Ecuador Yasuni ITT Trust Fund Brazil National Fund on Climate Change

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CHAPTER 6: ANNEX
Glossary of Terms Useful Websites and Resources

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National Climate Funds: A Guidebook for Decision-Makers

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Andrew Mears. Rebecca Carman. Henriette Keijzers. Stephen Gold. assessment of financing requirements. Cassie (2011). ii National Climate Funds: A Guidebook for Decision-Makers . Alex Heikens. generation of climate change profiles and vulnerability scenarios. UNDP Climate Change Policy Specialist Reviewers: Yannick Glemarec. blend and account for climate finance.org/energyandenvironment/climatestrategies. the reports offer detailed guidance for the identification of key stakeholders and establishment of participatory planning and coordination frameworks. New York. Simon Billett. UNDP Country Offices and developing country government decision-makers to acquaint themselves with a variety of methodologies most appropriate to their development contexts in support of their transition to green. USA. In a flexible and non-prescriptive manner. Jennifer Baumwoll. They can be accessed at www. United Nations Development Programme. Matt Spannagle. identification and prioritization of mitigation and adaptation options. NY. Khim Lay. Cristina Colon. low-emission and climateresilient development. Tomoyuki Uno and Goerild Heggelund. and development of green low-emission and climate-resilient roadmaps for project development. This publication focuses on the design and establishment of National Climate Funds to support countries to collect. These resources are intended to enable project managers. coordinate. Editor: Laura Jensen This guidance document should be referenced as: Flynn. guidebooks and toolkits that draws upon the experience and information generated by the United Nations Development Programme’s (UNDP) support for climate change adaptation and mitigation projects in some 140 countries over the past decade. policy instruments and financial flows. Pia Treichel. Author: Cassie Flynn. Dawn del Rio. Susanne Olbrisch. Isabel Kreisler.undp. Abu Mostafa Kamal Uddin. Blending Climate Finance through National Climate Funds: A guidebook for the design and establishment of national funds to achieve climate change priorities.Designing and Establishing National Climate Funds A Guidebook for Decision-Makers This guidebook is part of a series of manuals. Olga Aleshina.

It is my hope that this guidebook will contribute to the ongoing efforts of countries to manage climate change finance and that it will support countries to be more equipped to achieve transformational change whereby positive development and poverty reduction are achieved and sustained over time. coordinate them. In order for countries to take advantage of these opportunities. In this way. This guidebook is part of a series of practical guidance documents and toolkits to support national and sub-national governments to achieve low-emission. Addressing climate change requires that countries transform their economies and grow in a different way — climate and development planning must be integrated so that policies and actions across multiple sectors and scales lower greenhouse gas emissions. blend them together and account for them. reduce vulnerability to climate shocks and deliver poverty reduction gains. policy and fiscal frameworks and systems. climate-resilient development. however. Veerle Vandeweerd Director Environment & Energy Group United Nations Development Programme National Climate Funds: A Guidebook for Decision-Makers iii . NCFs are nationally-driven and nationally-owned funds that help countries to collect climate finance from a variety of sources. countries are in the driving seat and can make informed choices for how direct resources toward activities that deliver results on the ground.Foreword Climate change is one of the most pressing threats to development today. An important tool for countries to manage climate finance is a National Climate Fund. It provides information based on UNDP’s decades of experience in delivering climate change programming in order to help countries design and establish an NCF that is tailored to their priorities and builds on existing governance. The good news is that countries have new and expanded opportunities to finance climate change actions — billions from the public and private sectors will be channeled toward climate activities. the right institutional and financial mechanisms must be in place so that resources are directed efficiently toward national climate and development priorities.

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Overview "! "! "! Purpose of Guidebook Target Audience Structure of Report National Climate Funds: A Guidebook for Decision-Makers 1 .

Overview

Overview
By pledging $30 billion in climate change finance by 2012 and up to $100 billion annually by 2020, governments have ushered in a new era of funding for climate change. Only ten years ago, climate finance was managed by a small number of large funds associated with the United Nations Framework Convention on Climate Change (UNFCCC) process. Today, there has been an explosion of public, private, bilateral and multilateral sources that offer countries new opportunities to address their climate and development needs. While this new landscape of climate change funds provides increased resources, it also brings increased complexity. Requirements, processes and reporting can differ among the funds and countries are faced with the challenge of identifying which funds are appropriate for them, how to collect resources, how to blend them together, how to coordinate the actions funded by them and how to develop the methods to monitor and evaluate the results. Given the diversity of funds, it is critical that countries can build on existing institutions and programmes to manage resources at the national level to support countrydriven objectives. One tool that can help countries respond to these challenges is a National Climate Fund (NCF). An NCF is a mechanism that supports countries to manage their engagement with climate finance by facilitating the collection, blending, coordination of, and accounting for climate finance. NCFs provide a countrydriven system that can support climate change goal setting and strategic programming, oversee climate change project approval, measure project implementation and performance, offer policy assurance and financial control of climate change funds and assist with partnership management. NCFs help countries to blend various resources together at the national level, providing a mechanism for shifting power away from traditional top-down fund management to country-level management. A country’s climate change objectives are managed and supported from the inside out, not the other way around. Designing an NCF requires carefully considering its objectives and then crafting a structure that supports the achievement of these objectives. Many NCFs deliver a common set of services, however the exact components and structures to deliver the services vary greatly according to national circumstances and priorities. In other words, the way in which the fund’s components are designed shapes how the NCF delivers its support. For example, an NCF capitalized by international and national public finance will collect and blend resources differently that an NCF that relies only on private finance. Tailored fiscal tools and mechanisms will be required to access and channel public and private sources effectively. Further, depending on its capitalization modalities, an NCF may aim to strengthen capacities of national stakeholders, including for direct access to climate finance.

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National Climate Funds: A Guidebook for Decision-Makers

Overview

A key lesson learned from UNDP’s experience in administering over 750 funds around the world, and in providing trustee and administrative agent services for over $5 billion in multi-donor trust funds, is that a National Climate Fund must be carefully designed to align with national objectives and capacities on climate change. To accomplish this, the design and administration of an NCF can demand extensive time, effort and resources. While this guidebook does not focus on if a country should establish an NCF, it does help countries deepen their understanding of the design choices that are critical to successful NCFs. In the pages that follow, countries can identify the scope and scale of an NCF that matches their needs and priorities and decide if an NCF is right for them. It is UNDP’s hope that this guidebook will help countries to make the most out of the expanding climate change finance landscape. Well-designed NCFs can better equip countries to blend domestic and international, public and private, and concessional loan and grant climate finance at the national level. In this way, NCFs can help countries achieve results and more efficiently and effectively support the transition toward low-emission and climate-resilient development.

Purpose of Guidebook
The purpose of this guidebook is to assist countries in designing a National Climate Fund. It leverages UNDP’s experience with funds at the global, regional, national and sub-national levels and shares lessons learned about designing and administering NCFs. It also aims to provide a simple, robust and transparent method for meaningful stakeholder engagement throughout the design process.

Target Audience
The principle audience for this publication is the decision-maker at the national and sub-national levels, as well as domestic and international experts involved in assisting governments in establishing institutions and frameworks to support the management and delivery of climate finance.

Structure of Guidebook
The guidebook is divided into three parts. Chapter 1 provides an overview of NCFs, including the basic goals and functions. Chapter 2 provides a process for designing an NCF, including identifying the objectives, capitalization, governance, fiduciary management, implementation arrangements and monitoring, reporting and verification (MRV) structures and systems. Each of these components is accompanied by a series of targeted questions that facilitates decision-making for that component. Chapter 2 also describes UNDP’s approach for consolidating stakeholder input by creating a term sheet. Chapter 3 describes UNDP’s management and advisory services, and the implementation assistance offered by UNDP. Chapter 4 provides a conclusion and Chapter 5 presents five sample term sheets. The Annex includes a glossary and list of useful resources and websites.

National Climate Funds: A Guidebook for Decision-Makers

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National Climate Funds: A Guidebook for Decision-Makers

3 Common Functions of a National Climate Fund National Climate Funds: A Guidebook for Decision-Makers 5 .2 Key Goals of a National Climate Fund 1.Chapter 1 Overview of National Climate Funds "! "! "! 1.1 Climate Finance Landscape 1.

Low-Emission and Climate-Resilient Development. USA.1 Each of these public. a key challenge for countries will be to use scarce public funds to attract private investment. offering countries new resources to undertake climate change mitigation and adaptation actions. Recognizing this. shifts production and consumption processes to emit fewer greenhouse gases and promotes sustainable development. The requirements. including that from private sources. and how to develop the methods to monitor and evaluate the results. 6 National Climate Funds: A Guidebook for Decision-Makers . The dramatic increase in opportunities to access climate finance is matched by equally increasing complexity. Catalyzing Climate Finance: A Guidebook on Policy and Financing Options to Support Green. The increase in climate change funding opportunities makes it important for countries to consider how to attract and leverage different types of climate change investment. United Nations Development Programme.1 Climate Finance Landscape Climate change is regarded as a key environment and development challenge for the 21st century. there are already more than 50 international public funds. 1 2 UNDP. 40% from businesses and the remaining 20% from government. climate change impacts threaten to undo progress made toward poverty reduction and the achievement of the Millennium Development Goals. Public funds — such as those under the UNFCCC — must be leveraged in strategic ways to attract new resources from the private sector. countries must also figure out ways to blend funds together so that multiple sources can support climate change initiatives. Yannick (2011). The International Energy Agency (IEA) estimates that about 40% of the global additional investment needed in climate change finance in 2020 will come from private households. Affecting every continent. climate-resilient development. processes and reporting associated with the many funds can be confusing and overwhelming. New York. taken together. Countries must transition toward a new paradigm that supports low-emission.000 private equity funds providing climate change finance. Governments agree that businessas-usual development will not suffice — countries need a new way forward that helps their economies grow in a manner that acknowledges the pressing reality of climate change.2 With private sector funds outnumbering government funds by an enormous margin.2 Further. 45 carbon markets and 6. These pledges have been matched by an explosion of public and private funds outside of the UNFCCC process. how to coordinate the actions funded by them. Human Development in a Changing Climate: A Framework for Climate Finance. Ushering in a new development paradigm requires a dramatic increase in climate change finance. private. bilateral and multilateral sources offers new opportunities for countries to address their climate and development needs. Countries are faced with the challenge of how to identify which funds are appropriate for them. Glemarec. This will be necessary to finance a complete transformation toward low-emission and climate-resilient development. 2011. NY. governments gathered at the UNFCCC Climate Change Conference in Cancun and pledged $30 billion in “fast start” funding — climate funds pledged between 2010 and 2012 — and up to $100 billion annually by 2020.Chapter 1: Overview of National Climate Funds 1 Overview of National Climate Funds 1. UNDP estimates that.

Agents and Channels Innovative climate finance (sources and governance under negotiation) Government cooperation Private cooperation Capital markets Domestic budget National implementing entities Bilateral cooperation Multilateral cooperation National financial institutions Bilateral finance Multilateral finance UNFCCC Private sector CSOs/ NGOs Official Development Assistance ‘New and additional’ climate finance Carbon markets Industrialized countries ODA commitment Industrialized countries commitments to ‘new and additional’ finance for climate Industrialized countries emission reduction obligations Foreign Direct Investment CDM levy funding the Adaptation Fund Total finance available for climate change mitigation and adaptation initiatives Source: Adapted by author from Atteridge and others (2009). National Climate Funds: A Guidebook for Decision-Makers 7 .Chapter 1: Overview of National Climate Funds Figure 1: Climate Change Finance: Sources.

NCFs are a mechanism that supports countries to direct finance toward climate change projects and programmes. private. blending. effective and inclusive partnerships. climate-resilient development. Second. Public. NCFs provide a mechanism that can blend these resources with others resources at the project level. development partners. harmonization and coordination. national and subnational level. multilateral and bilateral sources to maximize a country’s ability to advance national climate priorities • Coordinate country-wide climate change activities to ensure that climate change priorities are effectively implemented • Strengthen capacities for national ownership and management of climate finance. an NCF provides a unified engagement point where the government. and achieving development results and accounting for them.2 Types of NCF Goals • Collect sources of funds and direct them toward climate change activities that promote national priorities • Blend finance from public. private. collect funds from them or increase the burden on countries and implementing entities.Chapter 1: Overview of National Climate Funds 1. In their structure and operations. as well as innovative sources. countries must blend together multiple sources — public. multilateral. Each of these goals can be tailored to support country-driven climate change priorities based on national circumstances and realities. private. Third. including for “direct access” to funds Key Goals of a National Climate Fund One tool that countries can use to meet this challenge is a National Climate Fund (NCF). private. as well as strengthening national ownership. Rather. an NCF facilitates the blending of public. while traditional mechanisms under the UNFCCC are limited to collecting donor funds or resources under the Clean Development Mechanism (CDM). The NCF mechanism responds to the need to provide flexible. Adaptation Fund and the emerging Green Climate Fund will each collect resources and direct them toward climate projects at the regional. civil society and other stakeholders can engage on and make decisions about climate change issues. First. and coordination. NCFs can coordinate country-wide climate change activities. NCFs can be designed to complement and blend sources from the emerging global public climate change financial system. It is rare that one or two funds would be able to cover the costs necessary to transition and entire economy toward low-emission. of climate finance (Figure 2). an NCF can attract a more diverse variety of sources of climate financing. can be collected by an NCF for coordinated and streamlined results. multilateral and bilateral funds. The Global Environment Facility. The NCF’s four goals provide the foundation for its programmatic and operational components. by collecting and distributing funds to climate change activities that promote national priorities. including national ownership and alignment with national priorities. The key goals of an NCF are the collection. multilateral and bilateral sources of climate finance. 8 National Climate Funds: A Guidebook for Decision-Makers . Moreover. NCFs are consistent with several principles of the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action. donors. NCFs can also serve as a gateway for enhanced capacity building and knowledge sharing among stakeholders. National Climate Funds are not meant to duplicate these financial flows. bilateral — in a coordinated and streamlined way that is strategic and can further catalyze more resources to support action on climate change. coordinated and predictable funding to support the achievement of national priorities on climate change and development. Rather. NCFs can provide the means for leveraging public funds to attract private funds and provide national-level coordination among and alongside the global climate finance system.

an NCF can also support National Implementing Entities (NIEs) and other entities using the “direct access” modality to deliver climate change projects. some NCFs may focus on blending various types of finance together to support projects while others may emphasize coordination. GEF. National institutions can be better equipped to develop project proposals. NCFs can provide a streamlined and effective system to translate financial opportunities into real results on the ground. An NCF can be designed to emphasize some goals more than others. climate change and aid effectiveness to reduce fragmentation and deliver results.. by strengthening national institutions and financial management. By aligning with existing national institutions and goals. Adaptation Fund. NCFs support the strengthening of existing national institutions that drive development. implement projects and monitor and report the results.g. the Green Climate Fund and other sources as they become available.g.. levy on coal) Other Sources National Climate Fund Steering Committee Multilateral Cooperation International Sources Collect Bilateral Cooperation Other Sources Account For Blend Funding Sources Private Sources Project Project Vertical Funds (e. manage funding.Chapter 1: Overview of National Climate Funds Fourth. This can also bolster national fiscal and financial systems to better prepare national institutions to absorb and manage all types of finance. Green Climate Fund) Carbon Funds Source: Flynn (2011). National Climate Funds: A Guidebook for Decision-Makers 9 . Although each of these four goals plays an important part in the operations of an NCF. This expertise can promote greater country ownership and strengthen fiduciary management so that national entities can more readily access funds through the Adaptation Fund. each should be tailored to match country needs. For example. Figure 2: National Climate Funds as Part of the International Climate Finance Landscape Domestic Sources Coordinate National Budgets Innovative Sources (e.

Further. including monitoring and reporting on activities and resource disbursement • Support knowledge exchange and management Common Functions of a National Climate Fund Once a country decides to establish an NCF. The NCF can become an important source of knowledge and information management that consolidates and disseminates lessons from climate change projects and programmes. 10 National Climate Funds: A Guidebook for Decision-Makers . an NCF can supply systems to ensure that quality standards are met throughout its operations. an NCF can serve as a central body for discussion and decision-making about how the NCF will support national action. As demonstrated in Chapter 2. Well-conceived guidelines can facilitate the transparent approval process of NCF climate change initiatives. An NCF with ill-designed functions runs the risk of not only failing to reach its goals. including NCFs. climate-resilient development. They can include goal setting. financial control and performance measurement. strategic programming. partnership management. Each should be considered carefully. capitalization can take a variety of forms and can utilize public. capitalization. policy assurance. Moreover. public and private sources. An NCF can provide a mechanism for managing partnerships by clearly defining and coordinating the roles of various climate change stakeholders. Uniform project cycle guidelines that clearly outline the technical and eligibility requirements support streamlined operations. bilateral and innovative sources of finance. such as those under the UNFCCC or with other multilateral. NCFs offer policy assurance through social and environmental safeguards. It can also ensure the clear management of the responsibilities of stakeholders at all levels and across climate change initiatives. financial controls that ensure fiscal monitoring and reporting and performance measurement that outlines specific performance criteria and then evaluates projects and programmes to ensure that the NCF delivers effectively and efficiently.Chapter 1: Overview of National Climate Funds 1. First. NCFs can provide a coordinated project approval and implementation structure for climate change programming. an NCF should enhance or provide a system that supports goal setting and the development of programmatic strategies on climate change. by facilitating regular discussions and stakeholder engagement on national climate issues. project approval. Functions should build upon existing mechanisms and systems that support action on climate change. there are a number of core functions that are common to any funding mechanism. the NCF can provide a coordinated supporting structure to a country’s national climate and development priorities. multilateral. but of undermining progress toward low-emission. The NCF can complement and support the management of relationships with other financing mechanisms. help projects implement good practices and spur innovative solutions to implement country-driven priorities on climate change. The exchange of such information can build capacity.3 Common Functions of an NCF • Support goal setting and the development of programmatic strategies • Fundraise • Manage partnerships • Provide project approval and support implementation • Supply policy assurance • Provide financial control • Manage performance measurement. An NCF should provide for fundraising toward climate priorities. the capitalization of the NCF — its ability to collect and raise funds — is one of the core functions that make an NCF a useful tool for implementing low-emission. By setting in place a process that aligns and supports existing general goals and strategic programmes. The functions of an NCF influence its components and services. private. stakeholders must identify the specific and necessary functions of the NCF. Indeed. climate-resilient development. bilateral. In UNDP’s experience.

1 Common Components and a Structural Overview of a National Climate Fund 2.2 Key Decision: Defining the Objectives 2.3 Key Decision: Identifying Capitalization 2.8 Consolidating Inputs into Term Sheets National Climate Funds: A Guidebook for Decision-Makers 11 .5 Key Decision: Ensuring Sound Fiduciary Management 2.4 Key Decision: Instilling Effective Governance 2. Reporting and Verification 2.Chapter 2 Designing a National Climate Fund "! "! "! "! "! "! "! "! 2.6 Key Decision: Supporting Efficient Implementation Arrangements 2.7 Key Decision: Facilitating Effective Monitoring.

implementation arrangements and monitoring. reporting. Chapter 2 of this guidebook focuses on a step-by-step decision-making process for the design of each component.” but many funds arrange the components into a common structure to support the delivery of NCF services. Each of these agents supports the delivery of actions to achieve the strategic priorities of the NCF. coordination. The structure includes funding sources.Chapter 2: Designing a National Climate Fund 2 Designing a National Climate Fund 2. and verification (MRV). there are a number of key decisions that must be made in order to ensure that an appropriate and effective NCF structure is established that maximizes the delivery of climate finance to support national priorities. Implementers receive funds and ensure activities are undertaken. Resources. capitalization.1 Common Components and Structural Overview of a National Climate Fund Given the diversity of design options. governance. Based on UNDP’s experience in the administration of over 750 trust funds and more than 40 multi-donor trust funds. fiduciary management. six common components have been identified that provide the basic skeleton for any NCF: objectives. Important decisions on each component of the fund must be considered in order for an NCF to achieve the core goals and functions described in Chapter 1. The end of Chapter 2 brings all of these decisions together into a term sheet that facilitates stakeholder engagement and consolidates stakeholder inputs on each component. NCFs are not “one-size-fits-all. Funding sources provide funds to the NCF while the governing bodies make decisions about the operations of the fund. UNDP has developed a structural overview (Figure 3) that demonstrates how these components can be arranged and the various design questions that must be answered. governing bodies. 12 National Climate Funds: A Guidebook for Decision-Makers . A description of each component is accompanied by a series of targeted questions that facilitate decision-making for that element. a trustee and implementers. Throughout each component. governing bodies. implementers and recipients. stakeholders should consider how the NCF will deliver its services and what structural components and design decisions are necessary to support the achievement of the NCF’s priorities. the trustee. The trustee manages the transfers of funds to and from the NCF’s bank account. support and MRV flow between sources.

This group is often made up of multiple ministries. specialized systems can be put in place to manage financial flows. The NCF structure can be tailored to align with its designated functions and national priorities. such as environment. Often. The chair person of the steering committee can be a government representative or other participant. including serving as a donor. such as taxes on bunker fuels. and representatives from civil society. This kind of flexibility helps each entity associated with the NCF to fulfill the role that best supports the objectives of the fund. the private sector and/or civil society play important roles in the fund’s structure. Relationships with the private sector and civil society should also be considered and clarified. to support activities. The flows of funds. The implementers conduct the projects and the recipients receive the benefits. The steering committee is usually supported by two other governing bodies. the steering committee will direct the trustee to distribute the funds to the implementing entities. the loans will be repaid back to the trustee. which holds them on behalf of the NCF. support and coordination of an NCF should align with its objectives so that the fund can operate smoothly. MRV would be conducted by the banks according to their lending criteria. The relationship between the NCF’s various bodies must be carefully defined through the design process so that each decision is implemented efficiently and promotes national climate and development objectives. When the governing bodies make decisions about how the funds should be allocated. strategic direction and reporting. In cases where the private sector or a civil society group has met the necessary fiduciary standards.Chapter 2: Designing a National Climate Fund Lessons Learned from Existing NCFs • Clearly define the functions of the fund (Financial mechanism? Coordination? Clearing house?) • Ensure that the objectives are well-defined and practical • Have realistic expectations of capitalization • Design a streamlined project cycle • Undertake stakeholder engagement to identify needs and requirements • Ensure unambiguous appraisal and performance criteria • Establish a clear system of fiduciary standards • Incorporate design elements that are stable but flexible to adjust over time • Allow the NCF to evolve by supporting stability and flexibility • Establish capacity development as a key element of the fund A set of governing bodies is usually at the centre of an NCF. an implementer or a representative on a governing body. the infrastructure must be set up in order to accommodate the collection and distribution of these funds. development banks. In some NCFs. including policy and operational guidelines. if a fund capitalizes national banks to provide low-cost loans for projects such as renewable energy. The implementers then report on their activities to the governing bodies. For example. a steering committee or other group makes decisions on the disbursal of funds and oversees the high-level activities of the fund. private sector or other partners. In the case of loans. In a majority of funds. they can also serve as the trustee. Depending on the objectives of an NCF. the United Nations. it may assign the government as the source of funds and the national bank as the trustee. In the case of an NCF using innovative financing mechanisms. National Climate Funds: A Guidebook for Decision-Makers 13 . a technical group that provides substantive reviews of project proposals and a secretariat that manages day-to-day operations of the NCF. resources flow from the sources to the trustee. planning and finance.

g. Innovative sources 3. Governing bodies identified 2. Oversight 6. Existing sources 5. Relation to other national funds Private Funds Innovative Sources KEY DECISION: MRV Considerations: 1. Cycle for fundraising Source: Flynn and Glemarec (2011). Oversight 9. Relation of capitalization to size. Link to project effectiveness 4. Allocate funds to specific activities 4. Audits 5. Proposal submission 6. Fund focus 3. Safeguards 8. Relation to other funds 4. Expected financial flows 6. Reporting and Verification Governing Bodies Sources Secretariat Technical Committee Steering Committee Public Domestic Public Multilateral Public Bilateral KEY DECISION: Governance Considerations: 1. Decisions-making process 5. Representation on bodies 4. Timeframe 5. Connection to existing MRV systems 2. Stakeholders 7. implementation 6. laws) 7. Guidance materials KEY DECISION: Capitalization Considerations: 1.Chapter 2: Designing a National Climate Fund Figure 3: Structural Overview and Design Considerations of a National Climate Fund Key Objectives KEY DECISION: Objectives Considerations: 1. General sources to be collected/blended 2. Proposal approval 7. Relation to other entities/programmes Flow of Support Flow of Coordination Flow of Funds Flow of Monitoring. National priorities 2. Necessary structures (e. governance. 14 National Climate Funds: A Guidebook for Decision-Makers . Relation to existing bodies 3.. NCF MRV requirements 3.

Relation to lending institutions 3.g. Relationship of fund to implementers (e.g. Fees Government Bodies United Nations NGOs Private Sector Civil Society Actors Others Actions to Achieve Strategic Priorities Eligible Recipients Instrument (loans or grants) Type of Support Eligible Activities National Climate Funds: A Guidebook for Decision-Makers 15 . Services of trustee 4. Implementer selection 4. grants and/or loans) 2... oversight) 5. Relation to domestic and international funds 9.Chapter 2: Designing a National Climate Fund Trustee/Administrative Agent National Development Banks Government Bodies KEY DECISION: Fiduciary Management Considerations: 1. Oversight 8. Private sector 6. Trustee selection 2. Government engagement with trustee 3. Programmatic instruments (e. Fees 7. Delivery 7. Conflicts of interest 5. Relation to implementers 6. Capacity development to strengthen national trustee United Nations Others Multilateral Development Banks Implementers Multilateral Development Banks National Development Banks KEY DECISION: Implementation Arrangements Considerations: 1.

Reporting and Verification Identifying Capitalization Supporting Efficient Implementation Arrangements Instilling Effective Governance Ensuring Sound Fiduciary Management Source: Flynn (2011). bilateral. Figure 4: Designing and Establishing a National Climate Fund Defining the Objectives Facilitating Monitoring.Chapter 2: Designing a National Climate Fund Importantly. Throughout the design phase of an NCF. institutions. private and civil society actors in the development and establishment of the NCF helps to more clearly identify needs and requirements and to accommodate best practices. NCFs must also have the flexibility to adjust over time. 16 National Climate Funds: A Guidebook for Decision-Makers . multilateral. NCFs must be firmly rooted in national realities. NCFs should take this into account by aligning with national climate change strategies. To provide stability. Including various government. Maintaining both stability and flexibility is imperative to stakeholder engagement. stakeholder consultations are critical to ensure that the NCF is robust and effective. however. National priorities and circumstances provide an important context for NCF delivery and can lead to opportunities and challenges as an NCF becomes operational. frameworks and stakeholders.

such as increasing renewable energy. Likewise. It is critical that objectives take into account the technical and political considerations that may support or hamper the NCF’s progress over time. such as the National Communications. Carefully defined objectives must be supported by appropriate functions of the NCF. such as mitigation. A country National Climate Funds: A Guidebook for Decision-Makers KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. National Adaptation Plans (NAPs) and Nationally-Appropriate Mitigation Actions (NAMAs). capacity building. please see pages 14-15 KEY DECISION 2 IDENTIFYING CAPITALIZATION Governing Bodies Trustee/Administrative Agent KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Sources KEY DECISION 4 Implementers ENSURING SOUND FIDUCIARY MANAGEMENT Programmatic and Management Objectives As a first step in setting up an NCF. a country should take into account its national climate and development strategies. REPORTING AND VERIFICATION 17 .Chapter 2: Designing a National Climate Fund 2. a country must identify its strategic goals on climate change and how the NCF will help it to achieve these goals. National Adaptation Programmes of Action (NAPAs). The NCF may serve the country by driving resources to national climate activities. An NCF’s objectives provide the foundation for its operations and outcomes. When setting objectives. These analyses can bring together current thinking on climate change. to achieve other priorities of the NCF. An NCF’s objectives may also include attracting private sector investment. adaptation. Thematic priorities. it may not be necessary to develop a complicated financial mechanism. technology building or other priorities. as well as focus the NCF on priority issues and sectors where activities can be undertaken in a cost-effective way. Likewise. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. reducing emissions from deforestation and forest degradation (REDD). if an NCF is to provide low-cost loans to a specific sector.2 Key Decision 1: Defining the Objectives Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. as well as other analyses and plans. or formalizing a system to collect resources from “polluter pays” policies that collect revenue from industry. such as capacity building for direct access to climate funds under the UNFCCC. it would not be necessary for the functions of the fund to include extensive coordination systems. If an NCF focuses on providing a type of “clearing house” for climate change initiatives. and appropriate and supportive systems be put in place. must be supported by analyses of the feasibility of increasing investment in that sector. these aims must be acknowledged. to identify the priorities of a National Climate Fund.

How will the objectives of the fund relate to the objectives of other international and domestic funds? 4. The NCF could be a funding arm and all activities under the NCF would link to Ethiopia’s mission statement. Climate-Resilient Economy mission statement sets out how Ethiopia is responding to climate change and how it can transition toward low-carbon growth. Likewise.)? 2. renewable energy) or support broader objectives? 3. the Carbon-Neutral.. For example. It is managed by a Board comprised of Ministers of environment. Clean Development Mechanism) 18 National Climate Funds: A Guidebook for Decision-Makers . the national strategy becomes the roadmap for the NCF. Will the fund focus on thematic priorities (e. NAMAs. the longer-term pledges of up to $100 billion per year by 2020 include a variety of sources.g. medium or long-term strategies that the NCF should support (including national strategies. If a country has already acquired funds from a specific source. one to provide funding for REDD activities and another for adaptation. importantly.g. What are the national priorities on climate change? Are there short. national strategies. can select the objectives that match its priorities but must ensure that the objectives are fully supported by the NCF’s functions. and an NCF may wish to accommodate these circumstances accordingly. etc. Some countries may have multiple NCFs that target specific issues — for example. If a national strategy or other funding mechanism is time-bound. ALIGNING OBJECTIVES WITH OTHER PRIORITIES AND FUNDING WINDOWS These programmatic considerations should be linked closely with fund management considerations and. those associated with a specific industry) 7. if a country’s goals are to optimize its relationships with stakeholders (e. In this model. then it will be important to ensure that the structure of the NCF can channel this funding appropriately. including private finance. Are there stakeholders that must be acknowledged in the objectives? (e. it is important to align the NCF with the 2012 deadline. the fund provides direct support for the implementation of Bangladesh’s Climate Change Strategy and Action Plan for 2009 — 2018.g. In Ethiopia. This will be especially important as countries consider their options under the UNFCCC process. Others NCFs may be linked to more comprehensive. It focuses on helping vulnerable communities adapt to greater climate uncertainty and changing agricultural conditions.. Other NCFs may wish to align themselves with the specific timeframe of a national strategy. CRITICAL DESIGN CONSIDERATIONS FOR DEFINING THE OBJECTIVES: 1.g.Chapter 2: Designing a National Climate Fund Bangladesh Climate Change Resilience Fund Endorsed by the government in 2009.. donors and civil society. The scope of the NCF must fully support its programmatic mission. how the NCF will relate to other international and domestic climate funds. agriculture and disaster management. What are the expected financial flows to the fund? Have funds already been pledged? Have these funds been earmarked toward a specific activity that should be acknowledged? 6. Similarly. this may affect the timeframe of the NCF. or funds have been earmarked for a specific activity. What timeframe is most appropriate? Should the NCF be time-bound? 5. if an NCF is designed to attract fast start funding. the Clean Development Mechanism) it may be necessary to codify this in the objectives. FUND TIMELINE Designing an NCF’s objectives must also consider timelines.g.. finance. the private sector) or funding programmes (e. The government is considering setting up a national fund to support these activities.. Should the objectives acknowledge a relationship with an entity or programme? (e.

climate-resilient development strategy — may aim to collect funds from international and national sources so that a wide variety of activities can be covered. such as those from one bilateral partner. national. A fund with a more targeted mission will often only focus on a single source. targeted objectives should not aim to access billions when it is not appropriate for the scope of the NCF. grounded in the objectives and functions of the NCF. supporting all of the activities under a low-emission. National Climate Funds: A Guidebook for Decision-Makers 19 . please see pages 14-15 KEY DECISION 2 IDENTIFYING CAPITALIZATION Governing Bodies Trustee/Administrative Agent KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Sources Public Domestic Public Multilateral Public Bilateral KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT Private Funds Innovative Sources KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS Implementers KEY DECISION 6 Building on the fund’s objectives. Generally. it usually blends together a broader array of sources than more targeted NCFs. Indeed. but they must build on existing frameworks and be supported by appropriate structures to access and channel funding efficiently. Many sources of finance — including international. REPORTING AND VERIFICATION Fund capitalization must be realistic. if a fund has a broad set of objectives. LINKING OBJECTIVES AND CAPITALIZATION FACILITATING MONITORING. An NCF with wide objectives — for example. a country should consider the types of resources that would best capitalize the fund. Funds with ambitious objectives must have clear expectations of how the fund will be capitalized and the objectives supported. public and private — can be delivered through an NCF. Designers of NCFs should exercise caution in this regard: expectations of co-financing and leveraging must be based on national circumstances. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. funds with smaller. deciding where the funds will come from is one of the most important choices that will shape the NCF.3 Key Decision 2: Identifying Capitalization Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. Likewise.Chapter 2: Designing a National Climate Fund 2.

20 National Climate Funds: A Guidebook for Decision-Makers . This helps the NCF to contribute toward sound investment and policy decisions that direct private finance toward activities that address national climate and development priorities. the NCF can stimulate and attract private investment by driving public finance toward commercially attractive projects. an NCF is designed to collect resources from non-traditional sources of finance such as levies on oil or coal production. the China CDM Fund is an innovative finance mechanism that collects resources from revenues generated from CDM projects in China. With both traditional and innovative sources. it is critical to consider national circumstances in order to optimize capitalization. By aligning with existing private sector regulations and incentive structures. It also provides preferential loans to energy-saving and renewable energy projects. The fund expects to have $1. For example. or to align with them so that activities will be undertaken in a coordinated manner. may need to be mandated by a national law that clarifies the rates of taxation. If the NCF does absorb them. the Brazil National Fund on Climate Change collects funds from revenue from the oil production industry and channels them toward climate change mitigation and adaptation activities. Laws or policies may be required to access and collect certain types of funding. The fund provides grants and investments for initiatives that address climate change and promote social and economic sustainable development. for example. grants and other types of cooperation and support from multilateral development institutions. The fund is overseen by the Ministry of Environment and operated by the National Social and Economic Development Bank. Brazilian National Fund on Climate Change The fund was created to allocate a portion of the government’s revenue from oil production to mitigate the impact of oil production and combat climate change. A country should also consider any available resources that could already feed directly into the NCF or any existing partnerships with donors. NCFs should have the ability to manage and account for funds coming from these non-traditional sources.Chapter 2: Designing a National Climate Fund INNOVATIVE FINANCING MECHANISMS A country may also want to consider the use of innovative financing mechanisms to provide capital for an NCF. CONSIDERING CONTEXT China CDM Fund Established by the Ministry of Finance and the National Development and Reform Commission in 2007. Innovative mechanisms require that complementary structures be put in place within the NCF to ensure the efficient collection and delivery of funds. for example. In this case. it is important to note whether they are “earmarked” toward specific activities — such as capacity building — that will affect the operations of the fund. Revenues from these sources are collected by an NCF and then directed toward the programmes and projects that fulfill the goals of the NCF. The resources from the fund can also be used to leverage international public finance and private finance in pursuit of the fund’s mandate. A country may wish for the NCF to absorb these resources or partnerships. fees from polluting companies or proceeds from carbon markets. earnings from CDM business operations.5 billion for renewable energy by 2012. A tax on an industry. Understanding and acknowledging national circumstances is especially important when considering the involvement of the private sector. The fund was established by a law adopted in December 2009 and provides grants and loans to adaptation and mitigation initiatives.

partnership agreements) 7. a number of legal contracts or systems will need to be established in order to collect resources from specific sources. enacting laws.g.. Will the fund utilize innovative sources. Some NCFs use a regular fundraising cycle while others adopt the cycles associated with specific sources. Will the size and sources of capitalization impact the size.Chapter 2: Designing a National Climate Fund The capitalization of the fund has implications for the size.. then it may be necessary to include private sector representatives in the governance system. CRITICAL DESIGN CONSIDERATIONS FOR IDENTIFYING CAPITALIZATION: KEY DECISION 1 DEFINING THE OBJECTIVES KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE 1. Will there be a regular process or cycle for raising funds? How will additional sources be attracted? KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. governance and implementation of the fund. investment) 4. Will donor funds be allocated to specific activities? (e. Based on the objectives of the fund. what kinds of sources will be blended together to capitalize the NCF? 2. institutional strengthening.g. For example. governance or implementing arrangements of the fund? 6. Furthermore. Are there any existing sources that could readily feed into an NCF? 5. Countries should also consider how additional resources will be raised throughout the life of the fund. For innovative funds. Are there specific structures necessary to support the fund’s capitalization? (e. such as levies? 3. if the private sector provides resources to the fund. laws or policies. REPORTING AND VERIFICATION National Climate Funds: A Guidebook for Decision-Makers 21 . policies or partnership agreements may also be necessary for the efficient capitalization of an NCF. capacity building.

First. please see pages 14-15 Governing Bodies Trustee/Administrative Agent Secretariat Technical Committee Steering Committee Sources Implementers Building on the objectives and capitalization of the NCF. If the NCF has a horizontal structure. If the NCF is a vertical institution.4 Key Decision 3: Instilling Effective Governance Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. Reporting and Verification For a full version of this diagram. a country must consider the scope of the NCF’s governance. decision-making processes and oversight can facilitate efficient management of the fund in order to drive resources toward implementation. Establishing governing bodies. countries must identify the appropriate governance system that will optimize the fund’s performance.Chapter 2: Designing a National Climate Fund 2. the governance system should be inclusive of stakeholders and provide coordination among partners. 22 National Climate Funds: A Guidebook for Decision-Makers . the governance arrangements may require more stringent reporting and management structures.

A Technical Committee provides technical assistance to the Steering Committee and evaluates project proposals. Representation guidelines should also carefully outline the role of nongovernment stakeholders. the governance structure of one fund can support the operations of others. Depending on the objectives of the fund. on the steering committee. The secretariat schedules meetings. for example. An NCF that supports a comprehensive low-emission. KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Though not required. when multiple environment or climate change funds exist in a country. can take on the role of the steering committee. many NCFs have a set of governing bodies that make decisions on fund management and strategic direction. The Secretariat manages the day-today operations of the ICCTF. prepares documentation for meetings and corresponds with project hosts. an existing body within a government ministry may also provide technical expertise or secretariat services. including approving funding to project proposals. Guidelines pertaining to representation on an NCF’s governing bodies should be established during the design phase. Moreover. non-government representatives can have decision-making abilities alongside the government. Many governments choose to have representatives from the sources and implementers. The Technical Committee reviews each proposal and develops an assessment report that is submitted with the project proposal to the Steering Committee. This can help to ensure that all parts of the fund are coordinated and streamlined. Or. Grant proposals are received by the Secretariat to ensure all documentation is complete. corresponds with stakeholders. A previously established inter-ministerial climate change committee. Some governments may have existing bodies. A technical group is made up of substantive experts who evaluate project proposals and provide recommendations to the steering committee. The bodies within the governance system must have clear roles that effectively support the NCF without adding increased burden or bottlenecks in the programming cycle. GOVERNING BODIES KEY DECISION 1 DEFINING THE OBJECTIVES As discussed previously. many NCFs have a high-level steering committee. chaired by the government. and by a secretariat that conducts day-today operations.Chapter 2: Designing a National Climate Fund Indonesia Climate Change Trust Fund The ICCTF is managed by a Steering Committee that is responsible for identifying general strategic policy recommendations and defining priority areas to be financed. which provides guidance and oversight to the fund. The scope of the bodies should align with the scope of the objectives. as well as the trustee. or they may participate as observers. if an NCF supports a more targeted objective with limited stakeholders. The steering committee is usually supported by a technical group that provides a substantive review of proposals to the NCF. climate-resilient development strategy will require a governance system that is equally comprehensive. then the scope of the governance system could also be limited. On the other hand. KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. REPORTING AND VERIFICATION National Climate Funds: A Guidebook for Decision-Makers 23 . The Steering Committee then approves or rejects the proposal. frameworks or systems in place that can serve as portions of the governance structure. Both play an important role in supporting the steering committee to make decisions about project proposals.

What safeguards will be put in place to increase effectiveness and efficiency? 8.g. In other NCFs. What is the project proposal approval process? 7. Ultimate oversight and of the fund must also be clarified. Who can submit project proposals? To whom do they submit them? 6. Each body has a defined role to support the decision-making process. development banks. United Nations. For example. reviewed by a technical group and the technical group’s recommendations are forwarded to the steering committee for approval. the China CDM Fund is governed by an inter-ministerial board made up of the Ministry of Finance. As demonstrated by this example. National Development Reform Commission (NDRC). Ministry of Science and Technology. civil society. private sector. proposals are received by the secretariat. the relationships between governing bodies should be clarified to ensure that decision-making is efficient. donors. Ministry of Foreign Affairs. What governing bodies are necessary to ensure efficient operations of the fund? Who reports to whom? 2. Ministry of Agriculture and China Meteorological Administration. Identifying who can submit proposals and who approves them will establish the lifecycle of a project proposal. a government body or other agent may have this role. How will any existing inter-ministerial or other high-level national body relate to the fund? 3. CRITICAL DESIGN CONSIDERATIONS FOR INSTILLING EFFECTIVE GOVERNANCE: 1. Who will be represented in the governing bodies? (e. management and use of the funds are the responsibility of a Management Centre affiliated with the Ministry of Finance. how do the governing bodies of these funds relate to one another? 24 National Climate Funds: A Guidebook for Decision-Makers . government. in many NCFs. In the case where there is more than one national environment/climate fund in a country. other development partners) 4. the Steering Committee is responsible for the delivery of the fund. What body has ultimate oversight over the activities of the NCF? What individual person will lead this body? 9. Ministry of Environmental Protection.Chapter 2: Designing a National Climate Fund SUBMISSION AND APPROVAL OF FUNDING PROPOSALS The process for submitting and approving proposals should be closely linked to the roles of the governing bodies. For example. The collection.. What decision-making process will be put in place for the governing bodies? 5. In many cases. Projects are submitted to the Management Centre which then sends them to the NDRC for review and recommendations. The recommendations are then sent to the entire board for approval.

National Climate Funds: A Guidebook for Decision-Makers 25 . For example. an NCF may wish to have a different set of fiduciary standards for a multilateral implementer than for an implementer from the private sector. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. project cycles and scale of risks of climate change projects. It is critical that decision-makers consider how fiduciary standards will apply to these various actors.Chapter 2: Designing a National Climate Fund 2. An NCF could be potentially coordinating the disbursement of funds to multiple implementers that have different fiduciary standards from the NCF and from each other.5 Key Decision 4: Ensuring Sound Fiduciary Management Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. an NCF must have a system of fiduciary management that accommodates the multiple standards. REPORTING AND VERIFICATION Sound fiduciary management provides the foundation for the efficient movement and tracking of funds flowing to and from the NCF. As the number of sources in the climate finance landscape continues to expand. DEFINING FIDUCIARY ARRANGEMENTS Fiduciary arrangements facilitate relationships between different actors in the NCF structure. They may also wish to have certain fiduciary standards for a large project that differ from those for a smaller project with lower risk. please see pages 14-15 KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 Governing Bodies Trustee/Administrative Agent United Nations National Development Banks Multilateral Development Banks INSTILLING EFFECTIVE GOVERNANCE Others KEY DECISION 4 Government Bodies ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 Sources SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS Implementers KEY DECISION 6 FACILITATING MONITORING. Some NCFs choose to have tailored fiduciary standards for different types of implementers or projects.

it holds the funds in an account and receives instructions from the steering committee for the timing and direction of distribution. Almost all trustees require a fee for their services. For some NCFs. Countries should take this into consideration as the agreement with the trustee is established.undp. Still others. use the United Nations (UN) system.org). This may include gathering and disseminating of data on projects to which funds are distributed. NCF designers must clarify the relationship between the trustee and government or domestic financial institutions. 26 National Climate Funds: A Guidebook for Decision-Makers . The trustee may provide a number of other administrative services beyond collecting and distributing funds and legal documentation. disbursing funds to each participating entity on behalf of the steering committee (or other decision-making body). A national body may wish to engage with the fiduciary management of the NCF in order to support delivery of funds. Importantly. To do this. the trustee coordinates the legal contracts and agreements that underpin the transactions of funds. including receiving contributions from various sources.Chapter 2: Designing a National Climate Fund Some funds have a “one size fits all” approach where an NCF sets out fiduciary principles that every implementer must apply to their operations. Even if the trustee is an external development partner. the trustee is a national development entity. The UN MPTF Office receives and administers contributions and disburses funds to implementing entities as directed by the fund’s steering committee. capacity building or MRV of funds. NCF designers should take into account that the various types of stakeholders — government entities. multilateral entities and others — may have varying degrees of flexibility to adopt these standards. These updates are distributed along with financial reports to the steering committee or other body. some trustees play a critical role in reporting by consolidating progress reports submitted by implementing entities. A national or international body can serve as the trustee. such as Guyana’s REDD+ Investment Fund. Further. private sector. Usually a trustee or administrative agent manages an NCF’s transactions and ensures that funds are collected and distributed in a coordinated and effective manner. the trustee for the Amazon Fund of Brazil is the Brazil National Development Bank (BNDES). BNDES coordinates donations and distributes funds. MANAGER OF FIDUCIARY ARRANGEMENTS Ecuador Yasuni ITT Trust Fund The fund uses the UNDP MultiPartner Trust Fund (MPTF) Office as the Administrative Agent. This can include oversight functions. Fees can range from 1 to 5% of funds managed. use the World Bank as their trustee. The trustee does not make decisions on what projects should be funded by the NCF. Other funds. investing funds that are not yet disbursed and providing financial reporting. For instance. It also performs a range of reporting functions. It ensures that the NCF meets all legal and fiduciary standards for collecting and distributing funds. However. such as the Ecuador Yasuni ITT Trust Fund. The standards can be as stringent or flexible as necessary. such as for supporting implementation. the trustee provides a number of fund management services. the NCF should be designed to ensure that there are no conflicts of interest. if the body selected as the trustee plays additional roles within the NCF. including consolidating reports based on those submitted by implementing entities and conducting regular financial reporting through an online platform (http://mdtf. Often. Rather.

Other than acting as a trustee. reporting) 4. This close partnership will support a smooth transition from one trustee to another. what capacity development activities should be undertaken? KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. How will the trustee be identified? Can a government entity serve as the trustee? Is an external development partner required? 2.Chapter 2: Designing a National Climate Fund CAPACITY DEVELOPMENT KEY DECISION 1 DEFINING THE OBJECTIVES Capacity development can be another critical function of fiduciary management.g. legal. For this to occur. If the trustee will transition to another agent in the future. predictable funding stream. REPORTING AND VERIFICATION National Climate Funds: A Guidebook for Decision-Makers 27 .. What fees will the trustee require? 7. and will maintain a coordinated. What services will the trustee provide? (e. How can conflicts of interest between the trustee and implementers be avoided? 5. CRITICAL DESIGN CONSIDERATIONS FOR ENSURING SOUND FIDUCIARY MANAGEMENT: KEY DECISION 2 IDENTIFYING CAPITALIZATION 1. it is critical that the trustee work closely with national institutions to strengthen domestic fund management so that countries meet international fiduciary standards. Many countries begin with an international body as the trustee but plan to transition this role to a domestic entity in the future. What is the relationship between the trustee and the governing/implementing bodies? 6. fund management. how will the government or domestic financial institution engage with the financial management of the fund? 3.

the Thailand Energy Efficiency Revolving Fund distributed a pool of government funds to private banks which then provided low-cost loans for energy efficiency. Reporting and Verification For a full version of this diagram.Chapter 2: Designing a National Climate Fund 2. Once the loans were repaid. This continual repayment of the initial loan cycle has supported additional loans. the money became available for new loans. SCOPE OF IMPLEMENTATION Identifying what kinds of programmatic instruments — such as grants or loans — will be used to implement the projects establishes the scope of implementation.6 Key Decision 5: Supporting Efficient Implementation Arrangements Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. others have diversified their activities to include low-cost loans. While many NCFs collect funds and then distribute them as grants. 28 National Climate Funds: A Guidebook for Decision-Makers . For example. please see pages 14-15 Governing Bodies Trustee/Administrative Agent Sources Implementers Government Bodies United Nations Multilateral Development Banks National Development Banks NGOs Private Sector Civil Society Actors Others Implementation arrangements — the processes and agents set in place to implement climate change programming — must support the objectives of the NCF and align closely with the other key design decisions.

national strategic thinking and planning. project implementers are approved or accredited by the steering committee and can then apply for funding for specific projects. ALIGNING IMPLEMENTATION ARRANGEMENTS With all implementers. REPORTING AND VERIFICATION Depending on the objectives of the fund. for delivery of NCF funds. Other international stakeholders are close partners. such as grants and loans. Arrangements like this support the objectives of the fund by establishing flexible systems to ensure that implementation is coordinated and efficient. Governments should take stock of their legal and financial tools in order to identify what types of services the NCF can provide. participation in international fora and the mobilization of climate and other environmental funds. implementers require a fee for their services. it is critical that the programmatic cycle is as streamlined as possible to avoid potential “double” project cycles where the NCF would have one project cycle and the implementers another. the steering committee directs the trustee to release the funds to the implementing entity. as the ability for the NCF to capitalize lending institutions will have implications for the financial management of the fund. similar to the manner in which the Adaptation Fund allows accredited entities to directly access funds for implementation. donor dialogues. There are many options for identifying the programmatic instruments. Activities include stakeholder engagement and consultation. UN-REDD is supported by three UN agencies: UNDP. In order to provide loans. civil society or the private sector to deliver activities. programme formulation. development banks.Chapter 2: Designing a National Climate Fund UN-REDD Programme in the Democratic Republic of the Congo (DRC) In DRC. including the World Bank’s Forest Carbon Partnership Fund (FCPF) and key international NGOs. a number of organizations or bodies can serve as implementing entities. National Climate Funds: A Guidebook for Decision-Makers 29 . the United Nations Environment Programme (UNEP) and the Food and Agriculture Organization (FAO). Using the NCF objectives as a guide. Projects must be able to move through the system as efficiently as possible in order to avoid unnecessary delays or bottlenecks. implementation can also occur by using combinations of these actors through. NCFs can specify that implementation should be carried out by a government ministry or other agent. Other options include United Nations agencies. For many NCFs. and risk and profit sharing arrangements with the NCF would need to be established. the bank would need to meet international fiduciary standards. for example. public-private partnerships. The role of national banks should be considered. data collection and analysis. KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. IMPLEMENTERS KEY DECISION 1 DEFINING THE OBJECTIVES KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Selecting implementers for an NCF should occur in a systematic and transparent way. such as Rainforest Foundation and the World Wildlife Fund. If project applications are approved. the UN-REDD programme provides grants to support the country to better engage with the international system for reducing emissions from deforestation and forest degradation (REDD+). Fees can range from 5 to 13% of the projects’ costs. As with the trustee.

How will the implementing entities be identified? What criteria are necessary? 4. What kinds of programmatic instruments will be used? (e. grants.. Some NCFs distribute funds to government bodies that sub-contract the implementation work. in some funds. Adaptation Fund and Green Climate Fund. These systems should be aligned to ensure effective and efficient delivery. How will the implementing arrangements relate to those of other domestic and international funds? 9.Chapter 2: Designing a National Climate Fund Further. Who has oversight and legal responsibility over implementation? 8. How can efficient delivery of funds be supported? 7. What fees will implementing entities require? 30 National Climate Funds: A Guidebook for Decision-Makers . It is worth noting that. the recipient of the fund and the implementer are separate entities. CRITICAL DESIGN CONSIDERATIONS FOR SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS: 1. or other funds at the national or subnational level. given that many NCFs will operate alongside international climate funds such as the Global Environment Facility. What is the relationship between the fund and the implementers? 5.g. since some implementers under the NCF may also be implementers under other funds. loans) 2. Can the fund capitalize lending institutions to support implementation? What does this mean for financial management and fiduciary standards? What does this mean for risk and profit sharing? 3. This will reduce transaction costs and should contribute to knowledge sharing. it is important that an NCF’s implementing arrangements align with the implementing arrangements of other funds. How will the fund engage with the private sector to encourage innovative investment opportunities? 6.

Public information systems can often support the dissemination of information. This real-time tracking supports transparency and access to information. robust and to minimize the reporting burden on NCF implementers.Chapter 2: Designing a National Climate Fund 2. The body with legal responsibility over implementation and achieving results should be identified and should ensure that the MRV systems optimize the use of existing national systems. MRV enables the NCF to ensure that results are being delivered. and to collect lessons learned from implementation that will further refine and improve NCF operations. Second. Each stakeholder responsible for providing information on the activities of the NCF must have clear guidelines and standards. this is conducted in a bottom-up manner by the implementers. First. including the roles of who will be conducting the MRV and who will be compiling the information. PROGRAMMATIC AND FINANCIAL REPORTING KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Two types of reporting are necessary. the activities implemented must be reviewed and data submitted on the results of those activities. REPORTING AND VERIFICATION Similar to the implementing arrangements. Generally. carrying out evaluations or commissioning audits. In the case of project reporting. NCF MRV systems should also be aligned within the fund to ensure that there are clear roles for oversight and audit functions. should be clarified. ALIGNING MRV SYSTEMS KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. National Climate Funds: A Guidebook for Decision-Makers 31 . Reporting and Verification (MRV) is a critical component of an NCF. the status of the finances of the NCF must be reported by the trustee. NAPs and other relevant mechanisms. This helps the NCF MRV system to be cost-effective. in some NCFs the governing bodies may collect data in a top-down manner by visiting project sites. MRV systems should align with other domestic and global climate change funds. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES Monitoring. as well as any MRV requirements of NAMAs. The NCF should have unambiguous appraisal and performance criteria. Also. Guidelines and templates should be established so each implementer reports on a similar set of metrics. However. MRV should be systematized across the NCF. institutional arrangements. The trustee often provides this information to the secretariat or steering committee on a regular basis.7 Key Decision 6: Facilitating Effective Monitoring. which report activities to one of the governing bodies. This data should be collected by one governing body that can compile the information for further analysis and identification of best practices. An NCF may choose to monitor the status of its finances through a series of regular reports or using web-based financial tracking tools.

CAPACITY DEVELOPMENT Many MRV systems are new to governments and project implementers that have not been a part of previous MRV systems. Importantly. Who will oversee the entire MRV process? 6. pay-for-performance options) 4. MONITORING. projects receive initial funding but future support is based on the results achieved. An annual report summarizes the progress of implementation for the full year. any MRV mechanisms established should provide tools. Will audits be undertaken? By whom? 5. MRV for NAMAs)? 2. For example. some NCFs may wish to use MRV as a way to incentivize results. methodologies. How should MRV results be linked to project effectiveness? (e. Based on this information. This model can promote accountability and provide incentives for recipients to use funds efficiently. A Joint Programme Annual Review occurs each year to review the report. Moreover. CRITICAL DESIGN CONSIDERATIONS FOR FACILITATING. in the case of performance-based funds. Can the NCF MRV system be built upon any existing systems (e.. who compiles the information into a single report.g.Chapter 2: Designing a National Climate Fund Cambodia Climate Change Alliance Trust Fund Grantees submit implementation reports every three months to the Trust Fund Secretariat. the head of the Trust Fund Secretariat provides quarterly progress reports. REPORTING AND VERIFICATION: 1. By aligning MRV with project effectiveness. What types of guidance materials are available or need to be created? What MRV capacity building activities should be undertaken? 32 National Climate Funds: A Guidebook for Decision-Makers . What type of programmatic or financial information should be reported? How often should information be reported and to whom should the reports be sent? 3. NCFs can use the information collected as a basis for future funding for the project. training and knowledge sharing to help countries strengthen their technical and institutional capacity for developing effective MRV systems..g.

Chapter 2: Designing a National Climate Fund 2. It also provides a means to codify agreements regarding fees charged by the trustee and implementing entities. the document can serve as a structure for discussion and help internal and external stakeholders contribute specific and targeted inputs. the term sheet helps to outline the project cycle and reporting arrangements.8 Consolidating Inputs into Term Sheets KEY DECISION 1 DEFINING THE OBJECTIVES To support efficient.g. the decision points in a term sheet can be tailored to accommodate NCF components that support national needs and priorities. as well as the decision-making systems that shape the relationships between the fund’s participants (e. By consolidating design decisions on the components of the fund. The information captured in the term sheet can also provide a basis for agreement among fund participants. transparent and robust NCF design. governing bodies. The term sheet can help formalize relationships between NCF sources. KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. step-by-step tool that can be used as a basis for discussion and agreement throughout the life of the NCF. implementers and recipients. capitalization. By outlining each element of the NCF. including the objectives. UNDP recommends consolidating the design decisions of an NCF into a term sheet organized to capture of the different components featured in this guidebook. responsibilities and expectations for each part of the NCF. fiduciary management. REPORTING AND VERIFICATION National Climate Funds: A Guidebook for Decision-Makers 33 . Through experience. term sheets can be used to facilitate engagement with stakeholders during the design process. By codifying this information. who reports to whom and how funds are allocated). While many NCF term sheets follow a similar structure. It can also outline the flow of funds. implementation arrangements and MRV. the term sheet identifies and clarifies roles. if applicable. A term sheet is a document that outlines critical pieces of information about the design and operations of the fund.. Capturing the objectives and the functional attributes in this way can help to clearly define the scope and administration of the fund so that it effectively supports country objectives. An annotated example term sheet is in Figure 5. governance. UNDP has learned that term sheets provide a simple. Importantly.

Key Decision The Cambodia Climate Change Alliance Trust Fund (CCCA TF) was launched in 2010 as the funding arm of the Cambodia Climate Change Alliance. including innovative mechanisms. the fund should blend a wider variety of sources. Sweden and Denmark. Through this process. However. Implementation is undertaken either solely by government agencies or in partnership with NGOs. The National Climate Change Committee. only a few types of domestic sources would need to be blended with international sources. The CCCA TF will provide up to $300. It coordinates national policy-making on climate change and provides strategic guidance to the Programme Support Board (PSB). Any governance system must facilitate effective decision-making to drive resources to appropriate actions that support the objectives of the fund. The PSB conducts the final review and authorizes the grants. UN agencies and universities. and mitigate. who compiles the information into a single report. The CCCA TF provides complete or partial funding to activities in the following ways: "! "! "! Co-financing of new or existing projects Full financing of new projects Financing of new components within existing projects Technical support can be provided by development partners as needed. The Alliance aims to directly help vulnerable communities by enhancing their resilience to climate change and other natural hazards. Priority is given to supporting the implementation of the Cambodia Climate Change Strategic Plan (CCCSP) and those initiatives identified in the National Adaptation Programme of Action as well as the National Strategic Development Plan. The head of the Secretariat manages the day-today operations of the fund and an inter-ministerial Climate Change Technical Team (CCTT) that provides technical expertise on policy and reviews grant applications. as well as by UNDP. based on findings of these experts makes recommendations to the PSB. the maximum grant amount is $150. Reporting and Verification Monitoring. Capitalization Should the fund focus on a handful of benefits. enabling the fund to be fast. An annual report summarizes the progress of implementation for the full year. Governance The governance system ensures that the project cycle flows smoothly and efficiently. climate change risks. The PSB is supported by the CCCA TF Secretariat. Grant proposals are first reviewed by the Trust Fund Secretariat and then independent experts. the head of the Trust Fund Secretariat provides quarterly progress reports. led by the Prime Minister as the honorary chair. The PSB makes high-level policy decisions for the fund and conducts the final review of grant applications.Chapter 2: Designing a National Climate Fund Figure 5: Example Term Sheet Cambodia Climate Change Alliance Trust Fund Term Sheet Category Objectives Defining the goals and management of a fund lays the foundation for the activities. A Joint Programme Annual Review occurs each year to review the report. UNDP holds the funds and distributes them to implementing partners for the execution of activities. Reporting and Verification ensures that results are being delivered. lessons are collected from implementation that could further refine and improve NCF operations. The trustee or administrative agent manages these transactions and ensures that funds are collected and distributed in a coordinated and effective manner.000 per grant. Implementation Arrangements It is critical that implementation arrangements support the objectives of the NCF and align closely with the fund’s governance and fiduciary arrangements.000. Grantees submit implementation reports every three months to the Trust Fund Secretariat. 34 National Climate Funds: A Guidebook for Decision-Makers . including the European Union. Fiduciary Management Sound fiduciary arrangements provide the foundation for the efficient movement and tracking of funds flowing to and from the NCF. Monitoring. A term sheet clearly outlines roles of each governing body and the processes for project approval and fund distribution. if a civil society organization is the applicant in partnership with a government entity. The CCTT. If the objectives are broader. scope and operations of the NCF. The selection of implementing entities and the process for delivering funds must be clarified so that beneficiaries can receive funds. As a UNDP local Trust Fund. It is envisioned that this role will eventually transition to the government. The objectives should clearly define how the NCF relates to national goals on climate change and other international and domestic funds and initiatives. flexible and country-driven. The CCCA TF is capitalized by bilateral donors. The CCCA TF objectives are to support capacity building and priority interventions to enhance adaptation and long-term resilience to climate change among vulnerable communities and eco-systems. Based on this information. is composed of 20 ministries and agencies. a national programme to support capacity development and institutional strengthening to prepare for.

1 UNDP Administered Trust Funds 3.2 UN Multi-Donor Trust Funds 3.3 UNDP Trust Fund Implementation Services 3.Chapter 3 UNDP Trust Fund Advisory and Management Services "! "! "! "! 3.4 UNDP NCF Advisory Services National Climate Funds: A Guidebook for Decision-Makers 35 .

Poverty and Environment. UNDP works to ensure that experiences are exchanged between and among countries.g. 36 National Climate Funds: A Guidebook for Decision-Makers . These trust funds include: "! Single-country Trust Funds that operate at the national level (e.. Knowledge sharing and policy dialogues assist in the development and delivery of programming. coordinated system for delivering results..1 UNDP Administered Funds As the UN development network... and are key components of UNDP’s work in administering trust funds. Integrated Water Management in Africa) or a region at the sub-national level (e. Leveraging this experience. present in 176 countries and territories. development banks. 25% are geographic trust funds. Chapter 3 of this guidebook presents an overview of on-going UNDP activities as a trust fund administrator. administrative agent for UN Multi-Donor Trust Funds (MDTFs). Women and Children’s Rights in Ukraine) Geographic Trust Funds that encompass a region of countries (e.g. 3. 58% are single country funds.Chapter 3: UNDP Trust Fund Advisory and Management Services 3 UNDP and National Climate Funds UNDP has broad experience as a trust fund administrator and as an implementation service provider. UNDP administers a large pool of single-country and thematic UNDP Trust Funds. supports an increasing number of UN Multi-Donor Trust Funds and provides implementation services to several key global environment trust funds. and 17% are thematic trust funds (Figure 6). the private sector and civil society organizations. UNDP also provides advisory services to countries for the establishment of national environment. Lessons learned from one trust fund can be applied to the others. climate and biodiversity funds. UNDP supports trust funds as a valuable tool to facilitate south-south cooperation. UNDP administers over 750 Trust Funds. Fostering Knowledge Transfer in Disaster Preparedness/Risk Reduction within the Caribbean). inter-ministerial groups and other stakeholders to support the funds to ensure that the funds provide a flexible. Climate Change. UNDP has worked closely with governments. a continent (e. national and sub-national government bodies. implementing entity and technical advisor for National Climate Funds. working alongside UN agencies.g. HIV/AIDS) "! "! Of the trust funds administered worldwide by UNDP.g. and draws from a wide breadth of donors by partnering with countries. Micro-Projects in Northwest Provinces of Cambodia) Thematic Trust Funds that address an issue globally (e.g. foundations and the private sector. UNDP’s partner network is extensive..

2 UN Multi-Donor Trust Funds UNDP’s portfolio includes over $5 billion in more than 45 country-level and global MDTFs and over 25 Joint Programmes (JPs). 58% 25% 17% Country Thematic 3. National Climate Funds: A Guidebook for Decision-Makers 37 . Once a fund is established. These funds support country-driven and UN-supported work in more than 80 countries with contributions from over 60 donors and development partners. UN Development Assistance Frameworks (UNDAFs). MDTFs and JPs are important tools to support specific country and/or global level strategic priorities that may be defined in national plans. MDTFs and JPs are UN-based funds that respond to the needs on the ground.Chapter 3: UNDP Trust Fund Advisory and Management Services Figure 6: UNDP Administered Trust Funds 500 450 400 350 Trust Funds 300 250 200 150 100 50 0 Geographic Source: Flynn (2011). ranging from transition and reconstruction actions to development and environmental issues. MDTFs are established according to the guidance provided in the United Nations Development Group (UNDG) Guidance Note on Establishing. Managing and Closing Multi-Donor Trust Funds and generally relies on UN entities to implement projects and programmes. They support a wide range of objectives. and “Delivering as One” Frameworks. operational and administrative capacities of the UN and the expeditious approval and implementation of projects and programmes. administered through a specialized unit UNDP Multi-Partner Trust Fund (MPTF) Office. as defined by the relevant government partners and the UN Country Team. it enables the UN system to quickly deploy the technical.

includes $700 million that is delivered in more than 50 countries. effectiveness and efficiency of the UN system. UNDP also has the systems in place to help countries manage trust funds as they evolve and grow. transfers and expenditures. official notices and publications are all housed in one accessible location in a full range of information formats. and include participating UN organizations and often donors and other stakeholders. For MRV of funds. Further. The programme started in 2008 with $12 million from a single donor. In keeping with UNDP’s commitment to transparency. For example. this information is displayed on the MPTF Office GATEWAY in real time directly from UNDP’s accounting system (see Figure 7). UNDP was able to help the fund navigate this dramatic growth by managing contributions and leveraging initial funds to attract increased investment.4 billion in contributions from 26 donors. UNDP promotes coordination across UN agencies toward the efficient delivery of results. which at the country level are normally co-chaired by the Resident Coordinator and national government. including both developed and developing countries. 38 National Climate Funds: A Guidebook for Decision-Makers . and tracks the related activities implemented and results achieved. each of the funds supports national ownership and capacity building. the UNDG Iraq Trust Fund. It has supported 212 projects since 2004 and delivered results through 16 implementers in eight thematic sectors. UNDP supports the UN and other partners by providing fund management services that enhance the coherence. Though differing in size and structure. Only four years later. has received over $1. it had expanded to a $97 million fund funded by four donors. One example. to whom and how much funding has been contributed globally to MDTFs. approved projects and activities. external reviews and evaluations. the global UN-REDD Programme Fund helps developing countries to build capacity to reduce emissions from deforestation and forest degradation. By providing a transparent and accountable framework for MDTFs. Information relating to donor contributions. Importantly.Chapter 3: UNDP Trust Fund Advisory and Management Services The MDTFs are governed through MDTF Steering Committees. the MDG Achievement Fund. UNDP provides support through a web-based reporting portal that offers full public disclosure and visibility to all partners. Another type of fund. This information documents where.

Special Climate Change Fund. For example. under the $92 million Africa Adaptation Programme. UNDP also provides support for the implementation of projects under a variety of bilateral funds. The programme ensures that national development processes weigh climate change risks and opportunities in order to secure development gains. implement and monitor long-term and cost-effective adaptation policies and plans. technology. As an implementing agency. UNDP supports 20 countries to develop integrated and comprehensive climate change adaptation actions and resilience plans. finance.000 climate change and ecosystems-management projects. National Climate Funds: A Guidebook for Decision-Makers 39 . Least Developed Countries Fund and Adaptation Fund.Chapter 3: UNDP Trust Fund Advisory and Management Services Figure 7: Multi-Partner Trust Fund Office Gateway 3. The organization currently supports the implementation of an $8 billion portfolio of 1. climate-resilient development. including the Global Environment Facility Trust Fund. Multilateral Fund. UNDP provides technical and financial assistance for projects across all thematic areas — including mitigation. UNDP helps countries establish an enabling environment and develop the capacity required to design.3 UNDP Trust Fund Implementation Services UNDP is an implementing agency of some of the largest global environmental trust funds in the world. adaptation. finance and REDD — and helps countries to put in place the systems that bolster low-emission.

Using the multi-stakeholder approach of Chapter 2.Chapter 3: UNDP Trust Fund Advisory and Management Services 3. While the questions posed in a term sheet are universal — objectives. In this way. or the existing strategy is outdated. as well as administrative and trustee units. In cases where countries do not have an existing strategy on climate change. Ensuring that all relevant stakeholders participate in the design process is an important element of any national fund. any short-.4 UNDP National Climate Fund Advisory Services Leveraging UNDP’s experience as a trust fund manager and implementation service provider for global. UNDP’s advisory services include support for: "! "! "! "! "! NCF Design Capitalization Trustee or Administrative Agent Capacity Development Implementation NCF Design — UNDP supports countries to develop and codify operational guidance to ensure streamlined fund delivery. For more detail on UNDP’s support team. climate-resilient development. for example. UNDP helps countries to develop detailed term sheets that consolidate the decisions emerging from the design process. should align with national goals on climate change. capacities to manage and deliver climate finance and other political and economic considerations. please see www. UNDP provides advisory services to governments to establish and operate national environment and climate change funds. UNDP has established teams of technical advisers at the national. to support countries throughout project design and delivery. national and thematic trust funds.undp. 40 National Climate Funds: A Guidebook for Decision-Makers . implementing arrangements and MRV — UNDP works to ensure that the answers reflect unique country priorities and circumstances. regional and global level. Designing funds according to a country’s priorities and circumstances is central to UNDP’s approach. UNDP has the tools and guidelines to help countries develop comprehensive strategic and programmatic roadmaps to achieve sustainable low-emission. UNDP’s term sheet approach consolidates stakeholder inputs so that a national fund addresses country-driven priorities as efficiently and effectively as possible. governance. fiduciary arrangements. mediumand long-term climate and development plans. The objectives of a fund. regional.org/climatechange. coordinated and predictable funding toward the achievement of national sustainable development priorities. capitalization. the funds can provide flexible.

From UNDP’s experience.Chapter 3: UNDP Trust Fund Advisory and Management Services Capitalization — Mobilizing resources is a critical part of any national fund. In this way. UNDP provides a “one stop shop” for all of the financial and legal activities of the NCF. tools and platforms to help countries put capitalization systems in place to attract and manage new sources of finance. UNDP provides the full range of financial services. administering funds received. UNDP provides a flexible and coordinated funding mechanism to direct funding toward agreed-upon priorities. works together with commercial banks to provide the private sector in developing countries with a direct link to carbon markets. National Climate Funds: A Guidebook for Decision-Makers 41 . Capacity Development for Decision-Makers to Address Climate Change. to facilitate predictable funding and the achievement of national priorities. effectiveness and efficiency. management and disbursement of funds from one unified source. This includes public. Another programme. it is imperative that climate finance be used catalytically. Establishing a levy on specific industries. an NCF can use public funds to create enabling investment environments and remove barriers for domestic and foreign investment. the MDG Carbon Facility. implementers and recipients can find information on the collection. but the NCF lays the foundation for private investment in the longer term. Since 2006. UNDP assists countries with establishing regulatory frameworks for identifying and collecting resources. UNDP has a number of facilities. UNDP has provided support services as a trustee/ administrative agent for 45 multi-donor trust funds and joint programmes in 80 countries. helps countries to conduct investment and financial flow analyses so they can get an accurate picture of what types of finance are needed to accomplish their climate change goals. memorandums of understanding and other agreements that codify partnerships and relationships with stakeholders. UNDP provides transparent and accountable fund management services to enhance coherence. such as partnership agreements. Trustee or Administrative Agent — As a trustee/administrative agent. For example. can require a number of regulatory and financial frameworks. contributors. This supports transparency. multilateral and bilateral sources of finance. consolidating statements and reports and providing final reporting. with contributions received from 60 contributors/ development partners. for example. UNDP also assists countries as they consider using innovative sources of finance. public funds cannot only be leveraged to attract private investment in projects. The finance required to support action on climate change is immense and an NCF should be able to collect and blend multiple sources together for maximum benefit. leveraging accessible funding sources to spur additional investments in climate change projects. private. Legal documents. governing bodies. in line with the Paris Declaration and the Aid Effectiveness agenda. Furthermore. All funds are managed using internationally-accepted fiduciary standards. UNDP helps countries to explore these options. including receiving contributions from sources. disbursing funds to each implementing organization in accordance with the objectives and guidance of the fund. One programme. efficiency and accountability. can be held by UNDP.

coordinate and account for climate finance. only disburses funds when directed by the governing bodies. blend. UNDP has systems in place to manage its role as an administrative agent/trustee alongside its role as an implementer of climate change projects. and can support the implementation of NCF programmes in different capacities.Chapter 3: UNDP Trust Fund Advisory and Management Services UNDP. when acting as the administrative agent/trustee. UNDP firewalls its administrative and implementing functions. countries can build the national systems that better position them to manage climate change programming and meet the standards necessary for national implementation under the Adaptation Fund and other sources. The administrative agent/trustee does not make any funding or implementation decisions at any time. regional and global levels. enhancing their ability to manage the operations of the fund and to support delivery of projects. This helps to keep the government in the driving seat and establish clear roles to support the efficient delivery of funds to achieve results on the ground. Capacity Development — As a capacity building organization. 42 National Climate Funds: A Guidebook for Decision-Makers . This is especially important as countries engage with national implementation and “direct access” of climate finance. Through NCFs. UNDP works to ensure that any national fund strengthens the capacity of governing bodies. Importantly. This promotes a country’s ownership and ensures that the operations of the fund fully align with national priorities. UNDP also provides implementation services at the national. Implementation — As discussed above. To avoid any real or perceived conflict of interest between its fund-management and programmatic roles. recipients and other stakeholders. helping them align with international fiduciary standards. implementers. UNDP’s services for NCFs strengthen national institutions’ ability to collect.

Chapter 4 Conclusion National Climate Funds: A Guidebook for Decision-Makers 43 .

a country will have crafted the components of its NCF. 44 National Climate Funds: A Guidebook for Decision-Makers . support and coordination should underscore all of an NCF’s components. blend them together. NCFs must also define the fund’s relationship to other global funds and programmes so that the NCF can make the best use of available resources and avoid duplicating other efforts. there is a set of key decisions that a country must consider when designing and establishing an NCF: "! "! "! "! "! "! Defining the objectives Identifying capitalization Instilling effective governance Ensuring sound fiduciary management Supporting efficient implementation arrangements Facilitating effective monitoring. Further. existing national strategies. As this guidebook demonstrates. National Climate Funds are a useful tool that can support countries to optimize their access to and management of climate finance. Each NCF must be tailored to country priorities and realities. countries must be equipped to effectively access and channel funds toward their climate and development priorities. and aligned with. NCFs put countries in the driving seat for transforming their economies and achieving low-emission. They should be firmly rooted in. NCFs are not one-size-fits-all. Based on UNDP’s experience in the administration of over 750 trust funds at the national. climate-resilient development. blend. It is critical that the increased number of funding sources are matched with an increase in a country’s ability to collect.Chapter 4: Conclusion 4 Conclusion Countries have immense opportunities to utilize climate finance — more sources of funding exist than ever before to help countries achieve their climate change objectives. A carefully considered and well-designed NCF will ensure that systems are in place to facilitate the flow of funds and monitoring. NCFs are nationally-owned and nationallymanaged so that a country can collect the sources that are right for them. ensuring that efficient decision-making supports the implementation of projects and programmes that achieve the NCF’s goals. in order for this increased funding to achieve real results. implement activities in a manner that accomplishes their priorities and set up a nationally-relevant system to account for the results of their work. global and regional levels. reporting and verification Once key decisions have been made. these components will provide a structure that helps to drive resources toward a country’s climate and development priorities. reporting and verification. However. Importantly. frameworks. and 40 Multi-Donor Trust Funds around the world. coordinate and account for climate finance. systems and other initiatives on climate change.

The targeted NCF can be capitalized by a limited number of funding sources in order to decrease administrative and operating costs. NCFs help countries to manage climate finance and to achieve their sustainable development goals. the United Nations. In this way.Chapter 4: Conclusion In UNDP’s experience. Capacity development is especially important as more global funds include opportunities for countries to access funds directly. By creating an NCF. transparent and robust NCF design. the answers will be unique to each country. a number of existing NCFs have been featured. Throughout this guidebook. Countries can use NCFs to strengthen national institutions and align with international fiduciary standards so that they can meet the criteria associated with those funds. a more targeted NCF is necessary to focus on a key priority for the country. Countries must realistically assess their needs: in some cases the NCF should be very broad and attract many different types of funding sources. implementers. the private sector and others can contribute specific and targeted inputs so that the NCF operates as efficiently as possible. ensuring that all voices are heard. the use of a term sheet helps to define the design and operations of the NCF by capturing the key considerations of each of its components. coordinates and accounts for climate finance. civil society. A key lesson applicable to all countries designing an NCF is to be very clear about what the NCF should accomplish. While the questions posed by a term sheet are universal. Capacity development is also a key element of any NCF. Stakeholder engagement is a critical part of the design and establishment of NCFs. The NCF should support on-going capacity development of governing bodies. Government. responsibilities and expectations are defined clearly. blends. in others. National Climate Funds: A Guidebook for Decision-Makers 45 . a term sheet supports an efficient. the trustee and other stakeholders so that they can drive results and continue to build robust systems that address the country’s climate change priorities over time. helping it to take advantage of the increased number of climate funding sources available. It is important to learn from their experiences and build on lessons from their NCF design and establishment process. As a document that outlines critical pieces of information about the operations and scope of the fund. Term sheets are also useful for this purpose — they can provide a structure for stakeholder engagement. development banks. and that roles. a country sets in place a system that efficiently collects. NCFs help countries to manage climate finance catalytically and build a system that supports low-emission and climate-resilient development now and in the future. academia.

46 National Climate Funds: A Guidebook for Decision-Makers .

Chapter 5 Sample Term Sheets of 5 National Climate Funds "! "! "! "! "! Indonesia Climate Change Trust Fund Bangladesh Climate Change Resilience Fund China CDM Fund Ecuador Yasuni ITT Trust Fund Brazil National Fund on Climate Change National Climate Funds: A Guidebook for Decision-Makers 47 .

The ICCTF is also applying for National Implementing Entity accreditation for direct access under the Adaptation Fund. the private sector will be able to access the Transformation Fund directly. Reports are developed on the status of projects and presented to the governing bodies. administrative and financial expertise. Reporting and Verification Website 48 National Climate Funds: A Guidebook for Decision-Makers . The “Innovation Fund. the Technical Committee would select and/or develop projects in line with the Steering Committee’s priorities. The national entity must be registered in Indonesia. ICCTF has 3 priority funding windows: Energy and Energy Efficiency. Capitalization The ICCTF is made up of two funds. Governance The Steering Committee provides policy and operational guidelines. The “Transformation Fund. in the future. development partners. The ICCTF will undergo an annual audit that will be presented to the Steering Committee. multilateral organizations. selected NGOs and civil society members are part of the ICCTF Steering Committee. The Technical Committee reviews each proposal and develops an assessment report that is submitted with the project proposal to the Steering Committee. NGOs and universities may apply. it has the mandate to prepare assessment reports. the society and the economy. the Steering Committee then approves or rejects the proposal. including approving funding to specific project proposals.icctf.or. as well as private firms through a public-private partnership. In this case. local governments. competent and well-recognized national institution. have proven financial management capability. Once a year. be a credible.Chapter 5: Sample Term Sheets of 5 National Climate Funds Indonesia Climate Change Trust Fund Category Objectives Key Decision The Indonesia Climate Change Trust Fund (ICCTF) is part of the government of Indonesia’s commitment to implement the Jakarta Commitments to enhance national ownership and improve aid coordination in response to climate change. The objectives of the ICCTF are to: 1. Grant proposals are received by the Secretariat to ensure all documentation is complete. http://www. loans and various types of investments which generate direct financial revenue and support the mobilization of investment in low-carbon and climate resilient economic development. However. In addition to national government representatives. While initial funding will be provided by government budgets and grants. At this point. sustainability and impact on the environment. sectoral ministries may apply for funding. The Technical Committee is comprised mostly of line ministries. In addition. and also provides technical assistance to the Steering Committee. the Secretariat organizes missions to monitor and evaluate projects. The gradual transfer of UNDP roles and responsibilities will be carried out in close coordination with the government from the planning stage. the Steering Committee does not include line ministries to avoid a conflict of interest (ministries approve their own projects). Achieve Indonesia’s goals of a low-carbon economy and greater resilience to climate change 2. Enable the government to increase the effectiveness and impact of its leadership and management in addressing climate change issues Further. ICCTF resources can be combined with resources from government. A national trustee will be identified through an open competitive process. Later.id Implementation Arrangements Monitoring. The Secretariat manages the daily operations of the ICCTF and supports the Steering Committee and Technical Committee. the Steering Committee may take on a more strategic role by providing direction on core investment areas for the Technical Committee. and Resilience Initially. it is anticipated that most funding will come from the private sector in the future. and have adequate human resources capacity. Eventually. plans to utilize funding sources such as domestic funds. In the future the Steering Committee may also include local government representatives. all external assistance interventions will include capacity development activities to ensure the sustainability of future ICCTF operations without relying on international assistance. management and monitoring and evaluation.” which is already operational. which will include recommendations for approval or rejection of project proposals. It consists of members with technical. The Steering Committee is responsible for identifying general strategic policy recommendations for the fund and defining priority areas to be financed by the ICCTF. The Technical Committee evaluates project proposals for eligibility. Fiduciary Management UNDP acts as the ICCTF’s Interim Fund Manager and supports developing capacity so that a national entity can take over this responsibility. feasibility. directs bilateral and multilateral grant funding from development partners and other contributors to activities that provide indirect economic and social benefits and will not provide any direct financial return to the participants. Sustainable Forestry and Peat Land Management.” which will be managed in close coordination with the Ministry of Finance. in order to strengthen country ownership. the private sector and civil society.

bilateral and multilateral contributions. The Management Committee reviews and endorses the BCCRF manual. It aims to provide support to vulnerable communities in adapting to greater climate uncertainty and changing agricultural conditions. Current donors include Denmark. both of which are chaired by the government and include representatives from ministries. establishing grant criteria. environmental and social viability of the project. the World Bank. draft grant agreement and an invitation letter to negotiate — for the review and clearance by the World Bank‘s Country Director for Bangladesh. financial. The Governing Council is planning for the transfer of fiduciary management responsibility to the government. economic. reviews grant requests and reviews and endorses reports by the fund. The BCCRF is set up to receive public national. A BCCRF Secretariat was established in the Ministry of Environment and Forests to support the Governing Council and Management Committee and manage the day-to-day operations. The two bodies ensure overall policy and decision-making coherence. such as setting the strategic goals and management. if desired. prepares a concept note for internal review. Baseline. The fund has a governance structure that consists of a Governing Council and Management Committee. The World Bank prepares a negotiations package — including a Project Appraisal Document. with technical support provided by the World Bank. The Expert Panel may also provide sectoral expertise on technical issues. Reporting and Verification National Climate Funds: A Guidebook for Decision-Makers 49 . the Governing Council provides guidance on highlevel issues. share relevant international best practices and advise the governing bodies as required. Implementation by NGOs and civil society will be managed by the Palli Karma-Sahayak Foundation. Project proposals are submitted by ministries to the Management Committee. aligning the BCCRF with the BCCSAP. In parallel. Government line ministries will provide implementation. Sweden. Specifically. Around 10% of funding will be directed at NGOs and civil society to support the development of grassroots mechanisms for communities to increase their resilience. Documents are submitted to the Governing Council and a grant appraisal mission is undertaken. institutional. An Expert Panel provides specific short-term advice and support to the Secretariat and the Management Committee (and. reviewing results and providing advocacy support. Monitoring. civil society and the trustee. the Governing Council) on any technical aspects including the review of proposals. establishes the work programme and budget allocation. The World Bank team independently assesses the technical. mid-term and annual evaluation of outcomes are based on agreed results indicators. the Fiduciary Manager. a microfinance institution established by the government in 1990. The Governing Council approves the negotiations package that leads to a grant agreement. the European Union and the United Kingdom. development partners.Chapter 5: Sample Term Sheets of 5 National Climate Funds Bangladesh Climate Change Resilience Fund Category Objectives Key Decision The Bangladesh Climate Change Resilience Fund (BCCRF) was established in 2010 and is linked to Bangladesh’s Climate Change Strategy and Action Plan (BCCSAP) for 2009-2018. Capitalization Governance Fiduciary Management Implementation Arrangements The World Bank serves as the interim trustee. The Management Committee reviews the proposals to ensure that they align with the BCCSAP and do not duplicate the work of other ministries.

verifying and accepting the project. affiliated with the Ministry of Finance.e. Upon approval by the board.cdmfund. the CDM Fund Management Centre is responsible for the initial selection and review.Chapter 5: Sample Term Sheets of 5 National Climate Funds China CDM Fund Category Objectives Key Decision The China CDM Fund was established by the Ministry of Finance and the National Development and Reform Commission (NDRC) as an innovative finance mechanism to support the National Climate Change Programme and promote international cooperation. the CDM Fund Management Centre is responsible for approval and ratification.org 50 National Climate Funds: A Guidebook for Decision-Makers . http://www. and other government-approved approaches. The board reviews management regulations. is responsible for the collection. Ratified projects are reported to NDRC and Ministry of Finance within 15 working days. relevant departments of the State Council or Provincial Development and Reform Commission). It collects. Investments are managed by the CDM Fund Management Centre. grants and other types of support from multilateral development banks and international institutions. carries out investments and wealth management activities. the Management Centre develops rules and regulations for the fund’s operation. For grants. The CDM Fund offers grants and investments. applicants must be institutions with research and training capabilities that are working on climate change in China. Ministry of Finance. Major investment projects (70 million RMB or above) are approved by the board and then sent to NDRC and Ministry of Finance for ratification. The reviewed applications are then sent to the board for approval. Ministry of Environmental Protection. Ministry of Foreign Affairs. The board is comprised of NDRC. strategic planning. It uses grants to support climate-related capacity building and promotion of public awareness. supervises and manages projects and reports major business activities to the board. applications for grants and investments and the annual budget and accounting. Monitoring. the applications are sent to NDRC and Ministry of Finance for joint ratification. The implementer for investment projects is CDM Fund Management Centre. formulates and implements the annual budget and accounting. entrusted loans. manages and utilizes the national share of proceeds from CDM projects and channels resources toward initiatives that address climate change and promote social and economic sustainable development. For non-major investment projects. Resources come from revenues generated by CDM projects in China. earnings from CDM business operations. NDRC is responsible for arranging reviews of the applications. The CDM Fund Management Centre. Reporting and Verification Website For grant projects. project applicant and China CDM Fund Management Centre. Ministry of Agriculture and the China Meteorological Administration. Ministry of Science and Technology. Project Applicant Organizer. applications are submitted to NDRC through the “Project Applicant Organizer. Specifically. NDRC. CDM Fund Management Centre and the project applicant will be responsible for monitoring and verifying the project as well as project acceptance. The fund is governed by a board and managed by the CDM Fund Management Centre. For investment projects. For grants. raises and manages funds. Capitalization Governance Fiduciary Management Implementation Arrangements he contracts are signed by NDRC. For investment projects. management and use of funds. financing guarantees. The Project Applicant Organizer of the project is responsible for implementation. Its investments mainly support industrial activities contributing to addressing climate change and can provide equity investment.” (i. the CDM Fund Management Centre is responsible for monitoring.

private enterprises. watershed and river management. Specifically.ec and http://mdtf. Capitalization Governance A Steering Committee.6 billion over the 13 year period. Ecuador is requesting public. The GCE assumes full programmatic and financial accountability and coordinates the design of the overall portfolio. if in the future the world carbon market accepts the CGYs as equivalents of emission permits. capacity assessment. The trustee also provides annual certified financial statements. mid-year updates. http://yasuni-itt. the government will issue CGYs for sale to private and/or public entities.e. the Administrative Agent will transfer the approved funding to the relevant recipient and implementing organizations. bilateral and multilateral contributors to compensate 50% (at 2008 oil prices) of the income it is forgoing. These CGYs guarantee that the ITT field oil reserves will not be extracted. It undertakes project appraisals. Reporting and Verification Website Recipients and implementing organizations provide annual narrative reports. Fiduciary Management The fund uses the UNDP Multi-Partner Trust Fund Office as the Administrative Agent for the fund. the fund will finance strategic sustainable development programmes within the guidelines of the Ecuadorian National Development Plan. directives and procedures. annual financial statements. The Ministry of Heritage serves as the Government Coordinating Entity (GCE). and accountability frameworks). the government issues Yasuni Guarantee Certificates (CGYs) for the face value of each contribution. social development. regulations. Coordinated by the GCE. acting through the Yasuni ITT Coordination Office and in cooperation with the National Secretary of Planning and Development. made up of three representatives from the government. provides strategic direction and oversight of the fund. The office receives and administers contributions. The CGYs will include the metric tons of carbon avoided according to the price of the European Union Allowances in the Leipzig Carbon Market. The GCE is responsible for the effective development. monitoring and evaluation of project performance and other analyses. amounting to $3. It also ensures the timely issuance of CGYs and their sale to private and public entities. 2.org/yasuni National Climate Funds: A Guidebook for Decision-Makers 51 . research. and instead will be maintained as part of a national park. grant proposals are developed by national recipients and implementing organizations.org). rules. The initiative will assist Ecuador to collect and channel funds toward climate change and sustainable development challenges and enable it to gradually change the energy matrix of the country through investments in environmentally friendly and socially inclusive renewable energy projects. The Yasuni ITT Fund is made up of two windows: 1. The Administrative Agent consolidates the reports and provides them to each contributor and the Steering Committee. individual. Implementation Arrangements Monitoring. technical and substantive support. In addition. energy. A Technical Secretariat provides administrative. science. In exchange for contributions. Revenue Fund Window — replenished with mandatory annual revenue payments received from national entities for the use of the Capital Fund Window. Implementation partners include NGOs/civil society organizations. They are submitted to the Steering Committee for approval after review by the Technical Secretariat. implementation and monitoring and evaluation of the ITT Trust Fund. This is used to develop projects within the framework of the sustainable development plan.undp. It also performs a range of reporting functions: it consolidates reports based on those submitted by implementing entities and provides regular financial reporting through an online platform (http://mdtf. laws. and intergovernmental organizations. technology and innovation. Capital Fund Window — financed by contributions to the Yasuni Fund Account (used to finance renewable energy projects). as required.undp. private. and disburses funds to implementing entities as directed by the Steering Committee. reviews and makes fund allocation decisions and ensures coordination with other relevant initiatives. Funds from the sale of the CGYs will contribute to the ITT Trust Fund. including the project selection process. Programmes address forestry. Based on the approval from the Steering Committee.Chapter 5: Sample Term Sheets of 5 National Climate Funds Ecuador Yasuni ITT Trust Fund Category Objectives Key Decision Yasuni Ishpingo Tambococha Tiputini (ITT) Trust Fund was established to support Ecuador’s decision to permanently forego the extraction of the Yasuni ITT oil fields (about 846 million barrels). two from donors and one from civil society. National entities receive funds and implement projects in accordance with the national regulatory framework (i. and project completion reports and certified final financial reports to the Administrative Agent.gob.

The Steering Committee consists of representatives from the Brazilian government. public calls for proposals or other methods. states. Grants are managed by the Ministry of Environment and loans are managed by BNDES. municipalities.monta&idEstrutura=251# 52 National Climate Funds: A Guidebook for Decision-Makers . Capitalization Governance Fiduciary Management Implementation Arrangements The trustee is the Brazil National Bank for Social and Economic Development. private. technology development. made possible by the Law of Petroleum. including Proposal Guidelines and Priorities for use of Resources and the Annual Implementation Plan of Resources. payment for environmental services and other activities. Implementation can take place through a variety of channels.php?ido=conteudo. The fund addresses energy. Monitoring.mma. The initial 2011 FNMC budget is estimated for $100 million. The fund plays an important role in promoting low-carbon development in Brazil. public policy formulation. REDD+ projects. and evaluates the allocation of financial resources for mitigation and adaptation actions. http://www. non-governmental sectors. desertification. Part of the resources will come from a special tax on the profits made in the oil production chain. including national ministries and BNDES. The Steering Committee is chaired by the Executive Secretary of the Ministry of Environment. Implementation is conducted in accordance with national guidelines. All initiatives are subject to approval by the Steering Committee. Projects can be derived from the national climate change programming portfolio. Other contributions are collected from public. national and international donors. education and training.br/sitio/index. Reporting and Verification Website Recipients prepare annual implementation reports. National Bank of Economic and Social Development (BNDES). the scientific community and rural and urban workers and entrepreneurs. national projects. the Brazil National Fund on Climate Change (FNMC) was created to finance mitigation and adaptation projects and to support studies on climate change and its effects. and studies. agriculture. A Steering Committee manages. The Ministry of Environment provides coordination of the administrative activities of the fund and drafts annual budget proposals and plans of implementation.gov. sustainable production chains. The FNMC provides grants and loans to recipients.Chapter 5: Sample Term Sheets of 5 National Climate Funds Brazil National Fund on Climate Change Category Objectives Key Decision Established in 2010. monitors. BNDES.

Chapter 6 Annex "! "! Glossary of Terms Useful Resources and Websites National Climate Funds: A Guidebook for Decision-Makers 53 .

Conference of the Parties (COP) – The supreme body of the UNFCCC. Innovative sources of climate finance – Innovative sources refers to a range of non-traditional mechanisms to raise new and additional funds for development and climate activities. Variability may result from natural internal processes within the climate system (internal variability) or from variations in natural or anthropogenic external processes (external variability). grants or loans). oil and natural gas. the occurrence of extremes. the GEF is a financial mechanism under the UNFCCC that provides grants to countries for projects related to biodiversity. Mexico. ..) of the climate of all temporal and spatial scales beyond that of individual weather events. such as taxes on transport or financial transaction. the CDM is intended to meet two objectives: (1) to assist parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the convention.. processes for selecting implementing entities and oversight and legal responsibilities. Fossil fuels – Carbon-based fuels from fossil hydrocarbon deposits. Implementation – Implementation includes the processes and agents set in place to carry out NCF programmes and projects.Chapter 6: Annex Glossary of Terms Adaptation – Initiatives and measures to reduce the vulnerability of natural and human systems to actual or expected climate change effects. Clean Development Mechanism (CDM) – Defined in Article 12 of the Kyoto Protocol. etc. methane (CH4) and ozone (O3) are the primary greenhouse gases in the Earth’s atmosphere. the atmosphere and clouds. nitrous oxide and methane. climate change. carbon dioxide (CO2). This can include programmatic instruments (e. Financial transfers are made directly from the funding source to the domestic entity for implementation. nitrous oxide (N2O). the GCF joined the GEF as a financial mechanism under the UNFCCC. International. the Kyoto Protocol deals with the greenhouse gases sulfur hexafluoride. programmes and policies and other activities in developing countries using thematic funding windows. This can include establishing fiduciary standards that apply to all monetary transactions. international waters. Moreover. the ozone layer and persistent organic pollutants. whether due to natural variability or because of human activity. Climate change – Any change in climate over time. there are a number of entirely human-made greenhouse gases in the atmosphere. Climate variability – Variations in the mean state and other statistics (such as standard deviations. decision-making processes and oversight functions that facilitate efficient management of an NCF. Greenhouse gases – Greenhouse gases are those gaseous constituents of the atmosphere. Green Climate Fund (GCF) – Established at COP 16 in Cancun. Additionality – Reduction in emissions by sources or enhancement of removals by sinks that is additional to any that would occur in the absence of a Joint Implementation (JI) or a Clean Development Mechanism (CDM) project activity as defined in the Kyoto Protocol Articles on JI and CDM. It allows those reducing GHG emissions below their emission cap to use or trade the excess reductions to offset emissions at another source inside or outside the country. Direct access – A funding modality in which domestic entities can access funds to implement climate change programmes and projects. and (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments. that absorb and emit radiation at specific wavelengths within the spectrum of infrared radiation emitted by the Earth’s surface. Capitalization – Refers to the types of resources that the fund would collect. The GCF will support climate change projects. such as the halocarbons and other chlorine. hydro fluorocarbons and per fluorocarbons. peat. land degradation. The exact design arrangements and structure of the GCF will be negotiated through a Transitional Committee with the goal of approving the modalities at COP 17 in 2011. Besides carbon dioxide. debt-holders) have been paid. The Fund is financed with 2% of the Certified Emission Reduction issued for projects of the Clean Development Mechanism and other sources of funding. including coal. Emissions trading – A market-based approach to achieving emissions reduction objectives. 54 National Climate Funds: A Guidebook for Decision-Makers Fiduciary management – Fiduciary management allows for the efficient movement and tracking of funds flowing to and from an NCF. Adaptation Fund – The Adaptation Fund was established by the Parties to the Kyoto Protocol of the UNFCCC to finance concrete adaptation projects and programmes in developing countries that are Parties to the Kyoto Protocol.and brominecontaining substances. both natural and anthropogenic. Global Environment Facility (GEF) – Established in 1991. Ecosystem –A system of living organisms interacting with each other and their physical environment. comprised of countries with the right to vote that have ratified or acceded to the convention. This property causes the greenhouse effect. public and private funds can all be relevant for an NCF. Equity – An investment in exchange for ownership of a company entitled to the earnings of a company after all other investors (e.g. Water vapor (H2O). The term is also sometime used to define innovative public financial schemes such as public-private equity funds or government-sponsored loan guarantee funds to scale up development action. These are dealt with under the Montreal Protocol. national.g. Governance of an NCF – Governance includes bodies.

PPP involves a contract between a public sector authority and a private party. either as individuals or as representatives of a group. and assist with partnership management. private sector or other partners. This can include mitigation. collecting documents and liaising with the Steering Committee. in addition to those included in the UNFCCC. National Climate Fund (NCF) – An NCF is a mechanism that supports countries to direct finance toward climate change projects and programmes by facilitating the collection. Public-Private Partnership (PPP) – A government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. such as environment. coordination of. Copenhagen (1992). Resilience – Refers to three conditions that enable a social or ecological system to absorb change and not fundamentally fall apart. National Adaptation Plan (NAP) – While NAPA focus on urgent and immediate needs. grades. NIEs are the national legal entities that have been identified by the Adaptation Fund Board as meeting the fiduciary standards adopted by the Board and accredited as NIE. the United Nations. a NAMA refers to a set of policies and actions countries undertake as part of a commitment to reduce greenhouse gas emissions. etc. National Implementing Entity (NIE) – Under the Adaptation Fund. Nationally-Appropriate Mitigation Action (NAMA) – Established under the UNFCCC process. development banks. Monitoring. such as chlorofluorocarbons. adaptation. NAPs can be undertaken by all countries. dimensions. planning and finance. LDCs submit NAPAs to the UNFCCC and can receive funding to implement the priority activities identified. Technical Committee. Annex B countries agreed to reduce their anthropogenic greenhouse gas emissions (carbon dioxide. Objectives of an NCF – Objectives are the strategic goals of an NCF. technical and operational risk in the project. Market barriers – In the context of climate change mitigation. a NAP targets medium and long-term adaptation needs. NAPAs provide a process for Least Developed Countries to identify priority activities based on urgent and immediate needs to adapt to climate change. 55 National Climate Funds: A Guidebook for Decision-Makers . market barriers are conditions that prevent or impede the diffusion of costeffective technologies or practices that would mitigate greenhouse gas emissions. Steering Committee – A Steering Committee of an NCF makes decisions on the disbursal of funds and oversees the high-level activities. hydrofluorocarbons. This group is often made up of multiple government ministries. capacity building. including policy and operational guidelines. methyl chloroform. Vienna (1995). technology or other programmatic priorities. This includes people who can influence a decision as well as those affected by it. and subsequently adjusted and amended in London (1990). and generally expects to exit their investment and make their returns in a three to five-year timeframe. offer policy assurance and financial control of climate change funds. Multi-Donor Trust Funds (MDTFs) – MDTFs are a type of NCF that is generally established to support specific country and/or global level strategic priorities that may be defined in national plans.. NIEs can access funds directly for implanting climate change projects. The conditions are: ability to self-organize. and accounting for climate finance. Private equity – Investors focus on later stage and more mature technology or projects. Mitigation – Technological change and substitution that reduces resource inputs and emissions per unit of output.g. The information can then be independently checked for accuracy and reliability. REDD. Montreal (1997) and Beijing (1999). nitrous oxide. UN Development Assistance Frameworks (UNDAFs). oversee climate change project approval and implementation. an MDTF relies on UN agencies for implementation services. Stakeholders – Those who have interests in a particular decision. Generally. The Kyoto Protocol came into force on 16 February 2005. methane. NCFs provide a country-driven system that can support climate change goal setting and strategic programming. Implementers and other agents. test methods and rules for use). Secretariat – A secretariat manages day-to-day operations of the NCF.and bromine-containing chemicals that destroy stratospheric ozone. in which the private party provides a public service or project and assumes substantial financial. as well as management priorities such as attracting private sector investment. Reporting and Verification (MRV) – MRV refers to the ability to quantify the results of an activity or funding commitment and provide this information to others. Montreal Protocol – The Montreal Protocol on Substances that Deplete the Ozone Layer was adopted in Montreal in 1987.Chapter 6: Annex Kyoto Protocol – The Kyoto Protocol to the UNFCCC was adopted at the Third Session of the Conference of the Parties (COP) in 1997 in Kyoto. ability to buffer disturbance and capacity for learning and adapting. blending. measure performance. characteristics. It controls the consumption and production of chlorine. Decisionmakers are also stakeholders. Standards – Set of rules or codes mandating or defining product performance (e. and representatives from civil society. National Adaptation Programme of Action (NAPA) – Under the UNFCCC process. It contains legally binding commitments. “Delivering as One” Frameworks. including scheduling meetings. strategic direction and reporting. carbon tetrachloride and many others. perfluorocarbons and sulphur hexafluoride) by at least 5% below 1990 levels in the commitment period 2008 to 2012.

Yannick.int Climate Finance Options: www. 2007/2008. Human Development in a Changing Climate. fiduciary management.shtml United Nations Framework Convention on Climate Change: www. Convention) – The Convention was adopted on 9 May 1992 in New York and signed at the 1992 Earth Summit in Rio de Janeiro by more than 150 countries and the European Economic Community. Its ultimate objective is the ‘stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Responsibility and Accountability: Re-Thinking the Legitimacy of Institutions for Climate Finance. Yannick. including a repository of all Multi-Donor Trust Funds and Joint Programmes administered by UNDP as a Trustee: http://mdtf. Making Climate Finance Transformational: A Possible Role and Structure for the Green Climate Fund. Catalyzing Climate Finance – A Guidebook on Policy and Financing Options to Support Green. public multilateral finance. July 2010.org Fast Start Finance: www. It provides a concise framework for the objectives. Trustee/Administrative Agent – the trustee of an NCF provides a number of important fund management services. private sources and innovative sources.undp.org/document/download/6132 United Nations Development Programme.unfccc. including receiving and holding contributions from various sources. National Funding Entities: Their role in the transition to a new paradigm of global cooperation on climate change. including public domestic finance. they can be tailored to accommodate NCF design elements that support national needs and priorities. 2010: http://pdf. Preparing Low-Emission.adaptation-fund. group or system is susceptible to harm due to hazards or stress.faststartfinance. and its (in)ability to cope. Vulnerability – The degree to which an individual. implementation arrangements and MRV of an NCF so that the basic conditions under which the NCF will operate are clearly defined. Term sheet – A term sheet is a non-binding financial agreement that describes each of the elements of an NCF.org/power_responsibility_accountability. It ensures that the NCF meets all legal and fiduciary standards for collecting and distributing funds. Oliver Waissbein and Hande Bayraktar.undp. Low-Emission and ClimateResilient Development. Louis.undp. United Nations Framework Convention on Climate Change (UNFCCC.pdf 56 National Climate Funds: A Guidebook for Decision-Makers . Technical Committee – The Technical Committee supports the Steering Committee by providing substantive reviews of project proposals and making recommendations for which proposals should receive funding. World Resources Institute.undp. recover or fundamentally adapt (become a new system or become extinct).wri.Chapter 6: Annex Useful Websites and Resources Subsidy – Direct payment or a tax reduction issued by the government to a private party for implementing a practice the government wishes to encourage. UNDG Guidance Note on Establishing. governance.org/go/cms-service/ download/publication/?version=live&id=2091672 United Nations Development Programme.undp. Sources of climate finance – A number of sources can contribute to an NCF.org/environment/ climatestrategies. the trustee coordinates the legal contracts and agreements that underpin the transactions of funds. Power. February 2011. Climate-Resilient Development Strategies – Executive Summary.org United Nations Development Programme Low-Emission. Gomez-Echeverri. While many NCF term sheets follow a similar structure. disbursing funds to each participating entity on behalf of the steering committee (or other decision-making body) and providing financial reporting. Often. Fighting Climate Change: Human Solidarity in a Divided World. October 2010. ClimateResilient Development Strategies: www.org/climatechange United Nations Development Programme Multi-Partner Trust Fund Office Gateway.org Global Environment Facility: www.org Adaptation Fund: www. Managing and Closing Multi-Donor Trust Funds. Glemarec.org PUBLICATIONS Glemarec. Charting a New Route to Low Carbon Development. 2009: http://content.thegef. United Nations Development Programme.’ It contains commitments for all parties. 2011: http://mdtf. public bilateral finance. April 2011. parties included in Annex I aimed to return greenhouse gas emission not controlled by the Montreal Protocol to 1990 levels by the year 2000. United Nations Development Group. United Nations Development Programme. WEBSITES United Nations Development Programme Climate Change Website: www. April 2011 United Nations Development Programme. EU Capacity Building Institute. United Nations Development Programme. Under the Convention. capitalization.climatefinanceoptions.

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United Nations Development Programme Bureau for Development Policy Environment and Energy Group 304 East 45th Street. 9th Floor New York.org September 2011 . NY 10017 USA www.undp.