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

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. Veerle Vandeweerd Director Environment & Energy Group United Nations Development Programme National Climate Funds: A Guidebook for Decision-Makers iii . reduce vulnerability to climate shocks and deliver poverty reduction gains. however.Foreword Climate change is one of the most pressing threats to development today. 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. coordinate them. countries are in the driving seat and can make informed choices for how direct resources toward activities that deliver results on the ground. climate-resilient development. the right institutional and financial mechanisms must be in place so that resources are directed efficiently toward national climate and development priorities. policy and fiscal frameworks and systems. An important tool for countries to manage climate finance is a National Climate Fund. 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. NCFs are nationally-driven and nationally-owned funds that help countries to collect climate finance from a variety of sources. In order for countries to take advantage of these opportunities. 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.

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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 1.1 Climate Finance Landscape 1.Chapter 1 Overview of National Climate Funds "! "! "! 1.

The dramatic increase in opportunities to access climate finance is matched by equally increasing complexity. bilateral and multilateral sources offers new opportunities for countries to address their climate and development needs. 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. United Nations Development Programme. 2011. including that from private sources. Recognizing this. processes and reporting associated with the many funds can be confusing and overwhelming. shifts production and consumption processes to emit fewer greenhouse gases and promotes sustainable development. Affecting every continent. how to coordinate the actions funded by them. there are already more than 50 international public funds.000 private equity funds providing climate change finance. New York. 1 2 UNDP.1 Climate Finance Landscape Climate change is regarded as a key environment and development challenge for the 21st century. Human Development in a Changing Climate: A Framework for Climate Finance. Countries must transition toward a new paradigm that supports low-emission. Glemarec.2 With private sector funds outnumbering government funds by an enormous margin.2 Further. countries must also figure out ways to blend funds together so that multiple sources can support climate change initiatives. NY. This will be necessary to finance a complete transformation toward low-emission and climate-resilient development. 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. offering countries new resources to undertake climate change mitigation and adaptation actions. UNDP estimates that. climate-resilient development. climate change impacts threaten to undo progress made toward poverty reduction and the achievement of the Millennium Development Goals.Chapter 1: Overview of National Climate Funds 1 Overview of National Climate Funds 1. Countries are faced with the challenge of how to identify which funds are appropriate for them. 40% from businesses and the remaining 20% from government. a key challenge for countries will be to use scarce public funds to attract private investment. Low-Emission and Climate-Resilient Development. taken together. Public funds — such as those under the UNFCCC — must be leveraged in strategic ways to attract new resources from the private sector. USA. Yannick (2011). 45 carbon markets and 6. private.1 Each of these public. Catalyzing Climate Finance: A Guidebook on Policy and Financing Options to Support Green. 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. and how to develop the methods to monitor and evaluate the results. The requirements. Ushering in a new development paradigm requires a dramatic increase in climate change finance. 6 National Climate Funds: A Guidebook for Decision-Makers . 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. These pledges have been matched by an explosion of public and private funds outside of the UNFCCC process.

National Climate Funds: A Guidebook for Decision-Makers 7 .Chapter 1: Overview of National Climate Funds Figure 1: Climate Change Finance: Sources. 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).

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

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

Indeed. capitalization. private. Moreover. project approval. 10 National Climate Funds: A Guidebook for Decision-Makers . The exchange of such information can build capacity. including NCFs. by facilitating regular discussions and stakeholder engagement on national climate issues. They can include goal setting. 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. bilateral and innovative sources of finance. such as those under the UNFCCC or with other multilateral. multilateral. strategic programming. but of undermining progress toward low-emission. The NCF can complement and support the management of relationships with other financing mechanisms. 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. Uniform project cycle guidelines that clearly outline the technical and eligibility requirements support streamlined operations. policy assurance. public and private sources. Functions should build upon existing mechanisms and systems that support action on climate change. the NCF can provide a coordinated supporting structure to a country’s national climate and development priorities.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. financial control and performance measurement. An NCF should provide for fundraising toward climate priorities. First. climate-resilient development. NCFs can provide a coordinated project approval and implementation structure for climate change programming. stakeholders must identify the specific and necessary functions of the NCF.Chapter 1: Overview of National Climate Funds 1. an NCF should enhance or provide a system that supports goal setting and the development of programmatic strategies on climate change. capitalization can take a variety of forms and can utilize public. there are a number of core functions that are common to any funding mechanism. Well-conceived guidelines can facilitate the transparent approval process of NCF climate change initiatives. In UNDP’s experience. An NCF with ill-designed functions runs the risk of not only failing to reach its goals. An NCF can provide a mechanism for managing partnerships by clearly defining and coordinating the roles of various climate change stakeholders. climate-resilient development. The NCF can become an important source of knowledge and information management that consolidates and disseminates lessons from climate change projects and programmes. By setting in place a process that aligns and supports existing general goals and strategic programmes. Each should be considered carefully. an NCF can supply systems to ensure that quality standards are met throughout its operations. partnership management. Further. The functions of an NCF influence its components and services. It can also ensure the clear management of the responsibilities of stakeholders at all levels and across climate change initiatives. 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. help projects implement good practices and spur innovative solutions to implement country-driven priorities on climate change. NCFs offer policy assurance through social and environmental safeguards. bilateral. 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 2 Designing a National Climate Fund "! "! "! "! "! "! "! "! 2.8 Consolidating Inputs into Term Sheets National Climate Funds: A Guidebook for Decision-Makers 11 .6 Key Decision: Supporting Efficient Implementation Arrangements 2. Reporting and Verification 2.3 Key Decision: Identifying Capitalization 2.4 Key Decision: Instilling Effective Governance 2.7 Key Decision: Facilitating Effective Monitoring.2 Key Decision: Defining the Objectives 2.5 Key Decision: Ensuring Sound Fiduciary Management 2.1 Common Components and a Structural Overview of a National Climate Fund 2.

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. Chapter 2 of this guidebook focuses on a step-by-step decision-making process for the design of each component. 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. Resources. NCFs are not “one-size-fits-all. Implementers receive funds and ensure activities are undertaken.” but many funds arrange the components into a common structure to support the delivery of NCF services. capitalization. a trustee and implementers. 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. 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. the trustee. and verification (MRV). coordination. implementation arrangements and monitoring. The structure includes funding sources. fiduciary management. support and MRV flow between sources. implementers and recipients. 12 National Climate Funds: A Guidebook for Decision-Makers . six common components have been identified that provide the basic skeleton for any NCF: objectives. The trustee manages the transfers of funds to and from the NCF’s bank account. governing bodies. reporting. governing bodies. Each of these agents supports the delivery of actions to achieve the strategic priorities of the NCF. A description of each component is accompanied by a series of targeted questions that facilitate decision-making for that element. 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. Based on UNDP’s experience in the administration of over 750 trust funds and more than 40 multi-donor trust funds.1 Common Components and Structural Overview of a National Climate Fund Given the diversity of design options.Chapter 2: Designing a National Climate Fund 2 Designing a National Climate Fund 2. Funding sources provide funds to the NCF while the governing bodies make decisions about the operations of the fund. Throughout each component. governance.

specialized systems can be put in place to manage financial flows. and representatives from civil society. a technical group that provides substantive reviews of project proposals and a secretariat that manages day-to-day operations of the NCF. Often. the private sector and/or civil society play important roles in the fund’s structure. When the governing bodies make decisions about how the funds should be allocated. In a majority of funds. The steering committee is usually supported by two other 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. The chair person of the steering committee can be a government representative or other participant. development banks. strategic direction and reporting. MRV would be conducted by the banks according to their lending criteria. This group is often made up of multiple ministries. if a fund capitalizes national banks to provide low-cost loans for projects such as renewable energy. 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. support and coordination of an NCF should align with its objectives so that the fund can operate smoothly. planning and finance. In some NCFs. The implementers then report on their activities to the governing bodies. In the case of loans. it may assign the government as the source of funds and the national bank as the trustee. This kind of flexibility helps each entity associated with the NCF to fulfill the role that best supports the objectives of the fund. including serving as a donor. the infrastructure must be set up in order to accommodate the collection and distribution of these funds. to support activities. The NCF structure can be tailored to align with its designated functions and national priorities. resources flow from the sources to the trustee. National Climate Funds: A Guidebook for Decision-Makers 13 . private sector or other partners. such as environment. In the case of an NCF using innovative financing mechanisms. The flows of funds. they can also serve as the trustee. Relationships with the private sector and civil society should also be considered and clarified. such as taxes on bunker fuels. Depending on the objectives of an NCF. In cases where the private sector or a civil society group has met the necessary fiduciary standards. the steering committee will direct the trustee to distribute the funds to the implementing entities. the loans will be repaid back to the trustee. the United Nations.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. The implementers conduct the projects and the recipients receive the benefits. which holds them on behalf of the NCF. an implementer or a representative on a governing body. including policy and operational guidelines.

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

.. Oversight 8. Conflicts of interest 5. Delivery 7.Chapter 2: Designing a National Climate Fund Trustee/Administrative Agent National Development Banks Government Bodies KEY DECISION: Fiduciary Management Considerations: 1. Trustee selection 2. 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. oversight) 5. Fees 7. Programmatic instruments (e. Relation to lending institutions 3. grants and/or loans) 2.g. Relation to domestic and international funds 9. Services of trustee 4. Government engagement with trustee 3. Relationship of fund to implementers (e. Implementer selection 4.g. Private sector 6. 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 .

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

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

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

Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. Designers of NCFs should exercise caution in this regard: expectations of co-financing and leveraging must be based on national circumstances. national. 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. LINKING OBJECTIVES AND CAPITALIZATION FACILITATING MONITORING. National Climate Funds: A Guidebook for Decision-Makers 19 . but they must build on existing frameworks and be supported by appropriate structures to access and channel funding efficiently. Indeed. grounded in the objectives and functions of the NCF. funds with smaller.3 Key Decision 2: Identifying Capitalization Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. 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. supporting all of the activities under a low-emission. climate-resilient development strategy — may aim to collect funds from international and national sources so that a wide variety of activities can be covered. a country should consider the types of resources that would best capitalize the fund.Chapter 2: Designing a National Climate Fund 2. An NCF with wide objectives — for example. A fund with a more targeted mission will often only focus on a single source. Likewise. such as those from one bilateral partner. it usually blends together a broader array of sources than more targeted NCFs. if a fund has a broad set of objectives. REPORTING AND VERIFICATION Fund capitalization must be realistic. targeted objectives should not aim to access billions when it is not appropriate for the scope of the NCF. Many sources of finance — including international. Generally. deciding where the funds will come from is one of the most important choices that will shape the NCF.

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

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

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

On the other hand. an existing body within a government ministry may also provide technical expertise or secretariat services. Representation guidelines should also carefully outline the role of nongovernment stakeholders. Guidelines pertaining to representation on an NCF’s governing bodies should be established during the design phase. A Technical Committee provides technical assistance to the Steering Committee and evaluates project proposals. Or. climate-resilient development strategy will require a governance system that is equally comprehensive. A previously established inter-ministerial climate change committee. Depending on the objectives of the fund. prepares documentation for meetings and corresponds with project hosts. which provides guidance and oversight to the fund. for example. The Technical Committee reviews each proposal and develops an assessment report that is submitted with the project proposal to the Steering Committee. The Steering Committee then approves or rejects the proposal. The scope of the bodies should align with the scope of the objectives. then the scope of the governance system could also be limited. This can help to ensure that all parts of the fund are coordinated and streamlined. Moreover. 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. Both play an important role in supporting the steering committee to make decisions about project proposals. many NCFs have a high-level steering committee. REPORTING AND VERIFICATION National Climate Funds: A Guidebook for Decision-Makers 23 . frameworks or systems in place that can serve as portions of the governance structure. KEY DECISION 2 IDENTIFYING CAPITALIZATION KEY DECISION 3 INSTILLING EFFECTIVE GOVERNANCE Though not required. non-government representatives can have decision-making abilities alongside the government. Grant proposals are received by the Secretariat to ensure all documentation is complete. Some governments may have existing bodies. Many governments choose to have representatives from the sources and implementers. The Secretariat manages the day-today operations of the ICCTF. including approving funding to project proposals. An NCF that supports a comprehensive low-emission. corresponds with stakeholders.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. on the steering committee. and by a secretariat that conducts day-today operations. as well as the trustee. GOVERNING BODIES KEY DECISION 1 DEFINING THE OBJECTIVES As discussed previously. 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. A technical group is made up of substantive experts who evaluate project proposals and provide recommendations to the steering committee. The secretariat schedules meetings. can take on the role of the steering committee. KEY DECISION 4 ENSURING SOUND FIDUCIARY MANAGEMENT KEY DECISION 5 SUPPORTING EFFICIENT IMPLEMENTATION ARRANGEMENTS KEY DECISION 6 FACILITATING MONITORING. chaired by the government. when multiple environment or climate change funds exist in a country. many NCFs have a set of governing bodies that make decisions on fund management and strategic direction. the governance structure of one fund can support the operations of others.

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

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. For example. They may also wish to have certain fiduciary standards for a large project that differ from those for a smaller project with lower risk. As the number of sources in the climate finance landscape continues to expand. It is critical that decision-makers consider how fiduciary standards will apply to these various actors. project cycles and scale of risks of climate change projects. Some NCFs choose to have tailored fiduciary standards for different types of implementers or projects. an NCF may wish to have a different set of fiduciary standards for a multilateral implementer than for an implementer from the private sector. 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. National Climate Funds: A Guidebook for Decision-Makers 25 . an NCF must have a system of fiduciary management that accommodates the multiple standards.Chapter 2: Designing a National Climate Fund 2.5 Key Decision 4: Ensuring Sound Fiduciary Management Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. DEFINING FIDUCIARY ARRANGEMENTS Fiduciary arrangements facilitate relationships between different actors in the NCF structure. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. REPORTING AND VERIFICATION Sound fiduciary management provides the foundation for the efficient movement and tracking of funds flowing to and from the NCF.

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

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

6 Key Decision 5: Supporting Efficient Implementation Arrangements Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. While many NCFs collect funds and then distribute them as grants.Chapter 2: Designing a National Climate Fund 2. This continual repayment of the initial loan cycle has supported additional loans. others have diversified their activities to include low-cost loans. Once the loans were repaid. 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. 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. the Thailand Energy Efficiency Revolving Fund distributed a pool of government funds to private banks which then provided low-cost loans for energy efficiency. For example. the money became available for new loans. 28 National Climate Funds: A Guidebook for Decision-Makers . Reporting and Verification For a full version of this diagram.

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

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

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

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

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

000. including the European Union. 34 National Climate Funds: A Guidebook for Decision-Makers . Reporting and Verification Monitoring. lessons are collected from implementation that could further refine and improve NCF operations. including innovative mechanisms. flexible and country-driven. UNDP holds the funds and distributes them to implementing partners for the execution of activities. The CCTT. The selection of implementing entities and the process for delivering funds must be clarified so that beneficiaries can receive funds. Monitoring. The PSB conducts the final review and authorizes the grants. who compiles the information into a single report. 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. The CCCA TF is capitalized by bilateral donors. If the objectives are broader. An annual report summarizes the progress of implementation for the full year. Capitalization Should the fund focus on a handful of benefits. The trustee or administrative agent manages these transactions and ensures that funds are collected and distributed in a coordinated and effective manner. The PSB makes high-level policy decisions for the fund and conducts the final review of grant applications. Grantees submit implementation reports every three months to the Trust Fund Secretariat. if a civil society organization is the applicant in partnership with a government entity. A Joint Programme Annual Review occurs each year to review the report. Through this process. led by the Prime Minister as the honorary chair.000 per grant. It is envisioned that this role will eventually transition to the government. the fund should blend a wider variety of sources. Grant proposals are first reviewed by the Trust Fund Secretariat and then independent experts. as well as by UNDP. Reporting and Verification ensures that results are being delivered. Sweden and Denmark. the maximum grant amount is $150. enabling the fund to be fast. Based on this information. The National Climate Change Committee. A term sheet clearly outlines roles of each governing body and the processes for project approval and fund distribution. 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 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. climate change risks. based on findings of these experts makes recommendations to the PSB. Implementation is undertaken either solely by government agencies or in partnership with NGOs. only a few types of domestic sources would need to be blended with international sources. and mitigate. As a UNDP local Trust Fund. It coordinates national policy-making on climate change and provides strategic guidance to the Programme Support Board (PSB). However. The Alliance aims to directly help vulnerable communities by enhancing their resilience to climate change and other natural hazards. Fiduciary Management Sound fiduciary arrangements provide the foundation for the efficient movement and tracking of funds flowing to and from the NCF. 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 PSB is supported by the CCCA TF Secretariat. scope and operations of the NCF. The objectives should clearly define how the NCF relates to national goals on climate change and other international and domestic funds and initiatives. Governance The governance system ensures that the project cycle flows smoothly and efficiently. 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. UN agencies and universities. Any governance system must facilitate effective decision-making to drive resources to appropriate actions that support the objectives of the fund. The CCCA TF will provide up to $300.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. the head of the Trust Fund Secretariat provides quarterly progress reports. 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. a national programme to support capacity development and institutional strengthening to prepare for. is composed of 20 ministries and agencies.

2 UN Multi-Donor Trust Funds 3.4 UNDP NCF Advisory Services National Climate Funds: A Guidebook for Decision-Makers 35 .Chapter 3 UNDP Trust Fund Advisory and Management Services "! "! "! "! 3.1 UNDP Administered Trust Funds 3.3 UNDP Trust Fund Implementation Services 3.

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

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. They support a wide range of objectives. UN Development Assistance Frameworks (UNDAFs). Once a fund is established. ranging from transition and reconstruction actions to development and environmental issues. operational and administrative capacities of the UN and the expeditious approval and implementation of projects and programmes. MDTFs are established according to the guidance provided in the United Nations Development Group (UNDG) Guidance Note on Establishing.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). Managing and Closing Multi-Donor Trust Funds and generally relies on UN entities to implement projects and programmes. it enables the UN system to quickly deploy the technical. as defined by the relevant government partners and the UN Country Team. and “Delivering as One” Frameworks. administered through a specialized unit UNDP Multi-Partner Trust Fund (MPTF) Office. National Climate Funds: A Guidebook for Decision-Makers 37 . 58% 25% 17% Country Thematic 3. These funds support country-driven and UN-supported work in more than 80 countries with contributions from over 60 donors and development partners.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).

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

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

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

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

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

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

blend. existing national strategies. reporting and verification Once key decisions have been made. support and coordination should underscore all of an NCF’s components. Based on UNDP’s experience in the administration of over 750 trust funds at the national. global and regional levels. reporting and verification. climate-resilient development. in order for this increased funding to achieve real results. blend them together. NCFs are nationally-owned and nationallymanaged so that a country can collect the sources that are right for them. and aligned with. systems and other initiatives on climate change. countries must be equipped to effectively access and channel funds toward their climate and development priorities. Each NCF must be tailored to country priorities and realities. Further. coordinate and account for climate finance.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. National Climate Funds are a useful tool that can support countries to optimize their access to and management of climate finance. frameworks. these components will provide a structure that helps to drive resources toward a country’s climate and development priorities. It is critical that the increased number of funding sources are matched with an increase in a country’s ability to collect. and 40 Multi-Donor Trust Funds around the world. NCFs are not one-size-fits-all. ensuring that efficient decision-making supports the implementation of projects and programmes that achieve the NCF’s goals. 44 National Climate Funds: A Guidebook for Decision-Makers . a country will have crafted the components of its NCF. 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. NCFs put countries in the driving seat for transforming their economies and achieving low-emission. A carefully considered and well-designed NCF will ensure that systems are in place to facilitate the flow of funds and monitoring. As this guidebook demonstrates. They should be firmly rooted in. implement activities in a manner that accomplishes their priorities and set up a nationally-relevant system to account for the results of their work. However. Importantly.

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

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 .

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

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

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

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

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

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

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. national. Clean Development Mechanism (CDM) – Defined in Article 12 of the Kyoto Protocol. Equity – An investment in exchange for ownership of a company entitled to the earnings of a company after all other investors (e. Global Environment Facility (GEF) – Established in 1991. Capitalization – Refers to the types of resources that the fund would collect. peat.g. International. climate change. methane (CH4) and ozone (O3) are the primary greenhouse gases in the Earth’s atmosphere. Variability may result from natural internal processes within the climate system (internal variability) or from variations in natural or anthropogenic external processes (external variability). Financial transfers are made directly from the funding source to the domestic entity for implementation.g. the atmosphere and clouds. This can include establishing fiduciary standards that apply to all monetary transactions. Fossil fuels – Carbon-based fuels from fossil hydrocarbon deposits. These are dealt with under the Montreal Protocol. whether due to natural variability or because of human activity. international waters. nitrous oxide (N2O). that absorb and emit radiation at specific wavelengths within the spectrum of infrared radiation emitted by the Earth’s surface. Emissions trading – A market-based approach to achieving emissions reduction objectives. grants or loans). Climate change – Any change in climate over time. 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. 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. oil and natural gas. the ozone layer and persistent organic pollutants. 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. decision-making processes and oversight functions that facilitate efficient management of an NCF.and brominecontaining substances. there are a number of entirely human-made greenhouse gases in the atmosphere. Implementation – Implementation includes the processes and agents set in place to carry out NCF programmes and projects. Greenhouse gases – Greenhouse gases are those gaseous constituents of the atmosphere. land degradation. the GEF is a financial mechanism under the UNFCCC that provides grants to countries for projects related to biodiversity. Mexico. such as the halocarbons and other chlorine. Moreover. comprised of countries with the right to vote that have ratified or acceded to the convention. This can include programmatic instruments (e. nitrous oxide and methane. the GCF joined the GEF as a financial mechanism under the UNFCCC. 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. Governance of an NCF – Governance includes bodies. including coal. . 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. processes for selecting implementing entities and oversight and legal responsibilities. The Fund is financed with 2% of the Certified Emission Reduction issued for projects of the Clean Development Mechanism and other sources of funding. etc. 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. Direct access – A funding modality in which domestic entities can access funds to implement climate change programmes and projects. both natural and anthropogenic. Green Climate Fund (GCF) – Established at COP 16 in Cancun.. programmes and policies and other activities in developing countries using thematic funding windows. public and private funds can all be relevant for an NCF. Conference of the Parties (COP) – The supreme body of the UNFCCC. Ecosystem –A system of living organisms interacting with each other and their physical environment. the Kyoto Protocol deals with the greenhouse gases sulfur hexafluoride. Water vapor (H2O). This property causes the greenhouse effect.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. carbon dioxide (CO2). The GCF will support climate change projects. debt-holders) have been paid. such as taxes on transport or financial transaction. and (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments..) of the climate of all temporal and spatial scales beyond that of individual weather events. 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. hydro fluorocarbons and per fluorocarbons. Besides carbon dioxide. Climate variability – Variations in the mean state and other statistics (such as standard deviations. the occurrence of extremes.

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

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

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