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

climate-resilient development. 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. countries are in the driving seat and can make informed choices for how direct resources toward activities that deliver results on the ground. reduce vulnerability to climate shocks and deliver poverty reduction gains. coordinate them. 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. policy and fiscal frameworks and systems. 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. however. This guidebook is part of a series of practical guidance documents and toolkits to support national and sub-national governments to achieve low-emission. In order for countries to take advantage of these opportunities. 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. In this way.Foreword Climate change is one of the most pressing threats to development today. An important tool for countries to manage climate finance is a National Climate Fund. Veerle Vandeweerd Director Environment & Energy Group United Nations Development Programme National Climate Funds: A Guidebook for Decision-Makers iii . the right institutional and financial mechanisms must be in place so that resources are directed efficiently toward national climate and development priorities. 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.

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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

2 Key Goals of a National Climate Fund 1.1 Climate Finance Landscape 1.3 Common Functions of a National Climate Fund National Climate Funds: A Guidebook for Decision-Makers 5 .Chapter 1 Overview of National Climate Funds "! "! "! 1.

Public funds — such as those under the UNFCCC — must be leveraged in strategic ways to attract new resources from the private sector.1 Each of these public. UNDP estimates that. a key challenge for countries will be to use scarce public funds to attract private investment. how to coordinate the actions funded by them. Affecting every continent. 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. including that from private sources.2 With private sector funds outnumbering government funds by an enormous margin. Yannick (2011).2 Further. 1 2 UNDP. offering countries new resources to undertake climate change mitigation and adaptation actions. taken together. Catalyzing Climate Finance: A Guidebook on Policy and Financing Options to Support Green. climate change impacts threaten to undo progress made toward poverty reduction and the achievement of the Millennium Development Goals. The requirements. Recognizing this. shifts production and consumption processes to emit fewer greenhouse gases and promotes sustainable development. and how to develop the methods to monitor and evaluate the results. United Nations Development Programme. there are already more than 50 international public funds. Countries must transition toward a new paradigm that supports low-emission. 40% from businesses and the remaining 20% from government. 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. The dramatic increase in opportunities to access climate finance is matched by equally increasing complexity. governments gathered at the UNFCCC Climate Change Conference in Cancun and pledged $30 billion in “fast start” funding — climate funds pledged between 2010 and 2012 — and up to $100 billion annually by 2020.Chapter 1: Overview of National Climate Funds 1 Overview of National Climate Funds 1.1 Climate Finance Landscape Climate change is regarded as a key environment and development challenge for the 21st century. 45 carbon markets and 6. New York. Human Development in a Changing Climate: A Framework for Climate Finance. Ushering in a new development paradigm requires a dramatic increase in climate change finance. 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. Low-Emission and Climate-Resilient Development. processes and reporting associated with the many funds can be confusing and overwhelming. private. This will be necessary to finance a complete transformation toward low-emission and climate-resilient development. Glemarec. countries must also figure out ways to blend funds together so that multiple sources can support climate change initiatives. bilateral and multilateral sources offers new opportunities for countries to address their climate and development needs. USA. 6 National Climate Funds: A Guidebook for Decision-Makers . Countries are faced with the challenge of how to identify which funds are appropriate for them. NY. These pledges have been matched by an explosion of public and private funds outside of the UNFCCC process.000 private equity funds providing climate change finance. 2011. climate-resilient development.

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

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

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

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

1 Common Components and a Structural Overview of a National Climate Fund 2.8 Consolidating Inputs into Term Sheets National Climate Funds: A Guidebook for Decision-Makers 11 .2 Key Decision: Defining the Objectives 2.4 Key Decision: Instilling Effective Governance 2.Chapter 2 Designing a National Climate Fund "! "! "! "! "! "! "! "! 2.3 Key Decision: Identifying Capitalization 2. Reporting and Verification 2.7 Key Decision: Facilitating Effective Monitoring.6 Key Decision: Supporting Efficient Implementation Arrangements 2.5 Key Decision: Ensuring Sound Fiduciary Management 2.

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

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

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

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

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

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

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

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

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

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

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

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

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

For example. 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. Some NCFs choose to have tailored fiduciary standards for different types of implementers or projects. an NCF must have a system of fiduciary management that accommodates the multiple standards.Chapter 2: Designing a National Climate Fund 2. As the number of sources in the climate finance landscape continues to expand. DEFINING FIDUCIARY ARRANGEMENTS Fiduciary arrangements facilitate relationships between different actors in the NCF structure. an NCF may wish to have a different set of fiduciary standards for a multilateral implementer than for an implementer from the private sector.5 Key Decision 4: Ensuring Sound Fiduciary Management Key Flow of Support Flow of Coordination Flow of Funds Objectives Flow of Monitoring. They may also wish to have certain fiduciary standards for a large project that differ from those for a smaller project with lower risk. 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. REPORTING AND VERIFICATION Sound fiduciary management provides the foundation for the efficient movement and tracking of funds flowing to and from the NCF. Reporting and Verification KEY DECISION 1 DEFINING THE OBJECTIVES For a full version of this diagram. National Climate Funds: A Guidebook for Decision-Makers 25 . 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 .

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

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

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

the government will issue CGYs for sale to private and/or public entities. as required. watershed and river management.e. Programmes address forestry. Implementation Arrangements Monitoring. The Ministry of Heritage serves as the Government Coordinating Entity (GCE).gob. private. including the project selection process. individual. The Administrative Agent consolidates the reports and provides them to each contributor and the Steering Committee. the Administrative Agent will transfer the approved funding to the relevant recipient and implementing organizations.undp. Coordinated by the GCE.org/yasuni National Climate Funds: A Guidebook for Decision-Makers 51 . Capitalization Governance A Steering Committee. They are submitted to the Steering Committee for approval after review by the Technical Secretariat. annual financial statements. grant proposals are developed by national recipients and implementing organizations. two from donors and one from civil society. research. 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. and project completion reports and certified final financial reports to the Administrative Agent. and instead will be maintained as part of a national park. reviews and makes fund allocation decisions and ensures coordination with other relevant initiatives. laws. It undertakes project appraisals. capacity assessment. science. These CGYs guarantee that the ITT field oil reserves will not be extracted. provides strategic direction and oversight of the fund. Implementation partners include NGOs/civil society organizations. It also ensures the timely issuance of CGYs and their sale to private and public entities. bilateral and multilateral contributors to compensate 50% (at 2008 oil prices) of the income it is forgoing. A Technical Secretariat provides administrative. Based on the approval from the Steering Committee. The GCE assumes full programmatic and financial accountability and coordinates the design of the overall portfolio. The Yasuni ITT Fund is made up of two windows: 1. monitoring and evaluation of project performance and other analyses. Fiduciary Management The fund uses the UNDP Multi-Partner Trust Fund Office as the Administrative Agent for the fund. acting through the Yasuni ITT Coordination Office and in cooperation with the National Secretary of Planning and Development. if in the future the world carbon market accepts the CGYs as equivalents of emission permits. 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. The trustee also provides annual certified financial statements. Funds from the sale of the CGYs will contribute to the ITT Trust Fund. In exchange for contributions. private enterprises. http://yasuni-itt. The GCE is responsible for the effective development.org). Capital Fund Window — financed by contributions to the Yasuni Fund Account (used to finance renewable energy projects). and accountability frameworks). rules. the fund will finance strategic sustainable development programmes within the guidelines of the Ecuadorian National Development Plan. made up of three representatives from the government. National entities receive funds and implement projects in accordance with the national regulatory framework (i. In addition. and intergovernmental organizations. The office receives and administers contributions. technical and substantive support. Reporting and Verification Website Recipients and implementing organizations provide annual narrative reports. implementation and monitoring and evaluation of the ITT Trust Fund. Specifically. energy. Ecuador is requesting public.undp. 2. directives and procedures. technology and innovation. and disburses funds to implementing entities as directed by the Steering Committee. This is used to develop projects within the framework of the sustainable development plan.ec and http://mdtf. social development.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). regulations. The CGYs will include the metric tons of carbon avoided according to the price of the European Union Allowances in the Leipzig Carbon Market. the government issues Yasuni Guarantee Certificates (CGYs) for the face value of each contribution. Revenue Fund Window — replenished with mandatory annual revenue payments received from national entities for the use of the Capital Fund Window. mid-year updates. amounting to $3.6 billion over the 13 year period.

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

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

methane (CH4) and ozone (O3) are the primary greenhouse gases in the Earth’s atmosphere. Moreover. Besides carbon dioxide.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.. and (2) to assist parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments. such as the halocarbons and other chlorine. Global Environment Facility (GEF) – Established in 1991. Climate change – Any change in climate over time. the occurrence of extremes. International. Capitalization – Refers to the types of resources that the fund would collect. international waters. nitrous oxide (N2O).g. Implementation – Implementation includes the processes and agents set in place to carry out NCF programmes and projects. climate change. the Kyoto Protocol deals with the greenhouse gases sulfur hexafluoride.) of the climate of all temporal and spatial scales beyond that of individual weather events. Mexico. 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. These are dealt with under the Montreal Protocol. oil and natural gas. Clean Development Mechanism (CDM) – Defined in Article 12 of the Kyoto Protocol. comprised of countries with the right to vote that have ratified or acceded to the convention. decision-making processes and oversight functions that facilitate efficient management of an NCF. 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. Greenhouse gases – Greenhouse gases are those gaseous constituents of the atmosphere. Fossil fuels – Carbon-based fuels from fossil hydrocarbon deposits. Ecosystem –A system of living organisms interacting with each other and their physical environment. Governance of an NCF – Governance includes bodies. The Fund is financed with 2% of the Certified Emission Reduction issued for projects of the Clean Development Mechanism and other sources of funding. whether due to natural variability or because of human activity. national. hydro fluorocarbons and per fluorocarbons. Financial transfers are made directly from the funding source to the domestic entity for implementation. public and private funds can all be relevant for an NCF. This can include establishing fiduciary standards that apply to all monetary transactions. This property causes the greenhouse effect. The GCF will support climate change projects. This can include programmatic instruments (e. Green Climate Fund (GCF) – Established at COP 16 in Cancun. the GEF is a financial mechanism under the UNFCCC that provides grants to countries for projects related to biodiversity. Water vapor (H2O). etc. 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.and brominecontaining substances. 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. processes for selecting implementing entities and oversight and legal responsibilities. .g. peat. programmes and policies and other activities in developing countries using thematic funding windows. Conference of the Parties (COP) – The supreme body of the UNFCCC. Direct access – A funding modality in which domestic entities can access funds to implement climate change programmes and projects. carbon dioxide (CO2). land degradation. Climate variability – Variations in the mean state and other statistics (such as standard deviations. debt-holders) have been paid. Variability may result from natural internal processes within the climate system (internal variability) or from variations in natural or anthropogenic external processes (external variability). both natural and anthropogenic. Equity – An investment in exchange for ownership of a company entitled to the earnings of a company after all other investors (e. Emissions trading – A market-based approach to achieving emissions reduction objectives. there are a number of entirely human-made greenhouse gases in the atmosphere. grants or loans).. the ozone layer and persistent organic pollutants. including coal. such as taxes on transport or financial transaction. nitrous oxide and methane. the GCF joined the GEF as a financial mechanism under the UNFCCC. 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. 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. that absorb and emit radiation at specific wavelengths within the spectrum of infrared radiation emitted by the Earth’s surface. 54 National Climate Funds: A Guidebook for Decision-Makers Fiduciary management – Fiduciary management allows for the efficient movement and tracking of funds flowing to and from an NCF. Adaptation Fund – The Adaptation Fund was established by the Parties to the Kyoto Protocol of the UNFCCC to finance concrete adaptation projects and programmes in developing countries that are Parties to the Kyoto Protocol. the atmosphere and clouds.

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

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

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