A survey of priority knowledge topics conducted in November/December 2015 identified REDD+ financing as the most frequently requested topic for knowledge management support in the Asia/Pacific region.  Responding to this demand, a regional knowledge exchange on “REDD+ Financing” was held in Bangkok in May 2016, in collaboration with the FCPF, and with funding support from the REDD+ Partnership.

Participants from 12 countries in the region attended the event, with resource persons from a wide range of organizations, including the Green Climate Fund, the International Finance Corporation, Credit Suisse SA, Forest Carbon, and the Wildlife Conservation Society, as well as UN agencies providing insights into all aspects of REDD+ financing.

The meeting revealed many useful and interesting lessons learnt, experiences, and feedback. Among these, some of the main conclusions drawn from presentations and discussions during the meeting are:

REDD+ Finance is not just results-based payments: Although the provision of international results-based finance2 is the defining feature of REDD+, it must be remembered that there is also a need for investment finance in order to develop and implement the policies and measures (PAMs) needed to generate results.[1]  Finance is required for the first two phases (i.e. readiness and implementation) to generate the emission reductions (and/or enhanced removals) that will trigger results-based finance. Since the phases are not rigidly distinct, but tend to overlap, this implies the need for a comprehensive financing plan for REDD+ in each country, covering both investment and results-based finance.

REDD+ investment finance is not necessarily international: Although COP decisions emphasize the international nature of results-based finance, it does not mean that investment finance will also necessarily come from international sources or only from such sources. Working on the assumption of investment finance being international in origin risks diverting the attention of a country from the development of required capacities and identification of required PAMs. Identifying sources of domestic investment finance will enhance a country’s position to attract international investment and results-based finance.

Working with the Green Climate Fund (GCF): As noted above, anticipates that the GCF will play a key role in delivering results-based finance, so it is important to understand what this role might be.[2] However, the GCF is not expected to finalise its guidelines on the provision of REDD+ results-based finance until at least late 2016.  The GCF Board has already decided that “The Fund’s REDD+ RBP mechanism will seek to avoid double‐counting for emission reductions. The determination of whether emission reductions have already been supported by ex‐ante financing should be made ex‐ante”, although how such a determination will be made is not yet clear.[3]

Other international sources of investment and results-based finance: Besides the GCF, there are a number of other potential sources of international investment and results-based finance. These include climate funds administered by the World Bank and bilateral donors. A number of countries in Asia/Pacific are receiving support through the FCPF’s Carbon-Fund (C-Fund), the Forest Investment Program (FIP), or bilateral agreements.

The role of the private sector: The private sector is a very diverse stakeholder group. It includes entities that may be driving deforestation or forest degradation, companies seeking to demonstrate corporate social responsibility, carbon project developers, international and domestic banks and others. This diversity may confuse “engagement with the private sector”, but ultimately the scale of finance required for implementing REDD+ and reversing the trend of forest loss caused by companies mean that any national REDD+ programme will need to engage with the private sector.[4]

Managing REDD+ Finance: The main financial management options are budget support, fund-based or project/market-based models.  If transactions involving public financial resources are not subject to the same legislative approval process as the annual budget, they are outside the public budget and are therefore fund-based approaches or market-based approaches.  To date, no REDD+ country has opted for budget support but created independent REDD+ funds or integrated REDD+ into existing funds.

 

For more details please read our information note on “REDD+ Finance” and documents from the event.


[1] Decision 1/CP.16, paragraph 73

[2] Decision 9/CP.19, paragraph 5

[3] GCF, the latest Board documents, check at www.gcfund.net

[4] http://www.unredd.net/index.php?view=document&alias=14584-un-redd-policy-brief-qfiscal-incentives-for-agricultural-commodity-production-options-to-forge-compatibility-with-reddq&category_slug=policy-brief-series-3154&layout=default&option=com_docman&Itemid=134