On 5 and 6 July 2022, Libreville, Gabon hosted a high-level meeting on the global finance framework for biodiversity. The panel was initially comprised on July 5 of CAFI, the ADB, AFD, and the EU, and completed on July 6 by KFW and Winrock. It has been observed that the donors’ activities in the Congo Basin forests are mired in chaos. There are 35 funding efforts overall in the Congo Basin, with coordination being a challenge. In order to reassure the private sector, there is a need to reflect on developing an optimal coordination system as well as review the PES and their indicators. Please download the preliminary report

 

 

High Level Round Table on financing: Development Banks, Climate/Biodiversity Funds and carbon market mechanism gather to discuss the “Fair Deal” for the protection of Central African forests

 

Welcome remarks and opening statement: the Honourable Dr Christian Ruck, Goodwill Ambassador and CBFP Facilitator of the Federal Republic of Germany.

Panel members : Development Banks, Climate, Biodiversity and Forest Protection Funds: CAFI, ADB, AFD, Winrock International, KFW

Moderator : Mr Maxime Nzita Nganga Di Mavambu, ECOFAC VI's Head of Mission for Regional Technical Assistance and former CBFP Co-Facilitator (Resource Person)

Rapporteur : Jean Bakouma, Director of Conservation, WWF Congo Basin

Preliminary report.

The high-level meeting on the international financial architecture for biodiversity was held on 5 and 6 July 2022 in Libreville, Gabon. The session focused on four issues:

• Discussing instruments for improving financial coordination and terms of access.
• “Fair deal” mechanisms, arrangements and terms to guarantee ongoing, adequate climate and biodiversity finance and political commitments for Central African ecosystems.
• Discuss frameworks, conditions and incentives needed to attract private investment in sustainable development and forest protection.
• Consider the possibilities of merging the carbon market with public funding methods on the one hand and development aid on the other.

 

The panel was composed of CAFI, ADB, AFD and the EU on 5 July and completed by KFW and Winrock on 6 July.

It has been observed that donor efforts promoting the Congo Basin forests are conducted in a disorganized fashion. There are 35 funding initiatives underway, but coordination is lacking. This calls for reflection on developing the best possible coordinating mechanism, the PES and their indicators; as well as the best strategies for reassuring the private sector.

 

All the panellists agreed with this observation, and went on to propose possible solutions.

 

There is a need for an integrated coordination mechanism. We require a pilot for fundraising. There is also the issue of the credit market. The credit process needs to be streamlined. For the EU’s Philippe Mayeux, this issue is not new, which is why OFAC was established, and following its launch, there was an influx of large investors.

For the AFD, the answer lies in a two-part solution at the programming level: There is an investor database, although it is not widely known. Donors should take initiative before committing themselves. They need to access the database.

For CAFI, this coordination needs to happen within the donor college. It goes beyond having a database. Coordination is a time-consuming process. Resources must be made available and coordination committees must be established in the capitals if the CBFP is to coordinate donors. The coordination team needs a mandate before anyone can assume leadership of coordination.

For the ADB, it is important to understand what responsibilities fall to each country and those that behove to the partners, as well as strike a balance. The Bank needs to recognize that coordination requires money, time and patience. Therefore, the donors must accept this cost.

Because implementation takes place on the ground in the countries, coordination must take place at two levels: regionally and then nationally. The ADB believes the countries should coordinate, but we must acknowledge that some countries lack the capacity to do so, requiring regional level coordination to assist those nations. If there is to be coordination, it must be done by the regional organization most suited to cross-country coordination.

 

Coordination must take place throughout the project cycle. How do we make a coordinated approach work at the operational level?

The first step is to agree on what exists. Analyse and map out existing resources. How do we incorporate thematic coordination? The ADB could take the lead on certain themes.

The issue of the coordinator's mandate needs to be considered: complementarity, division, subsidiarity, and comparative advantage.

For the AFD, it is important to distinguish between political and operational coordination. The Glasgow "Pledge" lays out principles for political coordination. Given the significance of the CBFP, the donors college should allow for such coordination since CAFI and COMIFAC are coordinating structures. This will ensure coherence and guarantee that the Congo Basin is represented. The CAFI coordination model should also be considered.

There are two options. For instance, the CIGAR, a hybrid coordination structure that prioritizes thematic and financial coordination, was established at ICRAF.

A first option: the coordinating body could be transformed into a secretariat to which the nations would assign a mandate, much like ECCAS assigned COMIFAC a mandate.

Coordination should also be a topic of high-level political dialogue.

There are also other issues to be considered, such as the fact that REDD+ targets do not include intact forests and yet we can’t protect ecosystems (or their services) if they are not compensated.

If we want to protect ecosystems, there needs to be political dialogue on payment for conservation efforts.

Regarding the second issue, it is important to note that some nations, including Gabon, desire extra rewards in addition to those provided by the REDD+ process. So, the issue is how to set up "Fair Deal" financing arrangements.

CAFI complements bilateral flows and has worked on investment plans. Donors want to improve efficiency and boost verification capability. Positive indicators suggest that deforestation is stabilizing. Despite all  the progress made, monitoring and assessment still need to be improved. We want to alter CAFI's course such that it places more emphasis on output and performance.

We have a first agreement with Gabon, but the funding provided is insufficient. It is easier to measure carbon than biodiversity. We need more capacity and more results.

How do we link this to our intervention, CAFI’s intervention?

First lesson: Data is crucial. The only nation with accurate data is Gabon. Only one or two nations have provided reference levels, and many more are still lacking. Therefore, the region needs to be developed/strengthened in order  to gain access to climate funding.

 

Central Africa may need a slightly different type of funding. Donors must consider every aspect of IFLs (Intact Forest Landscapes), which enables nations to retain high forest cover.

Deforestation increases with even the smallest concession in nations where little is done to curb it. Countries need to develop, but they need to demonstrate  political commitment.

Absorption capacity is an additional issue. We have numerous partners, want to raise funds, and require strong coordination and capacity across the nations.

Finally, there are requirements: reliable data, verification, and political commitment.

In China, contextualized standards have been developed.

Carbon financing is the foundation of the "Fair Deal."

At the ADB, 40% of the bank's commitments are directed towards climate financing, however the bank has some reservations about the sustainability of some of the “pledges”. Governance and market openness are crucial when discussing PES (payment for ecosystem services) or carbon. How do we establish it? Is it a niche market or a standard supply-demand market?

How do we ensure that the States have the minimum capacity needed to intervene in these carbon markets, when that ability is in doubt? How can development aid help?

Why not ease the rules in order to facilitate access to climate finance?

Putting rules before capacities to allow for negotiation with other actors.

This can help if official development assistance is used to strengthen the States.

In the AFD’s view, 3 points must be considered:

The first is the link between climate and biodiversity, for example, LFIs are not taken into account in climate models, mistakes can be made when biodiversity is not taken into account.

.

The second point: what climate-related actions is Gabon taking? Can we find a deviant model given the CB's unique characteristics? Develop specific models for the Congo Basin and consider the prevailing model.

The third point is whether we can envision this carbon financing as a more tightly integrated component of macroeconomic development models. Better integration of carbon financing would incorporate national debt. This would help to broaden the spectrum of carbon finance and increase its significance for development.

 

Establishing linkages between political and economic interests, development and debt.

However, the biodiversity issue is difficult to track in terms of metrics.

For WCS, there is no incentive to protect LFIs. No one is paying for LFIs. WCS is developing an initiative. The idea is to build a small portfolio of projects to demonstrate the existence of initiatives for LFI conservation. We need pilot sites, what metric will we measure?

Second point

We must revisit our coordination with private investors like Bezos.

Enhance the role that forests play in financing for both biodiversity and climate change.

At the national level, we must review intervention frameworks, starting with already existing frameworks in the countries. We must investigate the possibilities for active management outside of protected zones.

Finance for sustainability is a possible solution, but there are conditions that must be met before we start working with Gabon.

 

We have 8 to 10 years to change the trajectory and the LFIs, ad that would be at least 30% of the solution. Under the GEF, more than USD 300 million have been earmarked for LFIs. In countries with high forest cover and low deforestation, LFIs are gaining popularity. A workshop can be envisaged within the framework of the GEF.

The deviant model: why do we disregard climate microfinance? Microfinance, which must reach the communities, serves as an inspiration for the funding strategy that will reach those communities.

According the CBFP, the COMIFAC countries struggle to access financing because all the measurement criteria are beyond their reach, so the countries get frustrated and ready to give up. Why not consider how to support the countries knowing that they have limited resources?

Third question: What organizations can help the subregion? What potential scenario could the subregion have to help the private sector reduce risks? How can public and private funds be combined?

 

CAFI. We need to distinguish between the private sector’s role in the carbon market and its function as an economic player. No one will pay for carbon if we are unable to verify it, hence a system for carbon accounting must be established.

 

Project financing must take into account the real economy.

There are existing large-scale economic operations or the agro-industry sector to be considered. The most straightforward approach is to have a project that can show a return on investment; we need a zero-deforestation project that generates a return on investment.

According to the ADB, the forestry industry is a niche sector within a global economy. How do you manage risks? The ADB has resources available to manage risks. if we are successful in providing the private sector with genuine, clever incentives. However, some questions remain:

 

How are private sector tax regimes defined in public policies? Public policy for regulating the private sector has two facets; concerning the private sector, how do you get finances? The ADB is working to industrialize Gabon's timber industry in order to foster secondary and tertiary processing.

For the AFD: 2 points to be considered: First, the AFD is fortunate to have access to a range of private sector financing options. However, it should be noted that the Congo Basin as a whole is in a challenging institutional situation, has poor capacity for absorption, and few economic actors who accept financing from AFD, notably in the banking sector. There is a need to enhance the business climate and procedures.

 

Secondly, the private sector has tremendous potential to invest in conservation. Example 1: The AFD established the management plans for the Congo Basin forestry sector 30 years ago. Today, they need to be updated, so the States are renewing their commitment for another 30 years. The Congo Basin's management strategies need to be improved.

The wood industry; yes indeed. The question is how to respond to the States in the area of agricultural demands? How to help companies transition towards "deforestation-free" production, but there is also a concern about small scale farmers. We need to offer them "deforestation-free" technical itineraries.

 

For more information, please download the documents below: