REDD+ funding mechanisms

In 2018, UN-REDD consolidated its knowledge and technical assistance streams on REDD+ funding mechanisms to help countries organize, mobilize, sequence, channel, coordinate and monitor finance for REDD+ actions, from finance for policy reforms to finance for incentive schemes, investment programmes, and results-based payments, depending on the country opportunities, needs, circumstances and priorities.

The technical advice and knowledge in this domain aims to connect funding (public and private, domestic and international) with national strategies, policies and safeguarding measures. Here follows a description of a selected set of cases in which UN-REDD generated, mobilized and offered knowledge to craft innovative funding arrangements for implementing REDD+ actions in countries and connecting the work and skills of various stakeholders.

In Paraguay, UN-REDD technical assistance served to advance an innovative collaboration between the country and the Dutch Development Bank (FMO) to promote sustainable practices in the soy and cattle ranch sectors, including their role in mitigating climate change. In particular, the technical assistance and engagement with the FMO aims to establish a new, major credit line for such sustainable practices for US$ 220 million, which can simultaneously serve to mobilize GCF funding. Among other knowledge efforts, UN-REDD advised stakeholders on options to align investments with the National Forest Strategy for Sustainable Growth (the national equivalent of the REDD+ Strategy) and prepared the concept note to structure the process and guide stakeholders through it.

In Ecuador, UN-REDD technical assistance supported the investment foundation “&Green” to align its investment capital with the implementation of the National REDD+ Action Plan. The assistance served to underpin the design of a large project with long-term finance for productive and commercial transformation in the farm sector, which will particularly cover the cacao, coffee, palm oil and cattle sectors (all of which have key linkages with deforestation).

This technical assistance supported Sail Ventures, the asset manager for “&Green”, by providing project incubation and support for developing the first set of projects, thus creating models for agricultural investments that can reduce deforestation in Ecuador. This technical assistance is currently covering the following knowledge streams:

  • Identification and capacity assessment of potential commercial partners;
  • Creation of a participatory project development process involving the &Green foundation in the run-up to making the projects ready for investment, in order to foster trust among stakeholders;
  • Support to &Green to specify and apply their methodology and system to quantify the environmental return for &Green (i.e. forest conservation, reduced deforestation and forest restoration) – the results of this effort will be scaled up and replicated nationally;
  • Fostering liaisons with key stakeholders, notably the Ministry of Agriculture, producer associations and other private actors in the context of the PROAmazonía stakeholder engagement work.

In Ecuador too, UN-REDD technical assistance also supported the Fund to align its investment capital with the implementation of the National REDD+ Action Plan. In particular, UN-REDD helped this fund to scope the option of providing a “deforestation-free” credit line to Banco Pichincha, a national private bank, which could then extend such finance to other producers along the value chain in the cacao, coffee, palm oil or cattle sectors.

However, it is fair to note that the above-mentioned assistance to &Green and private investors has yet to result in concrete investment opportunities. They will therefore still require continued knowledge and support from UN-REDD in the coming years.

In addition, UN-REDD produced and provided a set of briefing notes for the Governments of Costa Rica, Ecuador, Mexico and Peru on options for accessing REDD+ funding from public sources, as well as on fiduciary and operational arrangements. These briefing notes were tailored to the policy context and funding sources for REDD+ actions in each of these nations.

In 2018, the UN-REDD technical assistance also helped Brazil and Ecuador to design their first results-based payment proposals on REDD+ to the GCF – scheduled for official submission in 2019. These are the very first programmes to recognize and reward REDD+ implementation under the UNFCCC rules, and are likely to have a catalysing effect in the REDD+ arena, as they demonstrate that REDD+ as a results-based financial system can and does work, while showing how to make it do so. In particular, UN-REDD knowledge and advice underpinned a coherent and technically-sound sequencing of policy design and implementation, monitoring, assessment and reporting through complex and transparent data analysis and management, as well as due compliance with social and environmental safeguards.

Finally, special technical assessment briefs were prepared to advise the Governments of Paraguay, Ecuador, Cambodia, Ghana and Kenya on the option to sell UNFCCC compliant REDD+ emission reductions to oil companies (e.g. Eni, Shell and BP). In relation to this, UN-REDD provided technical assistance to facilitate preliminary exchanges between each Government and these companies on this matter and provided knowledge and advice on key technical requirements and issues to ensure that governmental decisions were fully aligned with UNFCCC REDD+ provisions.

This report is made possible through support from Denmark, Japan, Luxembourg, Norway, Spain, Switzerland and the European Union.