IDB – GEF ProgramHighlights and Visions

May 24, 2010

IDB-GEF Program Overview Since joining the GEF as an Executing Agency in 2004, the Bank

has developed a portfolio that amounts to nearly US$120 million of GEF funding, of which 16 projects are under implementation and 13 in preparation

On average, additional co-financing is over 80% of total funding for IDB-GEF projects in execution, either through the Bank´s own resources or from third parties

16 countries in the LAC region have accessed GEF funding through technically sound projects and innovative financing mechanisms

that attain significant impacts and transformational results across economic sectors

Private Sector ParticipationGEF – RAF Resources – IDB’s public sector window

Regional: Gulf of Honduras Pollution Control in Marine Transportation. USD 4.8m of GEF funds, plus USD 11.8m of co-financing (of which 6.8% comes from private sector). The project creates private-public partnerships to build the regional capacity for maritime and land-based pollution prevention and control, and offer incentives for private sector participation in monitoring and prevention of pollution.

Barbados: Sustainable Energy Framework. USD 1m of GEF funds, plus USD 11.8m of co-financing (of which 3% comes from the private sector). The project includes the assessment of RE and EE projects’ financial requirements, and the design of financial mechanisms to support their implementation.

Private Sector ParticipationGEF – RAF Resources – IDB’s private sector window Brazil: Energy Efficiency Guarantee Mechanism. USD 10m of

GEF funds, plus USD 15m of IDB funds through its private sector window. Partnership with UNDP for TA activities. The EEGM will provide guarantees to commercial banks for on-lending to ESCOs, demonstrating the financial viability of using EE savings

performance contracts as loan collateral.

GEF – Earth Fund Regional: Water Funds Platform for Watershed Protection.

USD 5m of GEF funds, plus USD 15m of co-financing (of which 50% is expected from the private sector), in partnership with the TNC. The Water Funds will provide a platform for private sector projects

targeting watershed protection. Sources of capital for the Water Funds include private sector donations.

Public-Private Funding Mechanisms for Watershed Protection

OBJECTIVE: Water Funds Platform for Watershed Protection aims to establish at least 5 water funds across the LAC.

These water funds would support projects related to: (i) payment for environmental services, including watershed

management and biodiversity conservation; (ii) water resource management such as sustainable land use;

and (iii) conservation projects for further protection of the natural

habitat where these services originate.

Eligible conservation projects for funding include creating and strengthening protected areas, helping neighboring landowners switch to conservation-friendly practices, and supporting other community-driven conservation initiatives.

Water Users

Water Fund

Operational Activities

Taxes , Levies Donors GEF Other Local

Entities

Conservation Activities

Endowment Returns

Endowment Fund

Public-Private Funding Mechanisms for Watershed Protection

Public-Private Funding Mechanisms for Watershed Protection

The organizational structure for the Water Funds across the region would share certain commonalities:

(i) representation of key stakeholders, including local residents, local governments, large water users, and bilateral or

multilateral agencies;

(ii) oversight from a Board of Governors to ensure transparent management of the sources and uses of funds, and a Technical Secretariat to ensure that project financed by the Water Fund would yield the desired results;

(iii) gradual build up of an endowment fund.

Outreach Feasibility Studies

Seed Capital Contribution Start Up

2-4 months 9-18 months 4+ months 3+ months

- Identify Key Stakeholders

- Secure funding for feasibility studies

- Identify level of environmental services

- Conduct social economic studies

- Review legal, financial and institutional structures

- Negotiate with key stakeholders on MOU

- Determine amount of capital contributions from stakeholders

- Finalize MOU and fiduciary agreement for Water Fund

- Develop strategic planning documents

Public-Private Funding Mechanisms for Watershed Protection

Quito Water Fund

9

Fund Development• 2000: $21,000 Original seed capital• 2008: $6,000,000 • Annual Investment of $2 million

Participation

• EMPAAQ (Quito Water Utility); Quito Electric Utility; USAID; Swiss Development Agency; Andean Brewery Company; Tesalia Springs Co.

Progress in Conservation

• Project Master Plan included programs in forestation, environmental education, public awareness campaigns and patrol and control (park guards).

© Sergio Pucci/TNC; © Ami Vitale

Quito Water Fund Leverage

Financing Breakdown (2008)

FONAG USD 700,00017%

Co-financing USD 3,378,00083%

Total Investment USD 4,078,000

Leverage: 1: 5

Conclusion The IDB has engaged the private sector under the GEF; both through the

RAF and the Earth Fund, using its public and private sector windows.

Mobilizing private sector investment is critical to addressing climate change and to generate environmental benefits in the other GEF focal areas.

The Earth Fund under GEF V provides a unique opportunity to leverage private sector capital and IDB's own resources for investments in private projects with high demonstration value.

In addition to development impact at the project level, GEF's engagement with the private sector should seek to maximize the mobilization of private capital and achieve financial sustainability of the underlying interventions.

Conclusion Projects with the highest demonstration value are often not in countries

that receive the highest GEF resource allocations. The Earth Fund provides an important avenue for financing projects without having to compete with public sector projects for allocated funding. The IDB’s own process provides for significant country ownership for

all projects financed under its umbrella.

The Earth Fund’s platform-based structure offers a streamlined and efficient process for approvals and implementation, which is critical for private sector engagement.

A robust Earth Fund replenishment is key to ensuring a strategic and scaled-up engagement with the private sector.