FEATURE: Becoming ‘climate finance ready’: Peru’s experience
Anna Hickman of CDKN catches up with Alberto Paniagua Villagre, Executive Director of Profonanpe, to quiz him on his organisation’s success in becoming accredited to both the Adaptation Fund and Green Climate Fund.
The Peruvian Trust Fund for National Parks and Protected Areas (Profonanpe), has funded biodiversity conservation in Peru for 22 years. Across 46 protected areas and reserves, it has strengthened natural resource management and supported civil society’s and the private sector’s contributions to saving biodiversity.
The organisation became a National Implementing Entity (NIE) of the Adaptation Fund in 2014 and recently became Latin America’s first accredited implementing entity for the Green Climate Fund (March 2015). The Adaptation Fund was set up by the UNFCCC to provide a major source of finance for climate adaptation activities in developing countries. The Green Climate Fund – also established by the UNFCCC – is set to become one of major channels of climate adaptation and mitigation finance from rich to poor countries, which is targeted to reach US$100 billion a year by 2020.
Now that Profonanpe is successfully accredited as an NIE with both institutions, it means that Peru can receive and disburse climate finance directly – known as ‘direct access’ – rather than relying on multilateral organisations such as regional development banks to disburse funds. Developing countries are strongly in favour of direct access, because of the increase autonomy and agenda-setting power it gives them (see some of CDKN’s Climate Finance Advisory Service guides on this topic).
In a recent interview, Alberto Paniagua Villagre, Executive Director of Profonanpe, explained that Profonanpe established highly rigorous operating procedures to win the confidence of the accreditors:
“In order to attract climate finance from international and national sources, it is important that the NIE responsible for the funds has properly established its operating procedures,” he said.
“This includes not only administrative and financial procedures, but environmental and social safeguards, project risks assessments, anticorruption procedures and process auditing, amongst others. The institution must have designated committees, with clear and specific tasks according to their functions (e.g. Financial committee, Audit committee), which will facilitate decision-making and ongoing monitoring. It’s essential that, in order to be reliable for the donors, the institution demonstrates transparency in all its processes, and illustrates results-based management.”
Profonanpe is experienced in attracting private sector finance for adaptation and mitigation, as it was mainly created to finance biodiversity conservation through specific projects. Over its history, it has raised around US$ 151 million overall from different sources including multilateral, bilateral and private cooperation. In Peru, public institutions are not allowed to hand over public financial resources to a private institution such as Profonanpe. Therefore, Profonanpe has only administered funding that has come from international agencies and private businesses. However, it carries out work in partnership with government agencies and these agencies provide counterpart funding in turn.
According to Mr Paniagua, the key factors for Profonanpe’s success are its institutional independence, administrative efficiency and transparency. The climate finance landscape is not without its challenges, though: “For Peru, one of the main hurdles to attracting foreign resources is that, due to its growth, it is now being seen as a middle-income country, in spite of the significant financing demand for nature conservation and poverty alleviation,” he notes.
A key gap for all low- and middle-income countries to watch, he says, is around monitoring, reporting and verification (MRV). Countries preparing to receive climate finance need to develop comprehensive systems around MRV. In the natural resources sector in which Profornanpe works, for instance, Mr Paniagua highlights that “it is necessary for LICs and MICs to update their forest legal frameworks and other regulations, to develop a national system for monitoring social and environmental safeguards, and to implement a national emissions inventory.”
Finally, we asked Mr Paniagua whether climate finance seems to be a driver for climate compatible development strategies and plans – or, is it the other way round?
The reality at NGO or institution level, he said, is that “despite having previously identified a problem, funds that become available are drivers to further develop specific projects related to climate change.”
The ideal, though, is that “at a national level, governments are tasked with developing strategies and plans to tackle climate change regardless of the funds available at the moment. The next step is the implementation of a fundraising strategy, so that such plans can be implemented.” With accreditations in place for both the Adaptation Fund and the Green Climate Fund, Peru certainly looks set on the cusp of receiving – and programming – significant resources in support of climate compatible development according to its own national priorities.
Image: forest, Peru. Courtesy CIFOR.