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LEDS Finance Resource Guide – Developing good projects


Introduction

To achieve the targets outlined in NDCs and other LEDS plans, countries will need to develop and then implement a range of interventions – these are the ‘building blocks’ that collectively will achieve the overall outcomes sought. In order to secure international financial support for these actions and to encourage the private sector to participate, countries will need to develop good quality projects that ‘make sense’ to the private sector and which meet the standards of international funders. The following resources provide guidance on how to develop good quality projects, both in general terms and also focusing on making them impactful (e.g. meeting the GCF’s requirement to achieve ‘paradigm shift’), and on making them ‘financeable’. Most of the resources focus on NAMA projects (nationally appropriate mitigation actions) but these will mostly also be relevant for other kinds of project seeking international support, including from the GCF.

In many ways this section is about how to ‘package up’ the concepts covered in several of the other sections of this guide into a specific intervention (or combination of interventions) that will achieve LEDS or NDC policy outcomes and in doing do attract finance, both from international public sources but also leveraging private investment too. As such there are strong linkages with the previous three sections in particular – ‘Creating an enabling environment’, ‘Using domestic and international public finance’, and ‘Implementing effective financial instruments’ – all of which will normally feature in a NAMA or GCF project.

Featured introductory resources

Planning for NDC implementation: Reference Manual (finance chapter) (CDKN / Ricardo, 2016, 92 pgs total (finance chapter 10 pgs))

CDKN’s NDC implementation Reference Manual (also included in the overall resources in the Introduction section) was produced to support developing countries in implementing their NDCs. Several of the activities identified in the finance chapter (begins on p.68) are relevant to ‘Developing good projects’: see in particular activity 8 (Develop a project pipeline and financing propositions).

Online version [navigate to the finance chapter]: Access resource here

PDF to download [Guide and Reference Manual combined]: Access resource here

 

Guidance for NAMA Design in the context of NDCs: a tool to realize GHG mitigation under NDCs (UNDP/UNEP DTU/UNFCCC , 2016, 100 pgs)

This Guide, updated in 2016, aims to support developing countries in the NAMA development and implementation process by providing guidance and good practices on the key aspects of NAMAs, and provide insights on how NAMAs may support NDCs. The Guide includes the policy framework, potential types of actions, financing, institutional arrangements and the roles of different actors, and MRV procedures. The Guide also provides guidance on best practice and other practical advice for those who are faced with the task of developing a NAMA, especially in the context of an NDC. While focused on NAMAs, much of the guidance will be relevant to the development of any ambitious mitigation project and the linkage to NDCs

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Guide to develop a project proposal for the Green Climate Fund (Acclimatise/ IIED / ICCCAD, 2017, 84 pgs)

This toolkit was developed to help private sector entities understand the key considerations to take into account and to meet the GCF’s requirements when developing funding proposals for the GCF. It was developed for Bangladesh but nearly all of the content will be relevant to other countries, and the guidance is also suitable for public sector bodies. The guide covers the essential details of the GCF, the GCF project cycle, the GCF proposal template, key project development requirements and provides a guide for how to get started.

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Developing good projects – subsections covered

  • General
    • Resources that cover a number of aspects of project design and development and are relevant across several subsections
  • Impact and transformational change
    • Resources on how to define and estimate project impact (including ‘transformational change’ or ‘paradigm shift’), covering both GHG reduction and wider sustainable development impacts (‘co-benefits)
  • Making projects financeable
    • Guidance on how to design projects with realistic and practical financing structures and based on sound business models
  • MRV
    • Resources on how to incorporate robust MRV in the design of projects

General resources

The resources in this subsection were developed to provide comprehensive guidance across most or all aspects of good project design and development.

 

Key resources 

Guidance for NAMA Design in the context of NDCs: a tool to realize GHG mitigation under NDCs (UNDP/UNEP DTU/UNFCCC , 2016, 100 pgs)

This Guide, updated in 2016, aims to support developing countries in the NAMA development and implementation process by providing guidance and good practices on the key aspects of NAMAs, and provide insights on how NAMAs may support NDCs. The Guide includes the policy framework, potential types of actions, financing, institutional arrangements and the roles of different actors, and MRV procedures. The Guide also provides guidance on best practice and other practical advice for those who are faced with the task of developing a NAMA, especially in the context of an NDC. While focused on NAMAs, much of the guidance will be relevant to the development of any ambitious mitigation project.

Access resource here

 

Guide to develop a project proposal for the Green Climate Fund (Acclimatise/ IIED / ICCCAD, 2017, 84 pgs)

This toolkit was developed to help private sector entities understand the key considerations to take into account and to meet the GCF’s requirements when developing funding proposals for the GCF. It was developed for Bangladesh but nearly all of the content will be relevant to other countries, and the guidance is also suitable for public sector bodies. The guide covers the essential details of the GCF, the GCF project cycle, the GCF proposal template, key project development requirements and provides a guide for how to get started.

Access resource here

 

GIZ NAMA Tool: Steps for moving a NAMA from Idea towards Implementation (2016 (v10), GIZ, 100 slides)

The NAMA Tool provides developers and implementers of NAMA projects with brief step-by-step instructions on how to develop a NAMA, updated in 2016 to reflect the links between NAMAs and NDCs. Most if not all of the content is relevant to any mitigation project where international financial support is desired. The process is structured into 10 steps. The 10-step approach is designed to help practitioners work through the stages necessary to develop a good project and to supply users with more data, publications, and tools relevant for certain aspects of developing a NAMA . Also available in French and Spanish.
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IRENA Handbook on Renewable Energy NAMAs (IRENA, 2014, 80 pgs)

This Handbook presents guidance on NAMA project development for renewable energy experts and policymakers that can be used to support renewable energy deployment in developing countries. The handbook covers the NAMA concept and its relevance to renewable energy, considers typical barriers and how NAMAs can address them, explores financing options, and outlines the NAMA development process. The final chapter contains detailed case studies of renewable energy NAMAs in Tunisia, Chile, and Mexico.

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Accessing international financing for climate change mitigation – a guidebook for developing countries (UNEP; GEF / TNA Guidebook Series, 2012, 142 pgs)

This guidebook provides information to help developing countries better identify and access financial resources for their mitigation activities. Chapter 5 addresses the key elements of program and project proposals and provides some guidelines for proposal preparation. This chapter provides a useful overview of the different sections of a project proposal and what needs to be covered in each section. The target audience for this guidebook is national experts, consultants, and government agencies within developing countries’ Technology Needs Assessment teams, including a broad range of stakeholders from government institutions, non-government organisations, and the private sector.

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Country examples

See 3 case studies in IRENA resource above.

Impact and Transformational Change

Projects are designed to achieve specific outcomes – in the context of LEDS and NDCs, these are often measured in GHG emissions reduced, or in the increased resilience of people and communities. Many projects will also lead to broader impacts (also known as ‘co-benefits’ or ‘benefits’), for example improvements to air pollution levels, energy security or employment. The resources in this subsection provide some guidance on how to identify and estimate impact (both GHG and broader impacts), and also on the emerging concept of ‘transformational change’. This is now a requirement of several providers of international public climate finance (the GCF uses the term ‘paradigm shift’ to refer to this concept) but it is not yet widely understood in a consistent way.

 

Key resources

GHG Protocol Policy and Action Standard: An accounting and reporting standard for estimating the GHG effects of policies and actions (WRI, 2014, 188pgs)

The Policy and Action Standard provides a standardized approach for estimating and reporting the change in GHG emissions resulting from policies and actions. The primary intended users are analysts and policymakers considering or designing government policies and actions at any level, including national, state, provincial, or municipal. The Standard was designed to help users estimate the GHG effects of planned policies and actions to inform decision making, monitor progress of implemented policies and actions, and retrospectively evaluate GHG effects to learn from experience.

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The co-benefits of climate change mitigation (UN ECE, 2016, 5 pgs)

This introductory brief describes how mitigation actions can have benefits that go beyond GHG emissions reduction and presents some high level estimates of the significance of these benefits. Including information on these broader impacts can make project funding proposals more compelling (some funders may actually require such information).

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Framework for measuring sustainable development in NAMAs (UNEP DTU / IISD, 2014, 47 pgs)

This paper proposes a framework for measuring the sustainable development impacts of NAMAs. While the framework (see section 4.4) is quite conceptual in nature it provides a useful high-level approach to inform thinking about how broader impacts should be considered in NAMA development and provides guidance to some specific tools and resources that may help.

The template in the Annex also provides a useful and comprehensive list of potential broader impacts across four dimensions (environmental; social; economic; institutional).

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Potential for Transformational Change (NAMA Facility Factsheet, 2014, 2 pgs)

Several funders require evidence of ‘transformational change’ in the projects they fund (the GCF refers to this as ‘paradigm shift’). Being a rather new concept, this new term is often poorly understood. The NAMA Facility was one of the first funders to use the term ‘transformational change’ and this factsheet offers insights on their understanding of what constitutes ‘transformational change’ in the context of sustainable low emission development.

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From theory to practice: Understanding transformational change in NAMAs (UNEP DTU/Wuppertal Institute, 2014, 28 pgs)

The objective of this concept paper is to propose an operational definition for what transformational change means in the context of NAMAs, taking into consideration ongoing discussions among NAMA experts. The review of theoretical approaches in Chapter 2 may be less relevant for LEDS practitioners and policymakers, but Chapter 1 (5 pgs) provides a useful exploration of the key aspects of transformation change in the context of NAMAs.

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Country examples

Transformational change for low carbon and sustainable development (UNEP DTU, 2015, 112 pgs)

This publication presents five case studies exploring success factors and indicators of transformational change in low carbon development across countries and sectors. The cases were selected in order to learn from the most successful examples of transformations that have happened or that are planned to achieve low carbon development. Two developed country and three developing country examples are explored.

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Assessing the missed benefits of countries’ national contributions: Quantifying potential co-benefits (NewClimate Institute, 2015, 74 pgs)

This report assesses the co-benefits that a selection of countries could realize by achieving the emissions reductions targets in their INDCs, and the additional co-benefits they could achieve through more ambitious targets. First it provides an overview of the general co-benefits that climate action may have and how they could be used to incentivize further ambitious GHG reductions. It then provides illustrative results for the forgone or missed benefits that could have been achieved with action to meet a trajectory towards 100% renewables by 2050, as compared to the current policies and the INDCs. The USA, China, the EU, Canada, Japan, Chile, South Africa and India are considered.

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Making projects financeable

Nearly all projects designed to contribute to LEDS and NDC goals will require financing. This includes both the finance required to initiate a project (usually provided by some form of national or international public finance) and then the resulting flow of private investment towards a low emission or more climate-resilient solution. In order to secure that initial financing (e.g. from the GCF) and then more importantly to effectively stimulate a lasting change in how private investment flows, projects must be designed with realistic financial structures and mechanisms at their core. This requires an understanding of who the relevant market and financial actors are, how finance flows between them, and what models could successfully change these flows towards a low emission model. The resources in this subsection provide guidance and lessons learned on how to make projects ‘financeable’.

As noted in the introduction to this section, there are strong links with other sections of this guide. This subsection has a particularly strong linkage with the ‘Implementing effective financial instruments’ section as the financial structure of many projects will ultimately make use of one or more of the financial instruments covered in that section.

 

Key resources

Designing NAMAs to catalyse bankable low carbon investments (CCAP/NCI/UNEP DTU; Sept 2016, 11 pgs)

This policy brief looks at how to develop NAMAs or other mitigation projects that are ‘bankable’ i.e. something that a bank or other financier is willing to finance. The brief proposes three main elements for making projects bankable and explores each of these: improving policy and institutional frameworks; addressing financial risks and returns; and identifying projects and demonstrating feasibility. This brief, written by leading NAMA finance experts, is a useful introduction to this topic.

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See also: the finance chapter (Ch. 5) of “Guidance for NAMA Design in the context of NDCs” (document details provided in the introductory resources for the ‘developing good projects’ section)

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Financing Nationally Appropriate Mitigation Actions (UNEP DTU, 2014, 36 pgs)
This Primer is devoted to the financing of NAMAs and presents essential principles and models of financing. It highlights challenges in the financing of the policies and programmes that make up the NAMAs, as well as possible ways to overcome these challenges. The guide’s four sections cover: defining NAMA finance; sources of NAMA finance; instruments; and leveraging finance for NAMAs. Although focused on NAMAs, the content of this guide would be very applicable to the design of any mitigation project that requires a robust financing strategy (such as the GCF).
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See also: ‘Demystifying Private Climate Finance’ (UNEP FI 2014), especially Part B. Document details provided in the ‘identifying barriers’ subsection

See also: ‘Derisking Renewable Energy Investment (DREI)’ (UNDP, 2013, 151 pages). Document details provided in the ‘implementing effective financial instruments / general resources’ sub-section

MRV

Good projects will be designed with consideration of how their impact can be monitored and evaluated, to provide information on how to improve project performance, to check whether the desired results are being achieved and to provide lessons for future project development. In the international arena of climate negotiations and international climate finance, this has additional significance, in the form of MRV (Measuring, Reporting and Verification), now referred to under the Paris Agreement as ‘transparency’. MRV is relevant at the project level as well as at the national (and international) level, and many providers of international climate finance require MRV to be built into project design from the outset and for information to be provided on this in project proposals. The resources in this section provide some introductory guidance on how to incorporate MRV into project design.

 

Key resources

MRV 101: Understanding Measurement, Reporting, and Verification of Climate Change Mitigation (WRI, 2016, 28 pgs)

This introductory paper aims to clarify the different types of MRV relevant to climate mitigation, and covers 3 types – MRV of emissions; MRV of mitigation actions; and MRV of support. MRV of mitigation actions is most relevant here and is covered in Section 2.2. The paper is aimed at national decision-makers and practitioners from environment and development organizations with no or little prior knowledge. It does not provide detailed guidance on implementing each type of MRV, nor does it cover monitoring and evaluation of adaptation efforts. The aim is that this paper will enhance understanding of the landscape of MRV, the ways in which different types of MRV fulfill particular needs and utilize respective method­ologies, and the synergies among them.

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See also: the MRV chapter (Ch. 7) of “Guidance for NAMA Design in the context of NDCs”, (document details provided in the introductory resources for the ‘developing good projects’ section)

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See also: ‘GHG Protocol Policy and Action Standard: An accounting and reporting standard for estimating the GHG effects of policies and actions’ (WRI, 2014, 188pgs)

Document details provided in ‘impact & transformational change’ section above. The Protocol is mainly focused on estimation before implementation of projects but does provide some guidance on how to estimate and report impacts after implementation.

 

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