AMCEN/ /SS/IV/REF.

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AFRI ICAN DE EVELOPM MENT BA ANK GRO OUP

FRA AMEWO ORK DO OCUMEN ON THE PR NT T ROPOSE ED AF FRICA GREEN FUND (AfGF) N

AfGFs design and e d establishment is an ongoin ng process that w ben will nefit fro extensive ongoin om ng co onsulta ation w with re egional mem l mber co ountrie es, donors, civil society and a var y riety of other o st takeholdersto oseekinputin ntoitsdesign. .

Thispro oposalisaworkinprogress s.Ithas snoty yet been endor rsedby y the e Ba anks Senior M Manage emento ortheB Boardo ofDirec ctors.

Please send com mments, con , ntributions or su uggestions t to cli imatechange@ @afdb. .org b by th Se eptemb ber10 latest t.

August 2011

AMCEN/SS/IV/REF./2

ABBREVIATIONSANDACRONYMS
AfDB AF AfGF AMCEN AWF CAHOSCC CBFF CCAP CDSF CDM CER CIFs COP CRMA CSIRO CTF FFCO FIP FTRY GECL GEF GHG MDB MDGs MRV NAMA NAPA NCAR NEPAD NGO NIE ONEC ORQR OSAN PBOs PPCR RDBs REDD+ RMCs SEFA SCF SMEs SREP UN UNCBD UNCCD UNFCCC AfricanDevelopmentBank AdaptationFund AfricaGreenFund AfricanMinisterialConferenceonEnvironment AfricanWaterFacility ConferenceofAfricanHeadsofStatesonClimateChange CongoBasinForestFund ClimateChangeActionPlan ClimDevAfricaSpecialFund CleanDevelopmentMechanism CertifiedEmissionReductions ClimateInvestmentFunds ConferenceofParties ClimateRiskManagementandAdaptationstrategy(AfDB) CommonwealthScientificandIndustrialResearchOrganization CleanTechnologyFund FinancialControlDepartment(AfDB) ForestInvestmentProgram TreasuryDepartment(AfDB) GeneralCounselandLegalServicesDepartment(AfDB) GlobalEnvironmentFacility GreenhouseGas MultilateralDevelopmentBank MillenniumDevelopmentGoals Measurement,ReportingandVerification NationallyAppropriateMitigationActions NationalAdaptationProgramofActions NationalCentreforAtmosphericResearch(USA) NewPartnershipforAfricasDevelopment NonGovernmentalOrganizations NationalImplementationEntity Energy,EnvironmentandClimateChangeDepartment(AfDB) QualityAssuranceandResultsDepartment(AfDB) AgricultureandAgroIndustryDepartment(AfDB) PolicyBasedOperations PilotProgramonClimateResilience RegionalDevelopmentBanks ReducedEmissionsfromDeforestationandForestDegradationandotherLand uses RegionalMemberCountries SustainableEnergyFundforAfrica StrategicClimateFund SmallandMediumEnterprises ScalingupRenewableEnergyProgram UnitedNations UnitedNationsConventiononBiodiversity UnitedNationsConventiontoCombatDesertification UnitedNationsFrameworkConventiononClimateChange

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TABLEOFCONTENTS
EXECUTIVESUMMARY ............................................................................................................ 44 . 4 1. BACKGROUND ............................................................................................................ 66 . 6 2. RATIONALEFORESTABLISHINGTHEAFGF...................................................................... 77 7 2.1 2.2 2.3 3. 4. 4.1 4.2 4.2.1 4.3 4.3.1 4.3.2 4.4 4.4.1 4.4.2 4.4.3 4.5 5. 5.1 5.2 6. 6.1 6.2 6.3 6.4 6.5 6.6 6.7 7. 7.1 7.2 7.3 7.4 8. 9. AfricasLimitedAccesstoExistingClimateFinancing...................................................................777 NeedforaFinancingMechanismHostedinAfricaandAlignmentwithAfricasPriorities.........888 RequestbyAfricasLeadership....................................................................................................999 THEAFRICAGREENFUNDPLATFORM............................................................................ 99 9 THEAFRICAGREENFUND(AFGF) ............................................................................101010 . GoalandObjectivesoftheAfGF............................................................................................101010 ScopeoftheFund ..................................................................................................................101010 . AfGFsFinancingWindows............................................................................................................101010 GovernanceStructure............................................................................................................121212 TheGoverningCouncil...................................................................................................................121212 TheAfGFSecretariat......................................................................................................................131313 Trustee...................................................................................................................................131313 AfDBasTrustee ..............................................................................................................................131313 . ManagementofFunds...................................................................................................................141414 FinancialReporting ........................................................................................................................141414 . ExecutionofLegalAgreements..............................................................................................141414 IMPLEMENTINGANDFINANCINGARRANGEMENTS ..................................................151515 . EligibilityandAccessibility .....................................................................................................151515 . FinancingProceduresandConditions....................................................................................161616 COMPLIANCEANDREPORTING...............................................................................171717 FiduciaryStandardsandResponsibility..................................................................................171717 Audit ......................................................................................................................................181818 . EnvironmentalandSocialSafeguards....................................................................................181818 Gender...................................................................................................................................181818 MonitoringandEvaluation....................................................................................................191919 Reporting ...............................................................................................................................191919 . DisclosureofInformation.......................................................................................................191919 EXPECTEDROLEOFTHEBANK.................................................................................191919 TheBankasaTrustee.............................................................................................................202020 TheBankastheAfGFsSecretariat........................................................................................202020 . TheBankasanImplementingEntity......................................................................................202020 AfGFsAlignmentwiththeBanksMandate..........................................................................202020 AFDBSINSTITUTIONALCAPACITYTOMANAGEAFGF................................................202020 NEXTSTEPS ..........................................................................................................212121 .

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EXECUTIVESUMMARY
1. There is strong evidence from the scientific community that climate change would have a disproportionately large effect on socioeconomic development in Africa. The average cost of climate changetoAfricaneconomiescouldbebetween1.5and3percentofGrossDomesticProduct(GDP)by 2030andrising.Climatechangeisathreattotheachievementofsustainabledevelopmentandpoverty alleviation on the continent. It has shown the potential to undo the modest gains made by the continenttowardsattainingtheMillenniumDevelopmentGoals. 2. Africas high vulnerability to the adverse impacts of climate change makes incorporating adaptation in all sectors the immediate and medium term imperative. Although the continent is currentlyalowcarbonemitter,abusinessasusualscenarioshowsthatithastheriskofbecominga majoremitterinthefutureifnothingisdonenowtohelpitfollowalowcarbonintensivegrowthpath. 3. However, adaptation and mitigation come at additional costs to the ongoing development interventionsonthecontinent.RecentestimatesofthecostofputtingAfricaonalowcarbongrowth pathwayareaboutUS$912billionperyearby2015whiletheincrementalcostofadaptationinAfrica is estimated between US$13 US$19 billion, if proper actions are not taken now. Current organized interventions will substantially reduce these costs. Yet, the long term economic benefits from the implementationoftherequiredadaptationandmitigationmeasuresonthecontinentwouldoutweigh thesecosts. 4. Current resources available to address climate change concerns on the continent are grossly inadequate, as are the related financing. Africa has had historically low access rate to global climate changefunds.Furthermore,previouslyavailableresourceshaveprovedinadequatetourgentlyredress the African climate change effects. A report jointly produced by Multilateral Development Banks in 2010 shows that Africa has received the lowest proportion of climate change financing among the developingregions.Manyofthecontinentspeculiaritieshavenotbeentakenintoconsiderationinthe design of existing global funds, including the need to provide greater financing for adaptation. It is therefore important that the resources pledged under the Cancun Agreements be managed under a mechanism that will adequately respond to the continents needs and increase its access to such funds. 5. A binding global deal on climate change did not materialize at the 2009 UNFCCC COP 15 in Copenhagen. However, the Copenhagen Accord endorsed by the worlds Heads of State and Government,Ministers,andotherheadsofdelegationnotedthatdevelopingcountries,especiallythose withlowemittingeconomies,shouldbeprovidedincentivestocontinuetodeveloponalowemission pathway.TheAccordprovidedforacollectivecommitmentbydevelopedcountriestoprovidenewand additional fasttrack financing, approaching US$ 30 billion for the 2010 2012 period. The Accord further established the goal of mobilizing US$ 100 billion a year by 2020 by developed countries to addresstheneedsofdevelopingcountries. 6. The Cancun COP 16 held in December 2010 formalized the commitment made by developed countries in Copenhagen to mobilize US$100 billion a year by 2020 to address the mitigation and adaptation needs of developing countries. The Cancun Agreements include the establishment of a GreenClimateFund,whichwillmanageaportionofthisfundinginordertoscaleuptheprovisionof longtermfinancingfordevelopingcountries.ThedesignoftheGCFbytheTransitionalCommittee(TC) isunderwayandisexpectedtobedeliveredinCOP17inDurban,SouthAfrica,inDecember2011. 7. Despite the progress mentioned above, Africas low access to global funds to address its climatechangeneedshasprompteditsleadershiptorequestsomeoftheresourcespledgedunderthe CopenhagenAccordandtheCancunAgreementstobeallocatedtoAfrica,andtobemanagedbythe African Development Bank (AfDB). Recent decisions by Africas leadership in the last AU Summit in Malabo, Equatorial Guinea, from 23 June to 1 July 2011, requested the Bank to complete the AfGFs

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designaheadofCOP17. 8. When established,the AfGF willcomplement existing instruments, and enhancetheability of AfricancountriestorespondtoClimateFinancechallenges.ThedesignandestablishmentoftheAfGFis an ongoing process that benefits from extensive consultation with the institutions Regional Member Countries, Donors, the Civil Society and a variety of other stakeholders. It also benefits from the experience that the Bank has acquired in hosting and administering special funds that address the needs and specificities of African countries. The Fund is part of the AfGF platform that aims at addressing the gaps in climate financing in Africa. The platform comprises three building blocks. The first block constitutes a set of existing thematic climate finance instruments within the AfDB (AWF, CBFF, SEFA, ClimDevAfrica Special Fund) within a framework that will improve their efficiency by simplifying processes and improving access. Although the governance of these instruments will be harmonized, to the extent possible, it will remain internal to the Bank. Access is open to Regional Member Countries directly or through the Bank. The second block involves the creation of a new instrument; the Africa Green Fund (AfGF), with a governance structure that involves both African countries and donors and held in trust by the AfDB that is able to receive, manage, and deliver resourcesfromFastStartFundsandlongtermpledgesmadeundertheCopenhagenAccordandCancun Agreements as well as other sources. The AfGF is independent of the Banks own decisionmaking structure. The third block is a scaled up Africa Green Fund instrument that echoes the key design featuresoftheGreenClimateFundthatwillseektoreceive,manageanddeliverfundstoAfricawitha governance structure that involves both African countries and donors. It will seek to become Africas preferredchannelforpartoftheclimatefinanceresourcesoverthemediumterm. 9. TheAfGFwillprovidebalancedallocationtobothmitigationandadaptation.Itwillsupportthe transfer and deployment of low carbon technologies with a significant potential for long term greenhousegasemissionssavings,andclimateproofingofthecontinentsinvestments.TheFundwill allow direct access1 to eligible countries and institutions to respond to countryspecific needs and concerns,basedonnationallydefinedobjectives.Thefundsoperationwillbededicatedtoaddressthe special nature of climate change challenges and Africas specific circumstance, and it will focus on operationsthatsupportclimatecompatibledevelopmentonthecontinent.TheoperationoftheAfGF buildsontheexperiencesofotherinternalandinternationallyadministeredclimatechangeFunds. 10. Dependingonthenatureofthepledgesandresourcesmadeavailable,theAfGFshallprovide grants,concessionalloansandguaranteestosupportpublicaswellasprivatesectorinvestmentsand capacitybuilding in Africa. It will complementthe activitiesof otherglobal fundssuch as theClimate InvestmentFunds(CIFs),theGlobalEnvironmentFacility(GEF),andtheAdaptationFund(AF),anditfill thegapsidentifiedtoaddressAfricaschallenges.TheFundsadministrationwillensureownershipby AfricancountriesoftheprojectsandprogrammestobefinancedbytheFund. 11. Recognized entities operating on the continent including eligible African countries, and institutions such as the AfDB, other MDBs and national governments, shall serve as the Funds ImplementingEntitiesandshallbeeligiblefordirectaccesstotheFundinordertoimplementclimate compatible projects on the continent. The AfGF will ensure transparency, equity and accountability through its organization and governance structures. In order to provide strategic guidance, oversight andtoensurebroaddonorandstakeholderparticipation,theAfGFwillhavealeanGoverningCouncil, comprising equal representation from donor and African countries, with the Civil Society and private sectoractingasobservers.TheFundsoperations,includingprojectapprovals,willbesupportedbya FundSecretariatthatwillbehousedattheAfricanDevelopmentBank.TheAfricanDevelopmentBank willserveasaTrusteeoftheAfGF.

DirectaccessmeansthataccreditedagenciesintheRMCswillbeabletodirectlyapproachtheFund.Theaccreditation approachisdetailedinSection8.

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1.

BACKGRO OUND

Inthepastd decade,Afric cahasseena acceleratede economicgr rowthandde evelopment,particularly 1.1 frastructure,energy,agriculture,edu ucationand healthsecto ors.However r,theprogre essachieved initsinf thusfar isalreadyb beingderaile edbythene egativeimpactsofclimat techange.C Climatechan ngepresents edented cha allenges for the continent, partic r cularly in t terms of meeting its sustainable m unprece development imper ratives, inclu uding the Millennium D M Development Goals (MD t DGs), thus th need for he concertedan ndcoherenteffortstoad dequatelyad ddressthisde evelopmentchallenge. urgent,c Recent asse essments hav shown th the avera economic costs of c ve hat age climate chan in Africa nge 1.2 eequivalent to1.5%3. .0%ofGDPe eachyearby y2030,andi itisprojecte edtoriseint theabsence couldbe of an in nternational agreement on emission (Figure 1) The contin ns ). nent is alrea bearing the cost of ady f addressi the hug impacts o climate v ge of variability an change. F example in East A nd For e, Africa, major r ing periodic cdroughtandfloodeven ntsaccount foreconom miccostsatb between5% and8%GDP Pperevent, whichislargelyabso orbedbynat tionalgovern nments

Figure1:Pr rojectedEconomicCosto ofClimateC ChangeinAfr rica

Source:Ba asedonFUNDn nationalmodel lintheAdaptCo oststudybythe eStockholmEnv vironmentInsti itute(2009).

1.3 While imposing costs a a signifi and icant burden on develo n opment, add dressing clim mate change sapotentialopportunity yforAfricatochartclima ateresilientandlowcar rbondevelop pmentpaths provides by sup pporting the National A e Adaptation Programs fo Action (N P or NAPAs) and Nationally Appropriate Mitigatio Actions (NAMAs), respectively. Given Africa high impact to climate change v on ( as vulnerability, adaptati ionholdshig gherpriorityforthecont tinent. Africarequir ressubstantialadditiona alfinancialre esourcestoi incentivizeb bestpracticestosupport 1.4 on ptation efforts through the introduction of new technolog the enha w gy, ancement of f mitigatio and adap institutio onalcapabili ity,andthe implementat tionoflong terminvestm mentsinpro ojectsthatbu uildclimate resilienc and are low carbon. Recent estimates of the combined costs of ad ce d daptation as well as for s r putting Africa on a lowcarbon growthpath hwaystand between US$22 andUS S$31billion peryear by US$52andUS$68billionperyearby2030,ifnoa actionistake ennow. 2015andbetweenU Thecommit tmenttonew wandadditionalfinance eforinternat tionalaction nonclimate changewas 1.5 swhereprog gresswasachieveddurin ngthelastCo onferenceso ofPartiestot theUNFCCC oneofthefewareas 5inCopenha ageninDece ember2009 andCOP16 6inCancuni inDecember r2010.TheA Agreements COP15 bymajorworldleaderscommitdevelopedc countriestoc collectivelyp provideresourcesappro oachingUS$ riod20102 2012tosup pportdevelo opingcountri iestomitigatetheirgree enhousegas 30billionfortheper ns, a f e rding to the emission and to adapt to the effects of climate change. These faststart funds accor Copenha agenAccord dshouldhave ea'balancedallocation betweenad daptationandmitigation n,'shouldbe 'newandadditional ltoODA,an nd'prioritize edforthemo ostvulnerabledevelopingcountries, suchasthe eveloped cou untries, smal island deve ll eloping State and Africa, and include investme es ents through least de internat tionalinstitut tions.These eresourcesa areexpected dtoprogress sivelyincreas setoUS$10 00billionper r

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yearby2020. 1.6 Whiletheinternationalcommunityhasrecognizedtheneedforenhanced additional financial support to Africa, it is equally important to have a proper financing mechanism to deliver these commitments to ensure that the continent benefits optimally from the pledges of the Cancun Agreements.CurrentfinancingmechanismshavenotdeliveredtheresourcesthatAfricaneeds,hence theneedforanewfinancingmechanismthatisappropriateforthecontinent. 1.7 The High Level Advisory Group on Climate Finance set up by the United Nations Secretary GeneralinFebruary2010stressedinitsfinalreportlaunchedinNovember2010theexceptionalnature ofclimatechangeinAfrica,andrecognizedthatanAfGFcanbeanappropriatewaytofacetheclimate changechallengesinthecontinent.ThereportespeciallynotedthatraisingUS$100billioninadditional climate finance by 2020 is challenging but feasible, considering four sources of revenue: public revenues;developmentbankinstruments;carbonmarkets;andprivatelowcarboninvestment. 1.8 Therecent17thOrdinarySessionofAUHeadsofStateandGovernmentheldinMalabofrom23 Juneto1July2011calledontheAfDBtocompletethedesignoftheAfGFaheadofCOP17inDurban.

2.
2.1

RATIONALEFORESTABLISHINGTHEAfGF
AfricasLimitedAccesstoExistingClimateFinancing

2.1.1 The resource requirements to address the threats of climate change and grow a low carbon economyinAfricafarexceedcurrentlyavailablefunds.TheincrementalcostofadaptationinAfricais estimatedbetweenUS$13US$19billionandUS$9US$12billionperyearformitigationby20152. This climate financing gap will seriously hamper efforts by African countries to respond effectively to the growing challenges of energy security and adaptation, especially with regard to countries facing highpovertylevels. 2.1.2 Africancountrieshavehadlimitedbenefitfromcurrentfinancingmechanismswhencompared tootherdevelopingcountries.Comparedtootherworldregions,Africahasreceivedonlylimitedglobal Climate funds3actuallydisbursedbetween 2005and2009.ArecentjointMDBsAssessment4hasalso revealedthatonly12%ofallMDBdisbursedmitigationfinancingwithin20062009hasgonetoAfrica. 2.1.3 While global attention focuses on efforts at mitigating greenhouse gas emissions, adaptation remainsAfricasprioritybecauseoftheregionshighcurrentandprojectedvulnerabilitytotheadverse impactsofclimatechange.Anassessmentofcurrentclimatechangefinancingshowsthat82%ofthe resources go to support mitigation, 5% for Reducing Emissions from Deforestation and forest Degradation(REDD+),only8%foradaptationandabout5%formultifociprojects.AdaptationinSub SaharanAfricawilltakealargershareofnationalincomecomparedtootherregions(Table1).

Grantham Research Institute on Climate Change and Environment, Possibilities for Africa in Global Action on Climate Change,ImperialCollege,UK(2009) 3ThemajorclimatefundscomefromsourcessuchastheClimateInvestmentFund(CIFs),GlobalEnvironmentFacility(GEF), CleanDevelopmentMechanism(CDM),andtheAdaptationFund. 4 PreliminaryjointMDBReportonClimateFinancing,June2010

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Table1:ProjectedAdaptationCostsbyWorldRegions(%GDP)5 Region SubSaharanAfrica EastAsiaandPacific EuropeandCentralAsia LatinAmericaandCaribbean MiddleEastandNorthAfrica SouthAsia NCARestimates 2.44% 0.71% 0.67% 0.72% 0.33% 1.17% CSIROestimates 2.26% 0.58% 0.39% 0.56% 0.34% 1.39%

2.1.4 Currently,allglobalfundsarehosted,governedandadministeredoutsidetheAfricancontinent, creatingasenseofalienationamongtheintendedbeneficiariesbecausetheirgovernancestructuresdo notpromoteAfricasequitableparticipationindecisionmaking.Thereisalsothelackofownershipof climate changerelated projects financed on the continent by African governments and intended beneficiaries. Some of these funds have exceedingly cumbersome accessibility procedures, with unnecessarycomplexityandbureaucraticbottlenecksdelayingnationalplans.

2.2 Need for a Financing Mechanism Hosted in Africa and Alignment with Africas Priorities
2.2.1 TheAfGF,dedicatedtotheneedsoftheAfricancontinent,isimperative.TheAfGFservesasa financing mechanism for addressing the specific needs essential for tackling climate change in Africa. ThedesignoftheFundrespondstothepeculiarneedsandcircumstancesofthecontinent.Hostingand administeringclimatechangefundsinAfricabyanAfricaninstitutionhasscoresofadvantagesforthe continent. Firstly,itenhancestheownershipofclimatechangeresourcesandinvestments,andproject ideas and processes necessary to deal with climate change as well as reinforce countryled processes. Secondly,itempowersAfricancountriestoparticipatefullyindecisionmakingregardingthe use of the funds. The active presence of African countries in the decisionmaking processes pertaining to allocating funds, through an appropriate governing structure, will enhance the principle of equity and fairness in the allocation of funds as well as provide the incentives to ensurethattheresourcesaredisbursedtransparentlyandusedforthepurposesforwhichthey havebeenprovided. Thirdly, it facilitates easier and direct access for recipient African countries and other benefitingentitiestothefunds,therebyrespondingefficientlyandurgentlytoAfricasclimate changeneeds. Fourthly, it provides a balanced allocation to both adaptation and mitigation through appropriate instruments while directly responding to national concerns through nationally definedobjectives. 2.2.2 Thehosting andmanagementofaconsolidatedclimatefundinAfricawillreducethecurrent fragmentation of climate funds and will increase the continents access to the pledges under the Copenhagen Accord and commitment under the Cancun Agreements. This increased access will enhancethecontinentsconfidencetocontributetoclimatechangeeffortsaspartofthesolutiontoan intelligentglobalclimatechangedeal.
5

ExtractedfromAdapcostbriefingpaperpreparedbytheStockholmEnvironmentInstitute(2009)

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2.2.3 The administration of the Fund by the African Development Bank is consistent with its institutional mandateandcapacitytomanage investments incoredevelopmentsectors inAfrica. For example, the total lending volume by the Bank to African countries for the 20082010 period was US$24.8 billion, comprising US$14.4 billion of ADB (nonconcessional) and US$10.4 billion for ADF (concessional)loansandgrants.Ofthis,infrastructurereceivedthelargestsharewith60%(inclusiveof private sector). The public sector benefited 51% with 9% allocated for private sector operations. Governance accounted for 22%, 14% for regional integration, the remaining was allocated to agriculture,health,environment&climatechangeandeducation.

2.3

RequestbyAfricasLeadership

2.3.1 BasedonAfricascharacteristicallylowaccesstoexistingglobalfunds,andtheneedtourgently increase Africas access to resources to address the continents increasing vulnerability, the African leadershipatCOP15requestedthatsomeofthefasttrackresourcesforclimatechangeprovidedfor intheCopenhagenAccordbeallocatedtoAfrica.TheGroupfurtherrequestedthatAfricasallocationof the fasttrack financing as well as its share of longterm financing be administered by the African DevelopmentBank.Thisdecisionwasendorsedbythe14thOrdinarySessionoftheHeadsofStateand GovernmentoftheAfricanUnionon2February 2010. The recent Malabo Decisions takenduringthe 17thOrdinarySessionoftheAUHeadsofStateandGovernmentmeetingheldfrom23Juneto1July 2011alsocalledontheAfDBtocompletethedesignoftheAfGFaheadofCOP17inDurban. 2.3.2 The AfGFs establishment comes as a response to this request by Africas leadership. Preliminary consultations were held in 2010. At the 7th African Development Forum in Addis Ababa, Ethiopia, from 10 15 October 2010, African Ministers, the Civil Society and other stakeholders supported the African Development Banks proposal to establish this Fund, and requested speedy processing to enable Africa to benefit from the pledges and commitments under the Copenhagen AccordandCancunAgreements.

3.

THEAFRICAGREENFUNDPLATFORM

The African Green Fund is part of a platform that addresses climate financing gaps in Africa. The platform will bring together a number of existing and new climate finance instruments to enhance Africasaccesstoclimatefinance.Theplatformisdesignedas aflexible and efficientmechanismthat seekstogrowovertimeandisabletoadjusttofutureclimatefinancearchitectureinawaythatbest servesAfricasneeds.ThebuildingblocksofthePlatformcanbedescribedasfollows: The first block constitutes a set of existing thematic climate finance instruments within the AfDB(AWF,CBFF,SEFA,ClimDevAfricaSpecialFund)withinaframeworkthataimstoimprove theirefficiencybysimplifyingprocessesandimprovingaccess.Accesswillcontinuetobeopen toRegionalMemberCountriesdirectlyorthroughtheBank. The second block involves the creation of a new instrument; the Africa Green Fund (AfGF) whichwillbepartoflongtermfinance,withagovernancestructurethatinvolvesbothAfrican countries and donors, and managed in trust by the AfDB. The structure should be able to receive,manage,anddeliverresourcesfromfaststartfundsandlongtermpledgesmadeunder the Copenhagen Accord and Cancun Agreements as well as other sources. The AfGF is independentoftheBanksdecisionmakingstructure. ThethirdblockisascaledupAfricaGreenFundinstrumentthatechoesthekeydesignfeatures oftheGreenClimateFund(GCF)thatwillseektoreceive,manageanddeliverfundstoAfricaat scale,withagovernancestructurethatinvolvesbothAfricancountriesanddonors.Itwillseek tobecomeAfricaspreferredchannelforpartoftheclimatefinanceresourcesoverthemedium term.

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Africa Green Fu Platfor a und rm Enhance o Access to Existing CC Instrument ts

AfGF In nstrument

Sca up AfG aled GF Instrument I

Figure1:The F eAfricaGree enFundPlatf form usofthisdocumentison nthenewin nstrumentde escribedasthesecondb blockoftheA AfricaGreen Thefocu FundPla atform.Inth hefuture,blo ock2willbe escaledupto otakeintoconsideration nthefutureevolutionof f theglob balclimatefin nancingarch hitecture. 4. 4.1 THEAFRICAGREENFUND D(AfGF) bjectivesoft theAfGF GoalandOb

ortcountryo ownedandc countryledc climatecompatibledeve elopmentin ThegoaloftheAfGFistosuppo private secto programs that will co or ontribute to poverty alle eviation and Africa by financing public and p abledevelopmentonthe econtinent.T Tomeetitsg goal,theAfG GFwillachiev vethefollow wingspecific sustaina objectives: Mobilize an facilitate access for its Regiona Member Countries to existing a nd al o and internal (a) resource provided within spec es cific instrum ments, especally ClimDev CBFF, AW and SEFA as well as v, WF A bilateral lsourcesoff financing,an ndcofinancingtosupportpublicand dprivatepro ogramsandp projectsthat contribu utetotheFu undsobjecti ives.TheAfG GFwillalsoc complement totherexisti ingmultilate eralfinancial mechanismssuchas stheCIFs,GE EFandAdapt tationFund. Promotedir rectandimm mediateacce esstofastst tartfundsforclimatemi itigationand dadaptation (b) to comp plement fun existing within the Bank and channel new and additio nds w onal financing to assist Regional Member Countries to respond to the risks a threats posed by c C o o and climate chan through nge adaptationprograms. supporttocountrya Support the developme of climat resilient a low carb program and proje that are e ent te and bon ms ects (c) truly em mbedded in national p n plans and s strategies to achieve s o sustainable developmen and the nt Millenni iumDevelop pmentGoals. . (d) Strengthen nationalinst titutionsand dsupporttheuseofcou untrysystem mstoensure asustained yearlyin ncreaseinthenumberof fAfricancou untriesthath havethecapa acityfordire ectaccesstotheFund.

4.2

Scopeofth heFund

4.2.1 AfGFsFinan ncingWindo ows entwiththeCopenhagen nAccordand dtheCancun nAgreement ts,theresour rcesoftheA AfGFshallbe Consiste administ teredinitiallythroughtw wowindowsAdaptatio onandMitigationinlinewiththere equestfrom Africas leadershipa andcurrentd discussionsu undertheUNFCCC.Each hofthesewindowswill alsofinance utting activit ties such as capacity b s building and technology transfer th are app y hat propriate to crosscu activitiesfundedthr rougheachw window.Additionalwindo owswillbee establisheda astheneeda arises. hiswindoww willfinanceadaptationpr rojects6andprograms7t thatsupport 4.2.1.1 AdaptationWindow.Th

Anadapt tationprojectisasetofactivitiesaimedataddressingthea adverseimpacts sofandrisksposedbyclimate echange.

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climateresilientdevelopmentonthecontinent.Itwillsupportthemainstreamingofclimateresilience and adaptation into development planning, poverty reduction strategies and socioeconomic policies thatwillinclude:investmentsinwaterresourcesmanagement,landmanagement,agriculture,health, transport and other infrastructure development, fragile ecosystems, integrated coastal zone management, enhanced capacity to monitor diseases and vectors affected by climate change and related forecasting and earlywarning systems, and in this context, improve disease control and prevention.Consideringthelimitedunderstandingofhowadaptationcanbeimplemented withinthe contextofdevelopment,theFundshallserveasacatalystforfasterandbetterunderstandingofAfrica specificadaptationissues.Someoftheprogramsthatwillbefundedinclude: SustainableLandandWaterResourceManagement:increasingfinancingrequiredtosupport multipurposewaterinfrastructure,optimizationofexistingdams,waterstorageandirrigation systems and projects in support of the implementation of the African Agenda on the water sector, particularly the Africa Water Vision 2025, adopted by the African Ministers of Water ResourcesandendorsedbytheAfricanUnion. BuildingClimateResilienceinKeyEconomicSectors:supportingthegenerationofknowledge and competencies required to make adaptation a core component of development in key economic sectors and promoting innovative initiatives with the potential of positive transformation. These interventions will also target activities to enhance the private sectors capacitytosupportadaptation.Theprivatesectorhasanimportantroletoplayinsupporting adaptation,whichiscurrentlybeingsupportedentirelyfrompublicsources. SupportingDisasterManagementActivities:Supportingthedevelopmentandimplementation of disaster management strategies for vulnerable populations. These strategies could include earlywarningproceduresfornatural disasterssuch as floodsordroughtsthatareforecastto increasein frequency andmagnitude, and disease outbreaksaswellasmeasuresdesignedto alleviate the impact of natural disasters in order to minimize loss of human life, economic assets,andnegativeeffectsonbothurbanandruralsocieties.

4.2.1.2 Mitigation Window. This financing window will support low carbon actions addressing the power sector (renewable energy, as well as increased efficiency in generation, transmission and distribution, transboundary interconnection lines); transportation (modal shifts to public transportation,improvedfueleconomy,andfuelswitching);andlargescaleadoptionofenergyefficient technologies, water sector and other demand management techniques in the relevant sectors. It will alsosupportreductionofemissionsfromdeforestationandforestdegradation,includingthepromotion of conservation, sustainable management of forests and the enhancement of forest carbon stocks (REDD+).ThescopeofprogramsbenefitingfromtheMitigationWindowwillincludethefollowing: RenewableEnergyandEnergyEfficiency:supportinganincreasingshareofrenewableenergy inAfricasenergymixandadditionalelectricitygeneration,usingrenewableenergysourcesas wellaspromotingsupplyanddemandsideenergyefficiency. SustainableTransport:supportingprojectsthatfocusontechnologicalsolutions,suchasmore efficientpublictransportthatispoweredbynewfuelcellsandcleanliquidgas;projectsthat improve the transport system on an urban scale, either by standalone investments (public transportinfrastructures,nonmotorizedtransport),andcomprehensiveurbanstrategies,such as urban and transport planning, the introduction of multimodal/mass rapid transit systems/trafficandfleetmanagementsystemsleadingtoincreasingaccesstoandshareinthe useofpublictransportbyurbancommuters. Sustainable Land and Forestry Management: Scalingup support to sustainable forest management, including the development of policy frameworks to slow the drivers of undesirable landuse changes, supporting projects to reduce greenhouse gases from deforestationandforestdegradation,andsupportingafforestationandreforestationleadingto

An adaptation program is understood as a process, a plan, or an approach for addressing climate change impacts that is broaderthanthescopeofanindividualproject.

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a reduction in the current rate of deforestation and land degradation. Several countries have collectively pledged about US$ 6 billion dollars to support REDD+ initiatives in developing countries.REDD+initiativesinAfricawillbenefitfromtheseglobalresourcesthroughthefunds channeledthroughthisAfGFwindow. 4.1.2.3 Tosupportmitigationandadaptationefforts,thefollowingcrosscuttingprogramsshallalsobe fundedfromthetwoAfGFwindows: EnhancedTechnologyDevelopmentandTransferProgram.Whiletherearesignificantgainsto bemadefromtheadoptionofexistingtechnology,additionaleffortsareneededtodeveloped new technologies to better support mitigation and adaptation efforts on the continent. This callsforcooperationonresearchanddevelopmentofcurrent,newandinnovativetechnology, including winwin solutions, and collaboration by institutions in developed and developing countries,onmitigationandadaptationtechnologies.ItisproposedthattheAfGFwillsupport northsouth and southsouth technological collaborations, including the promotion of indigenoustechnologies. CapacityBuildingActivities.TheAfGFwillfundinitiativestoenhancecapacityandknowledge within Regional Member Countries to address the climate change challenges and ensure sustainability and gender equality through policy and regulatory reforms and strengthen existingand,whereneeded,establishregionalandnationalcentresandinformationnetworks for addressing climate change impacts, including those related to extreme weather events. Capacity building investments from the AfGF will be complementary to those undertaken by otherinitiativesandFunds. Fostering Collaboration and Coordination between the three UN Conventions UNFCCC, UNCCD and UNCBD as climate change, desertification, and the loss of biodiversity are inextricablylinked. TheAfGFwillalsofundothercrosscuttingspecialinitiativesthatmayadvanceitspurpose.This mightincludetheestablishmentofspecializedproductssuchasaclimateindexinsurance.

4.3

GovernanceStructure

TheAfGFsgovernancestructureisdesignedtoprovidetherequiredtechnicalsoundnessandproper oversight, whileensuring efficiencyand effectiveness. The initial governance frameworkhas been set outbelowandinotherpartsofthisdocument.Theconstitutivedocumentsprovidingfurtherdetailsof the Fund and its governance will be developed following AfGFs establishment. The governance structure consists of the Governing Council, the Trustee and the Fund Secretariat. The Governing Council will decide on any constitutive documents and further developments of the governance structure. 4.3.1 TheGoverningCouncil 4.3.1.1 Inordertoprovideastrategicorientationaswellaspolicy,financialandlegalguidanceinorder to provide oversight and ensure broad donor and stakeholder participation, the AfGF will have a Governing Council which will also serve as the AfGFs ultimate governance authority. The Governing Council will have 9 voting members, comprising an equal number of representatives of donors and Africancountries(4each),andarepresentativeoftheTrustee.Observerswillincludecivilsocietyand privatesectorrepresentatives. 4.3.1.2 ThenominationofmembersrepresentingAfricancountrieswillbeonthebasisofarotational andregional representation,based on theselection carried outby AU inconsultationwith the RECs. The donors shall consult among themselves in order to select their representatives. A senior AfDB representativewillrepresenttheTrustee. 4.3.1.3 Decisions by the AfGF Governing Council will be made by consensus (which does not imply unanimity but a possibility for a member to block a decision), and the quorum necessary for the conduct of any meeting of the Governing Council shall be five members, including at least one

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representativeofeachofthedonors,AfricanGovernmentsandtheBank.TheAfGFGoverningCouncil will meet at such frequency as it may decide, but at least once a year. The Governing Council may choosetodelegateitsauthoritywhenappropriate.Dependingontheimportanceofthedecisionstobe taken,theGoverningCouncilmaydecidetohavephysicalorvirtualmeetings. 4.3.1.4 In addition to being the Funds ultimate governance authority, the Governing Council is responsible for determining AfGFs general policy direction, ensuring an alignment with international standards;andreviewingandapprovingtheannualreportofactivitiesfinancedwithAfGFresources. 4.3.1.5 The Governing Council is also responsible for approving AfGFs resource envelope and disbursementdecisionsforprogramsandprojectstobefinancedusingAfGFresources,thetechnical integrity and consistency of a transparent proposal review process. It is also in charge of approving AfGFsadministrativebudgetofthe. 4.3.1.6 The AfDB Board of Directors shall have an oversight role only over the performance of the BanksroleasTrusteeandonlyoverAfGFfinancedprojectsimplementedbytheBank. 4.3.2 TheAfGFSecretariat 4.3.2.1 A Secretariat will be established to support the AfGF Governing Council, and to facilitate communicationsbetweentheGoverningCouncilandallotherAfGFstakeholders.TheSecretariatwill beresponsibleforthedaytodaymanagementoftheAfGFportfolio,executingtheGoverningCouncils decisions,providingadministrativesupport,andoverseeingmonitoring and evaluation ofthe Funds portfolio. It is also responsible for screening proposals submitted, making recommendations to the GoverningCouncilandcommunicatingprogramsandprojectproposals.TheSecretariatisalsoincharge ofpreparingtheGoverningCouncilwork.Itisalsoresponsibleforreviewingprogramsandprojectsto ensureconsistencywiththeobjectivesoftheFund,eligibilitycriteriaandensuringthemonitoringand periodicindependentevaluationofperformanceandfinancialaccountabilityofimplementingentities. TheSecretariatalsoensurescomplementaritybetweenactivitiesoverseenbytheAfGF andthoseof other development partners active in the field of climate change such as the CIFs, GEF, AF and the UNFCCC,andensureseffectivecooperationtomaximizesynergiesandavoidoverlap. 4.3.2.2 The AfGF Secretariat shall be hosted at the AfDB headquarters and shall be headed by a Coordinator who will be appointed by the Governing Council at a level commensurate with the responsibilitiesoftheoffice. 4.3.2.3 TheAfGFSecretariatwillberesponsiblefortheaccreditationprocessofImplementingEntities inordertoensurethattheymeetbasicfiduciarystandardsasapprovedbytheGoverningCouncil. 4.3.2.4 Staffing8requirementsoftheSecretariatareexpectedtoincluderelevantspecialistsinclimate changerelatedoperations,legal,fiduciary,safeguardsandadministration.Thesestaffwillberecruited directlyfortheFundbutsomecouldalsobesecondedfromtheBankandotherImplementingEntities, where appropriate. The TOR of the Secretariat will be elaborated in the Operational Manual to be preparedbytheTrusteeinconsultationwiththeGoverningCouncil.

4.4
4.4.1

Trustee
AfDBasTrustee

TheAfricanDevelopmentBankservesasAfGFsTrustee.Inthiscapacity,itwillestablishatrustfundfor the AfGF to receive contributions, and will hold in trust, assets and receipts that constitute the Trust Fund,pursuanttothetermsoftheagreementsenteredintowithdonors.TheTrusteeisresponsiblefor
8

Based on initial provisional staffing assumptions of a Coordinator, 8 professional staff, 1 Secretary and 1 Team Assistant, meetings of Governing Council and equipping of Secretariat, the estimated operating costs for the first year should be approximatelyUS$1.6million.ItisimportanttonotethattheoperatingcostsshallalwaysbebornebytheFund.

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threemajorfunctions:managementoffunds,financialreportingandexecutionoflegalagreements. 4.4.2 ManagementofFunds a. Inthiscapacity,theBankshallberesponsiblefor:(i)Establishingandmaintainingappropriate records and accounts to identify contributions and other receipts, including reflows; (ii) Disbursing approved funds in accordance with instructions received by it from the AfGF Secretariat; and (iii) PreparingfinancialreportsandauditcoordinationfortheFund. b. Pendingthedisbursementofproceeds,theAfDBwillinvesttheFundsresourcesinaccordance with AfDBs policies and procedures for the investment of other similar funds that it administers. IncomeearnedoneachinvestmentwillbecreditedtotheFund,thusincreasingresourcesavailablefor operations. 4.4.3 FinancialReporting TheBankasaTrusteeisaccountabletotheGoverningCouncilwithregardtotheperformanceofits fundmanagementresponsibilities.TheBankwillsubmitannualreportstotheGoverningCouncilonthe AfGFs financial status. The Bank will provide for an external annual audit of the funds accounts in accordancewithitsusualexternalauditregime.TheBankwillalsoforwardtotheGoverningCouncila copyoftheannual,AfGFauditedfinancialstatementstogetherwiththeauditorswrittenreportofthe auditfindings.

4.5

ExecutionofLegalAgreements

(a) As aTrustee,theAfDBwill acceptastandardizedLegal InstrumentofParticipationfromeach financialcontributor.TheTrusteewillalsoenterintoagreementswitheachofthestakeholdersofother climatechangerelatedfunds,andImplementingEntities,whichwillsetoutthetermsandconditionsof commitment,transferofAfGFresourcestotheimplementingEntities,aswellasreportingrequirements andremediesincaseofabreachoftheagreement. (b) TheTrusteewill,subjecttotheavailabilityofapplicableresourcesintheFundandthetermsof theContributionAgreements,makecommitmentsandtransfersofAfGFresources,inaccordancewith the approvals of the AfGF Governing Council and to the relevant approval organs of respective Implementing Entities (as will be described in the AfGF Operational Manual and stipulated in agreementstobeenteredintobetweentheTrusteeandtheseImplementingEntities). (c) UpontransferoffundstotheImplementingentities,theTrusteewilltakenoresponsibilityfor theuseoftheAfGFresourcestransferredandactivitiescarriedouttherewith.TheTrusteewillrequire, andreceivefromtheImplementingEntitiescertainperiodicfinancialandotheragreedreports,aswill be required under the agreements to be entered into between the Trustee and the Implementing Entities.

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Figure2:A AfGFGovern ningStructur re

5.
5.1

IMPLEME ENTINGAN NDFINANC CINGARR RANGEMEN NTS

Eligibilitya andAccessib bility

5.1.1 Th Banks Regional Me he R ember Coun ntries, public and priva enterpri ate ises, nongo overnmental organiza ations, civil s society entit ties, other undertakings in the territ tory of a reg gional memb country, ber bilateral landmultilateralorgan nizations(inc cludingother rMDBs),Afr ricanregiona alorganizatio ons,suchas COMESA AandECOW WAS,andtheAfricanDeve elopmentBa ankshallbee eligibletore eceivefinanc cingorother r assistance from AfG resources. These en GF ntities can a apply directly to the Af fGF Secretar riat through llegalentitie esdesignated dasImplementingEntities,orthroug ghbilaterala andmultilate eralentities. national Theseentitiesshall allbeaccreditedasImp plementingE Entitiesinor rdertoacces ssAfGFreso ources.9This on lementing Entities exte ensive exper rience in co ountries and unique partnership will build o the Impl retherapiduseoffunds s. regionsandtheirabilitytoensur ccredited Im mplementing Entities will assist beneficiary countries and other entitie to design o es 5.1.2 Ac program which me the elig ms eet gibility criter to be ap ria pproved by the AfGF, a well as a as assist in the impleme entation of these progr rams. The ac ctivities that will be sup t pported thro ough the pu ublic sector, privates ublicPrivate ePartnership pswill meet certaineligibilitycriteria.Examples sofsomeof f sector,orPu thesecr riteria,which hwillbefully ydeveloped dintheOper rationsManualandthe ResultsFram mework,are highlight tedbelow. Activitie estobefinancedbyAfG GFshallmee etthefollow wingEligibilityCriteria a) Development Impact: de emonstrate the poten ntial to contribute to climateco ompatible development, and the achieve ement of the Millennium Developme Goals an ability to enhance e m ent nd resilien ncetoaddres sscurrentan ndprojectedclimatechangethreats b) Pot tential for costeffective climatere c e esilient and adaptation investmen n nts: demonst trate the potential to build resiliency in developm nto ment investments as w as build adaptive ca well apacity in Africa
9

Toattain naccreditation, ,Implementing gEntitiesshallg gothroughana accreditationp processanddem monstratethattheymeetthe fiduciary a manageme standards t and ent that the Gover rning Council sh set and ela hall aborated in the Operational Manual. These e standards sshall,amongo others,include financialinteg grityandmanagement,adequ uateenvironme entalandsocialsafeguardsas requiredu undertheCoun ntrySystem,and dinstitutionalc capacity.

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AMCEN/SS/IV/REF./2

c) Potential for costeffective Greenhouse Gas (GHG) Emissions Savings: demonstrate the potential for high CO2equivalent emissions reductions over the lifetime of the proposed program/project. d) Potential to scale up climateresilient and lowcarbon technologies: provide technological solutions and should demonstrate the scalability of these technologies and their potential for greateradoptionanddeploymentonthecontinent. e) Implementation Potential: demonstrate alignment with country and sector strategies, responsibility,capabilityandcapacityofimplementinginstitutionsorabsorptivecapacitytosupport technologyadoptionandsustainabilityofprojectsthroughevidenceofcommitmentandownership ofprojectandrelevantpolicies and, whennecessary, arrangements forlong term operations and maintenancebyprojectbeneficiaries.

Other appropriate criteria will be added and approved by the Governing Council, once the need arises.

5.2

FinancingProceduresandConditions

5.2.1 An accredited Implementing Entity shall submit a Concept Note (Request for Funding) with a resource envelope which shall be processed for approval and earmarking of resources by the Secretariat for successful requests. This will authorize the Implementing Entity to proceed with the development, preparation and approval of individual programs/projects using its internal processes. Thefinalapprovedprogram/projectdocumentwiththeexactfundingrequestedwillberesubmittedto the Governing Council through the Secretariat for final clearance for disbursement. Details of project approval process, threshold for project size as well as the accreditation process of Implementing EntitieswillbeprovidedintheFundsOperationalManual. 5.2.2 Thefollowingrequirementswillapplytoallprograms/projectsfinancedbytheAfGF: (a) Eachoperationwillbeapprovedandadministeredinaccordancewiththeapplicableguidelines oftheconcernedaccreditedImplementingEntity,whichwilldischargeitsresponsibilitieswiththesame degreeofcareasitexerciseswithrespecttoitsownresources; (b) TheaccreditedImplementingEntitywill,forpurposesofeachfinancing,concludeanagreement withthebeneficiary,expressingthetermsoffinancingandacknowledgingthesourceoffinance; (c) Eligible expenditures under individual financing will be determined in accordance with the policies and procedures of the respective accredited Implementing Entity or other approved organizations,includingenvironmentalandsocialsafeguardsarrangementsandfiduciarystandards. 5.2.3 Each operation will follow the investment lending policies and procedures of the accredited Implementing Entity, including its fiduciary standards and environmental and social safeguards. Each Implementing Entity will apply its own appropriate procedures in designing, appraising, approving, supervising,monitoringandevaluatingoperationstobefinancedfromtheAfGF.Detailsofthiswillbe providedintheOperationsManualoftheFund. 5.2.4 In line with standard practice in relation to the administration of similar funds, the Bank will charge an Administrative Fee of at least 5% of the contributions to support the AfGF in terms of services,officespaceandoperatingcosts.TheBankwillhoweverbeentitledtofullcostrecoveryinthe eventthat theexpenses incurredby it in the execution of itsrole inrelation totheAfGF exceedthe minimumadministrativefeeof5%10. 5.2.5 TheAfGFmayfacesomerisksthatmayhampereffectiveimplementationofitsobjectives.The designoftheFundhasprovidedmeasurestomitigatethepotentialnegativeimpactoftheseriskson thefunctionalityandoperationalcapacityoftheAfGF.
10

ThisfigureisunderconsiderationbytheBank.

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5.3 AfGFFinancingInstruments 5.3.1 The AfGF will utilize a range of appropriate financing instruments, including grants and concessional loans, risk mitigation instruments, such asguarantees,andequity to support public and privateprogramsandprojectsthatcontributetotheobjectivesofthefund. 5.3.2 Grantfundingwillmainlybeusedforactivitiesthatprovideeconomicandsocialbenefitwith theinternalratesofreturnbeingnegativeorbelowthenormalmarketthresholdanddoesprovideany direct financial return to the participants. As an example, activities in adaptation such as coastal community preparedness in anticipating increased sea level rise and the education of farmers in tacklingclimatechangeissuescouldbefinancedthroughgrantfunding.Grantelementsareofspecial importanceforadaptationinterventions,particularlyincountriesthatarehighlyvulnerabletoclimate changeimpacts.Grantresourcescanalsobeprovidedtogovernmentstocreateenablingenvironments tosupportprivatesectorparticipationinlowcarbondevelopment 5.3.3 Concessional loans will mainly be provided for investments to support lowcarbon economic developmentthathaveinternalratesofreturnjustabovethenormalmarketthreshold.Concessional loanscouldbeusedtofilltheinvestmentgapintransformingsectorsand,possiblyincombinationwith revenues from emissions reductions, to make low carbon investments attractive by improving the internalratesofreturnonsuchinvestments. 5.3.4 The AfGF could provide guarantees to cover political and commercial risks that undermine project viability which the market is not willing or able to bear. Such risks could include credit risk, technologyrisks,orchangestotheprojectsregulatoryenvironment. 5.3.5 AfGF instruments will be adequately structured to provide the appropriate level of concessionality that will increase the commercial viability of projects without displacing investments that may otherwise transpire through commercial or standard MDB borrowing or guarantees. The resources of the AfGF may be used complementarily in combination with other instruments and mechanisms available on the market, such as GEF resources, other donor funds, insurance and/or carboncredits. 5.3.6 Detailsofthesefinancinginstrumentsandspecificmechanismsdesignedtosupportprivateand publicsectorparticipationintheAfGFwillbeelaboratedindetailintheAfGFOperationsManual.

6.

COMPLIANCEANDREPORTING

6.1 FiduciaryStandardsandResponsibility AsAfGFwillhavedifferenttypesofbeneficiariesasimplementingentities.AfGFfiduciarystandardswill bedeveloped,includingcriteriaforaccreditationthatimplementingentitieshavetomeet. (a) When national entities meet basic standards such as governance and procurement requirements,theircountrysystemswillapplyfordirectaccesstoAfGFresources.Asetofminimum fiduciary standards will be established through the Operational Manual. Where needed, countries institutional capacities will be strengthened in order to help them meet the minimum standards required. (b) Where AfGF finances operations to be implemented by other Multilaterals and RDBs, procurement arrangements and financial management practices should, in principle, follow those institutions rules and procedures, where they meet basic accreditation criteria, including fiduciary standards.

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(c) In cases where the AfGF is financing private sector and civil society organizations, it will be essential to ensure that the quality of fiduciary standards, policies and procedures of these organizations be generally acceptable. Where these standards are considered inadequate, while workingtogetherwithsuchorganizationsinordertodevelopstricterstandards,theAfGFsstandards willapply. (d) Operations funded by the AfGF and implemented by the AfDB will follow the Banks procurementrulesandproceduresandfinancialmanagementstandards.However,considerationwill be given to making the processes more flexible to allow for faster processing of projects without compromising on high fiduciary standards (wider use of post review might be considered, where feasible).

6.2

Audit

6.2.1TheAfGFshallbesubjecttotheinternalcontrolproceduresoftheBank,includinganannualaudit to be conducted by the external auditors of the Bank. Upon a written request of the Governing Council, the Bank shall cause the accounts and records of any specific activity financed with AfGF resourcestobeauditedbyafirmofexternalauditorstobeappointedbytheBank.Thecostsofany suchauditsshallbechargedtotheFund. 6.2.2NationalentitiesborrowingfromtheAfGFresourcesshallberesponsibleforcarryingoutanaudit oftheiroperations.

6.3

EnvironmentalandSocialSafeguards

6.3.1 DuediligenceshallbeappliedtoallprojectsandprogramsfinancedusingAfGFresources.The AfGFshallestablishaminimumsetofenvironmentalandsocialsafeguardstoensurethatallprograms and projects financed by the Fund are environmentally and socially appropriate. Projects financed by theAfGF,butimplementedbyotherfinancialintermediaries,shallapplytheirenvironmentalandsocial safeguards policies, where these are found acceptable to the AfGF Governing Council during accreditation.WherethesafeguardspoliciesoftheimplementingEntitiesdonotmeettheminimum standards set by the Governing Council, (and where the Implementing Entity has been granted conditionalaccreditation),thesafeguardsstandardsoftheAfGFshallapply. 6.3.2 Thesesafeguardsstandardsshallbedevelopedinaparticipatoryprocessandshallnotserveas deterrentstopoorerAfricancountriesinparticipatingintheAfGF.TheAfGFshallprovideresourcesto enhancethecapacitiesofcountriesthatdonotmeettheseminimumsafeguardsstandardstobeable todoso.

6.4

Gender

Climate change andgender inequality are inextricably linked. On theone hand,climatechange slows progress towards gender equality and poses a challenge to poverty reduction efforts. On the other hand,genderinequalitycanfurtherworsentheeffectsofclimatechangeoncommunities.Womenand men contribute differently to the causes of climate change. They are affected differently by climate changeandreactdifferentlytoitsimpactsand,giventhechoice,favordifferentsolutionstomitigate, andoptionstodealingwiththeconsequencesofclimatechange.InAfrica,existingdisparitiesresulting from womens social position within the family and the community are aggravated by the effects of climate change on the factors that protect womens means of subsistence (food, water and energy supply).Itis,therefore,criticaltounderstandthelinkagesbetweengenderandclimatechangeinterms of vulnerability and adaptation to existing stressors that have the potential to worsen already precarious sets of economic and social circumstances, as well as in mitigation actions necessary to reduceglobalemissions. Gender inequalities in access to resources, including credit, extension services, information and

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technology, must be taken into account in developing climate change intervention activities. Intervention efforts to be financed by the Fund will seek to systematically and effectively address genderspecificimpactsofclimatechangeintheareasofenergy,water,foodsecurity,agricultureand fisheries, biodiversity and ecosystem services, health, industry, human settlements, disaster management, and conflict and security. Gender equality shall be built into the criteria for project selection. The Log Frame Matrix in project documents will specifically address gender targets and indicators.TheM&Esystemwillalsobuildintogendermainstreaming.

6.5

MonitoringandEvaluation

6.5.1 The availability of timely and regular monitoring and evaluation systems and results will enhanceAfGFsefficientmanagement.Adetailedresultsframeworkwillbe developed andapproved bytheGoverningCouncil,inresponse tothespecificsectorandcountrydemands and inaccordance with existing Results Management Frameworks. The results framework will have key indicators and targets that will be set according to the level of resources that will be available, and shall include gendersensitiveindicators. 6.5.2 The AfGF shall establish an Independent Evaluation Mechanism to carry out periodic independent evaluation of the overall operation of the Fund, its entities (Secretariat, Trustee, implementing Entities), and the programs and projects financed by the Fund. This function, at the beginning,shallbecontractedtoanexternalindependententity,untilsuchatimethattheGoverning CouncilshalldecidetoestablishanIndependentEvaluationMechanismwithintheFund.Thereportsof theevaluationshallbesubmitteddirectlytotheGoverningCouncil. 6.5.3 AMonitoringandEvaluationsystemshallbedevelopedfortheAfGFthatshallshow,indetail, the type, frequency and responsibility for monitoring and evaluation within the Fund. To further strengthentheuseofcountrysystems,theAfGFshallsupporttheestablishmentofnationalmonitoring andevaluationsystemstosupportDirectAccessoperations.

6.6

Reporting

The Bank shall present to the Governing Council an Annual Report on AfGF activities. The Annual ReportshallcontainabriefdescriptionofAfGFactivitiesduringtheprecedingfinancialyear,including alloperationsfinancedfromAfGFresources,andtheoutcomesofsuchoperations.TheAnnualReport shallalsoincludetheauditedfinancialstatements.

6.7

DisclosureofInformation

AfGF operations of would be subject to the Bank Groups Information DisclosurePolicy. The policy is intendedtopromoteproperaccountabilityforresourcesentrustedtotheBanktomanage.Thiswould bedonethroughthetimelydisclosureanddisseminationofrelevantdocumentstothegeneralpublic, including governments, civil society organizations and the private sector, unless there is a compelling reason not to do so. Information on AfGFs operations shall be posted on the AfGF website with updated information on the resources and uses of resources. Audited financial reports, project completion reports, independent evaluation reports, or any other AfGF relevant documents shall be disclosedandpostedontheAfGFwebsite.

6.8

Recourse/RedressMechanism

The AfGF shall have an Independent redress mechanism that will receive complaints, evaluate and make recommendations on the implementation of AfGFs social and environmental safeguards by implementingentities.TheserecommendationsshallbesubmitteddirectlytotheGoverningCouncil.To reduce the cost of establishing such a mechanism from the beginning, the Independent Review Mechanism of the African Development Bank shall perform this function until such a time that the GoverningCouncilshalldecidetoestablishanIndependentmechanismfortheAfGF.

7.EXPECTEDROLEOFTHEBANK
TheAfricanDevelopmentBankshallserveasTrusteetotheAfGF,hosttheFundSecretariatandbean

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ImplementingEntityfortheFund.ThethreerolesoftheBankwillrequiredifferentcapacities.Potential conflictsofinterestwillbeaddressedand,ifnecessary,theobjectofspecificcommitments.

7.1

TheBankasaTrustee

7.1.1 The Bank has the requisite experience and capacity to manage and efficiently disburse large scalefunds,includingthoserelatedtoclimatechange.AsofJune2011,theBankiscurrentlyatrustee and managing US$ 5.46 billion on behalf of over 50 funds either hosted by the Bank or by external institutions. 7.1.2 The Banks responsibilities shall include fund management, financial reporting and the executionoflegalagreements.TheBanksinstitutionalstructureandprocessesallowtheBanktoplay this role, as it currently does for several similar funds such as the Nigerian Trust Fund, the NEPAD InfrastructureProjectPreparationFacility,CongoBasinForestFund,theAfricanWaterFacility,andthe newlyestablishedClimDevFund.TheBankalsohostsseveralbilateralTrustFunds.TheBanktherefore hastheexperienceinmanagingdifferenttypesoffunds.However,additionalhumanresourceswillbe requiredbytheBanktoexecuteitsTrusteerole.

7.2

TheBankastheAfGFsSecretariat

TheBankhasadequateexperience inhostingthe SecretariatofFunds.Itplaysthatfunctionwiththe AWF,theCBFFandtheClimDevAfricaSpecialFund.Whilethemagnitudeofexistingfundsissmaller thantheproposedAfGF,theprincipleisthesame.TheBankwillrecruittherequiredstafftomanage thesecretariatinlinewiththelevelofAfGFresourcesthattheSecretariatwillmanage.

7.3

TheBankasanImplementingEntity

7.3.1 TheBankisanImplementingEntityofotherglobalfundssuchastheClimateInvestmentFunds andtheGlobalEnvironmentFacility.ItiscurrentlybeingaccreditedasanImplementingEntityforthe UNFCCCAdaptationFund.TheBankscomparativeadvantageasanImplementingEntitystemsfromthe factthatitisthelargestinfrastructurefinancinginstitutiononthecontinent. 7.3.2 TheBankalsohasexpertiseinimplementingprojectsinalleconomicsectorsthataresensitive toclimatechange.AsanImplementingEntity,theBankwillleverageAfGFresourceswithinternalBank resources as well as raise additional resources from donors who have come to trust the Banks high fiduciary standards, as exemplified by the recent Bank 200% capital increase. As an Implementing Entity,theBankwillapplytotheFund,aswithotherregisteredandaccreditedagencies,forresources toimplementitsprojects.TheBankisnotexpectedtoabsorballtheFundsresources.

7.4

AfGFsAlignmentwiththeBanksMandate

7.4.1 TheproposalfortheBanktohost,governandmanagetheAfGFreflectsacarefulconsideration ofAfGFobjectives,aswellasAfDBsmandate,capacityandprocedures.TheAfDBisasignificantand committed leader of African development. It was established for the purpose of contributing to the sustainable economic development and social progress of its regional member states. Clearly, addressingclimatechangeissuesinAfricaiscriticaltoachievingtheAfDBsmandate. 7.4.2 AfGFsestablishmentisconsistentwithArticle8oftheAgreementestablishingtheBank,which authorizestheBank to establish Special Fundsthataredesignedtoserve the purposes forwhichthe Bankwascreated,andwhichfallwithinthescopeofitsfunctions. 7.4.3 The AfGFs design and implementation will benefit from the experience that the Bank has acquiredinhostingandadministeringsimilarspecial fundsthataddresstheneedsandspecificitiesof AfDBRegionalMemberCountries.

8.AfDBsINSTITUTIONALCAPACITYTOMANAGEAfGF
8.1TheBankhastherequisiteexperienceandcapacitytomanageandefficientlydisburselargescale funds,includingthoserelatedtoclimatechange.AsofJune2011,theBankiscurrentlythetrusteeand

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is managing US$ 5.46 billion on behalf of over 50 funds either hosted by the Bank or by external institutions.Fromitsownaccounts,theBankstotallendingvolumefrom2008to2010wasUS$24.8 billion, comprising US$ 14.4 billion in nonconcessionary loans and US$ 10.4 billion in concessionary loansandgrants.Sixtypercentoftheseresourceswereinvestedininfrastructureacrossthecontinent. Twentytwopercentwasinvestedingovernanceandcapacitybuildinginvestments,fourteenpercentin investments promoting regional integration, with the remaining investment shares split across agriculture, health, environment and climate change and education sectors. To further enhance development outcomes, the Bank is setting up a dedicated fund for fiduciary reform activities to strengthen national institutions of regional member countries in the use of their country systems for publicfinancialmanagementandprocurementsystems. 8.2Furthermore,theBanksinstitutionalstructureandprocesseswillallowittohostandmanagethe AfGFfund,asitcurrentlydoesforseveralsimilarfunds. 8.3TheBankwillputitsexperiencetoprovideanytechnicalandadvisorysupportneededtotheFund. The Bank has developed institutional experience. This includes knowledge and expertise designing climate resilient projects from its experience as an implementing entity for existing global environmental financing facilities, as well as project design and implementation, capacity building, policy and regulatory reforms and budget support to climate change initiatives through its own operations.TheBanksgrowingrenewableenergyportfolioandtherequestfromotherMDBsforthe BanktoleadtheMDBreportonfinancingadaptationisevidenceoftheBanksgrowingexpertiseand capacitytoaddressbothclimatechangemitigationandadaptation.

9.NEXTSTEPS
9.1TheconsultationwillcontinuethroughSeptemberbeforetheproposalisfinalizedandprocessed internallyaheadofsubmissiontotheBoardofDirectorsforconsideration.Someofthekeyconsultation formsinclude: FurtherconsultationwiththeAfricanNegotiators; ConsultationwithAfricaGroupsRepresentativestotheTransitionalCommitteedesigningthe GreenClimateFund; ConsultationwithAfDBBoardmembersthroughaSeminartoseekviewsandcomments; ConsultationwithDonorsandpotentialcontributorstotheFund; ConsultationwiththeAfricanCouncilofMinistersofEnvironment; ConsultationwiththeCivilSocietyandPrivateSector; Keyareaswherecommentsareinvitedarepresentedbelow: StructuresupportingtheactivitiesoftheFund; Approvalprocesswithrespecttoprojects/programs,includingprocurementprocedures; MonitoringandevaluatingtheFund; Projectandprogramselectioncriteria; Fundinginstrumentsforbothpublicandprivatesectoroperations; Mechanismonbeneficiarycontributions; AccreditationofImplementingEntities; PossiblethresholdsonpercentageofAfGFcontributiontoprojects/programsfinancedbythe Bankandotherpartners; Proceduresandguidelinesforaccessingfunds;and Monitoringindicatorsandevaluationprocedures.

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