A resource book for the design and operation

Their valuable advice with respect to audiences for, and the substance of, the handbook are most appreciated.

Please note that this handbook is not copyrighted in whole or in part and may be cited freely by organizations and individuals interested in sharing the contents with others.

Jane Wilder Jacqz
Chairperson, IPG
Senior Adviser, UNDP/GEF

Contents

Contributions to the Handbook 3

I. Preface 7

Jane W. Jacqz, Chairperson, IPG

II. What is an environmental fund, and when is it the right tool for conservation? 10

Scott E. Smith, Monitoring and Evaluation Officer, Global Environment Facility

III. Environmental funds in the national context 14

A. EFs and national governments, national planning processes 14

Lorenzo Rosenzweig, Executive Director, Mexican Nature Conservation Fund

B. EFs and the NGO community 17

David Smith, Executive Director, Jamaica Conservation and Development Trust

IV. Legal structures of environmental funds 21

A. Trust funds in common law countries 21

Barry Spergel, Director and Legal Advisor for Conservation Finance, WWF-US

B. Structures typical of civil code legal systems 25

Marianne Guerin-McManus, Director, Conservation Finance and Policy, Conservation International, with Dillon Kim

V. Governance 29

Bruce Moffat, The Nature Conservancy

VI. Operational issues 33

A. Designing a program strategy 33

Ruth Norris, Independent Consultant

B. Staffing and management issues 37

Ruth Norris, Independent Consultant

C. In-country partnerships and cooperation 41

1. The role of community foundations 41

Shari Turitz, Program Officer, The Synergos Institute

2. Working with the GEF Small Grants Programme 44

Sarah Timpson, Global Manager, GEF Small Grants Programme

D. Building the capacities of grantees 47

George Scharffenberger, Vice President, New Initiatives, Pact

E. Monitoring and evaluation 55

Scott E. Smith, Monitoring and Evaluation Officer, Global Environment Facility, and Renée González, Director, Protected Areas Program, Mexican Nature Conservation Fund

VII. Raising capital 64

A. Overview/designing a resource mobilization strategy 65

Lorenzo Rosenzweig, Executive Director, Mexican Nature Conservation Fund

B. Multilateral sources 67

Randall K. Curtis, Director, Conservation Finance and Policy, The Nature Conservancy, with Kari Keipi, Inter-American Development Bank

C. Bilateral sources 71

Victor Bullen, USAID

D. Debt conversions 74

Melissa Moye, Independent Consultant

E. International foundations 79

Ruth Norris, Independent Consultant, and Randall K. Curtis, Director, Conservation Finance and Policy, The Nature Conservancy

F. In-country resource mobilization 81

Barry Spergel, Director and Legal Advisor for Conservation Finance, WWF-US

VIII. Asset management 83 Mary McClellan, Senior Advisor for Conservation Finance, The Nature Conservancy

Annexes

Typical steps in the creation of an environmental fund 91

Glossary 93

Bibliography 96

Index 100

Global list of Environmental Funds 107

IPG members 133

I. Preface

Jane W. Jacqz
Chairperson, IPG
Senior Adviser, UNDP/GEF

As the title suggests, this is a resource book for the establishment and operation of environmental funds (EFs). It is intended to share with a wide audience the experience gained by fund directors and specialists who have been involved over the past ten years in designing, setting up, managing, monitoring, and evaluating environmental funds.

Environmental funds are innovative financing mechanisms that cover the recurrent costs of parks and protected areas, support the conservation of biodiversity, promote the sustainable use of natural resources such as forests and/or strengthen local institutions engaged in conservation and sustainable development. They include trust funds established by special legislation, foundations, common law trusts, and nonprofit corporations. Most environmental funds include representatives from both the host government and non-governmental organizations (NGOs) on their governing boards. With a few exceptions, most “green funds,” the focus of this handbook, are located in Africa, Asia and the Pacific, and Latin America and the Caribbean.

In considering the nature and purpose of environmental funds, the 1999 GEF Evaluation of Experience with Conservation Trust Funds observed that conservation trust funds “are not simply financial mechanisms, but must be viewed as institutions that have several roles to play, in addition to channeling funds. These include roles as key actors in the development of national conservation strategies, as technical experts who can work with public and private agencies to develop agile and effective management approaches and, in some countries, as capacity-builders and nurturers of an emerging group of non-governmental organizations becoming involved in biodiversity conservation.”

The environmental fund movement has grown significantly in recent years. At the time of the First Global Forum on environmental funds, held in Bolivia in 1994, there were globally only 21 funds either operating or in the process of establishment; of these, only a handful had been functioning for more than a year. Today there are more than 100 funds operating, in the process of establishment, or in design.

The new interest in environmental funds and the rapid growth of the EF movement suggest that there is a wide, and growing, range of organizations and institutions which could benefit from experience gained to date in setting up and managing a fund. These include, in the first instance, the boards and staff of funds that are already operating but may face new problems as the national context and their situation evolve; the leaders of funds in the process of establishment who must address a host of design questions; governments; and NGOs and other organizations of the civil society, including local groups and international NGOs providing financial resources and technical support for the establishment and operation of environmental funds.

This handbook is intended to meet those needs. A “self-help guide,” it has been designed to provide enough good information on relevant topics so that fund officers and organizers can develop their own fund with local consultative processes and reduce reliance on international experts.

Subjects covered in the handbook include whether or not to address environmental problems by setting up an EF; the national context in which funds operate; legal structures; governance mechanisms, and operational issues, including program strategies, staffing and management issues, resource mobilization, asset management, in-country partnerships, building the capacities of funds’ grantees, monitoring, and evaluation. The handbook contains the best available current knowledge on each of these subjects. By drawing on this compendium of knowledge, EF board and staff members and fund organizers and supporters should be able to identify, address, and resolve most problems and to move ahead to the successful implementation of the fund program.

Interagency Planning Group on Environmental Funds (IPG)

The Interagency Planning Group on environmental funds, generally referred to as the IPG, is an informal body which brings together representatives from multilateral and bilateral donor agencies, international environmental NGOs, philanthropic foundations, environmental funds (when feasible), and other groups that actively promote and support environmental funds. Approximately 32 organizations are currently represented on the IPG, which generally meets in working groups. A list of current participants is included among the Annexes. Staff support services for the IPG have been assured to date by the GEF Coordination Unit of the United Nations Development Programme (UNDP/GEF).

The IPG was formed in 1993 to plan the First Global Forum of environmental funds held in Bolivia. Its principal purposes since then have been to serve as:

• A forum for exchanges of information among supporters of environmental funds.

• A mechanism for the coordination of services and technical assistance to funds.

• An advocate of environmental funds as an innovative approach to promoting conservation of the environment and sustainable development.

Activities sponsored by the IPG have focused on networking and capacity-strengthening. They include:

• The First Global Forum on environmental funds (1994).

• A briefing on environmental funds for members of the OECD/DAC Working Party on Development Assistance and Environment (1995).

• A regional consultation of environmental funds in Latin America and the Caribbean, held in Cartagena, Colombia (1996).

• The First Asia-Pacific Forum on environmental funds, held in Cebu, Philippines (1997).

• A regional workshop to strengthen the capacities of operating funds in Latin America and the Caribbean, held in Mérida, Yucatan, Mexico (1997).

• Three meetings of a regional steering committee of Latin American and Caribbean funds leading to the establishment of REDLAC, the new regional network for communication and capacity building among funds, held in Antigua, Guatemala; Kingston, Jamaica; and Santiago, Chile (1998-1999).

• Regional capacity-building workshops of funds in Latin America and the Caribbean on strengthening the capacities of fund grantees and on monitoring and evaluation; during which an Assembly convened to establish REDLAC, in Antigua, Guatemala (1999).

• An assessment of environmental funds in Africa (1999-2000).

• A survey of the capacity-building needs of EFs in Asia and the Pacific (1999-2000).

• Preparation and dissemination of this handbook (1999-2000).

Acknowledgments of Support

UNDP has helped to finance many of the activities listed above with resources made available by The John D. and Catherine T. MacArthur Foundation, the Charles Stewart Mott Foundation, and The Summit Foundation.

The IPG gratefully acknowledges the support provided by these foundations, which has made so much of its work possible.

The IPG would like also to thank numerous donor agencies participating in the IPG, host governments, international and local NGOs, foundations, and local business enterprises for their contributions in support of particular activities sponsored by the IPG. This coming together of assistance and support reflects the spirit that has characterized the work of the IPG from the outset and is much appreciated.

December 08, 1999

II. What is an environmental fund, and when is it the right tool for conservation?

Scott E. Smith
Monitoring and Evaluation Officer
Global Environment Facility (GEF)

Key Points

EFs are appropriate when the issues being addressed are long-term and require a sustained response over a number of years.

EFs can be structured as endowments, sinking funds, revolving funds, or a combination of these.

EFs are appropriate when existing agencies cannot effectively manage the amount of funds and type of activities needed to address the problem – when there is a need for new procedures or a new kind of institution, accountable to and counting on the participation of its stakeholders.

There should be a community of organizations able to implement the range of activities needed to achieve the objective.

EFs cannot succeed without active government support and broad-based participation from a community of agencies and organizations who can work together despite their differences.

EFs can only operate in an environment of rigorous record keeping, transparency, and reliable systems of contracts, banking, and auditing.

Key Terms