Non-Regional (Global)-Critical Ecosystem Partnership Fund (CEPF) Address 2500 M Street, NW, Washington, DC 20033

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name Region Sector Project ID Recipient Implementing Agency Environment Category Report No. PID9673 Non-Regional (Global)-Critical Ecosystem Partnership Fund (CEPF) Global Environment 1WGE73195 Conservation International Date PID Prepared October 5, 2000 Project Appraisal Date October 23, 2000 Project Board Date December 5, 2000 Conservation International Address 2500 M Street, NW, Washington, DC FI 1. Country and Sector Background The CEPF is a global response program targeted to address those critical ecosystems of the world which are the most biologically rich and currently under great threat. It will provide timely, strategic and focused assistance to those globally vital ecosystems in Bank client countries, judged to be the most threatened in developing countries. The targeted locations include the following Global Biodiversity Hotspots: 1. Caucasus 2. Atlantic Forest 3. Cape Floristic Region 4. Choc6-Darien-Western Ecuador 5. Brazilian Cerrado 6. Central Chile 7. Eastern Arc Mountains and Coastal Forests Tanzania and Kenya 8. Guinean Forests of West Africa 9. Mountains of South-Central China 10. Indo-Burma 11. Madagascar and Indian Ocean Islands 12. Mesoamerica 13. Philippines 14. Polynesia/Micronesia 15. Succulent Karoo 16. Sundaland 17. Tropical Andes 18. Wallacea 19. Western Ghats and Sri Lanka 20. Caribbean * 21. California Floristic Province * 22. Mediterranean * 23. New Caledonia * 24. New Zealand * 25. Southwest Australia *

2 * These areas include countries not eligible for CEPF funding through the World Bank. The CEPF offers an opportunity to promote the conservation of some of the most important ecosystems in the world?places of high biodiversity and great beauty. In addition, the importance of meeting conservation goals is enhanced by the growing recognition of the multiple benefits provide by healthy, diverse ecosystems in areas such as agriculture, forestry, water supply and fisheries, issues critical to the Bank's contribution to poverty alleviation. The unprecedented rate of biodiversity loss is destroying opportunities for development, is a major cause of poverty, and is threatening the ability of the entire planet to support life. Since most species have not even yet been described, loosing them is like burning a library without knowing what the books are about. The chemical substances of many of these species no doubt contain the cure for cancer and AIDS, in the same way as they have already given us penicillin and quinine. 2. Objectives The protection of the earth's biological diversity is one the highest priorities for long-term global well-being. The loss of species and natural habitat is proceeding at an alarming pace, with unknown but potentially disastrous future consequences. The Critical Ecosystems Partnership Fund (CEPF) takes aim at this global problem by providing timely, strategic assistance for conservation work in the planet's most biologically rich and threatened ecosystems. 3. Rationale for Bank's Involvement Although the Bank's portfolio in support of ecosystem and biodiversity conservation shows a combined investment (including loans, GEF-implemented funds, counter-part funding and co-funding), in the order of U.S.$2.6 billion since 1988, much more needs to be done. The CEPF targets twenty-one critical areas with high biodiversity importance and high degree of threat (out of 25 of these "hotspots"). This approach aims at achieving maximum impact with limited resources: the hotspots amount to just 1.44t of the land surface of the planet; nevertheless, the concentration of terrestrial biodiversity in them is enormously high, including a staggering 131,399 vascular plants that are endemic to them, representing 44t of all plants on Earth. Under conservative calculations, at least 65t and more likely 70, or more of all vascular plants occur within these hotspots. Similarly, for birds, mammals, reptiles and amphibians, at least 62w, and perhaps 70- or more occur in the 1.44t of Earth's land surface occupied by the hotspots. The CEPF complements existing Bank tools through strengthening our ability to (i) better engage the non-profit private sector; (ii) engage small grassroot or community based groups at priority sites; (iii) build national awareness and support for critical sites. The CEPF fills this missing niche, particularly through: (i) targeting key sites that harbor a disproportionate percentage of biodiversity in the world; (ii) smaller amounts of money spread over a greater number of recipients; (iii) more flexibility and speed; (iv) building awareness and emphasizing communication aspects at national levels. The Bank's comparative strengths in dealing with macro and sectoral strategy and policy will compliment the more micro-oriented field-based interventions funded under the CEPF. The CEPF would be a unique program given its focus and targeted clients. -2-

3 4. Description This program is a global response to conserve those critical ecosystems of the world which are the most biologically rich and currently under great threat. The CEPF will provide timely, strategic and focused assistance to those globally vital ecosystems in Bank client countries, judged to be most threatened in developing countries. The CEPF will deliver assistance in an agile manner; it will allow the engagement of a wide range of local community groups, civil society organizations, NGOs and private companies in addressing conservation needs. Funds will be utilized to provide small scale grants to conservation projects managed by private, NGO and civil society groups working in the critical ecosystems. Funding at the project level will result in significant financial leverage both through financial and in-kind contributions. CI has long been the main advocate of the hotspot approach to biodiversity conservation. The organization has earned a strong reputation with governments, other non-governmental organizations and the private sector for its creativity, effectiveness and results orientation. Furthermore, CI has a strong network of offices and partners in many of the hotspots as well as a wealth of information and operational experience in many of these areas. Indeed, one of the strongest points of the CEPF is its proponent. Conservation International is a results-oriented, highly effective NGO because of the flexibility of its approaches, and its ability to effectively engage governments and the private sector in finding consensus-based solutions to the complex problems affecting biodiversity. BCIS is the largest consortium of biodiversity institutions that collects, integrates and maintains biodiversity data and information. BCIS comprises 12 international organizations worldwide and it has unparalleled experience in biodiversity information systems. BCIS will be contracted to assemble and link relevant information on each ecosystem and it will be linked to the Bank's knowledge management node of biodiversity and the GEF. 5. Financing Funding for the core fund of the CEPF is expected to be shared between the principle partners (World Bank, GEF and CI at the moment). Each is expected to contribute around $5 million a year over a period of five years. Based on a minimum of four donors, the CEPF would commit approximately $20 million a year. The Bank has already contributed $1.5 million from the President's Contingency Fund in May of this year to enable CI to undertake preparatory activities for the CEPF's launch, and has committed to contribute $5 million a year during the subsequent five fiscal years from the Bank's DGF, subject to established procedures, for the operation of the fund. 6. Implementation The project will be implemented over a 5 year period. The proposed management arrangements for the CEPF have been delineated taking into the account the following principles: Arrangements must be consistent with the CEPF philosophy of rapid disbursement in the field, decentralization, flexibility, efficiency, and minimal bureaucracy. -3-

4 Arrangement must permit the Bank to uphold its safeguard and other institutional policies with a minimum risk of liability to the institution. Arrangements must permit the Bank to effectively engage the regions in the dialogue with CI at the ecosystem level to maximize opportunities for mainstreaming and to influence the country dialogue process. The Bank will treat the CEPF in a manner similar to a Conservation Trust Fund (financial intermediary). Bank-administered funds (DGF and GEF) will be released into the CEPF Account on a quarterly basis, using the Program Management Report-based (PMR) disbursement procedures and after CI matching funds have been released into that Account. An initial advance of six months of the first year's estimated expenditures will be released into the account upon effectiveness. Operationally, the Bank will review each Ecosystem Profile before it goes to the Donor Council based on agreed-upon criteria and emphasizing compliance with Bank policies, including safeguards. The Bank will also review the CEPF Annual Reports which will include descriptions of activities funded and issues pertinent to the Bank's safeguard policies. The Bank and the GEF will be represented on the "CEPF Donor Council," which will be a high-level group of eminent institutional representatives, and would be the main governance structure of the CEPF, to oversee the broad strategic direction of the CEPF. The Council will review, approve and if necessary amend, the Ecosystem Profiles prepared and presented to it by CI, and will also approva an Annual Spending Plan for preparation and implementation of the Ecosystem Profiles. The Council will act by unanimous vote. The Bank will ensure that country operations staff (including country directors, where appropriate) are fully apprised of CEPF funding strategies and will be encouraged to coordinate them within regular lending activities (especially in sectors such as forestry, land management, agriculture and GEF projects). CI will serve as manager of the CEPF. CI will prepare profiles of each of the critical ecosystems, identifying main threats to sustainability, key organizations working in the ecosystems and opportunities for funding. These Ecosystem Profiles together with endorsements from GEF focal points in the countries concerned -- will be approved by the CEPF Donor Council. On the basis of strategic guidance by the CEPF Donor Council, CI will manage the wholesaling of projects through local ecosystem facilities, designed for each ecosystem. CI will deliver an Annual Report as well as certified audited accounts to the CEPF Donor Council. Supervision: The Bank will review the initiative at three levels: By sitting on CEPF's Council to ensure that Ecosystem Profiles (which include a description of the types of activities to be financed in each ecosystem) and funding strategies are consistent with overall, broad strategic philosophy of the program; Review of CEPF annual report, which will outline issues regarding the World Bank safeguard policies; -4-

5 (iii) Spot checks on projects in the program as needed. 7. Sustainability The CEPF will contribute to not only the environmental sustainability of each of the hotspot ecosystems, but also institutional sustainability through capacity building at many levels in particular for local NGOs and communities. The project aims to strengthen existing collaboration between NGOs, communities, the private sector and governments. 8. Lessons learned from past operations in the sector The Critical Ecosystems Partnership Fund (CEPF) aims to provide timely, strategic assistance for conservation work in the planet's most biologically rich and threatened ecosystems. The CEPF represents a new to create a new biodiversity funding instrument that combines technical and financial strength, field knowledge, administrative agility and flexibility, and a knowledge system to facilitate information communication. The combination of these strengths will allow the CEPF to provide a significant total amount of targeted funding in small- to medium-sized field projects in a more streamlined fashion than has been possible to date. Despite scattered successes, providing this sort of modest-scale, narrowly targeted and expeditious assistance for privately implemented biodiversity conservation has proven a significant challenge for international financial institutions, including the World Bank. The CEPF is a new strategy for project delivery that attempts to overcome typical obstacles and delay through a non-traditional set of working arrangements between the Bank and private non-governmental organizations (NGOs). CEPF will make grants to the leading international, national, regional and local NGOs in the world's most critically threatened ecosystems in Bank client countries. It will target the most effective organizations in each ecosystem in order to strengthen its ability to alter the course of each eco-region's degradation. The basic approach of the CEPF is to allocate authority, responsibility and accountability purposefully and strategically among three very different institutions, according to their particular strengths and capabilities. 9. Program of Targeted Intervention? N 10. Environmental Aspects Issues: The CEPF program is designed specifically to benefit the environment. It focuses on the conservation of the remaining natural ecosystems that are still richly endowed with an extraordinary diversity of unique plant and animal species. Most are known as "biodiversity hotspots" because their abundant variety of life faces extreme risk. Protecting these natural resources is vital to the prosperity, health and well being of future generations. The Critical Ecosystem Partnership Fund (CEPF) advances the global conservation agenda on several fronts. The purpose of the Fund is to serve as a catalyst to create strategic working alliances among diverse groups helping them to combine unique capacities and eliminating duplication of efforts for a comprehensive, coordinated approach to conservation challenges. Investments support such projects as managing of protected areas and coordinating biodiversity corridors; training; transnational planning; encouraging local dialogue with extractive industries; engaging in conflict - 5 -

6 resolution; priority setting and consensus building; strengthening indigenous organizations and facilitating partnerships between the private and public sector. Given this aim of the CEPF, the project will have overall positive environmental impact by conservation biodiversity and improving natural resource management and use. Potential environmental and/or social impact issues that may arise during the screening of applications for sub-projects could include: the increase in recreational use of protected areas which may result in minor increases in noise, wildlife disturbance and refuse management; the small-scale construction and/or renovation of protected area or tourism infrastructure (e.g. trails and administration or tourism infrastructure), but if sited well will have minor direct impacts on flora and fauna; inadequate understanding of sustainable forest management applications; and/or changes in natural resources management, zoning and regulations that could impact local livelihoods and/or tenure arrangements. The CI will screen proposed sub-projects and ensure that recipients of grants carry out appropriate environmental assessments. 11. Contact Point: Task Manager: Gonzalo Castro The World Bank 1818 H Street, NW Washington, DC Tel: For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, DC Tel FAX Web: Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. Only occurring there and nowhere else on the planet. Referred to in the DGF and GEF proposal as the "Advisory Committee." This PID processed by the InfoShop during the week ending November 17,