Strengthening climate resilience and resource efficiency for greater competitiveness of MSMEs

Transcription

1 Strengthening climate resilience and resource efficiency for greater competitiveness of MSMEs Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago CAF Latin American Development Bank 30 August 2016

2 Project/Programme Title: Country/Region: Strengthening climate resilience and resource efficiency for greater competitiveness of MSMEs Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago Accredited Entity: CAF Latin American Development Bank National Designated Authority: Colombia: Departamento Nacional de Planeación Dominican Republic: Ministry of Environment and Natural Resources; Ecuador: Ministry of Environment of Ecuador; Peru: Ministry of Economy and Finance Trinidad and Tobago: NDA designation pending

3 A. Project / Programme Information PROJECT / PROGRAMME CONCEPT NOTE GREEN CLIMATE FUND PAGE 1 OF 25 Please submit the completed form to fundingproposal@gcfund.org 1 A.1. Project / programme title A.2. Project or programme A.3. Country (ies) / region A.4. National designated authority(ies) A.5. Accredited entity A.6. Executing entity / beneficiary Strengthening climate resilience and resource efficiency for greater competitiveness of MSMEs Project Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago Colombia: Departamento Nacional de Planeación Dominican Republic: Ministry of Environment and Natural Resources Ecuador: Ministry of Environment of Ecuador Peru: Ministry of Economy and Finance Trinidad and Tobago: NDA designation pending CAF Latin American Development Bank Executing Entity: International Trade Centre Beneficiary: MSMEs and smallholder producers from Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago A.7. Access modality Direct International A.8. Project size category (total investment, million USD) A.9. Mitigation / adaptation focus A.10. Public or private Micro ( 10) Small (10<x 50) Medium (50<x 250) Large (>250) Mitigation Adaptation Cross-cutting PPP Which of the following targeted results areas does the proposed project/programme address? A.11. Results areas (mark all that apply) Reduced emissions from: Energy access and power generation (E.g. on-grid, micro-grid or off-grid solar, wind, geothermal, etc.) Low emission transport (E.g. high-speed rail, rapid bus system, etc.) Buildings, cities, industries and appliances (E.g. new and retrofitted energy-efficient buildings, energy-efficient equipment for companies and supply chain management, etc.) Forestry and land use (E.g. forest conservation and management, agroforestry, agricultural irrigation, water treatment and management, etc.) 1 Please use the following naming convention for the file name: [CN]-[Agency short name]-[date]-[serial number] (e.g. CN-ABC ).

4 GREEN CLIMATE FUND PAGE 2 OF 25 Increased resilience of: Most vulnerable people and communities (E.g. mitigation of operational risk associated with climate change diversification of supply sources and supply chain management, relocation of manufacturing facilities and warehouses, etc.) Health and well-being, and food and water security (E.g. climate-resilient crops, efficient irrigation systems, etc.) Infrastructure and built environment (E.g. sea walls, resilient road networks, etc.) Ecosystems and ecosystem services (E.g. ecosystem conservation and management, ecotourism, etc.) A.12. Project / programme life span A.13. Estimated implementation start and end date 4 years Start: 1/1/2017 End: 31/12/2020 B. Project/Programme Details The Fund requires the following preliminary information in order to promptly assess the eligibility of project/programme investment. These requirements may vary depending on the nature of the project/programme. B.1. Project / programme description (including objectives) The proposed GCF project will enable micro, small and medium sized enterprises (MSMEs) 2 in the targeted countries to adapt and mitigate climate change as well as to access international markets and finance. The outcome of the project will be: Increased climate resilience, resource efficiency and competitiveness of MSMEs in Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago The project outcome consists of three intermediate outcomes: 1) Strengthened climate resilience and resource efficiency of MSMEs and smallholder producers 2) Improved financial and trade readiness of MSMEs and smallholder producers 3) Increased access to markets and finance for MSMEs. The project will build upon the Latin American Cocoa Initiative (Iniciativa Latinoamericana de Cacao ILAC 3 ), which the CAF launched in 2016 and which is supported by the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD) and the International Cocoa Organization (ICCO). The initiative aims at promoting the development of fine or flavour cocoa as a sustainable economic activity in Latin America and the Caribbean, achieving significant social and environmental impact on the conservation of biodiversity associated with cocoa. Within this GCF project, CAF will pilot the issuance of Green Credit Lines (GCLs), which will be available through local financial institutions and direct financing in each of CAF s member countries. Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago are country members of CAF. CAF will run this pilot value chain financing initiative, with an overall offer of USD 15 million starting This pilot is planned to be scaled up to other members of the ILAC through additional Green Credit Lines. This green financing scheme is part of a wider, USD$ 1.2 billion dollars regional program, for Green Business and Energy Efficiency Financing. 2 The target group of MSMEs includes all supply chain stakeholders with a particular focus on enterprises adding value to cocoa-based products as well as associations, cooperatives and social enterprises, which act as catalysts for economic development of smallholder producers. 3 For more information on the Latin American Cocoa Initiative:

5 GREEN CLIMATE FUND PAGE 3 OF 25 The technical assistance provided by the project will strengthen the capacity of MSMEs to develop and implement climate adaptation and mitigation strategies, thus lowering their operational risks and increasing resource efficiency. MSMEs in the beneficiary countries are highly exposed to climate change risks, as their capacity to adapt remains low. This is due to lack of climate information, adequate finance and insurance, availability of and knowledge about climate resilient crop varieties, sufficient export diversification and of institutional support, networks and partnerships. This GCF project will provide technical assistance for MSMEs to develop and implement business strategies addressing these needs thus strengthening the enterprises climate resilience and increasing their competitiveness. Moreover, MSMEs in the targeted countries operate with high levels of resource inefficiencies, which lead to high operational costs and risks. In particular, energy and water inefficiencies and shortages create operational instability and costs, which translate into lower profitability and reduced competitiveness. Improving economic performance while reducing pressure on natural resources results in higher profitability and strengthens enterprise competitiveness. By building capacity of MSMEs to improve their resource efficiencies, economic growth is further decoupled from resource use. In order to enter a climate resilient and resource efficient growth path, enterprises have to learn how to create more with less, delivering greater value with less input, using resources in a sustainable way and minimising their impacts on the environment. Furthermore, the project will prepare MSMEs to access the GCLs and local financial institutions to manage and disburse GCLs. By connecting MSMEs with the international buyers and support them in engaging in direct contracts, the beneficiaries will be enabled to create the necessary collateral for accessing GCLs. The cocoa sector will serve as an entry point for this GCF project; however the project will not be limited to the sector as further explained under section D3. The cocoa sector and associated value chains have been identified as a suitable starting point for this GCF project given the following reasons: 1) While demand for cocoa based products is increasing, supply is threatened due to rising temperatures in West Africa, currently the main world cocoa producing region, which is becoming unsuitable for cocoa cultivation 4. Latin America and Asia have to be prepared to sustainably cultivate the crop to meet the globally increasing demand. 2) Given a shift of the cocoa industry towards Latin America and the Caribbean, especially to areas surrounding rainforests, where conditions to cultivate cocoa are favourable and a large range of cocoa varieties can be found, deforestation through slash and burn techniques is increasing. This pressure to land is contributing to the degradation of the region s rainforests, important carbon sinks and habitats for biodiverse range of animals and plants.. 3) In order to reduce pressure on rainforests due to land use change for agricultural activities, climate-smart and sustainable sourcing practices have to be implemented and strengthened in the cocoa value chain. Increasing the surface of land under sustainable management and reducing deforestation will result in a reduction of carbon emissions from land use change. Given the importance of tropical rainforests to regulate water supply and climate conditions, buffer zones surrounding these areas have to be maintained and human activity limited to those zones. 4) Cocoa producing regions surrounding rainforests are considered highly vulnerable to climate induced events, for example. In order to ensure long-term profitability and competitiveness of the cocoa and associated agricultural sectors in those regions, climate resilient and productive supply chains have to be built and strengthened. Enhancing the adaptive capacity of smallholder producers through the generation of climate information, knowledge and skills to implement adaptation measures will increase agricultural yields. This capacity building together with and advising on income diversification strategies will generate more and stable income for smallholders. 5) In all five targeted countries cocoa producing regions experience high poverty rates with smallholder farming being the primary source of household income. 6) All beneficiary countries are classified as exporters of fine or flavour cocoa by the ICCO. As a result of the points mentioned above the governments from the targeted countries have expressed their support to the Latin American Cocoa Initiative as well as prioritized the cocoa sector 4 International Centre for Tropical Agriculture, Predicting the Impact of Climate Change on the Cocoa- Growing Regions in Ghana and Cote d Ivoire. Retrieved from:

6 GREEN CLIMATE FUND PAGE 4 OF 25 within their national development strategies as further discussed in D5.About the International Trade Centre The International Trade Centre (ITC) is the joint agency of the United Nations and the World Trade Organization. Established in 1964, ITC is a development agency that is fully dedicated to supporting the internationalization of small and medium-sized enterprises (SMEs), which are proven to be major job creators and engines of inclusive growth. ITC s mission is to foster inclusive and sustainable economic development in developing countries and transition economies, and contribute to achieving the United Nations Global Goals for Sustainable Development. It does this by making businesses in developing countries more competitive in regional and global markets and connecting them to the global trading system. About the Latin American Development Bank CAF CAF is a development bank created in 1970, owned by 19 countries 17 of Latin America and the Caribbean, Spain and Portugal as well as 14 private banks in the region. It promotes a sustainable development model through credit operations, non-reimbursable resources, and support in the technical and financial structuring of projects in the public and private sectors of Latin America. With headquarters in Caracas, Venezuela, CAF has offices in Buenos Aires, La Paz, Brasilia, Bogota, Quito, Madrid, Mexico D.F, Panama City, Asuncion, Lima, Montevideo and Port of Spain. CAF provides sustainable development and regional integration through an efficient mobilization of resources for a timely provision of multiple financial services, with high value added, to clients in the public and private sectors of the shareholder countries. CAF is a competitive financial institution, client-oriented, sensitive to the social needs, and supported by a highly specialized staff. B.2. Background information on project/programme sponsor Describe project/programme sponsor s operating experience in the host country or other developing countries. CAF has Country Offices in Bogotá, Quito, Lima y Puerto España with the necessary technical and administrative operational capabilities. By 2015, the CAF total size of active sovereign projects was of USD 24, MM ( ; and the total size of active environmental projects was of USD 5, MM CAF has an specific operating experience executing development projects for the cacao value chain. The CAF-GEF Andean Biotrade Project ( and USD 42,23 MM budget) supported CAF to strengthen technical, environmental, social and administrative capabilities working with local executing agencies and stakeholders in Colombia, Ecuador and Peru and help them to achieve all planned goals and project goals. ( CAF's Integrated agenda on sustainable development is focused on removing structural barriers that hinder the economic growth of Latin America as a means to combat poverty but will strive for such growth to be low in carbon emissions, make efficient use of resources and be socially inclusive. CAF recognizes the importance of promoting environmental and social sustainability in all its lending activities and pursues these objectives through the application of an Environmental and Social Management Framework, in place since CAF also promotes the creation and growth of the production value of natural capital, supports the development of emerging green markets, and promotes mitigation and adaptation to climate change at government sector and business levels so that countries' integration to international markets is done in a sustainable and eco-efficient fashion. Describe financial status and how the project/programme sponsor will support the project/programme in terms of equity, management, operations, production and marketing. CAF has relationships with over 40 financial institutions in Colombia, Ecuador and Peru including the institutions specialized in agribusiness and MSME with credit lines approved over USD 2,000 MM and is exploring new collaborative relationships with financial institutions in Dominican Republic and Trinidad and Tobago. CAF has been working in a special initiative (Green Business and Energy Efficiency Financing Program) to provide assistance and support financial intermediaries in the evaluation and structuring of loans to finance energy efficiency projects and eco-friendly projects, which will include cocoa value chain development initiatives. CAF has the commitment to make available to this program USD 1,200 MM (including an estimated US$15MM for financing operations in the cocoa value chain), through financial intermediaries or direct financing.

7 GREEN CLIMATE FUND PAGE 5 OF 25 CAF has also started, through ILAC, evaluating the cacao value chain in 10 countries within the Latin American and Caribbean region, gathering important baseline and market data, engaging with key multi-stakeholders and identifying clients and transactions with the potential to be considered for financing. B.3. Market overview The cocoa market has been dynamic and growing in recent years. The global production of conventional cocoa was 4.2 million tons on average between 2014 and Of this total, 72% is produced in Africa, an additional 10% in Asia and Oceania and the remaining 18% corresponds to Latin America, which produces on average tons. 5 However, the Latin America region is the leading producer of fine or flavour cocoa, which exports are directed to more mature markets and with greater payment capacity. The strong comparative advantage is based on a privileged geographical position, as well as other aspects related to genetics and the typical diversity of ecosystems of Latin America, which have allowed the region to concentrate 7 of 11 cocoa genetic clusters. This unique feature has enabled the region's strategic positioning, as leading supplier of varieties of prime cocoa, segment that has the highest level of growth among all segments of cocoa globally (9% per year). 6 Thus, Latin America is responsible for 80% of the world production of fine cocoa with aroma, with a total of tons exported in According to the International Cocoa Organization (ICCO), between 95% and 100% of the total exports of cocoa in countries like Bolivia, Costa Rica, Mexico and Colombia are of this special variety, while in countries like Peru, Ecuador and Panama, they represent 50% to 75% of the country s total exports of cocoa. To the extent that the demand for fine cocoa continues growing, initiatives that encourage research, innovation and supply diversification are needed. The opportunity is to promote new usages of fine or flavour cocoa in sectors such as the phyto-pharmaceutical and cosmetics, as well as to consolidate a distinctive position of Latin America as a main supplier of food, in the category of cocoa and special manufactures. Besides, an excellent opportunity materializes to increase production sustainability of small integrated producers by improving their productivity, quality and good environmental practices. Cocoa production represents a contribution to the Latin American and Caribbean region in different ways. On the one hand, it generates a strong cultural and social contribution to the region. Between 80% and 90% of world cocoa production is based on small-scale family activities, i.e., farms of less than 5 ha. It also promotes, directly and indirectly, economic inclusion and improvement of the living standards of more than 3 million people in Latin America. 7 In this way cocoa farming becomes an integrating factor and catalyst of opportunities to share knowledge, traditions, cultures, identities and experiences among the producers in the region. Moreover, a comprehensive approach based on principles of biotrade and market orientation offers the opportunity to stimulate a new generation of green businesses able to contribute to the agenda of sustainable development being pursued by the region. Support for business activities that generate a good or service from the sustainable use of the country s native biodiversity in this case associated with cocoa under good environmental, social and economic practices becomes an opportunity for the sustainable development of the region. Finally, the opportunity that development and production of fine or flavour cocoa represents for Latin America and the Caribbean is evidenced in its potential to serve international markets. The region is the main supplier of this variety, trading it mainly to mature international markets with greater capacity to pay, such as the European Union and North America. While global demand for conventional cocoa increases at an average of 3% per year, 8 the prime varieties have the highest growth rate of all the segments of cocoa worldwide, reaching 9% per year. 9 The value of the market trend and the preferential price of fine cocoa in world markets are also worth noting. Acknowledging cocoa s traditional roots and being a typical economic activity in the region, as well as the current consumer trend towards healthy natural products, the Latin American Cocoa Initiative 5 ICCO, 2015: New trends in the international cacao market: opportunities for Peru as a producer of fine and aromatic cacao 6 ICCO, 2015 International cocoa market 7 The world cocoa economy: current status, challenges and prospects, The world cocoa economy: current status, challenges and prospects, ICCO, 2015 International cocoamarket

8 GREEN CLIMATE FUND PAGE 6 OF 25 would mean an important contribution to the efforts for promotion of sustainable development and regional integration. B.4. Regulation, taxation and insurance Not applicable. The project will be implemented following the ILAC Action Plan to be adopted by the representatives of Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago (pending) to strengthen their respective cocoa sectors. As an Accredited Entity to GCF, CAF s overall roles is to provide oversight and quality assurance through its GCF Focal Point Unit. This role includes: (i) overall project life cycle management; (ii) monitoring and auditing; (iii) safeguards accountability; (iv) implementation and supervision of each funded activity in line with its CAF own internal rules, policies and procedures as well as evaluation and reporting responsibilities. The International Trade Centre (ITC) will be the Executing Entity for this project. In this capacity, ITC will be establishing a project management unit, which will be responsible for the execution of the proposed GCF project in close collaboration with the governments of the targeted countries and private sector partners. Any inputs related to the costs incurred to ITC for the execution are covered under the Project Support Costs. B.5. Implementation arrangements An Advisory Board (AB) for the implementation of the project will be established. The AB will comprise of representatives of CAF, ITC, the governments of the targeted countries, Trade and Investment Support Institutions 10 (TISIs), private sector enterprises and technical experts. The AB will meet twice a year and is responsible for approving, by consensus, the Annual Work Plan prepared by the Project Manager, and making management decisions when guidance is required by the Project Manager. AB decisions will be made in accordance with standards that shall ensure management for pre-established key performance indicators (KPIs), transparency, integrity, fairness and effective international competition. In case a consensus cannot be reached within the AB, final decision should rest with CAF and ITC. The Project Manager (PM) will run the project, under the guidance of the Advisory Board and dayto-day supervision by ITC. The PM function will end when the final project terminal evaluation report and other documentation required by the GCF and ITC, has been completed and submitted to ITC. The PM is responsible for day-to-day management and decision-making for the project within the Annual Work Plan approved by the AB and reviewed by ITC and CAF. The PM s main responsibility is to lead the management of the project, oversee its planning, budgeting, personnel needs, quality management, stakeholder relations and to ensure that the project achieved the project results under the pre-established key performance indicators. The PM will have a direct reporting arrangement with ITC and CAF. The PM will be part of and supported by a Project Management Unit (PMU), which comprises of a group project-financed staff. The PMU will be located in one of the beneficiary countries. The PMU will be responsible for supporting the PM in carrying out day-to-day activities of the project, the overall operational and financial management, and liaison with relevant stakeholders for the project. In coordination with ITC s headquarter the PMU will supervise and manage national experts and service providers hired for the implementation of capacity building activities. The management arrangements for this project are summarized in the chart below. Project Organization Structure 10 The International Trade Centre defines Trade and Investment Support Institutions (TISIs) as trade promotion organizations, chambers of commerce, sector associations, enterprise development agencies, supply chain management organizations.

9 GREEN CLIMATE FUND PAGE 7 OF 25 Project Assurance + Provision of Green Credit Lines: CAF Local financial Institutions Adivsory Board: CAF, ITC, governments, experts ITC local Project Management Unit Local experts and service providers Project Execution: ITC ITC Headquarters C. Financing / Cost Information Grant financing is requested from the GCF to strengthen the climate resilience, resource efficiency and competitiveness of MSMEs. The grant will cover the costs for the provision of capacity building activities and all items needed to facilitate those capacity building activities such as equipment and supplies, contracts with service providers, international and local travel, contingencies as well as project support and management costs. CAF will undertake a pilot project to issue Green Credit Lines for up to USD 15 million. Due to the financial and market readiness of MSMEs in the target countries reached through the project, the beneficiary MSMEs will be enabled to access the GCLs provided by CAF through local financial institutions. CAF has committed to provide a budget of USD 0.5 million for the provision of technical assistance under its Latin American Cocoa Initiative (ILAC). This additional resources will have a catalytic role in the project start up, providing a significant contribution in terms of local and key stakeholders engagement. An average of USD will be allocated to each country. This assistance funds will also contribute to an active regional knowledge exchange between ILAC countries. A regional Sustainable Cocoa Observatory will also be in place through direct financing by CAF, adding value to the overall knowledge management strategy. C.1. Description of financial elements of the project / programme The government of the beneficiary countries are expected to provide a minimum of USD 1.8 million as in-kind contributions to the project. This figure translates into a yearly contribution of USD 0.15 million per beneficiary country. This figure is based on the yearly in-kind contributions provided by the Peruvian government during ITC s intervention to promote the cocoa sector. Private sector companies are expected to contribute financially to the project through investments in their respective supply chains to increase the socio-economic benefits for their suppliers and strengthen their supply chain s climate resilience and resource efficiency. Moreover, international buyers will contribute to the project by actively participating in matchmaking events and international trade fairs, where they are introduced to beneficiary MSMEs. In-kind contributions of the private sector are estimated at a minimum of USD 4.5 million. Furthermore, beneficiary MSMEs will be requested to provide in-kind contributions for the implementation of their newly acquired knowledge. For instance, if a MSME receives a tailored consultancy on recyclable packaging of its products, it will have to ensure the implementation of this advisory service by committing to change its packaging towards recyclable alternatives. Through this learning by doing approach the responsibility of MSMEs will be gradually increased with regards to selecting and paying sector-related service providers for advice and training as well as interaction with clients and suppliers. A breakdown of the funding structure by output in USD is provided below: Project outcome: Increased climate resilience, resource efficiency and competitiveness of MSMEs in Colombia, Dominican Republic, Ecuador, Peru and Trinidad and Tobago Project intermediate outcomes Project outputs Financing (in million USD) Total GCF CAF Gov. Private 1. Strengthened climate resilience and 1.1 Increased awareness and understanding of MSMEs and smallholder producers about climate

10 GREEN CLIMATE FUND PAGE 8 OF 25 resource efficiency of MSMEs and smallholder producers 2. Improved financial and trade readiness of MSMEs and smallholder producers 3. Increased access to markets and finance for MSMEs change and value chain environmental impact of production, processing and commercialization 1.2 Increased generation of climate information and its use in decisionmaking by value chain operators with focus on MSMEs and smallholder producers 1.3 Improved climate adaptation capacity of MSMEs and smallholder producers 1.4 Enhanced climate mitigation capacity of MSMEs 1.5 Improved management of cocoa producing areas including agricultural land and forests contributing to emissions reduction of MSMEs and smallholder producers 1.6 Increased resource efficiency of operations of MSMEs 1.7 Improved regional dialogue between value chain operators, focusing on MSMEs and smallholder producers, and policy-makers 2.1 Increased competitiveness, business and sales capacity of value chain operators 2.2 Improved compliance with quality and international sustainability standards of value chain operators with a focus on smallholder producers and MSMEs 2.3 Strengthened branding, product market diversification and marketing strategies of smallholder producers and MSMEs 2.4 Strengthened sustainable packaging and labelling strategies for MSMEs 2.5 Increased financial and management capacities of MSMEs 3.1 Participatory global value chain analysis to determine sustainable upgrading opportunities for value chain operators with focus on MSMEs and smallholder producers 3.2 Creation of national, regional and international market linkages 3.3 Improved readiness of local financial institutions to gather baseline data, originate, analyse, underwrite and manage Green Credit Lines 3.4 Availability and utilization of Green Credit Lines Total project financing The expenditures of the project by types of activities based on the contributions by GCF and CAF and excluding government and private sector in-kind contributions, which total a minimum of USD 7.5 million, to the project, are presented in the table below.

11 GREEN CLIMATE FUND PAGE 9 OF 25 Activity Type Amount (USD) Percentage of Total Capacity building % Green Credit Lines (GCLs) % Travel (international + local) % Equipment and supplies % Contractual Services % Contingencies % Project Support Costs (ITC) % Project Management Cost (CAF) % TOTAL % Financial Instrument Amount Currency Tenor Pricing Total project financin g (a) = (b) + (c) C.2. Project financi ng informa tion (b) Request ed GCF amount (i) Senior Loans (ii) Subordinated Loans (iii) Equity (iv) Guarantees (v) Reimbursable grants * (vi) Grants * 19 million USD ($) * Please provide detailed economic and financial justification in the case of grants. ( ) years ( ) years ( ) % ( ) % ( ) % IRR Total Requested (i+ii+iii+iv+v+vi) Financial Instrument Amount Currency Name of Institution Seniority (c) Cofinancin g Grant Grant Grant million USD ($) million USD ($) million USD ($) million USD ($) CAF CAF Gov. of beneficiary countries Private sector Lead financing institution: CAF

12 GREEN CLIMATE FUND PAGE 10 OF 25 (d) Covena nts (e) Conditio ns precede nt to disburse ment The Accredited Entity is required to (i) ensure that the project-specific performance standard 2 is fully aligned with the Fund s ESS when it is applied in projects, and no strengthen its monitoring and review of E&S risks and impacts, as part of its Environmental and Social Management System; and (ii) approve by senior management the consolidated blueprint for E&S management and to communicate the blueprint within the organization and to its executing entities. Delivery of a Request for Disbursement, signed by the person or persons authorized to do so, within a timeframe that is acceptable to the Fund; Delivery of evidence, satisfactory to the Fund, of the authority of the person or persons authorized to sign each Request for Disbursement and the authenticated specimen signature of each such person; and Any other such documents and other evidence in support of each Request for Disbursement as the Parties shall specify in the Funded Activity Agreement. D. Expected Performance against Investment Criteria Please explain the potential of the Project/Programme to achieve the Fund s six investment criteria as listed below. This GCF project will contribute to the paradigm-shift objective of the GCF, which is moving towards climate resilient and low-emission sustainable development pathway by contributing to the achievement of the following fund-level impacts: 1) Reduced emissions from buildings, cities, industries and appliances; 2) Reduced emissions from land use, deforestation, forest degradation, and through sustainable management of forests and conservation and enhancement of forest carbon stocks; 3) Increased resilience and enhanced livelihoods of the most vulnerable people, communities and regions; 4) Increased resilience of health and well-being, and food and water security; 5) Improved resilience of ecosystems and ecosystem services. The project activities will be monitored and evaluated following the below indicators: D.1. Climate impact potential [Potential to achieve the GCF's objectives and results] Project intermediate outcomes 1. Strengthened climate resilience and resource efficiency of MSMEs and smallholder producers Project outputs Indicators Targets for 4 year project and comments 1.1 Increased awareness and understanding of MSMEs and smallholder producers about climate change and value chain environmental impact of production, processing and commercialization - Number of male and female staff members of MSMEs and smallholder producers participating in capacity building activities on climate change sensitization Directly impacted: smallholder producers Indirectly impacted: household members 1.2 Increased generation of climate information and its use in decision-making by value chain operators with focus on MSMEs and smallholder producers 1.3 Improved climate adaptation capacity of MSMEs and smallholder producers trough participatory approaches - Number of MSMEs and smallholder producers using climate information in decisionmaking - Number of MSMEs that developed and implemented adaptation strategies - Number of male and female smallholder producers developed and implemented climate adaptation techniques Directly impacted: 100 MSMEs smallholder producers Directly impacted: 100 MSMEs smallholder producers Indirectly impacted through ToT: smallholder producers

13 GREEN CLIMATE FUND PAGE 11 OF Enhanced climate mitigation capacity of MSMEs - Number of MSMEs that developed and implemented climate mitigation strategies Directly impacted: 100 MSMEs 1.5 Improved management of land and forest areas contributing to emissions reduction of MSMEs and smallholder producers through participatory approaches - Hectares of land and forests under improved and effective management that contribute to carbon emission reductions - Number of MSMEs and smallholder producers implementing improved land management that contributes to carbon emission reductions Directly impacted: 100 MSMEs plots of smallholder producers Indirectly impacted through ToT: 500 MSMEs smallholder producers Target for ha of land and forests: to be determined during project development phase Comment: Carbon emissions reductions from carbon sequestration through the implementation of agroforestry systems as well as from the reduction in pesticide and fertilizer use to be determined during project development phase 1.6 Increased resource efficiency of operations of MSMEs - Number of MSMEs implemented energy efficiency measures - Energy efficiency gains of operations MSMEs Directly impacted: 100 MSMEs Target for energy efficiency gains: minimum of 20% in carbon emission reductions of each beneficiary MSME - Water efficiency gains of operations of MSMEs Target for water efficiency gains: minimum of 10% reduction of water used in operations by each beneficiary MSME - Efficiency gains in the use of raw materials in operations of MSMEs Target for efficiency gains in the use of raw materials: minimum of 10% reduction of raw materials used in operations by each beneficiary MSME Comment: Needed technologies for the shift towards low energy intensive equipment and machinery will be financed through the Green Credit Lines provided by CAF through local financial institutions. 1.7 Improved regional dialogue between value chain operators, focusing on MSMEs and smallholder producers, and policy-makers - Number of regional fora organized - Number of male and female participants at regional fora Target: 3 regional fora 2. Improved financial and trade readiness of MSMEs and smallholder producers 2.1 Increased competitiveness, business and sales capacity of value chain operators - Number of MSMEs and smallholder producers developed and implemented improved competitiveness, business and sales capacity Directly impacted: 100 MSMEs smallholder producers Indirectly impacted through ToT: 500 MSMEs smallholder producers 2.2 Improved compliance with quality and international sustainability standards of value chain operators with a focus on smallholder producers and MSMEs - Number of quality and sustainability certifications obtained Directly impacted: 100 MSMEs smallholder producers Indirectly impacted through ToT: 500 MSMEs smallholder producers

14 GREEN CLIMATE FUND PAGE 12 OF 25 Comment: Under this output, certification programmes will be designed based on the market demand and potential. Targets for carbon emissions reduction derived from obtaining each sustainability certification programme such as organic will be set during the project development phase 2.3 Strengthened branding, product market diversification and marketing strategies of smallholder producers and MSMEs - Number of branding, product market diversification and marketing strategies developed and implemented by MSMEs Directly impacted: 50 MSMEs smallholder producers Indirectly impacted through ToT: 250 MSMEs smallholder producers 2.4 Strengthened sustainable packaging and labelling strategies for MSMEs - Number of sustainable packaging and labelling strategies developed and implemented by MSMEs - Carbon emissions reduced due to switch to recyclable and biodegradable packaging alternatives Directly impacted: 50 MSMEs Indirectly impacted through ToT: 250 MSMEs Under this output, the beneficiaries will be trained on the implementation packaging alternatives for better preservation and recyclability. Carbon emissions reductions from recyclable and biodegradable packaging alternatives will be measured during the project development phase. 2.5 Increased financial and management capacities of MSMEs - Number of MSMEs that developed and implemented financial management strategies Directly impacted: 50 MSMEs Indirectly impacted through ToT: 250 MSMEs 3. Increased access to markets and finance for MSMEs 3.1 Participatory global value chain analysis to determine sustainable upgrading opportunities for value chain operators with focus on MSMEs and smallholder producers - Number of MSMEs, smallholder producers, value chain operators and government officials included in global value chain analysis Directly impacted: 100 MSMEs smallholder producers + 20 value chain operators and 20 government officials 3.2 Creation of national, regional and international market linkages - Number of MSMEs and smallholder producers having transacted international business as a result of project s activities - Value (in USD) and volume of contracts closed by MSMEs and smallholder producers as a result of project s activities Directly impacted: 100 MSMEs smallholder producers Target for sales: USD 35 million, volume: 7000 tons of fine or flavour cocoa 3.3 Improved readiness of local financial institutions to gather baseline data, originate, analyse, underwrite and manage Green Credit Lines - Number of local financial institutions ready to operate GCLs - Number of male and female staff members ready to manage GCLs Directly impacted: 5 financial institutions staff members of financial institutions 3.4 Availability and utilization of Green Credit Lines - Number of beneficiary MSMEs utilizing GCLs Target for GCLs: 250 MSMEs

15 GREEN CLIMATE FUND PAGE 13 OF 25 The expected total number of beneficiary MSMEs of this GCF project are 100 MSMEs and 2200 smallholder producers directly impacted as well as 500 MSMEs and smallholder producers indirectly impacted through trained trainers and e-learning courses after the course of the project of 4 years. The Green Credit Lines offered by CAF through local financial institution are expected to reach 250 MSMEs in total. Additionally, 100 staff members of 5 financial institutions in the targeted countries will be directly impacted through capacity building on managing Green Credit Lines. D.2. Paradigm shift potential [Potential to catalyze impact beyond a one-off project or programme investment] D.3. Sustainable development potential [Potential to provide wider development co-benefits] Potential for scaling-up and replication (e.g. multiples of initial impact size): Based on the best practices and lessons learned from this GCF project ITC and CAF are planning to jointly scale up and replicate the intervention in other countries, which are part of the Latin American Cocoa Initiative and show a strong need for building climate resilience and access to finance and international markets. Potential for knowledge and learning As the beneficiary MSMEs and smallholder producers are likely to be involved in a second or third agricultural sector besides cocoa, spill-over effects of the project results to non-cocoa sectors are expected. In this way the enhanced capacity of MSMEs and smallholder producers to implement climate resilient and low-carbon production and processing practices will be benefitting associated sectors as well. Furthermore, access to finance and international markets will be enhanced for each sector where the beneficiaries are involved in. These knowledge and learning spill overs will be encouraged through capacity building activities on income and revenue diversification strategies. Contribution to the creation of an enabling environment By enabling MSMEs to access finance and international markets and working with established local Trade and Investment Support Institutions (TISIs) and local financial institutions, a long term enabling environment is created to foster a low carbon intensive and climate resilient development of the cocoa value chain. Contribution to the regulatory framework and policies The project will contribute to climate mainstreaming within all levels (local, regional and national) of the agricultural and rural development policy, especially on topics such as the cocoa sector, marketing, extension services, water management, climate adaptation and mitigation and land use and management. It will contribute to the formulation of improved legal framework for the protection of forests from agricultural land use and legal requirements on climate related areas of agricultural for example energy auditing for MSMEs The outputs under this GCF projects will result in the following co-benefits for the targeted countries at large and its individual beneficiaries in specific: Economic co-benefits - Total number of jobs created: The project is expected to foster job creation through strengthened competitiveness in various supply chains taking the cocoa sector as an entry point. Through its supply chain approach, the project will target producers, associations, cooperatives, processors and exporters of cocoa and its derivatives and associated sectors. Under output 2.1 supply chain stakeholders will be trained to implement and strengthen business and product diversification strategies to mitigate price and demand risks of each sector they are involved in. The project will put particular emphasis on the income diversification of smallholder producers through the promotion of inter-crop agroforestry systems, thus ensuring stability of household incomes and supporting food security. Furthermore, market linkages with international buyers created through the project are also likely to benefit supply chain stakeholders that are already diversified in associated sectors. - Amount of foreign currency savings: N.A. - Amount of government s budget deficits reduced: N.A. Social co-benefits: - Improved access to education: Project activities encompass trainings to direct beneficiaries involved in the cocoa value chain and training of trainers to allow the replication of best practices on climate smart cocoa production. - Improved regulation or cultural preservation: The regions of project implementation include areas inhabited by indigenous communities, which are involved in the harvest of wild cocoa. The project will seek to support MSMEs and cooperatives formed by indigenous people whenever aligned with project objectives and beneficiary selection criteria.

16 GREEN CLIMATE FUND PAGE 14 OF 25 - Improved health and safety: Under the project outputs 2.1, training activities will include modules on Health and Safety standards with the aim to enhance labour condition management in beneficiary MSMEs and cooperatives in compliance with ILO standards. Environmental co-benefits - Improved air quality: N.A. - Improved soil quality: The project contributes to improved soil quality through the promotion of inter-crop agroforestry systems for cocoa and other crops. Agroforestry systems of cocoa production ensure significant levels of biodiversity and enable synergies between climate adaptation and mitigation through carbon sequestration, multispecies cropping technologies and increase in soil productivity. - Improved biodiversity: The project contributes to biodiversity conservation through the promotion of agroforestry systems as well as through the creation of economic incentives for the cultivation of native fine or flavour cocoa varieties, which is achieved by positioning them the international market and generating direct linkages with international buyers willing to pay premium prices for sustainably sourced and high quality fine cocoa. Moreover, biodiversity of the region s rainforests is sustained by halting deforestation through the improvement of land use and forest management practices by MSMEs. Gender-sensitive development impact - Proportion of men and women in jobs created: The project seeks to achieve gender balance and women empowerment in different levels of the project implementation: a) at the production level, women empowerment is one of the main components of the capacity building activities provided to smallholder producers; b) gender sensitive policies is a criteria for the selection of beneficiary MSMEs. D.4. Needs of recipient [Vulnerability to climate change and financing needs of the recipients] Describe the scale and intensity of vulnerability of the country and beneficiary groups and elaborate how the project/programme addresses the issues: Level of exposure to climate risks for beneficiary country and groups Colombia, Ecuador and Peru: Colombia, Ecuador and Peru are highly vulnerable to climate change impacts across their wide range of ecosystems. All three countries have a coastal plain, Andean uplands, and tropical lands. People living on the coast will see rise in sea level which will increase the number of floods while highland populations will be subject to extreme weather events. These countries will be subject to increased temperatures, changes in precipitation pattern, glacial melt, and rise in sea-level. Due to El Niño and La Niña, crops in Colombia, Ecuador and Peru are subject to a variety of weather phenomena ranging from droughts to floods. 11 In unprecedented floods caused by El Niño highly affected the agricultural sector in Ecuador. The damages are evaluated to USD 1,187 million. 12 Some years later, in 2008 floods ravaged the Ecuadorian coast leading to the destruction of 114,384 ha of agricultural land. The total agricultural losses were estimated at USD 161 million. 13 Climate change most likely intensifies El Niño and La Niña effects and their frequency Crops are consequently subject to a variety of weather phenomena. Crops productivity is altered and probabilities of disease increase. In Peru, fluctuating precipitation levels are highly alarming since two-thirds of all farming lands are rain-fed. An estimated 444,707 ha of crop production, equivalent to USD 910 million, were lost due to climate events between 1970 and In unprecedented floods caused by El Niño highly affected the agricultural sector. The damages are estimated to be USD 1,187 million. 17 Some years later, in 2008 floods ravaged the Ecuadorian coast leading to the destruction of 114,384 ha of agricultural land. The total agricultural losses were estimated at USD 161 million FAO, 2015: 12 UNDP, 2007, p. 2: 13 World Bank, 2009: 14 World Bank, 2009: 15 FAO, 2014: 16 Ministerio del Ambiente Segunda Comunicación Nacional del Perú a la Convención Marco de las Naciones Unidas sobre Cambio Climático Lima, Perú: Impresiones & Ediciones Aguilar S.A.C. p.144: 17 UNDP, 2007: 18 World Bank, 2009:

17 GREEN CLIMATE FUND PAGE 15 OF 25 Soil aridity, erosion, and desertification are already posing serious threats and they are expected to intensify in the next years mainly due to El Niño and La Niña intensification An estimated 4.1% of Colombian soil is affected by desertification. Moreover, floods are affecting at different degrees 4.9% of the total area covered with cropland and pasture (7.2 million ha) on the Caribbean Coast. 21 In the agricultural sector, studies estimate that by 2050, temperature rises, erratic precipitation patterns, higher pest and disease prevalence will increase in the country. 22 Rapid glaciers retreat due to climate change is threatening temporal water reservoirs 23 which are essential to water consumption, land irrigation, and electricity generation 24. Peru is home of 70% of the world's tropical glaciers. In the last 35 years, however, they have lost 22% of their total area. This translates into a loss of 12% of coastal fresh water in areas where 60% of the population live in. 25 Similarly, in the last 30 years Ecuador has seen its glaciers coverage decline by 20 to 30%. 26 Agriculture occupies a central role in the Colombian, Ecuadorian, Peruvian economies. The agricultural sector (and therefore the economy) is severely threatened, as it is highly sensitive to temperature variations and water irrigation. In Peru. a quarter (25.7%) of the Economically Active Population works in sector 27 and around 17% of Peru's land is dedicated to agriculture. 28 In Ecuador, agriculture represents 9.1% of total value added and employs more than a quarter of Ecuadorian working population. 29 In Colombia, agriculture generates 6.4% of total value added and figures 16.3% of total employment in the economy. 30 Rainforests are highly threatened as demand for agricultural products including cocoa drives land use change for production. Areas dedicated to cocoa harvest are expending each year. For example, the cocoa area harvested annual growth rates between 2000 and 2014 for Ecuador, Peru and Dominican Republic are 0.23%, 1.61% and 6.64%. Over the same period of time, the production annual growth rates were 4.99%, 8.97% and 4.01% respectively. Dominican Republic and Trinidad and Tobago Small island states will be severely affected by climate change because of their small land mass, fragile ecosystems, and concentration of infrastructure and populations along the coast. Due to its location, Dominican Republic is highly susceptible to frequent and more intense cyclones, droughts, and tsunamis which affect human settlements and productive activities. 31 Trinidad and Tobago is not in the main Atlantic hurricane belt, however, one of the new natural hazards scenarios considered for the country is the increased potential to be hit by tropical storms. 32 Temperature is expected to increase while rainfall to decrease. This series of events will significantly affect agricultural practices and rural livelihoods. Furthermore, climate change threatens the yields of the most important crops of the State, but the distribution of crops suitability will be modified. 33 The economic cost of the extreme weather events gives an indication of the scale of this vulnerability. In 1998 for example, Hurricane Georges caused losses and damages equivalent to 19 World Bank, 2011,p. 8: p.8 20 OECD, 2015: D7B22F87B1B88F 21 World Bank, 2009, p. 9: 22 Charlotte Lau, Andy Jarvis, & Julián Ramirez. Policy Brief Colombian Agriculture: Adapting to Climate Change. International Center for Tropical Agriculture N. Slazmann et al., Glacier changes and climate trends derived from multiple sources in the data scarce Cordillera Vilcanota region, southern Peruvian Andes, The Cryosphere, volume 7 (2013), p Amanda Clark, 2016: 25 IPCC, climate change and water, technical paper: p INDC of Ecuador: %20-%20english%20unofficial%20translation.pdf 27 EY, 2014: 28 World Bank, 2009: 29 UNData, Ecuador, 2014: 30 UNData, Colombia, 2014: p INDC for Trinidad and Tobago: l%20indc.pdf 33 International Centre for Tropical Agriculture, 2015: ASSESSING-THE-IMPACT-OF-CLIMATE-CHANGE-ON-COCOA-AND-TOMATO.pdf

18 GREEN CLIMATE FUND PAGE 16 OF 25 14% of GDP. The tropical storms Olga and Noel in 2007 forced the government to adjust its priorities and the economy, causing losses and damages of 1.2% of GDP and 5.3% of the national budget. 34 In addition to the countries climate vulnerabilities, MSMEs and smallholder producers in all five targeted countries have expressed the following needs, which are addressed in the project: lack of climate information and its integration in decision-making processes high climate risk and low productivity in the agricultural sector high degree of inefficient use of resources (energy, water, etc.) in production and processes lack of adequate finance and insurance schemes for smallholder producers and MSMEs, especially for financing climate resilience and low energy intensive measures lack of institutional support for smallholder producers and MSMEs, especially in terms of strengthening climate resilient and low energy intensive business strategies lack of market intelligence, especially international market and finance requirements The International Trade Centre published an in-depth survey in 2014 of the climate change strategies and technical assistance needs of exporters of cacao and coffee in Peru 35. The study shows that 95% of surveyed exporters has been affected by climate risks, with one third reporting a severe impact, including reduced harvest quality and quantify as a result of rainfall variability, pest outbreaks and flooding. Extreme weather events had affected 25-50% of exporters. Most exporters thought climate change was of equal or greater importance to their existing export challenges, most notably price volatility, competitiveness and product quality. Other findings include: Climate variability had reduced the ability of MSMEs to secure access to credit due to the perceived risky nature of production. The most common strategies for adaptation included investments in new technology and infrastructure as well as training and extension services for producers. Technical innovations included mechanical dryers and shade covers to prevent crop losses and supporting irrigation to take advantage of intense rainfall periods. Exporters adaptation strategies were often targeted towards short-term issues rather than building long-term resilience and only two exporters believed they had the capacity to respond to future climate change. The majority were concerned about inadequate human and financial capital. The most common needs exporters identified to help them adapt to climate change included new crop varieties and export diversification. Exporters also said they needed climate-risk insurance, an improved institutional environment and better access to financing. To a lesser extent, exporters required additional climate information, human resources and new works and partnerships. Exporters called for more coordinated government initiatives, including practical and targeted support to assist in building climate resilience. The following graph from the report on the survey depicts the measures identified by exporters in order for them to response to climate-related risks and their impacts. The measures marked in green are directly addressed by this GCF project through the technical assistance provided by ITC and the issuance of Green Credit Lines by CAF. 34 INDC for Dominican Republic: DR%20August%202015%20(unofficial%20translation).pdf 35 ITC, 2014: Climate change and the agri-food:

19 GREEN CLIMATE FUND PAGE 17 OF 25 Measures needed to respond to climate-related risks and their impacts climate resilient crop varieties export diversification climate risk insurance institutional and political environment access to finance improved climate information human resources networks and partnerships infrastructure improvements 32% 41% 59% 55% 73% 68% 68% 68% 86% Needs for strengthening institutions and implementation capacity There is strong need for sensitizing and building capacity on climate-smart sectorial development policies in Ministries and Trade and Investment Support Institutions (TISIs) in the targeted countries. By integrating policy makers, experts and technical staff of the Ministries and TISIs in the capacity building work and utilizing them as multipliers for the dissemination of knowledge and skills within each country. D.5. Country ownership [Beneficiary country ownership of project or programme and capacity to implement the proposed activities] Coherence and alignment with the country s national climate strategy and priorities in mitigation or adaptation Colombia: The Colombia government has recognized climate change as a priority action for policy action. With regards to climate change prevention, the National Plan for Climate Change Adaptation (PNACC in Spanish), launched in 2011, aimed to increase knowledge of the potential risks and opportunities associated to climate change and its effects, as well as to integrate climate risk management in territorial and sectoral planning. Complementary to this framework, the government has developed sectoral plans and strategies on climate change adaptation such as the Agricultural Sector Climate Phenomena Adaptation Strategy. 36 The project is also aligned to Colombia s Intended Nationally Determined Contributions (INDC) plan 37, which adopts a national, economy-wide emissions target of a 20% reduction of greenhouse gas emissions by Dominican Republic The project is aligned with the country s INDC, according to which adaptation is a constitutional priority for the country. The sectors identified as most vulnerable are: Drinking Water, Energy (power generation component), National System of Protected Areas, Human Settlements and Tourism. In 2008, the Ministry of Environment elaborated a multi-sectoral National Adaptation Plan of Action that proposes 136 individual measures in order to increase the resilience and adaptation capacity of the country. Water, agriculture, and coastal zone sectors are prioritized. Adaptation efforts are focused, primarily, on capacity building, research, and knowledge dissemination. 39 Ecuador This GCF project is aligned with the targets of the National Climate Change Plan (Plan Nacional de Cambio Climático or PNCC), in which climate friendly initiatives are outlined in three different areas (1) capacity building, (2) mitigation, and (3) climate change adaptation measures 40. It gives priority to projects with a focus on agriculture and land use, water, ecosystems, energy, risk management, 36 LSE : 37 INDC for Colombia: pdf. 38 World Resources Institute, Graham Research Institute on Climate Change and the Environment, 2015: 40 Ministerio del Ambiente, Plan Nacional de Cambio Climático, 2015, p. 16

20 GREEN CLIMATE FUND PAGE 18 OF 25 and capacity building. In particular, the project will reinforce the plan s intention to encourage diversification of species more resistant to climate change and conservation of biodiversity as per the Ecuadorian INDC. 41 The project will directly contribute to these strategic areas within the INDC. Peru Peru s population particularly in rural areas is highly vulnerable to climate change impacts. Agricultural and forestry sectors as well as rural populations related to subsistence family farming and/or weak market linkages, indigenous communities, native communities, women and small producers are amongst the priorities as set out in the Peruvian INDC. 42 The project is aligned with The National Climate Change Strategy 43 (Estrategia Nacional ante el Cambio Climático or ENCC), which was created in 2003 and actualized in It aims to reduce the adverse effects of climate change through a) studies to identify the most vulnerable areas and /or sectors towards which adaptation projects should be targeted and b) controlling greenhouse emissions through renewable energy and energy efficiency programmes. Furthermore, the project contributes to the targets set in Peru s Ministry of Environment has also adopted the Action Plan for Climate Change Adaptation and Mitigation 44 (Plan de Acción de Adaptación y Mitigación Frente al Cambio Climático). It includes several specific measures for the agriculture sector such as promoting sustainable land use, agro-forestry and organic agriculture, and additional research and training on climate-related issues. The project s outputs also feed into the Ministry of Agriculture and FAO s Plan for Risk Management and Climate Change Adaptation of the Agriculture Sector (PLANRMCCA-A) for (MINAGRI and FAO, 2012). The plan includes and investment of USD 700 million towards mitigating climate-change impacts on the agricultural sector. The plan prioritizes 159 adaptation measures selected during regional workshops in which will be implemented by regional governments. The plan includes strategies for: Promotion of native species and traditional farming practices Reforestation and forest conservation Knowledge and information management Trinidad and Tobago The Government of Trinidad and Tobago has recognized the importance of addressing climate change both from a mitigation and adaptation perspective. Accordingly the Government has defined the policy framework for a low carbon development plan through the National Climate Change Policy, and developed a Carbon Reduction Strategy for the power generation, transportation and industrial sectors which forms the basis of Trinidad and Tobago's INDC 45. The country s climate change policy is guided by the following mutually supportive objectives: 1) reducing or avoiding greenhouse gas emissions from all emitting sectors 2) enhancing carbon sinks 3) protection of the natural environment and human health 4) conserving and building resilience of human and natural systems to adapt to the adverse impacts of climate change, including through capacity building, the application of cleaner and energy efficient technologies, and relevant research and development. 5) enhanced agricultural production and food security 6) educating the wider public on the potential impacts of climate change and the recommended adaptation strategies 7) conserving and guaranteeing a sustainable supply of potable water By strengthening the resilience of the cacao sector, the project will directly contribute to objective 4, 5 and INDC of Ecuador: %20-%20english%20unofficial%20translation.pdf. 42 INDC of Peru: 43 Ministry of Environment, 2015: 44 Ministry of Environment, 2010: 45 INDC for Trinidad and Tobago: l%20indc.pdf

21 GREEN CLIMATE FUND PAGE 19 OF 25 Brief description of executing entities (e.g. local developers, partners and service providers) along with the roles they will play The project will involve local partners in each of the targeted countries in its Advisory Board as well as in the direct implementation of the project activities. In terms of building export readiness of MSMEs, the project will establish partnerships with the local public, private and academic sector, especially local Trade and Investment Support Institutions (TISIs). Furthermore, partnerships will be established with local financial institutions for managing and disbursing the Green Credit Lines made available by CAF. Local service providers will be hired to enable efficient and effective implementation of capacity building activities. For the provision of capacity building activities ITC will ensure that the following methodological approach is followed in order to create local knowledge and expertise, which resides in the beneficiary countries beyond the project s duration. Firstly, assessments in terms of environmental and socio-economic impact of the supply chain are conducted for each target country. Based on the results of these impact assessments, training modules and e-learning courses are developed and delivered to the beneficiaries of the project. ITC follows a blended learning approach, which consists of Training of trainers (ToT) sessions, e- learning courses and direct trainings provided by ITC experts and the trained trainers. In this GCF project the trained trainers will serve as Climate Experts which function as knowledge focal points for smallholder producers as well as within MSMEs. Training for trainers (ToT) Capacity building for beneficiaries by trained trainers Partcipatory global value chain analysis Development of workshops and training modules E-learning courses Capacity building for beneficiaries by ITC experts Stakeholder engagement process and feedback received from civil society organizations and other relevant stakeholders Stakeholder consultations have been held with each of the signatory countries of the Latin American Cocoa Initiative. The governments of the targeted countries have confirmed their support and interest in being part of the initiative. All five targeted countries will attend the first regional ILAC Forum that will be held on September 22 nd 23 rd in Lima, Peru. Furthermore, apart from ITC, the United Nations Conference on Trade and Development (UNCTAD) as well as the International Cocoa Organization (ICCO) are supporting the initiative. D.6. Effectiveness and efficiency [Economic and financial soundness and effectiveness of the proposed activities] Estimated cost per t CO2 eq (total investment cost/expected lifetime emission reductions) Not applicable Co-financing ratio (total amount of the Fund s investment as percentage of project) The following table on the distribution of financing among GCF, CAF, the governments of the targeted countries and the local and international private sector is based on the minimum contributions expected from the public and private sector: Financing (in million USD) Percentage share of total Total

22 GREEN CLIMATE FUND PAGE 20 OF 25 Global Climate Fund Latin American Development Bank CAF Governments Private sector % 36.90% 7.14% 10.07% 100% Economic and financial rate of return The financial structure as presented above is necessary, as the grant provided by GCF for building climate resilient and low energy intensive MSMEs and enhancing their financial and market readiness is an essential leverage for CAF to contribute to overcome the financial gap this MSME S face by providing Green Credit Lines in the targeted countries through local financial institutions. Without the grant contribution of GCF the project will not have the available resources needed to start implementing the agendas of the ILAC countries and to pilot the green financing scheme that will provide the necessary expertise, tools and financial solutions to be scaled up through other ILAC country participants. E. Brief Rationale for GCF Involvement and Exit Strategy Please specify why the GCF contribution is critical for the project/programme. The GCF contribution is essential for the success of this project, as it will enable the provision of the necessary capacity building of MSMEs in the targeted countries to implement low carbon and climate resilient strategies and measures. Furthermore, it will enable MSMEs to become ready for the finance and international market. Thus, to access the Green Credit Lines made available by CAF for its member countries and ILAC participants in particular. In addition to the co-financing that will be mobilized through local governments and key stakeholders from the international community, government and private sector (both local and international), CAF will endeavour to make available up to USD 15M funding line that will be offered for enhancing the value chain of fine cocoa in targeted countries, through local financial institutions, which will also include capacity building opportunities value for the sector. This pilot financing initiative will be scaled up across the region (ILAC member countries), including the targeted countries (Colombia, Dominican Republic, Ecuador, Peru, and Trinidad and Tobago). This green financing scheme is part of a wider CAF regional mechanism for green businesses and energy efficiency designed for Latin America and the Caribbean, the overall funding available is USD 1.2 billion dollars. Please explain how the project/programme sustainability will be ensured in the long run, after the project/programme is implemented with support from the GCF and other sources. The project is designed so that both MSMEs and local partner institutions will be enabled to maintain and build on their increased climate resilience once the project closes. The project ensures long-term sustained competitiveness gains and climate resilience improvements by allowing that knowledge gained and expertise created resides in the beneficiary countries through the following project results: Socio-economic empowerment of smallholder producers and MSMEs. The project will build the capacity of smallholder producers and MSMEs to improve their entrepreneurial and management skills, ensuring that the efforts made remain as an asset to the smallholders and MSMEs and its stakeholders beyond the project s lifetime. Improved export readiness and access to market and finance of MSMEs. The project supports beneficiaries to become more competitive in international markets, achieving higher returns and developing long term relationships with buyers. Sustained climate resilient sourcing and production practices. Through the provision of capacity building activities, smallholder producers and MSMEs will be equipped with knowledge and capacity to ensure long-term productivity and a resilient sustainable sourcing and production system. Established network of trained trainers within MSMEs in each of the targeted regions to ensure long-term knowledge and skills dissemination in the country. Trained trainers will ensure the replication of best practices on climate resilient practices in their respective regions. Strengthened knowledge and skills of staff of local financial institutions on the management of Green Credit Lines. Through capacity building and advisory services to local financial institutions, the project will enable them to deliver appropriate support services to facilitate Green Credit Lines to MSMEs.

23 GREEN CLIMATE FUND PAGE 21 OF 25 Regional knowledge development and exchange building up on the ILAC regional knowledge development agenda, creating a momentum for regional proactive knowledge exchange and reaction to attend market trends and upcoming new trade regulation related to the Paris Agreement and other international environmental. Increased availability of credit in the market, and financial readiness through the strengthening of local financial institutions capacity to manage and provide solutions for the cocoa sector. The project mitigates possible donor dependency of its beneficiaries by requesting beneficiaries to provide in-kind contributions for the implementation of their newly acquired knowledge. By building effective service capacity, it is expected that by the end of the project Trade and Investment Support Institutions (TISIs) will see increased demand. The growing demand for trade and business support services will create an opportunity for the TISIs to expand service offerings. Project manuals, guides, methodologies and tools, reports will be also handed over to selected national institutions, which will act as resource centres for future reference to the program materials. A wrap up workshop will assist project and partners to gather together knowledge for dissemination by all parties. F. Risk Analysis Please describe the financial and operational risks and discuss mitigating measures. The financial risk is based on the issuance of a new financial product for both CAF and for the local financial institutions in the region, which traditionally have not strongly engaged in financing of the cocoa value chain. As all productive sectors, the cocoa sector is subject to market dynamics and value chain performance, which affect the payment capacity of the beneficiary companies. For example, climate change is resulting in higher levels of disease and, pests which impact the productivity of agriculture. Moreover on the market side, variations in international markets could affect the profits generated by the MSMEs. These types of dynamics may impact negatively the payment of the obligations under the financial conditions agreed. From the operational perspective, the project implementation risk is low considering ITC and CAF extensive expertise in capacity building and regional development programs management (technical and financial). Please briefly specify the substantial environmental and social risks that the project/programme may face and the proposed risk mitigating measures. Policy maker level Potential barrier to project implementation Lack of awareness of the need to integrate climate change and competitiveness related issues into national and sector trade policy development plans as well as regional policies Low capacity and/or lack of resources (human, financial, etc.) at policy maker level to implement necessary policies Lack of collaboration and coordination among policy makers Political risks in country Mechanisms to overcome project related risks Awareness raising and knowledge dissemination about climate change impacts and MSME competitiveness issues (through presentations at high level events, dissemination of relevant materials and publications) Stakeholder consultations for MSME groupings/clusters at national or sub-national level to increase knowledge, skills and exchange between policy makers and the private sector Training and advisory services to policy makers on enabling policies for entrepreneurship in selected sectors Training and advisory services to policy makers on strengthening mandate of specialized agencies, reinforcing regulatory role and building financial sustainability Trade and Investment Support Institutions level (including trade/business support providers) Potential barrier to project implementation Mechanisms to overcome project related risks Lack of relevant and committed TISIs Awareness raising and knowledge dissemination about MSME needs and challenges in international

24 GREEN CLIMATE FUND PAGE 22 OF 25 Lack of collaboration and coordination among national TISIs Lack of awareness at TISI level of MSME needs and challenges in international value chains as well as the evolution of demand and buyer requirements Low technical capacity and/or lack of resources (human, financial, etc.) at TISI level to implement necessary actions to support MSMEs Political risks in country value chains through presentations at high level events, dissemination of publications, case studies and best practices Consultations, platforms, and enhancement of technical collaboration between sector TISIs/specialized agencies, and between them and international partners Training and advisory, including distance learning, to TISIs on areas corresponding to MSME needs Training and advisory to TISIs on areas corresponding to focus sector needs (i.e. sector strategy and development, sector branding and positioning) Training and advisory to TISIs on improving management and operations performance, including improvement of overall service portfolio offered to MSMEs MSME level Potential barrier to project implementation Lack of dedicated partners and formalized suppliers Lack of awareness of MSMEs about constraints and opportunities of international value chains, and reluctance to engage with international buyers Lack of willingness of MSMEs to cooperate, i.e. to implement change in order to enhance climate resilience, reduce carbon emissions and increase competitiveness Lack of necessary skills by MSME owners/managers in order to be more competitive in international value chains Low technical capacity and/or lack of resources (human, financial, etc.) at MSME level to implement necessary actions to enhance climate resilience, reduce carbon emissions and increase competitiveness Lack of governance Political risks in country Mechanisms to overcome project related risks Information sharing, networking, and consultations for MSME groupings/clusters on constraints and opportunities of international value chains Training and advisory services to MSMEs on accessing key needed resources for enhancing climate resilience, reducing carbon emissions and improving competitiveness (human, financial, technology, etc.) Training and advisory services, including e-learning courses, to MSMEs on specific areas in order to enhance climate resilience, reduce carbon emissions and increase competitiveness Training and advisory services to MSMEs on managing buyer relationships/market linkages Training and advisory services for MSMEs on managing relationships with financial institutions and accessing finance. Partners (Private sector enterprises / foundations / cooperatives with complementary capacities) Potential barrier to project implementation Lack of consumer awareness about ethics and product provenance Lack of willingness of business leaders and international private sector partners to source/invest from and engage in Mechanisms to overcome projected related risks Networking and consultations with partners on opportunities to source from and invest in MSMEs Presentations at high level events and dissemination of case studies and best practices, including sustainable sourcing guides and database of

25 GREEN CLIMATE FUND PAGE 23 OF 25 product and market development with MSMEs Lack of transparency and traceability in the supply chain investment/sourcing opportunities, including opportunities for financing Advisory services on structuring supply chain and supplier development, procurement practices adapted to MSMEs, building transparency in the supply chain, supplier financing, etc. Creation of business linkages (market orientation tours, MSMEs visiting investing markets, inward buyer/investor trips, B2B meetings, direct linkages) G. Multi-Stakeholder Engagement Please specify the plan for multi-stakeholder engagement, and what has been done so far in this regard. At regional level, key stakeholders have been engaged under the Latin American Cocoa Initiative. CAF through consultations with the governments of the targeted countries, has received official endorsement letters where focal points have been assigned for ILAC. Furthermore at the international level, the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD) and the International Cocoa Organization (ICCO) have stated and engaged through signed Memorandums of Understanding with CAF about their interest in becoming strategic partners of the initiative. At the country level and through the ILAC program preparation, participatory meetings have supported the development of a regional fine cocoa sector baseline that has been validated by all ILAC country members and key stakeholders. Building upon the on-going multi-stakeholders engagement process already started in Colombia, Ecuador, Trinidad and Tobago and Dominican Republic, key stakeholders and focal points will participate in the ILAC Forum in Peru (September 22 nd 23 rd ), where a more detailed working plan with stakeholders will be discussed. The overall country stakeholders mapping has identified over 200 actors within the beneficiary countries. The ILAC will play a key role as a catalyst for regional engagement of key stakeholders, providing important opportunities for leveraging knowledge and expertise exchange. Multi-stakeholders engagement will be encouraged through their active participation in all steps of project design, implementation and monitoring meetings. Exchanges between different target countries will be actively promoted through the ILAC regional working plan and other specific activities to be identified through project design. H. Status of Project/Programme 1) A pre-feasibility study is expected to be completed at this stage. Please provide the report in section J. 2) Please indicate whether a feasibility study and/or environmental and social impact assessment has been conducted for the proposed project/programme: Yes No 3) (If Yes, please provide them in section J.)Will the proposed project/programme be developed as an extension of a previous project (e.g. subsequent phase), or based on a previous project/programme (e.g. scale up or replication)? Yes No (If yes, please provide an evaluation report of the previous project in section J, if available.) I. Remarks

26 GREEN CLIMATE FUND PAGE 24 OF 25 J. Supporting Documents for Concept Note Map indicating the location of the project/programme Financial Model Pre-feasibility Study Feasibility Study (if applicable) Environmental and Social Impact Assessment (if applicable) Evaluation Report (if applicable)