With the Global Green Growth Institute (GGGI) for Mongolia. 05 June 2017 Strategic Frameworks

Transcription

1 With the Global Green Growth Institute (GGGI) for Mongolia 05 June 2017 Strategic Frameworks

2 PAGE 1 OF 18 ver. 13 February 2017 Readiness and Preparatory Support Proposal How to complete this document? A readiness guidebook is available to provide information on how to access funding under the GCF Readiness and Preparatory Support programme. It should be consulted to assist in the completion of this proposal template. This document should be completed by National Designated Authorities (NDAs) or focal points with support from their delivery partners where relevant. Please be concise. If you need to include any additional information, please attach it to the proposal. Information on the indicative list of activities eligible for readiness and preparatory support and the process for the submission, review and approval of this proposal can be found on pages of the guidebook Where to get support? If you are not sure how to complete this document, or require support, please send an e mail to countries@gcfund.org. We will aim to get back to you within 48 hours. You can also complete as much of this document as you can and then send it to countries@gcfund.org. We will get back to you within 5 working days to discuss your submission and the way forward. Note: Environmental and Social Safeguards and Gender Throughout this document, when answering questions and providing details, please make sure to pay special attention to environmental, social and gender issues, in particular to the situation of vulnerable populations, including women and men. Please be specific about proposed actions to address these issues. Consult page 4 of the readiness guidebook for more information.

3 PAGE 2 OF 18 ver. 13 February 2017 SECTION 1: SUMMARY Country name: Mongolia Name of institution (representing National Designated Authority or Focal Point): Ministry of Environment and Tourism, Nature Conservation Fund 1. Country submitting the proposal Name of official: Mr. Batjargal Zamba Position: GCF Focal Point Telephone: zbatjargal@mne.gov.mn; z_batjargal@yahoo.com Full Office address: 7 th Floor, 22 Building, Amar Street, 8 th Micro district Sukhbaatar district, Ulaanbaatar, Mongolia 2. Date of initial submission 3. Last date of resubmission (if applicable) 4. Which entity will implement the Readiness and Preparatory Support project? (Provide the contact information if entity is different from NDA/focal point) 5. Title of the Readiness and Preparatory Support Proposal 14/02/2017 N/a National Designated Authority Delivery partner Accredited entity Name of institution: Global Green Growth Institute Name of official: Marco Yamaguchi Position: Principal Investment Specialist, Green Investment Services Telephone: +82(70) marco.yamaguchi@gggi.org Full Office address: 19F Jeongdong Bldg., 21 15, Jeongdong gil, Jung gu, Seoul , Republic of Korea Readiness Support for Enhancing Access to Green Finance in Mongolia This proposal seeks funding to support the Government of Mongolia (GoM) in establishing and scaling up a national financing vehicle to bring long term finance to projects and programs that stimulate green growth. Currently, Mongolia lacks a market instrument to facilitate the channelling of national scale green financing aligned with the government s priorities. 6. Brief summary of the request (200 words) Through a multi stakeholder, public private partnership approach, GGGI has been supporting the GoM and Mongolian Bankers Association (MBA) to establish the Mongolia Green Credit Fund (MGCF), including assessment and concept development stages in 2016 and further design and operationalization in Local stakeholders MBA, MET and other parties are committed to developing the MGCF and action plan is developed and approved by the Working Group. Based on the findings of the Concept Stage, the sub sectors with greatest potential impact include: a) Small scale renewable and alternative electricity and heating solutions for peri urban areas b) Green and affordable residential buildings c) Waste management and sanitation technologies and services in peri urban areas d) Energy efficiency measures for buildings, SMEs, and industrial markets This proposal directly complements ongoing work to improve financing for and evidence based management of the MGCF. This proposal seeks co funding to: (i) prepare investment projects/programmes within the scope of three high impact sub sectors (a, b, and c), (ii) undertake market and technical assessments to ensure the investment potential of projects/programmes to scale up the MGCF, enabling the development of bankable funding proposals. 7. Total requested amount and currency USD 350,000

4 PAGE 3 OF 18 ver. 13 February Anticipated duration May 2017 April 2018 (total number of months: 12) 9. Is the country receiving other Readiness and Preparatory Support related to the GCF? Yes No A GCF Readiness and Preparatory Support project for Mongolia was approved in February 2016 covering two areas: 1) Establishing and strengthening National Designated Authorities (NDAs) or Focal Points (FP) 2) Strategic frameworks for engagement with the Fund, including the preparation of country programmes. The project aims to strengthen NDA/FP s capacity in setting systematic country coordination mechanisms, developing a strategic framework as a basis for the preparation and implementation of funding proposals, and conducting roles and responsibilities as per decision B.04/05 including no objection procedure. Due to a change of delivery partner, project implementation is expected to begin in April Given the partially overlapping timelines of the projects, potentially valuable synergies are anticipated as the projects address distinct areas of Mongolia s Readiness in terms of strategic planning and investment proposal development.

5 PAGE 4 OF 18 ver. 13 February 2017 SECTION 2: COUNTRY READINESS LOGICAL FRAMEWORK Please complete the table below, which enables a country to assess its readiness for the GCF and set targets for strengthening its readiness, including proposed outputs and activities to improve the country s readiness. For further guidance on completing the table, please refer to the guidebook Accessing the GCF Readiness and Preparatory Support Programme. *Outcomes 1 and 2 will not be done by GGGI but by XAC Bank OUTCOMES 1 BASELINE TARGET ACTIVITIES (including key outputs or deliverables where applicable) 1. Country capacity strengthened NDA/focal point lead effective coordination mechanism 1.2 No objection procedure established and implemented 1.3 Bilateral agreements between the country and the GCF executed Monitoring, oversight and Workshop streamlining of climate finance Strategic workshop to NDA 2. Stakeholders engaged in 1 7 consultative processes 2.1 Stakeholders engaged in consultative processes 2.2 Country programmes, including adaptation priorities, developed and continuously updated 2.3 Stakeholder consultations conducted with equal representation of women 2.4 Annual participatory review of GCF portfolio in the country organized 3. Direct access realized Candidate entities identified and nominated for accreditation 3.2 Direct access entity accredited Entity/ies annual/multi annual work programme developed Based on decisions: B.08/10, annexes XII, XIII & XIV; B.08/11; B.11/10, annex I; B.12/20, annex I

6 PAGE 5 OF 18 ver. 13 February Funding proposals through enhanced direct access modality approved 4. Access to finance Structured dialogue between the NDA/Accredited Entities and the GCF Secretariat organized 4.2 Country programmes, concept notes, including on adaptation, developed that implement highimpact priorities identified in INDCs and other national strategies or plans Project/programme preparation support, including for adaptation, to Market demand and investment potential study Small scale RE and alternative energy solutions to peri urban areas develop funding proposals provided Market demand and investment potential study Waste management and sanitation solutions Market demand and investment potential study Green and affordable residential buildings Energy efficiency measures for buildings, SMEs, and industrial markets was included in the summary, but not here (co financed by GGGI) Legal service consultancy scale up phase of the MGCF 4.4 Funding proposals, including for adaptation, that are aligned with country priorities approved 5. Private sector mobilization Private sector engaged in country consultative processes 5.2 Enabling environment for crowding in private sector investments at national, regional and international levels exists 5.3 Funding proposals for private sector projects/programmes, including for adaptation, approved (Detailed activities are listed in Section 5) Workshops Inception workshop to Mongolian Bankers Association (MBA) Validation workshop to MBA

7 5.4 Funding proposals under the Private Sector Facility programmes (small and medium sized enterprises and mobilizing funds at scale) submitted and approved TOTAL READINESS AND PREPARATORY SUPPORT PAGE 6 OF 18 ver. 13 February Funding Proposal development support Developing funding proposa. In developing proposals, hold continuous consultative sessions with various stakeholders, including MET, MBA, NDA, line ministries, the end users and local Financial Institutes (FIs) to best reflect the interests of a wide range of stakeholders into the proposal.

8 PAGE 7 OF 18 ver. 13 February 2017 SECTION 3: ADDITIONAL INFORMATION Please explain how this grant will help deliver on the country s readiness needs as identified above and build on institutions, processes or existing work already underway in the country (maximum 500 words) This grant directly enhances Mongolia s readiness to access green finance and accelerate innovative multi stakeholder work underway in the country, especially for crowding in private investment. Pipeline project/programme development support in key green development areas of energy, housing, waste management and sanitation has the potential to unlock green financing at scale. With strong support of GoM and Mongolia s leading financial institutions, the Mongolia Green Credit Fund (MGCF) will address key barriers to national scale green financing, such as short loan terms, high interest rates, imbalanced risk reward perception, and limited bankability of green projects. The MGCF is a cornerstone of the GoM s efforts to mobilize private financing to help reach the GHG reduction targets fixed in Mongolia s INDCs. To overcome the current barriers to green finance at scale in Mongolia, the MGCF aims to: i) Provide medium and long term credit resources, ii) Provide lower cost credit resources to lower interest rate to end borrowers, iii) Offer a risk mitigation instrument(s) for high priority sub sectors, and iv) Support project/program pipeline development. Ultimately, the MGCF will contribute to wider access to finance for segments of the economy that are under served, resulting in a healthier environment, employment generation, and diversification of the economy. In the first phase, a multi stakeholder working group was established under the leadership of MET and MBA. The Global Green Growth Institute (GGGI) lead the development of the MGCF s preliminary business concept and legal framework assessment in The proposed MGCF structure received strong endorsement of GoM and MBA for finalization and launch in Based on the findings of the MGCF s Concept Stage, the working group determined four target sub sectors for pipeline project development to be financed by the MGCF (as listed in Section 1 6). For the MGCF Design Stage proposed here, with delivery support from GGGI, a detailed MGCF Business Plan will be developed confirming the fund s legal status and operational structure in Q GGGI supported pipeline project/programme development in energy efficiency (sub sector d listed in section 6 above) will commence in March This GCF Readiness grant will enable the collection of critical information about the market potential for small scale RE technologies, alternative energy supply to substitute coal, green building, and waste and sanitation management. Market potential at the sub sector level will review key gender and social aspects of market conditions, demand/supply, and enable informed decisions on the design of financial products to be offered by the MGCF to end users through participating financial institutions. In addition to the sub sector work, legal advisory and preparation of relevant fund operations documents will be carried out in tandem with the pipeline project preparation. While the fund is envisioned to be established in Q2 2017, prior to full funding proposal development, further legal work is expected to be required for satisfying international climate investor requirements. Following extensive pipeline project preparation and legal advisory, final preparatory activities for scaling up the MGCF will take place from Q3 2017, with a view to increase the capitalization of the MGCF and increase operations in Q Further, GCF is among the potential climate investors to the MGCF, from which additional funding will be sought. 7

9 PAGE 8 OF 18 ver. 13 February 2017 SECTION 4: BUDGET, PROCUREMENT, IMPLEMENTATION AND DISBURSEMENT OUTCOMES (same as in section 2) 1.4 Monitoring, oversight and streamlining of climate finance 4.3 Project/programme preparation support, including for adaptation, to develop funding proposals provided ACTIVITIES (same as in section 2) 1 Workshop Strategic workshop to NDA (Detailed activities are mentioned in Other relevant information of Section 5) Market demand and investment potential study Small scale RE and alternative energy solutions to peri urban areas and follow up implementation work. Market demand and investment potential study Waste management and sanitation solutions and follow up implementation work. Market demand and investment potential study Green and TOTAL COST (per activity) Consulta nts Travel COST CATEGORIES Workshops/ Trainings USD 12,000 USD 3,000 USD 5,500 USD 3,500 (GGGI staff USD 3,000 Material USD 500) Breakdown of staff cost Staff involved 1 project manager in HQ (20+ years of experience) with a daily rate of USD 580/day 1 project staff in HQ (2 3 years of experience) with a daily rate of USD 325/day Estimated number of manhours for both: 3.3 days. USD 164,000 USD 50,000 (legal) USD 9,000 EXPENDITURE AND IMPLEMENTATION SCHEDULE (add columns if >24 months) Others 6m 12m 18m 24m USD 105,000 (GGGI staff USD 105,000 for 3 staff) Seniority of staff to be hired 3 project staff in Mongolia, each with 5 8 years of experience. Daily fee/charge rate Approximately USD 135/day (USD 35,000/year) Level of effort in terms of days Each staff will be responsible for one market study and is 8

10 affordable residential buildings and follow up implementation work. Legal service consultancy scaleup phase of the MGCF READINESS AND PREPARATORY SUPPORT expected to spend approx. 260 business days per study. PAGE 9 OF 18 ver. 13 February Private sector engaged in country consultative processes 5.4 Funding proposals under the Private Sector Facility programmes (smalland medium sized enterprises and mobilizing funds at scale) submitted and approved (Detailed activities are mentioned in Other relevant information of Section 5) 2 Workshops Inception workshop to multistakeholders, Validation workshop to MBA (Detailed activities are mentioned in Other relevant information of Section 5) Funding Proposal development support Developing funding proposal In developing proposal, hold continuous sessions with various stakeholders, including MET, MBA, NDA, line ministries, the end users and local FIs, to best reflect their demand into the proposal. (Detailed activities are mentioned in Other relevant information of Section 5) USD 29,500 USD 6,000 USD 12,000 USD 11,500 (GGGI staff USD 10,000 Material USD 1,500) Breakdown of staff cost Staff involved 1 project manager in HQ (20+ years of experience) with a daily rate of USD 580/day 1 project staff in HQ (2 3 years of experience) with a daily rate of USD 325/day Estimated number of manhours for both: 11 days USD 95,000 USD 95,000 (GGGI staff), Seniority of staff to be hired 10+ years of experience Daily fee/charge rate Approximately USD 365/day (USD 95,000/year) Level of effort in terms of days Approx. 260 business days 9

11 PAGE 10 OF 18 ver. 13 February 2017 Portfolio Audit CONTINGENCY (UP TO 5%) DELIVERY PARTNER FEE (10%) TOTAL USD 5,000 USD 15, % USD 29, USD 350,000 10

12 PAGE 11 OF 18 ver. 13 February 2017 Procurement plan For goods or services to be procured/hired, list the items to be procured/hired (including consultants), the estimated cost of each item, and the procedure to be used (i.e. direct procurement, open tender, shopping, other and related thresholds). Please include the procurement plan for at least the first tranche of disbursement requested below. Consultant hiring: Legal advisory: USD 50,000 for max. 8 months (open tender) All purchasing will be carried out in accordance with GGGI s Rules for Procurement and Financial Regulations. The primary purchases under this project consist of medium value consulting services, which require competitive bidding, and low value non consulting goods and services. Disbursement schedule Specify the proposed schedule for requesting disbursements from the GCF, including amounts and periodicity. For amounts requested, keep to multiples of USD 5,000, and for periodicity, specify whether it s quarterly, bi annually or annually only. As previous agreed between GCF and GGGI, this project requests disbursement of 85% of project funds at the start of implementation on 1 May 2017, per GCF mandated ceiling, with final disbursement upon satisfactory completion of the project s planned activities in April The expected spending is as given in the timeline below. In addition, we also provide timeline of activities that will be conducted by in house staff (not consultants) and their respective costs for reference. These in house activities are coloured in blue. 11

13 PAGE 12 OF 18 ver. 13 February 2017 Additional information 12

14 PAGE 13 OF 18 ver. 13 February 2017 This box provides an opportunity to include further explanations related to the budget, procurement plan and disbursement schedule, including any details on the assumptions to justify costs presented in the budget. The technical cost of GGGI staff is allocated to the following activities: Three (3) market demand studies: $35,000 each ($135/day) (5 8 years of experience, full time for 12 months each) Funding proposal development and stakeholder engagement: $95,000 ($365/day) (7 10 years of experience) Three (3) workshops: $17,500 (total) GGGI will be utilizing in house staff as opposed to hiring short term consultants. The rationales are explained below. Cost effectiveness. The cost of utilizing in house staff is cheaper than hiring short term consultants. Value for money. For the same amount of money, we can utilize more than one in house staff who are incentivized to produce high quality outputs (evaluation, opportunities for promotion, etc.) and have a history of working together. Based on our experience to date, however, external consultants do not demonstrate a comparable level of loyalty/motivation since they are working mostly on a short term basis. Quick start. We can start working on these projects quickly as there is little need to go through a procurement process. Full engagement with the Gov. This is also in the client s best interests and GGGI will continue to engage with the Govt of Mongolia even after the completion of these Readiness activities as GGGI will proceed to establish the MGCF and seek financing for it. 13

15 PAGE 14 OF 18 ver. 13 February 2017 SECTION 5: IMPLEMENTATION ARRANGEMENTS AND OTHER INFORMATION Please attach an implementation map or describe how funds will be managed by the NDA/FP or delivery partner If the entity implementing the readiness support is not an accredited entity of the GCF, please complete the Financial Management Capacity Assessment (FMCA) questionnaire and submit it with this proposal. Implementation map

16 PAGE 15 OF 18 ver. 13 February 2017 Other relevant information The initiative for the MGCF grew out of a series of activities undertaken by MBA, its member banks, and the GoM s part of the Mongolian Sustainable Finance Initiative, which is aimed at providing a framework to help local banks integrate environmental and social considerations into lending decisions and product design. The MGCF has become a key aspect of the GoM s efforts to help meet the GoM s goals in the National Green Development Policy (NGDP), Intended National Determined Contributions (INDCs) to the Paris Agreement, and measures to reduce air pollution in urban areas. Mongolian commercial banks lack long term funding, and both real and nominal interest rates are high in Mongolia. In response, the MGCF initiative aims to blend public and private resources through a professionally managed, technically enabled financial mechanism (in Mongolia, through the legal form of Private Investment Fund). Additionally, the perceived lack of reward (or exorbitant risk) of green projects in the priority sub sectors particularly at the household and SME levels and the paucity of bankable projects have been identified as key obstacles to increasing green investment. Innovative risk sharing mechanisms (such as targeted first loss coverage) and front end technical assistance for project/program preparation are urgently needed. Taken together, MGCF will enable access to lower cost credit facilities that will ultimately help boost private sector participation in green project development. Furthermore, MGCF aims to provide risk sharing products addressing credit risk barriers to green project lending and assisting local FIs to pioneer new lending products. For the next stage, with leading support from GGGI a detailed MGCF Business Plan will be developed confirming the fund s legal status and operational structure. Pipeline project development in energy efficiency targeting Designated Entities identified under Mongolia s Energy Conservation regulations will commence in March Further preparatory activities will take place through 2017 with a view to incorporate the MGCF in Q with a phased scale up and operations launch approach through the end of Attachments: 1) Request letter by the MBA to GGGI March ) Action plan approved by MGCF Working Group June ) MGCF Concept development report August ) MGCF Legal and regulatory assessment December ) Validation letter of MGCF development January 2017 Detailed activities and budget allocations for pipeline project/programme preparation is given below per sub sector: a) Green and affordable residential buildings b) Small scale RE and alternative energy solutions for peri urban areas c) Waste management and sanitation in peri urban areas ACTIVITIES (same as in section 2) Market demand and investment potential study Small scale RE and alternative energy solutions to peri urban areas and follow up implementation work. Work with Utility and ERC to analyse current and potential electricity and heating demand and representative load curves with future projections to determine market size and investment potential Pay site visits to peri urban areas to investigate current and potential demand for energy efficiency measures Approach and discuss with ERC and other local specialized institutions to make TOTAL COST (per activity) Consultants COST CATEGORIES Travel $38,000 $3,000 (GGGI staff x2) Workshops / Trainings Others $35,000 (GGGI staff to be allocated)

17 PAGE 16 OF 18 ver. 13 February 2017 comprehensive assessment of current technologies to meet energy sourcing mix requirements of households and enterprises (including renewables, processed coal, biomass, fossil fuels) Comprehensive assessment on current cost (upfront and operational) for current technologies to meet energy sourcing mix requirements of households and enterprises Technical feasibility of off grid energy systems (Solar PV and thermal, ESS, hybrid system etc.) by approaching to local/foreign equipment providers. Minimum performance criteria of standardized modular PV and thermal solar systems appropriate for Mongolia s weather and climate conditions, including construction and installation requirements Preliminary assessment of small scale RE technology deployment relative to future grid extension plans and development scenarios Market demand and investment potential study Waste management and sanitation solutions and follow up implementation work Pay site visits to peri urban areas and discuss with relevant institutions to make assessment of current waste management and sanitation services and future projection to determine overall market size and investment potential Comprehensive techno economic feasibility for waste management and sanitation, identifying business linkage opportunities By approaching to waste management companies and relevant equipment/service providers (private and public), identity business opportunities and assess the market for waste management and sanitation services and potential opportunities to expand access to new or improved solutions through financial services/products Market demand and investment potential study Green and affordable residential building and follow up implementation work By collecting information from relevant institutions in public sector, real estate developers and local FIs, analyse current and potential affordable and green housing demand/supply and future projections to determine market size and investment potential o Operation of the overall housing market, with specific reference to the availability of a range of public and private housing types, the demand for housing, and the $38,000 $3,000 (GGGI staff x2) $38,000 $3,000 (GGGI staff x2) $35,000 (GGGI staff to be allocated) $35,000 (GGGI staff to be allocated)

18 efficiency of use of the existing residential housing stocks Through discussing with stakeholders such as real estate developers, local FIs and equipment providers as well as relevant public institutions, develop green and affordable housing techno economic landscape mapping, identifying business linkage opportunities in the property market in Mongolia Assessment of green and affordable housing success models for prospective low and middle income households and financing solutions Identify mechanism to improve affordability of housing, with respect to both the demand and supply of housing and associated infrastructure Legal service consultancy scale up phase of the MGCF Preparation of legal documents and contract between MGCF with asset management company, participating FIs, shareholders and other relevant parties with a view to complying with international climate finance requirements Development of other relevant tools, templates and manuals to scale up operations and introduce new products/services per sub sector Funding Proposal development support Develop funding proposal In developing proposal, hold consultative sessions with various stakeholders, including the end users and local FIs, to best reflect their demand into the proposal. Support in establishing MGCF. Workshops (x3) Inception workshop to multi stakeholders Validation workshop: final presentation to Working Group members of MGCF (e.g. MBA and local Banks, government officers, etc.) Strategic workshop to NDA on creation of enabling environment for crowding in private sector investments and MGCF management Portfolio audit $5,000 READINESS AND PREPARATORY SUPPORT $50,000 $50,000 PAGE 17 OF 18 ver. 13 February 2017 $95,000 $95,000 (GGGI staff to be allocated) $41,500 $9,000 (GGGI staff x6) $17,500 $15,000 ($13,000 GGGI staff, $2,000 Materials) CONTINGENCY (UP TO 5%) $15, DELIVERY PARTNER FEE (10%) $29, TOTAL $350,000 Funding proposals development support will aim to support GCF Accredited Entities (AE) to channel GCF funding to high impact green projects in Mongolia. GoM, MBA, GGGI and other relevant stakeholders have undertaken discussions with the following AEs to explore opportunities for joint funding proposal preparation:

19 PAGE 18 OF 18 ver. 13 February 2017 a) XAC Bank: Direct AE. As a member of MBA, XAC has been involved in the development of the MGCF from its inception. The GoM priority is to establish the MGCF as a national platform for climate finance available for all qualifying financial institutions, banks and non banks alike. XAC has expressed interest in participating, but XAC is also in a position to directly access and disburse GCF credit resources to its own clients. As a single, medium sized commercial bank, it is unlikely that XAC Bank alone could serve the full scope of green project demand in Mongolia. The MGCF offers a path for XAC to further leverage its climate finance first mover advantage and experience to channel funds to reach clients and markets beyond its current reach. b) ADB: International AE. ADB conducted a preliminary energy efficiency market assessment for industrial process improvement measures. Given ADB s resources, ADB may be in a position to access larger scale climate funds as well as contribute its own resources. c) FMO: International AE. As a founding member of the Mongolian Sustainable Finance Initiative (MSFI), FMO has keenly tracked the MGCF development. FMO has expressed interested to assess the fund design, pipeline and launch timeline, with plans to visit Mongolia and Republic of Korea in March 2017 to discuss further with key stakeholders. As a result, while it s too early for them to make any commitment on MGCF, we agreed to collaborate TA work on 1) market assessment on heating solution in Ger area and 2) fund management (i.e. fund manager capacity building). d) IFC: International AE. As a founding member of the Mongolian Sustainable Finance Initiative (MSFI), IFC has keenly tracked the MGCF development. IFC has expressed support for the MGCF concept, but further details about pipeline project/programme potential, which this project aims to address.