3 July 2007
TAPPING THE POTENTIAL OF ENVIRONMENTAL FUNDS
By Yibin Xiang (CBD Secretariat), Yoko Watanabe (GEF Secretariat) and Alberto Paniagua (RedLAC)
Since the early 1990s, many countries, particularly developing countries, have adopted the concept of trust funds for environmental protection, and established one or more environmental funds. The number of environmental funds is currently estimated to be more than 100 world-wide, and is steadily growing. Among the 118 countries that have submitted their third national reports to the Secretariat of the Convention on Biological Diversity (CBD), over two-thirds of them noted that national-level environmental funds are either in place, under preparation, or planned in their countries. A study on national biodiversity strategies and action plans shows that new environmental funds will continue to emerge, especially in Africa and Asia.
Most environmental funds are designed to support long-term management of national environmental issues, and naturally have a focus on biodiversity and protected areas management. Many environmental funds in Latin America are specialized in nature conservation. Diverse approaches have been used to set up national environmental funds, but they can normally be classified as endowment funds, sinking funds, revolving funds or a combination of the three. The investment revenues generated from environmental funds, in particular endowment funds, are used to cover long-term recurrent management costs of national protected areas systems and associated operational costs.
Most recently, the eighth meeting of the Conference of the Parties (COP) to the CBD encouraged governments and institutional stakeholders to promote environmental funds and share information and experience through networks and other channels. This was the first time that environmental funds had featured prominently into a decision of the Convention in charge of the global biodiversity agenda since 1992. The issue on environmental funds will also be part of the agenda for the second meeting of the Ad Hoc Open-ended Working Group on Review of Implementation, to be held in Paris in July 2007, and the ninth meeting of the Conference of the Parties in Bonn in May 2008.
As a contribution to the implementation of the afore-mentioned COP decision, the Latin American and the Caribbean Network of Environmental Funds (RedLAC) organized an expert group meeting on management of environmental funds, from 9-11 May 2007 in Lima, Peru. RedLAC is a network of 21 Environmental Funds that has financed more than 10000 biodiversity projects in the Latin American region. Together, they manage approximately US$ 850 million and have a combined annual operational budget of more than US$ 80 million for conservation activities in the region.
The three-day highly charged meeting explored the critical issues related to management of environmental funds: conceptual framework and operational context; raising and leveraging resources for conservation and sustainable development; investment portfolio management; new financial mechanisms and tools; resource allocation modalities; implementation in the field; monitoring and evaluation; learning platform; global finances for biodiversity; and niche for environmental funds. The issue on private partnership and its increasing opportunities for environmental funds were also discussed. A report of the Expert Group Meeting on Environmental Funds will be presented at the July 2007 meeting of the Ad Hoc Open-ended Working Group on Review of Implementation under the CBD.
National environmental funds have emerged to be an effective financial option at the national level for exploring innovative and sustainable financial mechanisms in support of the implementation of the Convention’s goals. In many countries, national environmental funds have played a larger role than just as a financial institution. They have actively participated in, and contributed to, national strategy and policy development related to environment and biodiversity, and also have been instrumental in developing public awareness on environmental and biodiversity issues at the national level. Many environmental funds have helped collect and disburse finance from diverse revenue sources, including payments for ecosystem services, taxation and fees, and donations from individuals and businesses. For example, one percent of the corporate tax in Trinidad and Tobago is used to establish an Environmental Fund, which now has accumulated over US$ 175 million in assets. Most national environmental funds have harbored financial expertise related to biodiversity and know-how that are often scarcely found in other biodiversity institutions.
Major biodiversity donors, in particular the Global Environment Facility (GEF) and the government of the United States, have invested a considerable amount of resources to develop and strengthen national environmental funds in the past decades. The GEF has been a pioneer and supporter of more than 60 environmental funds world-wide, and most of them are focused on supporting long term management of national systems of protected areas to conserve biodiversity of global significance. In the Latin American region alone, GEF has invested a total of more than US$ 220 million to establish a number of innovative environmental funds. According to its draft strategic paper on biodiversity for this current replenishment cycle (FY2007-2010), the GEF plans to continue its support on innovative sustainable financial mechanisms, including environmental funds, to support long-term management of national systems of protected areas.
The recent submission of the European Union to the biodiversity convention signals an emerging trend of new donor approaches towards national environmental funds. The German development agency, the KfW, has announced its plans to venture into this new but rather proven field of supporting national environmental funds.
While most environmental funds possess distinct national characteristics, fundamental constituents of an environmental fund remain largely the same. Existing environmental funds are best positioned to provide advice and suggestions on the development and strengthening of new environmental funds. They can work together to address common challenges and issues, such as those related to institutional and financial capacities, laws and regulations, governance and coordination. In this regard, RedLAC provides a convenient example.
Certain issues can also benefit from global consideration. Common standards can be developed, for instance, on the accounting of administrative costs, and monitoring indicators and systems. Even an international certification scheme may be explored in order to enhance external donors’ confidence in individual environmental funds. Regular exchange and sharing of experience and lessons learned in Africa, Asia and Europe, building upon the RedLAC experience, may also be promoted at the international level.
National environmental funds are only one of many national financial mechanisms available for supporting the national implementation of the Convention. Establishing a successful environmental fund requires substantial capacity and commitment at the national level. But their potential as an institution to pull together various national and international, public and private resources has not yet been fully utilized and remains to be tapped for effective conservation and sustainable use of biological diversity.