Jul 29, 2024
The Climate Investment Funds’ (CIF) forestry portfolio is a crucial source of funding for developing countries — accounting for 18 percent of the 9.5 billion global public climate mitigation finance, between 2010 and 2022. It pioneered a unique approach to protecting and managing the natural environment by providing direct financing to Indigenous People and local communities through the Dedicated Grant Mechanism (DGM), empowering them to sustainably manage natural resources by directly accessing and self-determining the use of financing.
These are two key highlights from a new, independent evaluation of CIF’s Forest Investment Program (FIP). CIF commissioned the study, titled “Midterm Evaluation of the Forest Investment Program,” which was completed by Indufor and ICF to assess what elements of the FIP and DGM have or have not worked, for whom, and under what conditions. The study drew on data, analysis, and case studies from across the CIF’s forestry portfolio which consists of 52 projects in 13 countries.
The learning-oriented study also found that CIF could strengthen the transformative impact of its forestry portfolio by more fully operationalizing the core features of its business model – bringing together diverse stakeholders and multilateral development banks (MDBs) to develop country-led investment plans – a process called CIF’s ‘programmatic approach’ in short. By placing greater attention on scaling mechanisms, systems thinking, and developing a sustainability plan that explicitly engages with both small- and large-scale drivers for deforestation, CIF could improve forest management and lead to sustained livelihood benefits.
Reflecting on the study's lessons and recommendations, CIF Evaluation and Learning lead Neha Sharma notes that the evaluation highlights important lessons to consider for future program development, especially during the initial planning phases, to realize more impactful outcomes at project completion.
She notes: "An important lesson coming clearly from this evaluation is the importance of upfront work during the planning stage on two critical aspects: first, examining what systems and structural changes can be addressed through the investments; second, how the investments will be sustained and scaled after the funds stop flowing. Looking at these aspects upfront can bring focus on both small- and large-scale drivers to deforestation and forest degradation. Otherwise, there is a risk that the burden of change may fall on the smallest players that are already the most vulnerable, without a line of sight to sustained impacts."
Five key lessons from the FIP independent midterm evaluation:
1. Both FIP and DGM had significant successes. These included strengthening forest governance in 8 countries, helping 4 countries unlock REDD+ payments, bringing 35.9 million hectares of forest under sustainable use, and benefiting 2.8 million people.
2. All closed FIP investment projects achieved or exceeded their beneficiary targets. FIP projects delivered both monetary benefits (diversifying and increasing income and employment for people in forest and adjacent communities) and non-monetary benefits (increased social capital and improved access to food and public infrastructure and services for local communities).
3. The FIP and DGM used resources efficiently, with projects focusing on land titling for Indigenous communities, agroforestry, and policy reform/ implementation being especially cost effective.
4. The financing provided through FIP was highly relevant in the context of a funding gap between REDD+ readiness and results-based payments. However, many FIP and DGM-related forest and livelihood gains can be at risk of not being sustained due to insufficient community incentives, lack of market access, and systemic barriers, including tenure security and policy distortions.
5. Greater attention is needed to a few dimensions of change, such as scaling mechanisms and adaptive sustainability, and engagement with the private sector, to more fully realize the transformative impacts of CIF investments, including improved forest management and sustained economic benefits more fully.
WATCH: Independent evaluators Jeffrey Hatcher, FIP Evaluation Team Lead (Indufor), and Jessica Kyle, FIP Evaluation Deputy Team Lead (ICF), share lessons and insights from their field visits to Mozambique and the Democratic Republic of Congo (DRC), having met Indigenous communities and hearing their insights first-hand.
FIP as a bridge in forestry finance
FIP also contributed to countries unlocking alternative funding streams from other funders, such as the Global Environment Facility (GEF) and Central African Forest Initiative (CAFI). As independent evaluator Jessica Kyle explains, the importance of this is that FIP plugged what the evaluation calls the “missing middle” in terms of the REDD+ framework.
She explains, “What FIP did, which was important and, you know, sits in the missing middle between readiness and payments, is implement the policies and strategies that the country's developed. So FIP’s been extremely important to show how those policies and strategies can be put into practice and, in some cases, link national actions to payments.”
What we learned: Country lessons
In Brazil, FIP helped scale up low-carbon agriculture practices among small and medium farms in the tropical savannah of the Cerrado, one of only 36 biodiversity hotspots on Earth. Projects there resulted in 93,800 ha of recovered pasture areas and an intensification of cattle production, all while improving the environmental performance of farms.
In the DRC, Indonesia, Mozambique, and Peru, projects focused on land titling for Indigenous communities, agroforestry, and policy reform or implementation were particularly significant because they proved to be cost-effective. They also generated sustainable outcomes and mobilized additional finance.
In Lao PDR, FIP and World Bank support led to changes in the policy environment that helped attract additional private investment in forestry, including a US$30 million project to develop a new 3,500-hectare plantation (funded by Proparco, the Dutch development bank FMO, and Finnfund).
In Ghana, one success of the FIP was helping to catalyze private sector co-financing for a public-private partnership at a ratio of 1:9, in a market without a history of private investment. The project has restored over 7,100 hectares of degraded forest land to date, through the development of certified sustainable teak plantations that reduce timber demands on natural forests, with plans underway to expand the plantation further.
As only 6 percent of the overall FIP portfolio engaged the private sector, the evaluation pointed to a need to expand successes, found in Lao PDR and Ghana, to other countries. This study can inform how CIF and other climate finance programs incorporate private sector co-financing opportunities and ensure more sustainability in the longer term.
VIDEO: Watch the independent evaluators, Jessica Kyle and Jeffrey Hatcher, discuss lessons on engaging the private sector in forestry investments:
The evaluation has several sectoral, country, and investment-level strategic lessons that will inform the remainder of CIF’s forestry program implementation. The study brings accountability and transparency, as well as generates evidence for new CIF investments under its Nature, People and Climate Investment Program, for example, which also incorporates the DGM as a key feature in its design. The evidence and lessons will also be of interest to others in the climate finance sector, particularly the MDBs, other multilateral climate funds, policymakers, and program designers and implementers working in sustainable forestry.
