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Procurement Practices in Climate Finance- Final Report -

Research Question n.1

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What is the current status of the application of sustainable procurement practices within climate finance around the world?

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Q1

ACTIVITY

Desk Research on Procurement Practices within Climate Finance

Literature review

Interviews

Consultancy

OUTCOME

  • Gaps in bridging CF and SPP
  • No guides or guidelines available on how to leverage public procurement through SPP to best support Climate Finance intervention

Research Question n.2

What lessons and best practices can be derived from diverse global experiences of implementing climate finance mechanisms and instruments to supprt future procurement practices?

Q2

ACTIVITY

Analysis of Collected Information

OUTCOME

Enabling Conditions to Climate Finance

  • Sustainable Finance Taxonomies
    • Panama Sustainable Finance Taxonomy

Perceived Gaps:

  • External debt pressures
  • Discrepancy in Climate Finance Reporting
  • High External Debt Burden
  • Financial Burden on Developing Nations

Research Question n.3

How can innovative financial mechanisms in different regions, landscapes, and sectors be effectively utilized to enhance climate-aligned project through sustainable procurement practices?

Q3

ACTIVITY

Develop case studies of specific selected Climate Finance interventions

OUTCOME

15 case studies of adaptation and mitigation Climate Finance interventions in different regions identified, considering different financial instruments where strong procurement standards were implemented:

  • Public Funding
  • Private Funding
  • Blended Funding

11 cases selected as most relevant

Research Question n.4

How can the quality of project procurement design and strategic contracting be scaled and aligned with climate financing mechanisms to support developing countries in institutionalizing climate finance through reformed Governance and Procurement systems which are climate Resilient and Sustainable?

Q4

ACTIVITY

Deliver a Toolkit of Recommendations and Approaches Customized for World Bank Operations

OUTCOME

Toolkit

14 Steps to support future-proof Climate Finance

  • Policy Level
  • Project Level
  • Contract Level

POLICY LEVEL

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  • Unit of Analysis: Country
  • 6 STEPS: Activity, Rationale, Instruments, Template, Criteria

PROJECT LEVEL

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  • Unit of Analysis: Specific initiative in the climate finance space
  • 8 STEPS: Activity, Rationale, Instruments, Template, Criteria

CONTRACT LEVEL

  • Unit of Analysis: Contract
  • Source: ITCILO - Sustainable Procurement Online Training Course for the World Bank

Policy Level

STEP 1.6: Elaborate an Action Plan for piloting climate-related SPP processes

Step-by-step guidelines to develop an Action Plan for climate-related SPP

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Methodology at Operational Level: Climate financed and associated risk captured by SPP

Project Level

Step 2.5: Select the climate finance instruments

ELEMENTS AND CRITERIA FOR THE ALIGNMENT OF CLIMATE FINANCE AND SPP

  • Element n.1: Climate Risk Assessment
  • Element n.2: Benefit from Greenhouse gas emissions reduction
  • Element n.3: Sustainability of financing and Market Readiness
  • Element n.4: Procurement cycle and processes
  • Element n.5: Monitoring

Elements

Subelements

Criteria

Sources and Tools

Project Level

Step 2.5: Select the climate finance instruments

a recognized

Project Level

Step 2.5: Select the climate finance instruments

tons

summarize

Project Level

Step 2.5: Select the climate finance instruments

Step 2.5: Select the climate finance instruments

Recommendations and Conclusion

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Disclose Full Costs and Benefits of Sustainable Electric Mobility

Harnessing Digital Technologies for Measuring and Valorizing Ecosystem Services

Promote Financial Innovation in the Power Sector

Explore No-Debt Innovative Financial Mechanisms

Integrated policy actions for LAC

EU-related case studies can inspire the conceptualization, design, and implementation of integrated policy actions for target countries in LAC, shifting the unit of analysis from single initiatives to a portfolio of mutually reinforcing initiatives.

  • Proactive steps towards integrating sustainability into economic frameworks and unlocking finance for nature-based solutions.
  • Innovative financial instruments, such as:
    • Biodiversity Credits (Bio-credits)
    • Natural Asset Companies (NACs)
    • Debt-for-Nature Swaps

What's Next?

Workshop for Bank’s Procurement Specialists with the Conclusions of the Analysis for:

Lead the possible change in transforming the WB’ approach for better results in climate change response: to refine the immediate actions to be taken based on their feasibility

Step 3

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Test the validity of the Recommendations and approaches in the Toolkit: to critically understand the validity of the Toolkit based on open discussion and specific ad-hoc activities among WB procurement experts

Step 2

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Informative and Build capacity: to share the findindings and practices in climate financing and reinforce capacity to approaches, mechanisms, sectorial interventions and aid risk assessment related in bridging climate financing and development needs.

Somos seres visuales

Step 1

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Questions?

Research on most effective climate finance instruments and mechanisms in supporting various climate-related activities (Adaptation/Mitigation) across different sectors (energy, infrastructure, transport, water, waste management, emerging technologies)

Step-by-step guidelines to develop an Action Plan for climate-related SPP

  1. Context & background
  2. Legal framework
  3. Institutional framework & definition of roles and responsibilities
  4. SPP implementation
  5. Capacity building
  6. Communication strategy & awareness-raising
  7. Monitoring & control
  8. Budget

Analysis of Collected Information identifying relevant experiences, lessons learned and best practices arising from those cases

  • Pros and cons of different financial mechanisms distilled
  • Socio-environmental criteria utilized as part of a developed framework considering safeguards
  • Various practices to inform future strategies for more effective climate-aligned project procurement operations worldwide.

2. Methodology at Operational Level: Climate financed and associated risk captured by SPP

Structured process for climate financed related procurement

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POLICY LEVEL STEPS:

  • Get a sense of the country
  • Gauge the climate finance readiness at a country level
  • Evaluate the procurement maturity at a country level
  • Acknowledge sectoral specificities
  • Check the fit with potential best practices
  • Elaborate an Action Plan for piloting climate-related SPP

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Desk research of existing experiences on the application of procurement practices within climate finance. A model, including key indicators has been developed to systematize the literature review.

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Climate Specialist was hired to support the desk research and analysis

11 cases selected as most relevant with more insight into procurement, highlighting innovation in different financial mechanisms, for a deeper dive into relevant illustrations of climate-aligned project procurement practices. Template mapping out the procurement implications against the MAPS Pillars:

  • Introduction
  • Climate relevance
  • Type of finance
  • Climate financial mechanism used
  • Relevant SDGs
  • ESG coverage
  • Sectoral priorities
  • Procurement Implications (mapped against OECD MAPS Pillars)
  • Potential for scale-up and replication
  • Policy recommendations to enhance the transferability readiness

TAKEAWAYS:

  • Isolated best practices, lack of comprehensive approaches in bridging CF and SPP at project level
  • Inspiration can be drawn from EU-related case studies to conceptualize, design, and implement integrated policy actions for target countries in LAC, shifting the unit of analysis from single initiatives to a portfolio of mutually reinforcing initiatives

Guiding questions:

  • Which are the common RISKs of the financing instruments and how they can impact the Climate response, Resilience and Sustainability of the Investments for Developement?
  • How sustainable procurement can render the design and preparation of project procurement activities better aligned with Climate Finance particularities?
  • How can Sustainable Public Procurement support climate investment while protecting and enhancing governance at the country level?
  • How to assist developing countries institutionalize climate financing through the mobilization of domestic and foreign financing while at the same time supporting governance, and enabling the institutional and managerial setup to support reforms in procurement systems which are climate change oriented?

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To gain valuable insights and understand the current landscape of procurement in climate finance, a series of interviews was conducted with key organizations. Organization for Economic Cooperation and Development (OECD) European Bank for Reconstruction and Development (EBRD) International Fund for Agricultural Development (IFAD) Asian Development Bank (ADB)

Considerations from a Contract Level Perspective

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PROJECT LEVEL STEPS:

  • Define the project purpose
  • Map sustainable development priorities
  • Recognize climate contributions
  • Set the project scene
  • Select the climate finance instruments
  • Ensure strategic alignments
  • Plan enabling actions
  • Implement Monitoring & Evaluation