Climate Finance and SPP

The Future of Public Procurement: Climate Finance and Sustainable Public Procurement

ITCILO

Create new jobs, improve decent jobs and livelihoods

DEVINVEST PROGRAMME

Sustainable Development Investments

WHERE TO INVEST

Fragile, post-conflict, emerging economies and BRICS+

OUR PARTNERS

ILO, UN Agencies, Development Banks, International Organizations, Governments, Universities

Global Competence Development Facility

OUR SERVICES

Training, non training services, projects

Almost Three Decades of Experience in Procurement Management

Comprehensive capacity-development Projects

Master Public Procurement Management for Sustainable Development

Professional Certification Diploma in Public Procurement Management

Short courses and tailor-made professional training in Procurement

New Frontiers in Sustainable Procurement?

厚积薄发“Thick accumulation before thin production”

New Frontiers in Sustainable Procurement?

Innovation and Technology

Climate Change Mitigation and Adaptation

Social Inclusion and Human Rights throughout Supply Chains

Circular Procurement

Net Zero Impact and sustainable infrastructures

Climate Finance & Public Procurement

Responsible business conduct and human rights criteria and due diligence processes

E-procurement, AI and new technologies in procurement processes.

1. Procurement Practices in Climate Finance

Private Finance will increase heavily

What could be the impacts in the long-run?

Lack of capacity of governments to design climate aligned projects

No obligations to impose governance and SPP standards

PP unable to influence climate-aligned results which guarantee governance

Report on Procurement Practices in Climate Finance

Current Barriers and Aims

SUSTAINABLE PUBLIC PROCUREMENT

CLIMATE FINANCEINSTRUMENTS

FINANCING FOR DEVELOPMENT

CLIMATE FINANCE

What can be done?

GUIDING QUESTIONS

HOW?

How can Public Procurement leverage better Climate Financing?

PROJECT LEVEL

CONTRACT LEVEL

POLICY LEVEL

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

• Unit of Analysis: Contract

• Source: ITCILO - Sustainable Procurement Online Training Course for the World Bank

Action Plan for piloting climate-related SPP

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

Policy Level

Importance to elaborate an Action Plan for piloting climate-related SPP processes

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

Climate financed and associated risk captured by SPP

RISKS, ELEMENTS, CRITERIA

2. Circular Procurement and Resilient Buildings

• Global Framework for Action
• Harnessing sustainable and circular public procurement to drive demand for near-zero emissions and resilient buildings

Government and Local authorities ROLE

SPP as key driver for transformation

Through Circular and SPP Policies and Processes, Governments can:

Foster decarbonization and resource efficiency through whole-life cycle assessments and setting disclosure standards

Achieve carbon reduction by promoting circularity strategies

OBJECTIVES

Stimulate innovation by encouraging reuse, modular design, low-carbon materials, and traditional techniques

Enhance resilience and social inclusion by encouraging practices such as urban mining and circular design that benefit communities

“Move the focus to whole-life sustainability”: FIDIC

Net Zero Clauses“Incorporation of Net Zero requirements / mechanisms for the design, procurement, construction and operation in FIDIC contracts” The FIDIC Carbon Management Guidance on:

Procurement evaluation

Carbon managment mechanism

Special Provisions for Red/Yellow/Silver/Green/Gold/Emerald/ Blue Books

3. Innovation and Technology

3. Innovation and Technology

Technological Innovations in SPP

Artificial Intelligence and Machine Learning

Digital Procurement Platforms

Blockchain Technology

4. Social Considerations and Human Rights

4. Social Considerations and Human Rights in Procurement - New Trends

UN Guiding Principles on Business & Human Rights

MDBs Environmental and Social Safeguards

Regional Example: European Union

Meaning reveals itself when you read something many times

Objectives concerning building materials:

• Prioritizing on-site assets
• Recycled and end-of-life use
• Local, sustainable, bio/geo-sourced
• Low carbon, energy efficient materials
• Use of products and components ensuring easy maintenance and repair for life extension, aligned with circular economy
• Eco-design and sufficiency and waste prevention principles,
• Enhancing carbon balance through storage and absorption in building materials
• Prioritize Retrofitting
• Material Circularity
• Design for Circularity

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

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

From Reverse-stress Testing to Risks SPP can address

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

Sustainability Safeguards in IFIs

World Bank - World Bank Environmental and Social Framework (ESF) - World Bank Environmental and Social Standards (ESS) International Finance Corporation (IFC): - Performance Standards on Environmental and Social Sustainability IFAD: - Social, Environmental and Climate Assessment Procedures (SECAP) African Development Bank (AfDB): - Integrated Safeguards System (ISS) European Investment Bank: - Environmental and Social Standards Inter-American Development Bank (IDB) - Environmental and Social Policy Framework (ESPF)

Putting together TOOLS and APPROACHES on SPP and Climate Finance at: - Governance/Policy level - Project level - Contract level which are recognized as best practices and guarantee governance protection

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?

Governments could exert their power at early stages of the construction value chain as:

• Regulators (setting policies and standards that promote sustainable construction practices and incentivize innovation for both developers and investors)
• Investors (allocating funds to projects that prioritize sustainability and innovation (e.g., green funds)),
• Urban planners (deciding what, where, and how to build, thereby shaping environmental and social impacts) to “lead by example through ambitious procurement policies with particular attention to public building procurements.

Business & Human Rights momentum in EU

EU Directive on Corporate Sustainability Due Diligence (2024) Links with Public Procurement:

• Contracting authorities may, according to the Public Procurement Directives, take into account environmental or social aspects complying with the obligations of this Directive as part of the award criteria for public and concession contracts or contract performance conditions
• Exclusion Grounds: “Contracting authorities may exclude or may be required by MSs to exclude from participation in a procurement procedure any economic operator where they can demonstrate by any appropriate means a violation of applicable obligations in the fields of environmental, social and labour law, including those stemming from certain international agreements ratified by all Member States and listed in those Directives, or that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable”

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UN Guiding Principles on Business and Human Rights (2017)

UNGP 6, Commentary: «Unique opportunity to promote awareness of and respect for human rights by enterprises, including through the terms of contracts» Human Rights Due Diligence

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Considerations from a Contract Level Perspective

Toolkit Structure

Activity:

• Rationale
• Instruments
• Supporting Tables and Boxes

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