Documentof The WorldBank FOROFFICIALUSEONLY ReportNo: 39592- GLB PROJECTAPPRAISAL DOCUMENT ONA PROPOSEDTRUST FUND GRANT FROMTHE GLOBAL ENVIRONMENTFACILITY INTHEAMOUNT OFUS$20MILLION TO CONSERVATION INTERNATIONAL FOR A SECOND CRITICAL ECOSYSTEM PARTNERSHIP FUNDPROJECT (CEPF-2) November8,2007 Rural Development, Natural Resources and Environment Sector Unit Sustainable Development Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = US$1 FISCALYEAR July 1 - June30 ABBREVIATIONSAND ACRONYMS AFD Agence Franqaise de DCveloppement CABS Center for AppliedBiodiversity Science CAS Country Assistance Strategy CBD Convention on Biological Diversity CEPF Critical Ecosystem Partnership Fund C I Conservation International EA EnvironmentalAssessment GEF Global Environment Facility GEFSEC GEF Secretariat IA ImplementingAgency IBA Important BirdArea IBRD International Bank for Reconstruction and Development MDG MillenniumDevelopmentGoals METT Management Effectiveness Tracking Tool MSP Medium-sized Project NGO Nongovernmental organization O.P. Operational Program PA Protected Area PDF Project Development Facility PMO Project Management Office PRA Participatory Rural Appraisal PRSP Poverty Reduction Strategy Paper RAF Resource Allocation Framework RIT Regional Implementation Team SGP Small Grants Program SIDS Small IslandDeveloping States SP1, SP2, SP4 GEF Strategic Priorities 1,2 and 4 STAP Scientific and Technical Advisory Panel WB World Bank WWF World Wide Fundfor Nature Vice President: James W. Adams, EAPVP Sector Director: James Warren Evans, ENV Sector Manager: Rahul Raturi, EASRE Task Team Leader: Kathy MacKinnon, ENV FOROFFICIAL USE ONLY GLOBAL SecondCriticalEcosystemPartnershipFundProject CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1 . Country and sector issues.................................................................................................... 1 2 . Rationale for Bankinvolvement ......................................................................................... 2 3. Higher level objectives to which the project contributes .................................................... 3 B . PROJECTDESCRIPTION ................................................................................................. 4 1. Lendinginstrument............................................................................................................. 4 2 . Project development objective andkey indicators.............................................................. 4 3. Project components ............................................................................................................. 5 4. Alternatives considered and reasons for rejection .............................................................. 9 C . IMPLEMENTATION ........................................................................................................ 10 1 . Partnership arrangements.................................................................................................. 10 2. Institutional and implementation arrangements................................................................ 11 3. Monitoring and evaluation o f outcomes/results ................................................................ 11 4 . Sustainability andReplicability ........................................................................................ 12 5. Critical risks and possible controversial aspects............................................................... 14 6. Loadcredit conditions and covenants............................................................................... 15 D APPRAISAL SUMMARY . ................................................................................................. 16 1. Economic and financial analyses ...................................................................................... 16 2. Technical........................................................................................................................... 16 3. Fiduciary ........................................................................................................................... 16 4. Social ................................................................................................................................. 16 5. Environment ...................................................................................................................... 16 6. Safeguard policies............................................................................................................. 17 7. Policy Exceptions andReadiness...................................................................................... 18 Annex 1: Country andSector or ProgramBackground ......................................................... 19 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies .................25 This document has a restricted distribution and may be used by recipients only in the performance of their official duties.Its contents may not be otherwise disclosed without World Bank authorization. Annex 3: ResultsFrameworkandMonitoring ........................................................................ 27 Annex 4: DetailedProjectDescription ...................................................................................... 37 Annex 5: ProjectCosts............................................................................................................... 42 Annex 6: ImplementationArrangements ................................................................................. 43 Annex 7: FinancialManagementandDisbursementArrangements ..................................... 49 Annex 8: ProcurementArrangements ...................................................................................... 61 Annex 9: EconomicandFinancialAnalysis ............................................................................. 62 Annex 10A: SafeguardPolicyIssues ......................................................................................... 63 Annex 10B: SummaryIndigenousPeoples PlanningFramework ......................................... 66 Annex 1OC: Summary Process Frameworkfor InvoluntaryRestrictions ............................ 71 Annex 11:ProjectPreparationand Supervision ..................................................................... 77 Annex 12: Documentsinthe ProjectFile ................................................................................. 78 Annex 13: Statementof LoansandCredits .............................................................................. 79 Annex 14: Country at a Glance ................................................................................................. 81 Annex 15: IncrementalCost Analysis ....................................................................................... 82 Annex 16: STAP RosterReview ................................................................................................ 91 Annex 17: IndependentEvaluationExecutiveSummary ..................................................... 102 MAP GEF#35366 WORLD SECOND CRITICAL ECOSYSTEMPARTNERSHIP FUND PROJECT APPRAISAL DOCUMENT GLOBAL PROJECT EASRE Date: November 8, 2007 Team Leader: Kathleen S. Mackinnon Sector Director: James Warren Evans Sectors: General agriculture, fishing and Sector Managermirector: RahulRaturi forestry sector (100%) Project ID: P100198 Themes: Biodiversity (P) Focal Area: Biodiversity Environmental screening category: Not Lending Instrument: Specific Investment Loan Required [ ] Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 20.00 from GEF Borrower: Conservation International 2011Crystal Drive, Suite 500 Arlington VA United States 2400 Tel: 1-703-341-2400 Fax: 1-703-553-0721 cepf@conservation.org www.cepf.net ResponsibleAgency: Conservation International 1919MStreet NW Suite 600 Washington D C UnitedStates 20036 Tel: 1-202-912-1808 Fax: 1-202-912-1045 cepf@conservation.org www.cepf.org Project implementationperiod: Start February 25,2008 End: December 31,2012 Expectedeffectiveness date: February 18, 2008 Expectedclosing date: April 30,2013 Does the project depart from the CAS incontent or other significant respects? Re$ PAD A.3 [ ]Yes [XINO Does the project require any exceptions from Bankpolicies? Re$ PAD D.7 [ ]Yes [XINO Have these beenapproved by Bank management? [ ]Yes [XINO I s approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated "substantial" or "high"? Re$ PAD C.5 [ ]Yes [XINO Does the project meet the Regional criteria for readiness for implementation? Re$ PAD D.7 [XIYes [ ] N o Project development objective Re$ PAD B.2, Technical Annex 3 The Project Development Objective is to strengthenthe involvement and effectiveness o f civil society incontributing to the conservation and management o f globally important biodiversity. Global Environment objective Re$ PAD B.2, TechnicalAnnex 3 The Global Environment Objective is to achieve sustainable conservationand integrated ecosystem management inareas o f globally important biodiversity, through consolidating Conservation outcomes inexisting CEPF regions and funding to new critical ecosystems. Project description[one-sentence summary of each component] Re$ PAD B.3., Technical Annex 4 Component 1. Strengthening Protection and Management o f Globally Significant Biodiversity. CEPF-2 would support activities that strengthen management and address threats to biodiversity across broad landscapes that include a matrix o f land uses, including protected areas, biological corridors and highvalue conservation sites inproduction landscapes. Component 2: IncreasingLocal and National Capacity to integrate Biodiversity Conservation into Development and Landscape Planning. CEPF-2 would support activities to integrate biodiversity conservation inproduction landscapes and sectors, including enabling civil society groups to plan, implement and influencebiodiversity outcomes as effective partners in sustainable development. Component 3: MonitoringandKnowledge Sharing. This component would support monitoring and evaluation o f individual projects and programs as well as deriving and sharing lessons learned within and across hotspots. Component 4. EcosystemProfile Development and Project Execution. This component would support three subcomponents: a) the development o f ecosystem profiles, b) the role o fRegional Implementation Teams as an extension service and ingrant- making and c) overall execution and administration o f the global program by Conservation International, through the CEPF Secretariat. The GEF Grant will be usedsolely to fund subprojects under components 1and 2. Which safeguard policies are triggered, ifany? Re$ PAD D.6, Technical Annex 10-A Forests (OP/BP 4.36) - Policy i s triggered, but not applied. Involuntary Resettlement (OP/BP 4.12) - Yes Indigenous Peoples (OP/BP 4.10) - Yes The project has an environmental assessment o f C. Significant, non-standard conditions, if any, for: Re$ PAD C.6 Boardpresentation: None Loadcredit effectiveness: This Agreement shall become effective on the date that evidence inform and substance satisfactory to the IBRD shall have been furnished to the IBRDdemonstratingthat: a. the Donor Council has approved the hnd-raising strategy referred to in Section 5.01 o f the Financing Agreement; b. the Donor Council has approved an indicative list o f Biodiversity Hotspots selected for investment under the Fund; c. the Donor Council has approved the revised Operational Manual; d. C I has established an internal audit fbnction, with staffing, resources and functions based on terms o freference satisfactory to IBRD; and e. Execution and delivery o f the Agreement on behalf o f C I has been duly authorized by all necessary corporate action and, upon execution and delivery, the Agreement shall constitute the legal, valid, bindingand enforceable obligation o f each Party hereto. Covenants applicable to project implementation: DatedCovenant: a. Adoption o f TOR for external audit acceptable to the Bank, within 120 days o fproject effectiveness. b. Agreement on TOR for program audit to assess economy, efficiency and effectiveness in relationto achieving the CEPF objectives, within 12 months o fproject effectiveness. c. Completion o f a program audit o f CEPF by the internal auditor within 24 months o f project effectiveness. A. STRATEGICCONTEXTAND RATIONALE 1. Country and sector issues 1.Earth's biologically richest ecosystems are also the most threatened. Together these "biodiversity hotspots" harbor more than 75 percent o fthe most threatened mammals, birds, and amphibians yet they have already lost 86 percent o f their original habitat.' These critical areas for conservation are also home to millions o fpeople who are highly dependent on healthy ecosystems for their livelihoods and well-being. 2. Inresponse to the growing threats to species andhabitats, the Critical EcosystemPartnership Fund(CEPF) was launchedin2000 to provide strategic assistance to engage non-governmental organizations (NGOs), community groups, and other civil society partners inconserving Earth's biodiversity hotspots. CEPF is apartnership between Conservation International(CI), the Global Environment Facility (GEF), the World Bank (Development Grant Facility), the Government o f Japan, andthe John D.and Catherine T. MacArthur Foundation. InMarch, 2007 the Agence Franqaise de De`veloppement (AFD)joined the program as the sixthpartner. 3. The hotspots approach to conservationi s a highlytargeted strategy for tackling the challenge o fbiodiversity loss at the global level. As manyhotspots cross national borders, the approach transcends political boundaries and fosters coordination andjoint efforts across large landscapes for local and global benefits. Duringits first phase, CEPF established active grant programs in 15 regions within 14 hotspots, with spending plans authorized for more than $100 million. By the end o f March 2007, CEPF had committed $89.8 million ingrants to more than 600 civil society groups in33 countries inSouth andCentral America (4 hotspots, $28.9m), Africa and Madagascar (5 hotspots, $28.8m), the Caucasus ($7m), and East Asia (4 hotspots, $25.lm). ByDecember, 2006, grant programs innine o f these hotspots closed after five years o f implementation. Each grant awarded helps implement a region-specific investment strategy developed together with diverse stakeholders and approvedby a council o f high-level j representatives from each CEPF donor institution. Grant recipients range from small farming cooperatives to local and international NGOs. Achievements include more effective management o f 20 million hectares o fprotected areas, including creation o fmore than nine millionhectares o f new protected areas; promotion o f biodiversity-friendly management o f forests and agricultural crops; strengthened community management o f natural resources and key habitats; successful piloting o fnew financing mechanisms, including payments for ecosystem services and successful interventions by civil society to influence development decisions. 4. A 2005 independent evaluation o f the CEPF global program was very positive and recommended that the donors seek further expansionopportunities (Annex 17). Current CEPF fundingfrom the World Bank and GEF finished inmid2007; the project was ratedsatisfactory inthe ImplementationCompletionReport. Although the CEPFprogramhasbeen shownto be highly effective, there are still significant conservationneeds, bothinthe 14hotspots already targeted and inother critical ecosystems that have not yet benefited under the CEPF program. Inseveral hotspots, investmentsonlytargeted selectedregions, while other areaswithin the hotspot also have major conservation needs. Moreover, in2005, based on new research by 1The 30 hotspots eligible for Bank support are listed in Annex 1. 1 nearly 400 experts, C I revisedthe number o fhotspots up from 25 to 34, o fwhich 30 are eligible for Bank andGEF support -seeAnnex 1. 5. The proposedproject would support a second phase o f the global CEPF program to expandand replicate successful civil society implementationmodels more broadly within at least 14 of the 30 eligible hotspots, including at least nine new ones. It would build on the lessons learned under the first phase o f CEPF, as well as recommendations from the independent evaluation to further strengthen the programinexistinghotspots andto expand activities to marine ecosystems andto new hotspots. By focusing on a small number o f critical ecosystems, and expanding into at least nine new hotspots, the project would maximize overall impact. The program can also serve as a mechanismto direct other donor investments to the hotspots. 6. Expected global benefits will arise from the increasedparticipation and capacity o fnational andlocal civil society groups to manage and deliver conservationinitiatives ina strategic and effective manner andto integrate biodiversity conservation into development and landscape planninginregions o f recognizedglobal importance. These interventions are expected to lead to generation, adoption, adaptation, and applicationo f lessons for improved conservation outcomes, relevant both to CEPF and the broader Bank and GEFbiodiversity portfolios as well as to other small- andmedium-size grant programs. 2. Rationale for Bank involvement 7. The World Bank has a long commitment to biodiversity conservationboth through lendingto client countries and as an Implementing Agency o f the GEF. Over the last 15 years, the Bank has supported more than 500 biodiversity projects, including bothprotected areaprojects and projects which support more sustainable natural resource management. The number o f biodiversity projects andprojects with biodiversity components has increased steadily each year, with GEF accounting for approximately 40% o f the funding and IBRD and IDA contributing 29% each to the overall portfolio. Many o f these projects have been large scale and government-led, though GEF Medium-sized projects (MSPs) have enabled more involvement o f internationalNGOs and a few national NGOs. 8. This project would complement these efforts by: Providing a streamlinedmechanism for capacity buildingand engagement o f a wide range o f local civil society actors, including local NGOs, community groups, Indigenous Peoples, and the private sector, many o f whom are outside the reach o f traditional .. fundingmechanisms. Supporting projects that combine community development and livelihood opportunities with small, but effective, conservation initiatives to promote environmental sustainability Promoting an ecosystem approach to conservationthrough strategic investment planning so that individual grants contribute to overall conservation targets 2 . Targetingnew CEPF programs to complement and addvalue to activities supported by the Bank andother donors, including support to client countries under the new Resource . Allocation Framework (RAF) adopted by the GEF. Deriving anddisseminatinggoodpractice for greater involvement o f civil society in biodiversity and natural resource management, through local capacity buildingand testing new management models and incentives. 9. Under the hotspot approach, more than 90 countries could qualify for CEPF support. Thus CEPF has the potential to be able to complement conservation efforts inthose Bank client countries with modest conservation funding, and to focus resources to innovative civil society andprivate sector conservationefforts that may not otherwisebe supported. Expansioninto marine ecosystems would also expand the opportunities for small islanddeveloping states (SIDS). 10. The CEPF program is a unique example o f a global partnership that links the comparative strengths o f the Bank with bilateral agencies, leading conservation NGOs and private foundations within a common approach to build a powerful biodiversity fund. The emphasis on empowerment o f civil society promotes strong local ownership, good environmental governance, effective national and local institutions andmore efficient and cost-effective delivery o f global and national benefits. 3. Higherlevel objectivesto which the projectcontributes 11. This is a global program designed to addressbiodiversity loss inBank client countries that have ratified the Convention on Biological Diversity (CBD). Inmany countries CEPF activities would complement national priorities identified inenvironment strategies, CAS and PRSPs to promote sound natural resource management and sustainable development linked to protection o f ecosystem goods and services. Prior to implementation each ecosystem profile would be endorsed bythe relevant national GEF Focal Points to ensure consistency with country biodiversity priorities, as outlined innational Biodiversity Action Plans. Additional cofinancing at the regional andnational levels will also be actively sought. 12. GEF OperationalStrategy/programobjectiveaddressed by the project. The project supports the objectives o f the Strategic Priorities o f the Biodiversity Focal Area and specifically supports SP 1(Promoting Sustainability o f Protected Area Networks) and SP 2 (Mainstreaming Biodiversity into Production Landscapes and Sectors) as well as SP 3 (Prevention, Control and Management o f Invasive Alien Species). By taking a strategic approach to conservation investments within critical ecosystems, the CEPF investments are also consistent with OP12 (Integrated Ecosystem Management). CEPF will also incorporate recent GEF Scientific and Technical Advisory Panel (STAP) guidance with respect to mainstreamingbiodiversity to maximize impact, effectiveness, and replicability. Mainstreamingbiodiversity considerations into management o fproduction landscapes that include, or affect, areas o fhighconservationvalue i s central to the CEPF purpose. 3 Enhancing the capacity o f civil society organizations for improved natural resource management inherently links national and global biodiversity benefits to environmental sustainability and local economic benefits. 13. The program is unique because o f its global scale and its focus on civil society participation in biodiversity conservation. It complements other GEF investments at national level by focusing strategically on programs o f investments inregions o f highest biodiversity value. It promotes an ecosystem approach to biodiversity conservation by supporting landscape-level conservation outcomes and transnational cross-border initiatives. The CEPF-2 project includes a specific strategy to promote cross-learning and replication, buildingon lessons learned. 14. The CEPF-2 project is fully consistent with, and explicitly supports, the goals and agreedwork programs o f the CBD, including the protected areas work program as well as ecosystem- specific work programs inforests, mountain, marine, islandand drylandhabitats. By directing resources to the most critical and irreplaceable ecosystems, CEPF directly supports the CBD goal "to achieve by 2010 a significant reduction o fthe current rate o f biodiversity loss at the global, regional and national level." The project responds to recognized national needs to target conservation fundingmore efficiently and effectively through development o f strategic investmentplans for critical ecosystems through a consultative andparticipatory process. B. PROJECTDESCRIPTION 1. Lendinginstrument 15. The CEPF i s a long-term global program with multiple donors. The CEPF-2 project would support a specific time slice o f that program, through a Grant from the GEF Trust Fundfor $20 million over five years. The CEPF-2 grant would be combined with at least $80 million inco- funding from other donors over the same period, with all funds managed by Conservation International. 2. Projectdevelopmentobjectiveand key indicators 16. The ProjectDevelopmentObjectiveis to strengthen the involvement and effectiveness o f civil society incontributing to the conservation and management o f globally important biodiversity. 17. The GlobalEnvironmentObjectivei s to achieve sustainable conservation and integrated ecosystem management inareas o f globally important biodiversity, through consolidating conservation outcomes inexisting CEPF regions and expanding fundingto new critical ecosystems. 18. These objectives would be achievedby providing strategic assistance to locally-basedNGOs, community groups, Indigenous Peoples, the private sector and other civil society partners to support: a) strengthened protection and management o fbiodiversity within selected hotspots and critical ecosystems, b) increased local and national capacity to integrate biodiversity conservation into development and landscape planning, and c) expanded and improved monitoring andlearning to demonstrate biodiversity impact and enable adaptive management 4 and replication. The CEPF program provides a field-tested mechanism for achieving these objectives, demonstrated by successful experience since its inception in2000. 19. Key indicators related to the project development and global development objectives are: At least 14critical ecosystemshotspots with investmentprograms involving civil society inconservation, including at least ninenewregions. At least 600NGOs and civil society actors, including local community organizations and the private sector, actively participate inconservationprograms guidedbythe CEPF ecosystem profiles. At least 20 millionhectares o fkeybiodiversity areas with strengthened protection and management, including at least 8 million hectares o fnew protected areas. 0 At least 1millionhectares inproduction landscapes managed for biodiversity conservation or sustainable use. 3. Projectcomponents 20. The proposedproject would buildupon the experiences and lessons learnedinphase 1and recommendations from the independent evaluation to expandthe CEPF global program, including expansion into new ecosystems andhotspots. The CEPF-2 project would focus on critical ecosystems within at least 14biodiversity hotspots inWorld Bank client countries that have ratified the CBD. Investment strategies for three new hotspots have already been developed and would be the first to be implemented: Polynesia-Micronesia, Indo-Burma (Indochina region); and the Western Ghats and Sri Lanka (Western Ghats region). Other ecosystems for investment would be chosen based on biodiversity status and threats, conservation needs, social and political environment, and current or plannedinvestment by other donors. The donor partners would also review eligibility criteria to enable CEPF investment inmarine ecosystems within, and adjoining, hotspots. Supplemental criteria are being developed for the CEPF Donor Council to decide whether to re-invest or exit from hotspots that have already received CEPF support. 21. The number o fhotspots approved for new investment would continue to be staggered to ensure adequate funding and implementation capacity. Total investment level per hotspot will vary depending on needs and local capacity. Ineach hotspot, disbursement of grants will be guided by ecosystem profiles based on a stakeholder-driven prioritization process to create a shared strategy from the outset. 22. The project would include four interlinked components. GEF grant fundingwould be used exclusively to support EcosystemGrants under components 1and 2. The other donors, including CI, AFD andthe JohnD. and Catherine T. MacArthur Foundation, will support all components. 5 Component1: Strengtheningprotectionandmanagementof globallysignificantbiodiversity (TotalBudget:$52.1 million; GEF$13.22 million). 23. CEPF-2 would focus on key biodiversity areas and address threats to biodiversity across broad landscapes that include a matrix o f landuses, including protected areas, biological corridors andhighvalue conservationsites inproductionlandscapes, including indigenous reserves, community andprivate lands managed for a conservation objective. Support to civil society groups would contribute to the strengthened protection and management o f more than 20 million hectares o f key biodiversity areas within hotspots, including at least 8 million hectares o f new protected areas. Specific activities will be selected on a competitive basis at the ecosystem level, as outlined inthe operational manual, but could include activities under the followingthemes: a) strengthening management o fprotected areas and other keybiodiversity areas; b) community and Indigenous Peoples' initiatives; c) innovative financial mechanisms for sustainability; and d) multi-regional priorities. 24. This component would finance civil society participation inimproving management and expansion o fprotected areas, conservationplanning, and support to communities, including indigenous groups and other partners, inmanagement and stewardship o f biologically-rich lands that buffer key biodiversity and protected areas. Activities to strengthen or pilot innovative financial mechanisms would also be supported. Component2: Increasinglocal andnationalcapacityto integratebiodiversityconservation into developmentandlandscapeplanning(TotalBudget:$23.9 million, GEF$6.78 million). 25, Reconciling ecosystem conservation with sustainable development on different scales across complex jurisdictional boundaries, often in situations o f weak governance, i s perhaps the major challenge facing the conservation and development community. Mobilizing civil society to play a more effective role inthis process is the CEPF niche. Grantees range fiom individuals, farming cooperatives and community organizations to research institutions, private sector organizations, and national and international NGOs.Many o f these groups also act as vital multipliers, hrther buildinglocal and national capacity for conservation. A key CEPF-2 goal i s empowerment o f civil society actors to take part in, and influence, decisions that affect local lives and livelihoods and, ultimately, the global environment. 26. CEPF would support activities to integrate biodiversity conservation inproduction landscapes and sectors, including enabling civil society groups to plan, implement, and influence biodiversity outcomes as effective partners insustainable development. Examples could include development o f community, municipal or regional land use plans, plans for local economic development, "territorial development" plans, certification for more sustainable management and private agreements. Suchparticipation will buildon local knowledge and technical expertise, and leverage social capital to bringinnovative ideas to solving local problems. The focal approach would be to strengthen protection o f critical biological corridors that link keybiodiversity areas within a multiple use landscape, including trans-boundary collaborationto protect key areas that straddle national boundaries. 6 27. This component builds upon Component 1through strategic and effective alliances to increase impact and sustainability, especially inproduction landscapes. Activities to be financed include catalyzing diverse partnerships andintegrated approaches, assisting inimproved land-use planningand activities that mainstreamconservation into management o fproduction landscapes, including collaborationwith the private sector andinformingpolicy and legislative frameworks. Component3: Monitoringandknowledgesharing(TotalBudget:$4.5 million; no GEF allocation). 28. This component would support monitoring and evaluation o f individual projects andprograms andderiving and sharinglessons learned within the hotspot. Monitoringandevaluation o f individual projects would be ledby Regional Implementation Teams (RITs) and would include: a) systematic analysis and documentation o f grantees' performance against individual project and ecosystem targets; b) assisting civil society groups, including local communities and Indigenous Peoples, to engage inparticipatory monitoring; and c) expanding and formalizing information sharing and learning opportunities across the hotspot. Additionally this component would support specific activities to strengthen outcomes monitoring andto document, disseminate and replicate lessons learned and good practice. Previous CEPF experience with monitoring andknowledge-sharing will be scaled upunder CEPF-2 to further strengthen capacity for adaptive management by CEPF partners andthe broader Conservation community. 29. This component would finance technical assistance and consultant services, training for participatory monitoring, hotspot review meetings, documentation o f lessons learned, and cross-site visits for targeted training and exchange programs to promote uptake o f good practice. Component4: Ecosystemprofiledevelopmentandprojectexecution(Total Budget:$19.5 million;no GEF allocation). 30. This component would support three subcomponents a) the development o f ecosystem profiles; b) the role o fthe Regional ImplementationTeams as an extension service and ingrant-making; and c) overall execution and administration o f the global program by CI, through the CEPF Secretariat. 31. Subcomponent 4a would finance the ecosystem profiles which provide the basis for grant making and overall implementation within selected hotspots. Profile development would be ledby civil society partners, selected through a competitive process. For each ecosystem profile, the investment strategy will be based on a stakeholder-drivenprioritizing process to identifyconservation targets, major threats, socioeconomic factors, and current conservation investment, 32. Subcomponent 4b would finance the role o f Regional Implementation Teams (FUTs), recruited on a competitive basis (as outlined inthe operationalmanual), to lead implementation o fthe ecosystem profiles, and assist other civil society groups indesigning, implementing and replicating successfwl conservation activities. The RITswould have full responsibility for 7 awarding all grants below a $20,000 threshold. RITs and local advisory groups will also play a role indeciding other grant applications (>$20,000) with the CEPF Secretariat. This subcomponent would finance technical assistance provided by the RITs, including training in grant development and implementationfor local groups, and evaluating grant applications. 33. Subcomponent 4c would finance overall management and administration o f the program by C I through the CEPF Secretariat. The Secretariat i s responsible for strategic and financial management, oversight andreporting for the global program. This includes supervision o f the ecosystem profilingprocess; training and management o f the RITs; and overall ecosystem portfolio development, grant-making, compliance on safeguards issues, and monitoring and reporting under supervision o f the regional Grant Directors. The Secretariat i s also responsible for fimdraising, donor coordination, and global information management and outreach, as well as development and implementation o f a program-wide replication and dissemination strategy. 34. This subcomponent would finance consultant services, technical assistance, and CEPF administration costs, including program management, financial management and annual audits, organizing independent evaluations, and communications and outreach, including website management, newsletter andpublicationproduction. 4. Lessonslearnedand reflectedin the projectdesign 35. Lessons learned duringthe first phase o f implementation and highlightedinthe independent evaluation include: 36. Needfor greater inclusiveness and transparency in decision-making. The ecosystem profiles are the primary tool for prioritizing conservation needs andplanning investmentstrategies. UnderCEPF-2 explicit efforts will bemade to informall stakeholders, including indigenous and local communities and the private sector, about the profile process and opportunities to access grants. 37. Roles of Regional Implementation Teams (RITs). Small grants programs usually require targeted efforts to access andbuild capacity among small local organizations. Inthis regard, the independent evaluation identifiedthe regional coordination units as one o fthe key strengths o f CEPF. CEPF has expanded the roles and responsibilities o f the RITs to further devolve responsibility for grant-makingdecisions, capacity buildingo f local partners andmonitoring o f individual projects at the regional level. Strategic oversight would remain at the Secretariat level to maintain focus and the reporting and safeguard standards required by the CEPF donors. 38. Needfor strengthened monitoring. Conservationoutcomes are difficult to attribute because theyusually result from the efforts o fnumerous actors. It is therefore difficult to determine how specific CEPF investments, separately or cumulatively, contribute to outcomes within a critical ecosystem. Under CEPF-2, monitoring will be strengthened by developing an explicit subset o f short-term benchmarks to monitor progress inachieving identified conservation targets for each ecosystem investment profile. As recommendedby the evaluation, monitoring at the portfolio level will also be strengthened and involve both the RITs and the CEPF Secretariat. 8 39. Socioeconomic and capacity benefits. While aiming for conservation outcomes, the process and implementationo f CEPF grants generates considerable socio-economic, governance and capacity impacts. Explicit efforts would be made under CEPF-2 to better capture these impacts inthe monitoring andevaluation frameworks at the ecosystem level throughthe development and testing o fnew tools. 40. Lessons learnedfrom other small grants programs. Experience from the Bank GEFportfolio shows that community benefits and small grants are a good way to engage a broad range o f stakeholders and elicit public support for protected areas but linking development activities to conservation outcomes remains a challenge. As part o f documentation o f lessons learned, the CEPF Secretariat and World Bankwould develop ajoint work program to assess the impact and value o f small grants programs inachieving biodiversity conservation. 5. Alternativesconsideredand reasons for rejection HotspotFocus 41. CEPF-2 active in all 30 eligible hotspots. This option was rejectedinfavor o f a more targeted approach so that CEPF ecosystem programs would be active inonly a limitednumber o f hotspots at any one time to maximize impact. 42. CEPF-2 tofocus only on "new hotspots that had not benefited under thefirst phase. This " option was rejected since in largerhotspots, several current CEPF programs focus on only specific sub-regions (e.g. only Sumatra inSundaland). Thus some first phase hotspots may require additional support to consolidate conservationgains or expansion to new regions. An initial indicative list o fpotential hotspots for investment has beenapprovedby the Donor Council. Investments innew regions will be phased and choices may be revised during implementation, according to emerging needs and other donor efforts. 43. CEPF-2 tofocus only on terrestrial habitats as inphase 1.Hotspots are defined according to terrestrialbiodiversity andphase 1o fthe CEPF focused on terrestrial systems. CEPF-2 would also support some conservation activities inadjacent marine and coastal habitats as part o f a more holistic approach to address agreed conservationneeds and hotspot targets. Implementationarrangements 44. CEPF to become an independent legal entity responsible only for grant-making so that C I wouldnot havethe dual role o fadministering the program andbeing a potential beneficiary from grant funds. This option was rejected because the CEPF receives additional benefits and services from linkages with C Iheadquarters andregional programs and Centers for Biodiversity Conservation. 45. Cap on grant resources available to CIand other international organizations. Under the first phase o f CEPF, C I could apply for up to 50 percent o f the total funds available globally for ecosystem grants. Over time, the C I share o f field grants declined to 26 percent o f the available 9 funding(as o fMarch312007), atrendthat is expected to continue. The emphasis under CEPF-2 would be to further empower and engage national and local stakeholders. Nevertheless local capacity may vary between hotspots andin some regions there may still be a substantial role for international NGOs, including CI, to take a leadinconservationprojects. Rather than establish a fundingcap for international NGOs, the project design incorporatesmeasures to ensure further transparency and devolution o f effective decision-making, including steps to avoid potential conflict o f interest. 46. Under CEPF-2, the role of RlTs would be awarded on a competitive basis and approved by the Donor Council. All RITs, whether C I or other locally-based organizations, would be ineligible to apply for additional CEPF grant funds withinthose regions where they serve as the RIT. All proposed grants above $20,000 to CI, would be approved by the CEPF Working Group (grants o f $20,000 and less will be awarded directly bythe RITs). The overall objective is to ensure that international organizations would not implement projects that could be successfully undertaken by local groups. C. IMPLEMENTATION 1. Partnershiparrangements 47. CEPF is a partnershipof CI, GEF, the World Bank, the Government o f Japan, the John D.and Catherine T. MacArthur Foundation andAFD. Partnerships are also a fundamental tenet o fthe program, which focuses on buildingalliances and coordinated approaches betweenNGOs, governments, donors and other sectors to contribute to better planning o f natural resource management and conservationinvestments and to promote their long-term success and sustainable outcomes. 48. Under CEPF-2, the partnership would retain the overall structure o f a Donor Council, Secretariat and Working Group. The Donor Council, comprised o f senior representatives from each CEPF donor institution,2 reviews and approves each ecosystem profile, annual spending plans andthe CEPF Operational Manual, which contains the specific operating policies and procedures o f the Fund. The Working Group, comprised o f technical experts from each donor institution, provides guidance to the Secretariat on strategy development, monitoring, and other aspects o f implementation. Members act as advisors to their respective Donor Council representatives and as CEPF focal points for their broader institutions. 49. Strengthening operational collaborationwith the CEPF donor partners will be an explicit priority duringimplementation. Activities will include engagingregional and national representatives o fthe partners and GEF ImplementingAgencies inthe planningprocess for each ecosystem. Eachprofile would include information on programs o f the World Bank and other donors inthe region to emphasize synergies andpotential linkages. Mechanisms would be developed for regular sharing o f information and collaboration, and further strengthening o f synergies and cooperationwith World Bank operations. Both the GEF and World Bank are representedon the CEPF Donor Council; the SDN VP, Kathy Sierra i s Acting Chair for the CEPF Donor Council. All Bank GEF projects, including global projects, are mappedto a Bank region. Since two o fthe f i s t three "new" hotspots fall within East Asia and the Pacific region, the CEPF-2 project i s mapped to EASRE. 10 2. Institutionalandimplementationarrangements 50. The CEPF implementation arrangements are designed to buildon lessons learned duringthe first phase, to enable continued expeditious, efficient support to diverse civil society groups, andto establish a clear and effective chaino faccountability for results. 51. C I will continue to administer and execute the project, through the CEPF Secretariat, onbehalf of the CEPF donors as detailed incomponent 4. The Regional Implementation Teams (RITs) comprised o f locally based civil society groups, will lead implementation within the hotspots. Each applicationto serve as the Regional Implementation Team will be reviewed by the CEPF Working Group, with final selection by the Donor Council through an approved transparent, competitive process. The C Imembers o f the CEPF Working Group and Donor Council will not participate inthe deliberations ininstances where CI, its branch office or affiliate, i s an applicant. The RITswill be responsible for the strategic implementation o f the ecosystem profiles and buildinga broad constituency o f civil society groups to work across institutional and geographic boundaries toward shared conservation goals. As recommendedby the independent evaluation, RIT responsibilities have been standardized and expanded to devolve further responsibilitiesto these teams. 52. All grants will be awarded on a competitive basis. The RITs will have direct decision-making authority for all grants up to $20,000. For grants above $20,000, the relevant team as well as CEPF Secretariat staff and other external reviewers as appropriate will be involved indecision- making within each hotspot. Grants above $250,000 would be subject to additional external technical review, including review by Bank regional staff as appropriate. Additional criteria will apply to grants to international organizations, including demonstrationof comparative advantage. Internationalproposals designed andimplemented with a local partner or incorporating strong capacity buildingwould be given preference. C I would not be eligible for a set share o f CEPF funds but would compete for CEPF grant funding on an equal basis with other groups. To avoid potential conflict o f interest, the individual groups that comprise the RITs, as well as other offices andprograms o f those organizations, would not be eligible for additional grants within that particular hotspot. Applications from formal partners o f those organizations that have an independent operatingboard o f directors will be accepted, but subject to additional external review. All proposedgrant awards over $20,000 to Conservation Internationalwill require approval on a time-bound no objection basis by the CEPF Working Group. The C I Working Group memberwould not participate inany aspect relatedto the grant submission or review and approval by the Working Group. 3. Monitoringandevaluationof outcomes/results 53. The CEPF monitoring approach would focus on monitoring and evaluation at three levels: the overall program, ecosystem andproject levels. Data gathered will inform decisions and adaptive management o f ecosystem portfolios and also feed into outreach and documentation o f lessons learned and best practice. 11 54. The independent evaluation recommendedstrengthening performance monitoring at a hotspot level intwo specific directions: i)involvingboththe Grant Directors based at the CEPF Secretariat and the locally based Regional Implementation Teams inecosystem-level analysis and reporting on a regular basis and ii)complementingthe use o f conservation outcomes as long-term operational targets with the development and adoption o f socioeconomic, policy and civil society measures and indicators to measure interim progress toward the outcomes. The proposedproject incorporates bothrecommendations. 55. At the hotspot/ecosystem level, each ecosystem profile would set the baseline, conservation targets and indicators against which progress will be monitored. Priorities for a second phase o f CEPF include: i)ensuring that conservationtargets and indicators are defined inall regions that receive CEPF funding; ii)improved outcomes monitoring at the ecosystem level inall critical ecosystems receiving funding; and iii)sharing the results widely to demonstrate biodiversity impact and enable adaptive management. Individual projects would use the GEF Monitoringtools, including the Protected Area management effectiveness tool SP1 and the GEF SP 2 tracking tools to assessthe biodiversity impact o fCEPF investments. At the ecosystem level, the RIT and other local partners would leadthe monitoring to further strengthen ownership andcapacity so that results feed into follow-up actions. 56. Results o fmonitoring at site and ecosystem levels will contribute to assessment o f progress in achieving the 2010 targets set by the CBD. This information will be calibrated against data on biodiversity status drawn from the Biodiversity Early Warning System developedby the Center for Applied Biodiversity Science at C I as well as data from other NGOs' regional programs. 57. The Bank will conduct semiannual supervision missions to assess progress andprovide input to overall project activities. Under CEPF-2, explicit mechanisms would beput inplace to ensure greater involvement inproject operations, including supervision, o fBank regional staff from headquarters and country offices. Inaddition, the Bank will conduct a midterm evaluation o f project execution no later than three years after the first project selection. 4. Sustainabilityand Replicability 58. The CEPF-2 project would contribute to ecological, institutional, social and financial sustainability. 59. Ecological sustainability. The fundamental premise o f CEPF i s that large-scale actions taken bymulti-lateral institutions andnational government agencies to protect biodiversity (andthe ecosystems on which many economic systems depend) are more likely to succeed ifthey are both influenced and supported by civil society. The CEPF-2 program would contribute to ecological sustainability inat least 14 hotspots through strategic civil society actions that would complement government and other donor conservation programs. All investments at the hotspot level would be made inaccordance with the strategic framework and five year investmentplan laid out inthe ecosystem profile. The project's components and specific elements are designed to interlink,with each complementing and buildinguponthe activities in 12 the other, to contribute to sustainability o fproject initiatives, influence larger policy and institutional framework, and ensure ecosystem conservation inthe long term. 60. Social and institutional sustainability. The CEPF experience over the past five years demonstrates that the program can strengthenpositive roles for civil society bybuildinglong- term skills and strengthened environmental governance. When local communities are enabled to contribute knowledge about the natural systems that form the basis o f their livelihoods and can articulate their economic andcultural interests, better andmore enduring decisions are likely to be made at national and international levels. A key component o f the RITs' responsibilitieswould be to assess potential projects for sustainability andto buildthe capacity o f local actors to design and implement appropriate conservation activities. CEPF-2 would empower a wide variety o f civil society actors to engage inbiodiversity conservation, to acquire a positive stake insustainable development programs, and to contribute to improved design, support, monitoring and sustainability o fthose efforts. At the midterm o finvestments ineachprofile, specific measureswillbeidentifiedandputinplaceto ensure sufficient strengthened capacity for collaborating organizations to sustain activities beyond CEPF grants, including training ingrant-making applications and information on other sources o f finance. 61. Financial sustainability. The CEPF is a long-term multi-donor program with different donors fundingdifferent time slices. The first phase o f CEPF leveraged an additional $130 million of non-CEPF funds toward specific projects and civil society activities within certain hotspots, thereby contributing to sustainability o f these efforts beyond CEPF involvement. Based on lessons from the first phase, CEPF-2 would also promote pilotingo f specific innovative financial mechanisms, including payments for ecosystem services andmarket transformation initiatives. Individual sub-projects are also requiredto consider sustainability issues. 62. The capacity o f CEPF to attract other donors, bothwithin, and beyond, the partnership, constitutes a significant market test o fthe initiative. It is predictedthat a second GEF investment inCEPF would leverage even greater additional funding, further illustrate the value o fthe program and encourage other donors to contribute both during, and beyond, the period o f GEFinvestment. The recent commitments from AFD recognizethe cost-effectiveness and utility o fthe CEPF program. There is no expectation o fGEF support beyondthis secondphase but it is expected that the overall CEPFprogramwould continue with funding from other donors. 63. Replicability. One o f the project activities i s development and implementation o f a focused replication strategy to disseminate information on best practices and lessons learned, including i)cross-siteexchangesbetweengranteesforlearninganddisseminationofbestpractice;ii) seminars, workshops and outreach activities to increase the uptake o f good practice, and iii) documentationand dissemination o f lessons learned by CEPF inmanaging a global grants program for the conservation community. Systematic information sharing, both through workshops and the CEPF website, will hrther build local capacity and disseminate experiences and good practice more broadly among the conservation community. 64. Regular liaison andpartnerships with national and international development agencies, relevant government agencies, andbusiness corporations will emphasize good practice andthe socioeconomic benefits o f fostering biodiversity conservation as part o f sustainable 13 development. Inparticular, more regular liaisonwith World Bank staff will be a focus to help replicate good practice within Bank operations. 5. Critical risks and possible controversial aspects 65. Risks include potential shortfalls inachieving the full $loom fundingtarget, due to changes in donor priorities, but experience from the first phase o f CEPF suggest that the expected additional co-financing will be secured. Economic and governance conditions, international terrorism, regional conflicts and lack o f local capacity could disrupt conservation efforts in some hotspots. Such risks are assessedinthe preparation o f the ecosystem profiles for each hotspot and further minimized by targeting multiple countries and critical ecosystems. 66. The expected risks and their ratings are summarized inthe following matrix: Risks Risk Rating RiskMitigationMeasures Expected co-financing may not N $62 million co-funding be secured infull commitments achieved. C I committed to fundraising strategy to raise additional $18 million. Donor Council approval o fprofiles and annual spendingplans assures investments consistent with agreed fundingcommitments. Reduction inconservation funds N CEPF i s not reliant on ingeneral due to changes in donor government political priorities priorities. Co-funding expected from a mix of donors, including NGO, MDB,bilaterals anda foundation. Economic downturns, M Investmentstrategies and international terrorism, and ecosystem profiles assess regional conflicts could disrupt risks prior to investment in conservation activities. any hotspot. Targeting multiplecountries and critical ecosystems also mitigates this risk. Lack o f interest and/or capacity M Criteria for choice o f o f local organizations to serve as ecosystem would include RITs civil society capacity and/or 14 Slow uptake o f funds due to N presence o f capable limitedcapacity o f local international NGO. organizations Levels o f investment will be based on assessment o f capacity o f locally-based organizations. RITs Inappropriate use o f grant funds M engaged to assist and train due to weak capacity and local organizations. inexperience o f local organizations RITsmonitor to ensure compliance and appropriate financial management. Overallrisk rating M RiskRating: H(Highrisk), S (Substantial Risk),M(Modest Risk), N(Negligible or Low Risk) 6. Loadcreditconditionsandcovenants Effectivenessconditions: This Agreement shall become effective on the date that evidence in form and substance satisfactory to the IBRD shall have been furnished to the IBRDdemonstrating that: a. the Donor Council has approved the fund-raising strategy referred to inSection 5.01 o f the Financing Agreement; b. the Donor Council has approved an indicative list o f Biodiversity Hotspots selected for investmentunder the Fund; c. the Donor Council has approvedthe revised Operational Manual; d. C I has established an internal audit function, with staffing, resources and functions based on terms o freference satisfactory to IBRD; and e. Execution and delivery o f the Agreement on behalf o f C I has been duly authorized by all necessary corporate action and, upon execution and delivery, the Agreement shall constitute the legal, valid, binding and enforceable obligation o f each Party hereto. DatedCovenants: a. Adoption o f TOR for external audit acceptable to the Bank, within 120 days o fproject effectiveness. b. Agreement on TOR for program audit to assess economy, efficiency and effectiveness in relation to achieving the CEPF objectives, within 12months o fproject effectiveness. c. Completion o f a program audit o f CEPF by the internal auditor within 24 months o f project effectiveness. 15 D. APPRAISAL SUMMARY 1. Economicandfinancialanalyses 67. For a complete Incremental Cost Analysis, refer to Annex 15. Incremental costs will also be calculated for each ecosystem profile. 2. Technical 68. The ecosystem profiles prepared for each hotspot are the mainplanningtool for prioritizing conservation needs and strategies. These profiles are based on wide consultation and scientific and technical input from stakeholders within the region. The Donor Council reviews and approves the profiles andproposed levels o f investment. This review involves the Working Group and provides an opportunity for additional review by Bank staff representing the regions, both at headquarters and incountry offices. 3. Fiduciary 69. Financialmanagement.The first phase o f CEPF already has financial management systems in place that meet Bank financial management requirements, e.g. financial and programmatic risk assessmentsand an anti-terrorism screening process. The Bank has conducted an updated assessment to ensure the adequacy o f financial management as stipulated inBP/OP 10.02. 70. Procurement.CEPF already follows Bank procedures for procurement. The CEPF OperationalManual sets out templates for grant agreements and procurement provisions. It will berevised andupdated as needed, as a condition ofproject effectiveness. 4. Social 71. While this project principally aims to improve the conservation and management o f biodiversity, it would also support projects that enhance livelihoods, ecosystem services and economic benefits for local people andprovide incentives to participate insustainable management o f natural resources. Specific measures on social safeguards issues have been incorporatedinthe Operational Manual to address potential impacts on local communities and Indigenous Peoples, including development of an Indigenous Peoples Planning Framework and a Process Framework for Involuntary Restrictions. These frameworks will be available on the CEPF website and Bank Infoshop. 5. Environment 72. The CEPF-2 project has been assigned a category o f C. Despite this overall categorization, all individual CEPF projects have to be screened for safeguards and appropriate mitigation taken as needed; the process is laid out inthe OperationalManual. 16 6. Safeguard policies Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OPBP 4.01) [ XI [I Natural Habitats (OPBP 4.04) [I [XI Pest Management (OP 4.09) [I [XI Cultural Property (OP 4.1 1) [I [XI Involuntary Resettlement (OPBP 4.12) [XI [I Indigenous Peoples (OPBP 4.10) [XI [ I Forests (OP/BP 4.36) [XI [I Safety o f Dams (OPBP 4.37) [ I [XI Projects inDisputedAreas (OPBP 7.60)* [I [XI Projects on InternationalWaterways (OPBP 7.50) [I [XI 73. Environmental Assessment. The CEPF-2 project will addresspriority Conservation objectives. Project activities will be selected on a competitive basis according to criteria that will ensure that resources are directed to addressing conservation needs while ensuring minimumadverse environmental effects. All project proposals will be screened for safeguard issues. 74. Natural Habitats. By design, CEPF would finance activities that promote conservation o f natural habitats. All project activities will be consistent with conservation priorities. It i s anticipatedthat any activity funded by CEPF would be consistent with existingprotected area management plans or other resource management strategies that are applicable to local situations. Beyond the selection criteria for identifying project activities, it i s not anticipated that any additional measures will be requiredunder this policy. 75. Forestry. The Project fully complies with the Bank's Forest Policy. Project activities will focus on conservation and more sustainable management o f forests. Beyond the selection criteria for identifyingproject activities, it is not anticipated that any additional measures will berequired underthis policy. 76. Involuntary Resettlement. It i s possible that sub-projects may restrict access to resources through enforcement o fprotection measure. Incases where sub-projects could lead to restrictions inaccess to resources, proponents must demonstrate that they have followed an appropriate process framework to establish off-setting management or compensation measures. 77. Indigenous Peoples. Many o f the world's remaining areas o fhighbiodiversity overlap with lands occupied and utilized by Indigenous Peoples. Individual project activities would be selected at the ecosystem level but it i s expected that Indigenous Peoples, as well as other civil society actors, will participate inidentifyingconservationpriorities andhave access to CEPF grants. Some CEPF-funded activities could potentially impact indigenous communities, either positively or adversely, depending on the nature of actions on the ground. Projectsproposed for CEPF funding should demonstrate that they have made provisions for evaluating the potential impacts on indigenous communities and site-specific action plans may be required. *By supportingtheproposedproject, the Bank does not intend toprejudice thefinal determination of theparties' claims on the disputed areas 17 For more information on safeguard measures see Annex 10. 7. Policy Exceptions and Readiness 78. The project i s designedfully consistent with Bankpolicies andno exceptions to policy are required. 18 Annex 1: Countryand Sector or ProgramBackground GLOBAL: Second CriticalEcosystemPartnershipFundProject 1. The Millennium EcosystemAssessment showed that over the past 50 years, human activities have changed ecosystems more rapidly and extensively than at any comparable period o f time inhuman history, largely to meet growing demands for food, fresh water, timber, fiber and fuel. This hasresultedina substantial and largely irreversible loss o f biodiversity. These changes have contributed too manynet gains inhumanwell being and economic development but have been achieved at growing environmental costs, biodiversity loss and the exacerbation o fpoverty for some groups o f people. The degradation o f ecosystem services could grow significantly worse duringthe first half o f this century andis abarrier to achieving the Millennium Development Goals (MDGs). Unless addressed, these problems will substantially diminishfuture options and the ecosystem goods and services available to future generations. 2. Earth's biologically richest ecosystems are also the most threatened. Together, these "biodiversity hotspots" harbor more than 75 percent o fthe most threatened mammals, birds, andamphibians yet they have already lost 86 percent o f their original habitat. In response to these growing threats, the Critical EcosystemPartnership Fund(CEPF) was launched in2000 to provide strategic assistanceto engage NGOs, community groups, and other civil society partners inconservingbiodiversity hotspots. The CEPF is a partnership program, with different donors committing resources against different timelines. The first phase o fthe CEPF involved CI, GEF, the World Bank, the Government o f Japan, and the John D. and Catherine T. MacArthur Foundation, each committing $25 million for a total o fUS$125 million ingrant fundingtowards a program that targeted 14 hotspots. The first phase o f GEF funding and World Bank DGFfunding will be completed inmid-2007. In March2007 the Agence Franqaise de DCveloppement (AFD)joined the partnership as a sixth donor. 3. By the end o f 2006, grant programs innineo fthe original hotspots closed after five years o f implementation. A 2005 independent evaluation o fthe CEPF global program recommended that the donors expand the program. Although the CEPFprogram has been shown to be highlyeffective, there are still significant conservationneeds, both inthe first phase hotspots and inother critical ecosystems that have not yet benefited from CEPF. Moreover in2005, based on new research bynearly 400 experts, Conservation International revised the number o fhotspots up to 34, o fwhich 30 are eligible for Bank and GEF support - see matrix below. 4. The proposed project i s a second phase project that would replicate and expand successful civil society implementation models for biodiversity conservation. It would build on the lessons learned under the first phase o f CEPF as well as recommendations from the independent evaluation to further strengthen the program and to expand activities to marine ecosystems and new hotspots. It would complement government-led conservation efforts, byproviding a streamlined and agile mechanism for capacity buildingand engagement o f a wide range o f local civil society actors, including local community groups, Indigenous Peoples, NGOs and the private sector, many o f whom are outside the 19 reach o f traditional fundingmechanisms. By focusing on a small number o f critical ecosystems the project would maximize overall impact. 5. The conservation and sustainable use o fnatural ecosystems and biodiversity are critical elements that support sectors as diverse as agriculture, forests, fisheries andwater management. Lessons learned from the Bank partnershipwith the CEPF are relevant to enhanced natural resource management and especially community driven development projects that are attempting to achieve enhanced livelihoods, poverty alleviation and environmental sustainability. These interventions are expected to lead to generation, adoption, and application o f lessons relatedto improved biodiversity outcomes, relevant both to CEPF andthe broader Bank and GEF biodiversity portfolios as well as to other small- andmedium-size grant programs. 6. The CEPF framework is consistent with the Bank's emphasis on partnerships to deliver development outcomes. CEPF is a unique global partnership that links the comparative strengths o f the Bank with bilateral agencies, leading conservation NGOs and private foundations within a common approach to builda powerful biodiversity fund to support civil society involvement inconservation activities. The emphasis on empowerment o f civil society promotes strong local ownership, good environmental governance, effective national and local institutions and more efficient and cost-effective delivery o f global and national environmental benefits. To ensure consistency with government priorities, each ecosystem profile requires endorsement bythe relevant GEF Focal Points prior to implementation at a national level. CEPF-2 Project:IndicativeListof Hotspotswith CountriesEligiblefor WorldBank andGEF Funding. Critical CEPF-2 Ecosystem WBIGEF ConservationSignificance Threats (Hotspot) Countries* Eligible Atlantic Forest Argentina, 40% o f plants (8,000), 27.3% of mammals, Logging, intensification Brazil, 15.4% o f birds, 30.2% o f reptiles, 61.8% o f and expansion o f Paraguay amphibians, and 38% of fishes are endemic. agriculture, clearing for Endemismintrees is particularly high, with plantation forestry, and more than half the species endemic. fragmentation. California Mexico 61% ofplants (2,124), 12% o fmammals, Commercial farming, Floristic urbanization, pollution, Province ** 2.4% o f birds, 6% o f reptiles, 54% of ampl-ubians and 21% o f freshwater fishes are habitat encroachment, endemic. O f nearly 3,500 species o fvascular construction, strip plants inthe hotspot, more than 2,120 (61%) mining and oil are endemic. extraction, invasive alien species, livestock grazing, and suppression o f fires. I 20 Cape Floristic South Africa 69% o f plants (6,210), 4.4% o f mammals. Agriculture expansion, Region 2% o f birds, 22% o freptiles, 35% o f population growth, amphibians and 41% o f freshwater fishes are invasive alien plant endemic. The regioni s the only hotspot that species and ecosystem encompasses an entire floral kingdom. degradation. Caribbean Dominican 50% ofplants (6,500), 46% o fmammals, Deforestation, Islands** Republic, Haiti, 27% o f birds, 93% o freptiles, 100%o f Agriculture (cacao, Jamaica, Islands amphibians and 40% o f freshwater fishes are coffee, sugar cane and inthe Lesser endemic. tobacco plantations), Antilles mining, tourism, and invasive alien species. Caucasus Armenia, 25% o f plants (1,600), 14% o f mammals, Logging, fuel wood Azerbaijan, .3% o f birds, 23% o f reptiles, 18% o f consumption, illegal Georgia, Iran, amphibians, 9.4% o f freshwater fishes are hunting, pollution, and Russia, Turkey endemic. overgrazing by livestock. Cerrado Bolivia, Brazil, 44% o f plants (4,400), 7% o f mammals, 3% Agriculture, ranching, Paraguay o f birds, 15% o freptiles and amphibians, charcoal harvesting, and 25% o f freshwater fishes are endemic. drought, and Ofthe 200 amphibian species, more than 25 infrastructure. are endemic. Chilean Winter Argentina, 50.3% o fplants (1,957 o f 3,892), 22% o f Overgrazing, invasive Rainfall- Chile mammals, 5.3% o f birds, 66% o f reptiles, species, accidental and Valdivian 71% of amphibians, and 56% o f freshwater intentional forest fires, Forests fishes are endemic. population growth and urbanization. Coastal Forests Kenya, 44% o f plants (1,750), 5.6% o f mammals, Agriculture, of Eastern Mozambique, 2% o f birds, 21% o f reptiles, 7% o f urbanization, lack o f Africa (Somalia) amphibians, and 15% o f freshwater fishes legal protection, Tanzania are endemic. wildlife-human conflicts andpressure on forest resources. Eastern Burundi,D.R. 31% ofplants (2,356 of7,598), 21% o f Agriculture, logging, Afromontane o f Congo, mammals, 8% o f birds, 27% o freptiles, 30% fires, mining, Ethiopia, o f amphibians, and 69% of freshwater fished infrastructure Kenya, Malawi, are endemic. development, and Mozambique, collection o f firewood Rwanda, andor plants for (Somalia), medicinal use, hunting Tanzania, and disease. Uganda, Yemen, Zambia, Zimbabwe 21 East Melanesia PapuaNew 37.5% o f plants (3,000 o f 8,000), 45.3% o f Rapid forest clearance, Islands Guinea, the mammals, 41.4% o f birds, 46% o f reptiles, logging, mining, Solomon 90.5% o f amphlbians, and 5.7% o f unsustainable farming, Islands, freshwater fishes are endemic. invasive alien species. Vanuatu Benin, 20% ofplants (1,800 o f 9,000), 21% o f Habitat loss and Forests Cameroon, C6te mammals, 10% o f birds, 25% o f reptiles, fragmentation o f West Africa d'Ivoire, 38.5% o f amphibians and 28% o f freshwater forests, illegal logging, Equatorial fishes are endemic. mining, agriculture, Guinea, Ghana, population growth, Liberia, Nigeria, bush-meat huntingand r Sao Tome and trade. I- Principe, Sierra Leone, Togo Himalayas Bhutan, China, 31.6% ofplants (3,160 o f lO,OOO), 4% o f Cultivation, logging, India, mammals, 2% o f birds, 27% o f reptiles, 40% overgrazing, fuel wood, (Myanmar), o f amphibians, and 12.3% o f freshwater unsustainable harvest Nepal, Pakistan fishes are endemic. o f medicinal plants. Horn o f Africa Djibouti, 55% o f plants (2,750 o f 5,000). 9% o f Overgrazing, Eritrea, mammals, 3.4% o fbirds, 33% o freptiles, agriculture, charcoal Ethiopia, 20% o f amphibians and 10% o f freshwater production, poor Kenya, fishes are all endemic. governance and (Somalia), political instability. Sudan and Yemen Indo-Burma Bangladesh, 52% (7,000 o f 13,500) o fplants, 17% o f Agriculture, over- Cambodia, mammals, 5% o fbirds, 39% o f reptiles, 54% harvesting, logging, China, India, o f amphibians and 44% o f freshwater fishes over-fishing, habitat Laos, Malaysia, are endemic. loss, rapidpopulation (Myanmar), growth and Thailand, unsustainable economic Vietnam development. IIrano-Anatolian Armenia, 42% (2,500 o f 6,000) o fplants, 7% o f Over-grazing, over- Azerbaijan, mammals, 10% o freptiles, 11%o f harvesting o f woody Georgia, Iran, amphibians, and 33% o f fresh-water fishes plants for fuel wood, (Iraq), Turkey, are endemic. mining. Political I Turkmenistan tensions and military operations have also resulted inthe loss o f forests and wetlands. Madagascar Madagascar, 89% (11,600 o f 13,000) o f plants, 93% o f Agricultural methods, and Indian Comoros mammals, 58% o fbirds, 96% o f reptiles, invasive alien species, Ocean Mauritius, 99.6% o f amphibians, and 59% o f industrial and small- Islands** Seychelles freshwater fishes are endemic. scale mining are growing threats. 22 MadreanPine- Mexico 75% of plants, 2% o f mammals, 4% ofbirds, Logging and Oak 10% o f reptiles, 25% of amphibians, and fragmentation. Woodlands** 21% o f freshwater fishes are endemic. Maputaland- Mozambique, 24% o f plants, 2% o f mammals, 14% o f Industrial and local Pondoland- South Africa reptiles, 15% o f amphibians, and 27% o f farming, over-grazing Albany and Swaziland freshwater fishes are endemic. bylivestock, timber, mining, urbanization, and invasive alien plant species. Mediterranean Algeria, Cape Infrastructure, Basin * * 52% o f plants, 11%o f mammals, 5% o f Verde, Egypt, birds, 34% o freptiles, 34% o famphibians urbanization, habitat Jordan, and 29% o f freshwater fishes are endemic. fragmentation and Lebanon, Libya, increasing tourism. Morocco, Syria, Tunisia and Turkey. Mesoamerica Belize, Costa 17% o fplants, 15% o f mammals, 19% o f Deforestation, timber Rica, El birds, 35% ofreptiles, 65% of amphibians and mineral extraction. Salvador, and 67% o f freshwater fishes are endemic. Guatemala, Honduras, Mexico, Nicaragua, Panama Mountains o f Afghanistan, 27% o fplants, 4% o f mammals, 2% o f reptileCivil conflicts, dams, Central Asia China, Kazakhsta 57% o f amphibians and 19% of freshwater reservoir construction, Kyrgyzstan, fishes are endemic. over-fishing, and invasil Pakistan, alien species. Tajikistan, Turkmenistanan Uzbekistan Mountainsof China and 29% o f plants, 2% o f mammals, 0.3% of Deforestation, logging, Southwest (Myanmar) birds, 16%o freptiles, 9% o famphibians over-grazing, illegal China and 25% o f freshwater fishes are endemic. hunting. Philippines Philippines 66% o fplants (6,091), 61 mammals, 35 Highpopulation growth birds, 68 reptiles, 85 amphibians and 24 rate, poverty, illegal freshwater fishes are endemic. logging and timber, miningand land conversion. Polynesia- Chili Easter 58% o fplants, 75% o f mammals, 56% o f Invasive alien species, Micronesia** Island, Fiji, birds, 48% o f reptiles, 100% o f amphibians urbanization and Micronesia- and 21% o f freshwater fishes are endemic. commercialization, Polynesia, habitat degradation. Tonga 23 Succulent Namibia, South 38% o f plants, 3% o f mammals, 4% o f birds, Diamondmining, large- Karoo Africa 16% ofreptiles, 5 % o~f amphibians are scale extraction of endemic. heavy minerals, over grazing and illegal collection o f succulents andbulbs. Sundaland Indonesia, 60% o f plants, 45% o f mammals, 19% o f Illegal huntingand Malaysia birds, 54% ofreptiles, 80% of amphibians wildlife trade, road and 37% o f freshwater fishes are endemic. construction, mining, and civil conflict. TropicalAndes Argentina, 50% ofplants, 13% o f mammals, 34% o f Mining, logging, Bolivia, Chle, birds, 45% ofreptiles, 67% ofamphbians construction of Colombia, and 35% of freshwater fishes are endemic. hydroelectric dams, Ecuador, Peru, over-grazing, invasive Venezuela alien species. Tumbes- Colombia, 25% ofplants, 4% o fmammals, 12% o f Urbanization, mining, Choc6- Ecuador, birds, 30% o freptiles, 15% of amphibians road construction, Magdalena Panama, Peru and46% o f fishes are endemic. agricultural expansion, and deforestation. ~~ Wallacea Indonesia, 15% o f plants, 57% o f mammals, 41% o f Agriculture, grazing, (Timor Leste) birds, 45% ofreptiles, 69% of amphibians, clearing o f land, illegal 20% o f fishes are endemic. logging, wildlife trade, plantations and population growth. WesternGhats India, Sri Lanka 52% o f plants, 13% o f mammals, 7% o f Fragmentation, and Sri Lanka birds, 65% o freptiles, 73% o famphibians population density, and 73% o f freshwater fishes are endemic. infrastructure, unsustainable agriculture, poaching. Hotspots inbold e.g. Atlantic Forest are where CEPF invested during Phase 1. The table i s based on the revised 34 hotspots e.g. Coastal Forests and Eastern Arc o f Kenya and Tanzania has become two Hotspots. * Countries eligible for GEF funding as World Bank client countries that have ratified the Convention on Biological * Diversityhotspots * These Countries inparenthesese.g. (Timor-Leste) not currently eligible. include some countries not eligible for W B and GEF funding. The CEPF Donor Council may review the eligibility criteria to include marine ecosystems within targeted hotspots. Underthe secondphase ofthe CEPF program, the Donor Council may also decide to establish new funding windows outside the WBiGEF CEPF-2 Project to accommodate the strategic interests o f specific donors. 24 Annex 2: Major RelatedProjectsFinancedby the Bankand/or other Agencies GLOBAL: SecondCriticalEcosystemPartnershipFundProject 1. The CEPF-2 project strongly complements several ongoing andplannedWorld Bank . global andregional projects, and other donor interventions. Relevant inthis respect are: Critical Ecosystem Partnership Fund. The Bank-implemented GEF grant for the . first phase o f CEPF closed inMarch, 2007. Coral Reef Targeted Research and Capacity Building for Management, a global project which focuses on strengthened conservation and sustainable management o f coral reefs. 9 Several regional projects that focus on conservation and sustainable use o f terrestrial and marine biodiversity in the MesoAmerican Biological Corridor, including: Conservation and Sustainable Use o f the Mesoamerican Barrier Reef . System; and IntegratedEcosystem Management inIndigenous Communities. ADB Greater MekongSubregionCore Environment Program 2. There are also several ongoing andplannednational projects relevant to the CEPF-2 program and especially to implementationinthe first three hotspots selected: Indochina, Polynesia-Micronesia and Western Ghats and Sri Lanka. 3, The table below provides a list o f completed, ongoing and plannedprojects that are relevant to this project. The proposedproject will buildon the experiences obtained in recently completed projects, including lessons learnedinlinking biodiversity conservation activities with community development, more sustainable resource management and income-generating activities for local communities. Sector Issue Project I Latest I (Bank Supervision (PSR) RatingsI financed projects only)- I Implementation Development Progress (IP) Objective (DO) Biodiversity Critical EcosystemPartnership Fund Satisfactory Satisfactory Conservation Coral Reef Targeted Researchand Capacity Building Satisfactory Satisfactory for management MesoAmerican Biological Corridor Satisfactory Satisfactory IFC Environmental Business Finance Program Satisfactory Satisfactory China Guangxi Forest Project NIA NIA 25 26 Annex 3: ResultsFrameworkandMonitoring GLOBAL: SecondCriticalEcosystemPartnershipFundProject ResultsFramework PDO/ GEO Project OutcomeIndicators Use of Project Outcome Information ProjectDevelopmentObjective At least 14critical YR1-YR5: Gauge CEPF's global -Strengthentheinvolvement ecosystemshotspots with performance inachieving coverage and effectiveness o f civil society active investmentprograms targets andkey milestones under inconservation andmanagement involving civil society in performance indicators against o f globally important conservation, includingat ecosystem profile targets. Missed biodiversity. least 9 new regions. targets may require the At least 600 civil society identification o f causes and GlobalEnvironment Objective actors, including NGOs and remedial actions. -Conservationoutcomes the private sector, actively consolidated inexisting CEPF participate inconservation YR3: Contribute to independent regions and funding expanded to programs guidedby the mid-termassessment and adjust new ecosystems inorder to CEPF ecosystem profiles. overall strategy and operations as achieve strategic and sustainable At least 20 million hectares recommended. conservation and integrated o fkey biodiversity areas with ecosystem management inareas strengthened rotection and All years: Identification andpursuit o f globally important management. P o f opportunities for long-term biodiversity. At least 8 million hectaresof sustainability and replication. new protectedareas4 established. All years: Results feed into global At least 1million hectares in outreach program. production landscapes managed for biodiversity Endo fproject evaluation. conservation or sustainable use. Intermediate Outcomes IntermediateOutcome Use of IntermediateOutcome Indicators Information Outcome1: 0 At least 70% oftargeted key Profile Midterm:Gauge portfolio- Globally significant biodiversity biodiversity areas with level performance against targets i s under improved management strengthened protection and and key milestones identifiedin and protection. management (SP1METT) ecosystem profile. Refine Results Framework or ecosystem profiles as needed. (Start-up inhot spots At least 30% ofprojects staggered) globally enable effective stewardshipo fbiodiversity Project Midterm: Assessment o f andecosystem services by contribution to GEF and CBD indigenous and local 2010 targets based on SP1 METT; communities in focal areas. SP2 METT Guidedby a sustainablemanagementplan Protectedthrough a formal legal declaration or community agreement 27 At least 10sustainable- All years: Identification andpursuit financing mechanisms o f opportunities for long-term established or strengthened sustainability and replication. with initial capital secured. At least 5 multi-regional All years: Results feed into global projects contribute to the outreach program. conservation o f globally significant biodiversity. Endof project: Assessmentof overall project achievement and contribution to CBD work programs. Outcome2: At least 60% ofprojects Profile Midterm:With each Biodiversity conservation i s outside protected areas hotspot, gauge portfolio-level integrated into landscape and effectively introduce or performance against targets and development planning as a result strengthenbiodiversity key milestones identifiedin o f increased local and national conservation inmanagement ecosystem profile. Refine Results civil society capacity, practices (SP2 METT). Framework or ecosystem profiles At least 10 public-private as needed.(Start-up ineachhotspot partnerships mainstream will be staggered.) biodiversity inproduction sectors, such as forestry, Project Midterm: Assessment o f agriculture andtourism contribution to GEF and CBD sectors. 2010 targets based on SP2 METT At least 50% ofglobal grant All years: Identification andpursuit funds allocated to local civil o f opportunities for long-term society groups5. sustainability and replication. At least 70% oftargeted Allyears: Results feed into global communities involved in outreach program. sustainable use projects show socioeconomic benefits. Endo fproject: Assessment of overall project achievement and contribution to CBD work programs. Outcome3: 0 100%of CEPFregions Profile midterm: Portfolioreview Effective monitoringand possess baseline data and to feed into strategy decisions knowledge sharing. indicators and report against approved logical frameworks. Midterm and endo fproject: Selected indicators from Calibrate against other biodiversity global Results Framework status reports produced for the standardized for all hotspots hotspot e.g. forest status, IBAs, etc. ecosystem profiles and contribute to global reporting All years: Identifyingbest practice and assessment, and lessons learned for At least 75% of civil society dissemination and uptake. groups receiving grants demonstrate more effective All years: Results feed into global CEPFdefines a local civil society group as one that is legally registeredina country within the hotspot andhas an independentboard of directors or a similar type of independentgoverning structure. 28 capacity to plan andmanage outreach program. conservation projects. At least 2 learning exchanges Midtermand endo fproject: assess andor participatory progress andexamples o f assessments o f portfolio-level replication results hosted and documented within each hotspot (at least 201). Outcome4: Ecosystem profiles and All years: Results feed into profile Ecosystem profiles act as shared investment strategies planning, implementation and strategies for effective program- developed with stakeholders, adaptation. wide implementation. approved, andguide grant- making. Allyears: Profiles guide decision- Inat least 5 hotspots, making and assessments o f ecosystem profiles influence progress and results. other donors' investment strategies. All years: Results feedinto global Numberof localcivil society reporting to CEPF donors and groups capacitated by RITsto overall outreach program. design andimplement projects. Midtermand endo fproject: results Overall program, including feed into evaluation. all activities and financial management, effectively monitored and in compliance with CEPF Operational Manual. Program-wide replication strategy developed and implementedto disseminate bestpractice within and across hotspots. 10publications producedand disseminated on CEPF experiences, lessons learned and specific themes. 100%o f final project reports compiled by grant recipients available online. Visitors to Web site and newsletter subscribers increase by at least 70% 5 annual reports and 20 quarterly reports produced. 29 Arrangementsfor results monitoring 1. Monitoringandevaluationwouldbe undertaken at three levels: the overall program, ecosystem and project levels. Data gathered will inform decisions and adaptive management as well as feed into analysis and documentation o fbest practices, lessons, and results within, and across, critical ecosystems and at the global level. 2. Institutionalissues.The Regional Implementation Teams would have lead responsibility for monitoring at the ecosystem andindividual project levels. All grantees, including the Regional Implementation Teams, will submit quarterly financial reports and regular programmatic reporting detailing progress toward specific deliverables. The Regional Implementation Team's monitoring will include review o f these reports by grantees and a participatory assessment at the ecosystem level conducted together with grantees and other stakeholders at the profile midterm.Monitoringby the CEPF Secretariat will include monitoring the performance o f the Regional Implementation Teams and lead responsibility for producing analytical overviews o f each ecosystem portfolio, including details o f interimprogresstoward the conservation outcomes and lessons learned. The Secretariat will also beresponsible for monitoringperformanceo fthe overall program and ensuring that all activities and financial management are carried out incompliance with the guidance o fthe Donor Council and the Operational Manual, including GEF Policies and the World Bank Safeguard Policies. The Operational Manual has beenrevised and updated andwill bepresented to the Donor Council for approval. 3. Monitoringfor biodiversityoutcomes. Specific conservation targets and related indicators would be developed as an integral part o fthe ecosystem profiling process for each ecosystem. Priorities for a second phase o f CEPF will include: i)ensuring that conservation targets are defined inall regions that receive CEPF funding; ii)improved outcomes monitoring at the ecosystem level inall critical ecosystems receiving funding; and iii)sharingthe results widely to demonstrate biodiversity impact and enable adaptive management by CEPF and the wider conservation community. Inall cases, the Regional Implementation Team and other local partners would leadthe monitoring. The approach will buildupon and further strengthen the success o fthe first phase to conduct baseline assessmentsinpartnership with these groups, and then to facilitate and support continuation o fmonitoring at the local level. These procedures will be systematically applied inevery portfolio using common tools and reports to generate comparable data that can be usedto develop portfolio overview reports and assessments o f the overall program's impacts. The project would utilize the GEF SP1 and SP2 tracking tools to monitor impact o fprotected area and mainstreaming interventions. Results from monitoring at the ecosystem level will be calibrated against data drawn from the Biodiversity EarlyWarning System at the midtermand other expertise o f CI's Center for Applied Biodiversity Science (CABS) as well as the global monitoring programs o f other conservation organizations. This calibration would provide additional information on the status o f specific conservation targets and landscapes and inform decisions on whether to adapt implementation strategies. 30 4. Other Outcomes.As recommended by the independent evaluation, CEPF-2would complement data collected on conservation outcomes by utilizing simple socio-economic indicators and developing and testing new performance monitoring methodologies, including measures to reflect changes inducedincivil society. The Regional Implementation Teams will also have leadresponsibility for monitoring these outcomes as part of assessingindividual project reports. These types o f indicators andmeasures may also be further developed at the ecosystem level as part o f the profiling process for each region, drawing from a strengthened analysis o f the socioeconomic, policy and civil society context o f each ecosystem. 5. Semiannualandmidtermevaluation.The World Bankwill conduct semiannual supervisionmissions to assess progress made inthe overall project activities. Supervision missions will involve regional Bank staff inreviewing implementation o f grants within selected hotspots to draw lessons learned andto provide guidance to the RITs and project team. Inaddition, a midterm evaluation o fproject execution will be conductedno later than three years after the first project disbursement. Indicative total cost of M&E (also reflected in the totalproject cost): $3.72 million; no GEF allocation. 31 *2 ca E mE E d rg ca E m E m 0 2 E E 3 3 0 0 0 E Y 0 E I . .I c,cd e a wE8 a 8 P8 a, u $ D a $ D a E8 s s 5 i .I E v, L 4 $: (El * a, 90 W rc, 5B U 0 s 0 M 8 gw s .I w 2 M N 0 2 m .I ii: 0 v1 80 s s .I I v, 0 .eu $: v1 0 g g 0 0 g Y cd I 8 .C( a, 3 0 0 0 a .4 M a a a a B B B B E8 E8 E8 3W 3O E8W U * W * W E E 2 2 sm b W sm t-0 m *d 3 s E: 0 0 ii ii Y Y Ucd .3 cx8 cx8 . d 0 N VI m d I 0 0 V a Q 9 m 9 2s cr, s 0 2 3 0 0 0 e0 CI 3C 9 Y 28 CI Annex 4: DetailedProjectDescription GLOBAL: SecondCriticalEcosystemPartnershipFundProject 1. The proposedproject wouldbuilduponthe experiences and lessons learnedinphase 1, , and recommendations from the independent evaluation, to expand the global CEPF program, including expansion into new ecosystems andhotspots. The CEPF-2 project ' 6 %.\'?. would focus on critical ecosystems within at least14 biodiversity hotspots, including nine 'h, new hotspots, inWorld Bank client countries that have ratified the CBD. Investment .I strategies for three new critical ecosystems have already been developed as part o fphase 1 andwould bethe first to be implemented: Polynesia-Micronesia; Indo-Burma; and Western Ghats and Sri Lanka. Other ecosystems for investmentwould be chosen based on biodiversity status and threats, conservation needs, social andpolitical environment, and current or plannedinvestment by other donors. The donor partners would also review eligibility criteria to enable CEPF investment inmarine ecosystems within, and adjoining, hotspots. An indicative list o f 14 hotspots for investment will be developed and endorsed bythe Donor Council for phased implementation; this list may change over time inline with conservation needs andother donor investments. 2. The number o f hotspots approved for new investmentwould continue to be staggered to ensure adequate funding and implementation capacity, and the total investment level per hotspot will vary depending on needs and local capacity. Ineach hotspot, disbursement o f grants will be guided by ecosystem profiles based on a stakeholder-driven prioritizing process to create a shared strategy from the outset. 3. The project will include four interlinked components. GEF grant finding would be used exclusively to support Ecosystem Grants under components 1and 2. Component1:Strengtheningprotectionandmanagementof globallysignificant biodiversity(Totalbudget:$52.1 million; GEF$13.22 million). 4. CEPF-2 would focus on key biodiversity areas and address threats to biodiversity across broad landscapes that include a matrix o f landuses, including protected areas, biological corridors and highvalue conservation sites inproduction landscapes. Protectedareas remain a critical foundation o fbiodiversity conservation worldwide, yet only 5% o f globally significant biodiversity within most hotspots is currently protected. Target areas would not be limitedto formal designated protected areas and legal entities but will also include indigenousreserves, and community andprivate lands that are managed for a conservation objective. Support to civil society groups would contribute to the strengthened protection and management o fmore than 20 million hectares o fkey biodiversity areas within hotspots. This would include at least 8 million hectares o f new protected areas. Activities will be selected on a competitive basis but are expected to include the following: (a) Protectedareas andother keybiodiversityareas. CEPF would support civil society efforts to catalyze improvedmanagement and expansion o f existing protected areas, including creation o fnew protected areas and innovative 37 management involving civil society andpublic-private partnerships. Supported activities would include buildingawareness and support for protected areas and systems, development andprovision o f technical expertise andtools for effective conservation planning, and enabling local community and indigenous groups to take part inthe design, implementation, andmanagement o fkeybiodiversity areas. (b) Community-IndigenousInitiatives.CEPF would assist communities, including indigenous groups and other partners inmanagement and stewardship o fbiologically rich lands that bufferkey biodiversity andprotected areas. The CEPF-2 portfolios would supported community stewardship o fbiodiversity through improved use andmanagement o f natural resources, the reduction or elimination o f practices harmful to biodiversity, and the development and adoption o f a variety o f alternative livelihood opportunities which emphasize synergies between biodiversity conservation and humanwelfare. (c) Innovativefinancialmechanisms for sustainability.Achieving financial sustainability for biodiversity conservation i s an ongoing challenge. CEPF-2 would scale up efforts to create and support innovative financial mechanisms for sustainability, including the introduction and use o f conservation financing tools such as payments for environmental services and economic incentives for conservation. CEPF-2 will also further strengthen joint efforts with government partners, the private sector and other fundingmechanisms, including two complementary funds managed by C I (the Global Conservation Fundand Verde Ventures), to maintainand ensure the sustainability o f globally significant biodiversity and ecological processes over time. (d) Multi-regionalpriorities.This subcomponent would support a few targeted grants to civil society groups to meet strategic needs inmultiple hotspots based on profile priorities. These could include, for example, activities to address common threats such as trade inendangeredspecies where demand and supply chains cross nationalborders, and global assessmentsto consolidate available information on the distribution, ecology and conservation status o f groups o f species to indicate the status o f ecosystem health. Multi-hotspot grants would also capitalize on significant co-financing opportunities andreplication and scaling up o f successful approaches across hotspots ina cost-effective way. Component2: Increasinglocal andnationalcapacityto integratebiodiversity conservationintodevelopmentandlandscapeplanning.(Totalbudget:$23.9 million, GEF$6.78 million). 5. Reconciling ecosystem conservation with sustainable development on different scales across complex jurisdictional boundaries, often insituations o f weak governance, i s perhaps the major challenge facing the conservation and development community. Mobilizing civil society to play a more effective role inthis process is the CEPF niche. Grantees include individuals, farming cooperatives and community organizations, national 38 NGOs, research institutions andprivate sector organizations, andinternational NGOs. Many o fthese groups act as vital multipliers, further buildinglocal andnational capacity for conservation. A key CEPF goal i s empowerment o f civil society actors to take part in, and influence, decisions that affect local lives and livelihoods and, ultimately, the global environment. This component is particularly targeted to biological corridors andmore sustainable management inproduction landscapes. Itbuilds upon the activities supported under Component 1through support for strategic and effective alliances to increase impact and sustainability. Grantmakingwill foster alliances byidentifyingand linkingpotential partners; helping to designintegrated and complementary approaches and supporting partnerships within civil society as well as with development institutions, government agencies, corporate partners, and others. 6. CEPF would support activities that seek to integratebiodiversity conservation in production systems and sectors, including enabling civil society groups to plan, implement, and influencebiodiversity outcomes as effective partners insustainable development. Suchparticipation will buildon local knowledge and technical expertise, and leverage social capital to bringinnovative ideas to solving local problems. Examples could include development o f community, municipal or regional land use plans, plans for local economic development, "territorial development" plans, certification for more sustainable management and private agreements. The focal approach would be to strengthen protection o f critical biological corridors that link keybiodiversity areas within a multiple use landscape. 7. Civil society activities to be supported will include assisting inimproved land-use planning and activities that mainstream conservation into production landscapes, including collaborationwith the private sector; promoting supportive policy and legislative frameworks; promoting more sustainable resource management linked to livelihoods; and implementing measures to control andmanage invasive alien species inregions where these are a particular threat. Buildingupon successful models from the first phase o f the program, CEPF would promote collaborationwith governmentalpartners and sectors such as mining, agriculture, logging and tourism, by fostering innovative public-private partnerships and multi-stakeholder alliances to harmonize conservation with economic development. The project would strengthen civil society capability for sustainable resource management and for advocacy and influence over development decisions andnational strategies at local, regional andtrans-boundary scales. Component 3: Monitoring and knowledge sharing (Total budget: $4.5 million; no GEF allocation). 8. CEPF priorities include i)improved outcomes monitoring inall hotspots receiving CEPF fundingand ii)promoting results-based conservationbasedon lessons learnedandgood practice. 9. This component would support improved monitoring, learning, replication and scaling up o fpromising models from components 1and 2. Specific subcomponents would include: 39 Strengtheningmonitoringandevaluationat the ecosystem level,includingsystematic analysisanddocumentationof CEPF resultsandexperiences. This component would support monitoring and evaluation o f individual projects and derivingand sharing lessons learnedwithin the hotspot. Monitoringandevaluation o fprojects would be ledby the RITs and include: a) systematic analysis and documentationo f grantees' performance against individual project and ecosystem targets and b) engaging civil society groups, including local communities and Indigenous Peoples, inparticipatory monitoring and c) expanding and formalizing information sharing and learning opportunities across the hotspot. 10. Specific conservation targets and relatedindicators would be developed as an integralpart o f the ecosystem profilingprocess for each hotspot. Inaddition, selected indicators from the global ResultsFramework would be monitored and evaluated within each hotspot annually. These would include indicators to monitor biodiversity status and outcomes, as well as civil society, policy, and socioeconomic indicators. Dataon the status o f specific conservation targets and landscapes would be calibrated against data drawn from the Biodiversity Early Warning System o f CI's Center for AppliedBiodiversity Science (CABS) andthe global monitoring programs o f other conservationorganizations and partners to determine whether shifts may beneeded ininvestment strategy. Expandingandformalizinginformationsharingandlearningopportunities.This subcomponent would support conservation at the regional level by expanding and formalizing information sharing and learning opportunities as part o f a participatory monitoring approach already tested andreplicated by CEPF inmultiplehotspots. Results would leadto adaptive management and also feed into analysis and documentation o f lessons learned and best practices, within, and across, the hotspot. The subcomponent will also support specific activities to promote distillation, dissemination and uptake o f good practice, including i)analyses o f specific management practices to derive lessons learned (ii) siteexchangesbetweengranteesforlearninganddisseminationofbestpractice; cross and iii)outreach activities targeting communities, local government and NGOs to increase the uptake o f good practice into other conservation initiatives within the hotspot. Component4: Ecosystemprofiledevelopmentandprojectexecution(Totalbudget:$19.5 million;no GEF allocation). 11.This component would support three subcomponents a) development o f ecosystem profiles as strategic implementation documents for the partnership and wider conservation community; b) Regional Implementation Teams within the hotspots; and c) overall execution and administration o f the global program through the CEPF Secretariat. Ecosystemprofiledevelopment.Ineachhotspot, disbursemento fgrants wouldbe guided by ecosystem profiles based on a stakeholder-driven prioritizing process to identify conservation targets, major threats, socioeconomic factors, and current conservation investments. The process would be ledby locally-based NGOs or other civil society organizations to develop a shared strategy by identifyingConservation needs, gaps, opportunities and the specific CEPF niche. Inline with recommendations from the evaluation, future profiling would include strengthened analysis o fthe socioeconomic, policy, and civil society context within each hotspot for a more comprehensive 40 understanding o f development priorities, threats and opportunities. Ways to address poverty and conservation linkages, and gender issues, will also be explored. Future profiles would ensure greater inclusiveness by ensuring that key communities, including indigenous groups within the focal biodiversity areas, take part indeterminingpriority actions. Regional Implementation Teams. Based on recommendations from the independent evaluation, CEPF-2 would devolve more responsibility to locally based Regional Implementation Teams for capacity buildingand grant-making and management at the local level. This subcomponent would support the RITs instandardized and expanded responsibilities and a more active role inoverall CEPF grant-making. Responsibilities would include i)acting as an extension service to assist local groups indesigning, implementingandreplicating successful conservationactivities; ii)reviewing all grant applications and managing external reviews with technical experts and advisory committees; iii)direct decision-making authority for grants up to $20,000 and deciding jointly with the CEPF Secretariat on other applications; and iv) interacting and collaboratingwith CEPF partnersand other donor agencies across the hotspot, as well as governments and other sectors inimplementation. CEPF Secretariat. C Iwould administer andexecute the global program. This includes hosting the CEPF Secretariat, employing CEPF Secretariat staff, and ensuring that all funds are managed with due diligence and efficiency. The Secretariat is responsible for strategic and financial management, oversight andreporting for the global program. This includes supervision o fthe ecosystem profiling process; training and management o fthe Regional ImplementationTeams; andoverall ecosystem portfolio development, monitoring andreporting to ensure that all activities and financial management are carried out incompliance with Donor Council decisions and CEPF operational guidelines. The secretariat is responsible for preparing and updating the OperationalManualto ensure that grant selection and implementation i s consistent with GEF Policies and the World Bank Safeguard policies andprocurement procedures. The Secretariat i s also responsible for fundraising, financial management, donor coordination, and global information management and outreach, including website management, newsletter and publication production, and development and implementation o f a program-wide replication and dissemination strategy for lessons learned and good practice. Through ajoint work program with the World Bank, the CEPF Secretariat would assess the impact and value o f small grants programs in achieving biodiversity conservation. 41 Annex 5: ProjectCosts GLOBAL: SecondCriticalEcosystemPartnershipFundProject Costs are indicative only and will be further refined at appraisal. Components: Number and Title Total Source of Cost in Financing I us $1,000 II GEP I __- Other I 1 I I -_--_- Strengthening protection and sustainable management of globally significant biodiversity 1A Protectionof key biodiversity areas 26,000 7,000 19,000 1B Community and Indigenous Initiatives 16,100 4,220 11,880 1C Innovative financial mechanisms for sustainabilitv 8,500 1,700 6,800 1D Multi-regionalpriorities 1,500 300 1,200 ComDonent 1: Total 52.100 13.220 38,880 2 Increasinglocal and national capacity to integratebiodiversity conservation into development and landscape planning Mainstreaming biodiversity conservation 23,900 I 6,780 I 17,120 Component 2: Total 23,900 6,780 17,120 I 3 Effective monitoring and knowledge sharing 3A Strengtheningmonitoringand evaluation, including 3,720 3,720 systematic analysis and documentation o f CEPF results and experiences 3B Expanding information sharing and learning opportunities 780 780 within hotspots ComDonent 3: Total 1 4.500 1 1 4.500 4 Ecosystemprofile development and project execution 4A Ecosystemprofile development 2,600 I 2,600 4B I Regional ImplementationTeams I 4.600 I I 4,600 4C ICEPF Secretariat 12,300 12,300 Component 4: Total 19,500 19,500 Total 100,000 20,000 80,000 42 Annex 6: ImplementationArrangements GLOBAL: SecondCriticalEcosystemPartnershipFundProject 1. The CEPF implementation arrangements are designed to buildon lessons learned during the first phase, to enable continued expeditious, efficient support to diverse civil society groups, andto establish a clear and effective chain o f accountability for results. 2. Under CEPF-2, the partnershipwould retain the overall structure o f a Donor Council, Secretariat and Working Group. C Iwill continue to administer and execute the project on behalf o fthe CEPF partners. This includes hosting the CEPF Secretariat, including the CEPF Grant Management Unit andRegional Grant Directors, and ensuring that all funds are managed with due diligence and efficiency. The CEPF Secretariat i s responsible for strategic and financial oversight o f the global program, overall information management, and global outreach and communications. The Secretariat would supervise the profiling process, the RITs and the performance o f the overall program to ensure that all activities and financial management are carried out incompliance with Donor Council decisions and the OperationalManual, including GEFPolicies, the World Bank Safeguard Policies, and Bank guidelines onProcurement. 3. The Donor Council, comprised o f senior representatives from each CEPF donor institution, reviews and approves each ecosystem profile as well as annual spending plans. The Council also approves any amendment to the CEPF Operational Manual, which contains the specific operatingpolicies and procedures o f the Fund. Inaddition, the Council creates and approves the conditions under which new donors may be invitedto take part inthe Fundand approves additional memberso f the Donor Council. The Donor Council i s currently chairedby the World Bank. 4. The Working Group, comprised o ftechnical experts from each donor institution, provides guidance to the Secretariat on strategy development, monitoring, and other aspects o f implementation. The members also act as advisors to their respective Donor Council representatives and as CEPF focal points for their broader institutions. Guests, including civil society groups that leadthe ecosystem profilingprocesses, grant recipients and other stakeholders, will be invited to informrelevant topics o f discussions. 5. The Regional Implementation Teams (RITs), comprised of locally-based civil society groups, will leadimplementation within the hotspots. The selection o fthe RITs will be based on a competitive process, with the Working Group makingthe selection to be approved bythe CEPF Donor Council. The RITs will be responsible for the strategic implementationo f the ecosystem profiles and buildinga broad constituency o f civil society groups working across institutional and geographic boundaries toward achieving shared conservation goals. As recommended by the independent evaluation, RIT responsibilitieshave been standardized and expanded to devolve further responsibilities to these teams. TORSfor RITshave been approved by the Donor Council. 43 6. All funds provided from the proceeds o f the GEF Grant would be utilized for ecosystem grants. Such grants would be awarded to civil society grantees inaccordance with the procedures outlined inthe Operational Manual. Government owned enterprises or institutions may participate only ifthey can establish i)that the enterprise or institution has a legal personality independent o f any government agency or actor ii)that the enterprise or institution has the authority to apply for and receive private funds and iii)that the enterprise or institutionmay not assert a claim o f sovereign immunity. 7. Once a Grant proposal i s approved, a grant agreement will be signed between C I andthe Grantee for grants above $20,000, andbetween the RIT and the Grantee for sub-grants o f $20,000 and less, based on a standard CEPF Grant Agreement outlined inthe Operational Manual. The maximum size of any grant would be less than U S $ l.O million dollars and would typically finance direct, approved costs, such as salaries, management fees, travel, consumables and other operating expenses. Such funds cannot be used for purchase o f land or the physical relocation o fpeople. The procurement procedures to be followed by the grantees are also outlined inthe CEPF Operational Manual and CEPF Grant Agreement and follow commercialpractices. C I will also enter into written agreements with RITs, describing the Framework under which RITswill issue sub-grants. GEF funds will be used for these sub-grants but not for directly fundingRITs. 8. RITs will provide guidance and assistance to the grantees to ensure that all procurements are carried out inaccordance with the CEPF Grant Agreement. They will have direct decision-making authority for all grants o f $20,000 or less, andjointly with the CEPF Secretariat will decide on all other applications. Grants above $250,000 would be subject to additional external technical review, including Bank regional staff as appropriate. In addition, the C I Secretariat shall carry out prior review and approval o f all procurement requests estimated to cost US$5,000 or more. The RITs will carry out this review and approval for the sub-grantsthey award. All other procurements may be awarded by the Grantees without prior review, but shall be subject to post-review on a sample basis. 9. All grants will be awarded on a competitive basis. Additional review for international . organizations will include the following steps: The existingprograms and potential role o f international organizations ineach . hotspot will be documented as part o f the ecosystem profilingprocess. All international groups, including CI, willberequiredto demonstrate a comparative advantage intheir grant application. Proposals designed and implementedwith a local partner or incorporating strong capacity buildingwould . be givenpreference. The RIT and/or advisory committee ineachhotspot will reviewthe proposal and, where appropriate, formally write ajustification for sole source approval. 44 10.The project incorporates specific steps to ensure further transparency and effective decision-making, particularly inregard to the award of CEPF grant funds to C Iprograms andother international organizations. C Iwould not beeligible for a set share o fCEPF funds but would compete for CEPF grant funding alongside other groups through the steps detailed above. Inaddition, the individual groups that comprise the RITs, as well as other offices and programs o f those organizations, would not be eligible for additional grants within that particular hotspot. Applications from formal partners ofthose organizations that have an independent operatingboardo f directors will be accepted, but subject to additional external review. All proposed grant awards over $20,000 to Conservation International will require approval on a time-bound no objection basis by the CEPF Working Group; grants up to $20,000 will be awarded bythe Regional Implementation Teams. Summaryof CoreRoles and Responsibilities CEPF Secretariat Regional Activity Imdementation Teams Grant Directors (GD) Grants Management Unit (G,) WTs) START UP Ecosystem profile Supervise the Support GD as needed NIA development development o fprofiles and related documents requiredfor approvalby the CEPF Donor Council, including negotiating and monitoringtechnical contracts Engage relevant NIA regional donor representatives, other I A S and CEPF Working Group inprocess; acquire GEF focal point approvals; and assist ExternalAffairs in finalizing documents for Donor Council approval RIT selection and Coordinate selection o f Ensureregion i s fully NIA award process RITsfor approved incorporatedinto CEPF profiles, including grants management analysis o fproposals system and all other against RIT Terms o f grant-making tools to Reference and Selection enable receipt and Criteria. processing of applications; support 45 CEPF Secretariat Regional Activity Implementation Teams Grant Directors (GD) Grants Management OUTS) Unit(GMU) Leaddevelopment and GD incompetitive negotiation o f selection process as consulting agreement needed with the selectedRIT based on Donor Council Contracting - risk Participate in direction assessment processing, negotiations, complete agreement preparation, any additional steps to Train RIT staff on CEPF legal review finalize agreement strategic approach and coordination, etc key elements o fproject design process (outcomes focus, etc) Train RIT inCEPF Receive training on grant-making and safeguards, Operational reporting systems, Manual, harmonize processes and standards, report systems. including procurement and safeguard policies Launch CEPF Participate inlaunch Support RIT as needed, Leadlaunchpreparation program national-level website and activities in announcements consultationwith CEPF External Affairs IGRANT MAKING Grants up to $20,000 Supervision o f RIT Coordinate with RIT on Leadreview and selection and awarding overall performance to financial management decision-making for all include post-review o f and reporting proposals, develop sampling o f awarded documentation and grants agreements, and directly award grants. Support RIT as needed Assist civil society groups indesigning, implementingand replicating successful projects Grant above $20,000 Jointly lead decisions on Contracting-risk Jointly lead decisions on selection and awarding all proposals with RIT* assessmentprocessing, all proposals with GD* agreementpreparation, Conduct final technical legalreview Preparejustification for review andsign off for coordination, etc approval and all compliance andrisk to requiredassessments C I andCEPF prior to presentation to CEPF Review all grant EDfor signature 46 CEPFSecretariat Regional Activity ImDlementation Team! Grant Directors (GD) Grants Management Unit (GMU) (RIW Support RIT in applications and lead coordinating review external reviews with process as needed technical experts and advisory committees Assist civil society partners indesigning, implementingand replicating successful projects MONITORING ?rojectlevel Support RIT with advice Guidance and support to Leadmonitoringand relatedto performance, GD andRIT as needed evaluationo f all finances, and safeguard projects, including compliance o f grantees reviewingreports and conducting site visits Monitor overall RIT Final review o f financial Maintain all required performance against reports for grants above reports; manage funding TOR, including $20,000; payment for grants under $20,00C sampling o f award o f processing and recommend grants less than $20,000 approval o fpayments to GMUfor all others 'ortfolio level Leaddevelopment of Support GD and RIT as Support GD inpreparing annual hotspot portfolio needed annual portfolio overviews. Recommend overviews, including refinementofprofile organizing a andor logical participatory assessment framework targets as at the mid-term and needed supporting final evaluation as needed Monitor RIT Regularly report on performance, and implementation o f overall portfolio projects andprogress development. against RIT Terms o f Reference and indicators inthe profilelogical framework 47 CEPF Secretariat Regional Activity ImplementationTeams GrantDirectors (GD) GrantsManagement WTs) Unit(GMU) Manage portfolio budget Support GD as needed and recommend adapting Strategic Direction allocations and strategy approaches as needed to meet the profile objectives PARTNERSHIPDEVELOPMENT rhroughout Support RIT as needed Support RIT and GD as Coordinate with mplementation needed regional programs o f CEPF donors and GEF implementing agencies, government officials, and other donors inthe hotspot for effective profile implementation kGrantsabove $20,000 proposed for award to CI, its branch offices, or affiliates would require the approval o f the CEPF Working Group. 48 Annex 7: FinancialManagementandDisbursementArrangements GLOBAL: Second CriticalEcosystemPartnershipFundProject EXECUTIVESUMMARY 1. A Financial Management Assessment ofthe ConservationInternationalFoundation(CI) was undertaken inMarch 2007 with the objective o f determining whether it has inplace adequate financial management arrangements that satisfy the Bank's OPBP10.02 with regards to the Proposed Grant from the Global Environment Facility (GEF) Trust Fundto the Critical EcosystemPartnership Fund(CEPF). Under OPBP10.02, financial management arrangements are the budgeting, accounting, internal control, funds flow, financial reporting, and auditing arrangementso f the entity and entities responsible for implementing Bank-supported operations. For each operation supported by Bank administered financing, the Bank requires the recipient to maintain financial management arrangements that provide assurancethat the proceeds o f the financing are used for the purposes for which the financing was granted. 2. The assessment was carried out inaccordance with the Bank's guidelines under Financial Management Practices inWorld Bank-Financed Investment Operations dated November 3, 2005. Financial management risk i s the risk that grant proceeds will not be usedfor the purposes intended and i s a combination o frisk factors. Taking into account the risk mitigation measures proposed, the financial management risk rating for this project i s assessedas moderate. 3. CI's financial management systemmeets the Bank's minimumrequirements andthe proposed accounting and internal control systems for the CEPF will ensure proper reportingo fuse o fthe funds for the conservation o fthe ecosystems that are approved annually. The project can also use the existing financial management system to produce Interimun-auditedFinancialReports (IFR)that canbe usedas abasis for disbursement. 4. Foundedin2000, CEPF i s ajoint initiative o f the World Bank, Global Environment Facility (GEF), the Government o f Japan (GoJ), the John D. and Catherine T. MacArthur Foundation(MacArthur) and CI. L'Agence Franqaise de DCveloppement joined in2007. As one o fthe founding partners, C I administers the initiative, hosts the CEPF Secretariat and ensures that all funds are managed properly. Each o f the original five donors committed to providing $25 million to the first phase o f the program for a total o fUS$125 millioningrant funding. Fundingfrom the Bank and GEF will end inearly 2007. To date over 900 civil society groups received grants under the first phase o f the program. 5. The proposed project aims to support a second phase o fthe global CEPF program, or CEPF-2. The total proposedcost for CEPF-2 amounts to US$lOO million o fwhich the GEF contribution will beUS$20million. CEPF-2 would focus on critical ecosystems within at least 14biodiversity hotspots eligible for CEFP investment. As part o fthe first phase of CEPF, investment strategies for three new hotspots have already been developed andwould bethe first priorities for implementationunder CEPF-2, namely: Polynesia- Micronesia, Indo-Burma (Indochina region) andthe Western Ghats and Sri Lanka. Other 49 ecosystems for investment would be chosen based on biodiversity status and threats, conservation needs, social and political environment, and current or plannedinvestmentby other donors. The total investment level per hotspot will vary dependingon conservation needs and local capacity. Resources for the part o f the program to be administered by the Bank will come from a GEF grant. 6. The proposedproject has four interlinked components, o fwhich GEFresources are proposedto contribute to only components 1and 2 through Ecosystem Grants: (a) Strengthening protection and management o f globally significant biodiversity. (b) Increasinglocal and national capacity to integratebiodiversity conservation into development and landscape planning. (c) Monitoringandknowledge sharing. (d) Ecosystem profile development andproject execution. 7. The CEPF-2 implementationarrangements are designed to build uponthe lessons learned from phase 1. Under CEPF-2, the partnershipwould retain the overall structure o f a Donor Council, Secretariat and Working Group. The administration and execution o f the program will still rest with C I through the CEPF Secretariat, on behalf o f the CEPF donors. C I has suitably qualified staffto carry out this function. One o f the lessons learned from the first phase o f CEPF and highlightedinthe independent evaluation i s that the coordination units, CEPF's representatives andgrant managers on the ground, were one o f the key strengths o f CEPF. Hence CEPF has expanded the roles andresponsibilities of the coordination unitsnow referredto as Regional Implementation Teams (RITs) to include more responsibilities ingrant-making decisions, capacity buildingof local partners and monitoring o f individual projects at the regional level. 8. Advance method i s usedfor disbursement o f the proceeds from the GEF Grant. Advances will bemade into the C I CEPF fund account, and the uses o fthe advances will be tracked through the C I accounting system. The ledger account usedfor monitoring the receipt and use o f the advances under the CEPF fund account i s considered as the designated account (DA) for advances. The ceiling for this designated account will bevariable, and determined on the basis o f cash projections against the Annual Spending Plans approved bythe CEPF Donor Council. C Iwill be directly responsible for the management, monitoring, maintenance and reconciliation o f the DA o f the program. 9. The project will be disbursingusingthe report based disbursements. Proceeds o f the GEF grant will be disbursed against the EcosystemGrants expenditure category. The disbursement rates will bebased on cash projections against the annual spending plans approved by the CEPF Donor Council. 10.Under the first phase, advances were made into the CEPF FundAccount based on cash projections included inthe PMRs. These advances were then accounted for inthe subsequent PMRs. This would therefore be referredto as "accountable" advances. 50 11.The project wouldbe required to submit quarterly Interim un-audited FinancialReports (IFR), annual spendingplanandfinancial report and annual CEPF Audit. The proposed project will use IFRprepared by C I as supporting documents for disbursement. IFRwill be producedby C I on a quarterly basis, usingthe same IFRtemplate as under the first phase o f the CEPF program. FINANCIAL MANAGEMENT ASSESSMENT The Country Issue 12. The geographical dispersion and expansion o fhot spots add to the complexity o f the project. 13. There may beweak overall FMcapacity inthe targeted regions but the capacity o f the RITs is likely to be relatively strong, since having an acceptable financial management capacity and FMsystems i s a selection criterion for the RITs. However, the FMcapacities o f the local grantees are likely to be weak andmay lack well qualified staff. Clear and adequate FMguidelines and good supervisionby the RITs should address this problem. The Sector Issue: 14. Investments have targeted specific regions. Although inthe first phase this has been shown to be highly effective, there are still critical conservation needs inthe original 14 hotspots and inother critical ecosystems that have not yet benefited under the program. Inaddition, C Irevised the number o f hotspots up from 25 to 34 in2005, though only 30 are eligible for Bank and GEF support. Strengthening o f the program inexisting hotspots and expanding to other activities like marine ecosystems and new hotspots would maximize the overall impact o fthe project. This project may inspireandhelp direct other donor investments to the hotspots. RISKASSESSMENT AND MITIGATION 15. The overall fiduciary risk is assessedto be moderate. C I receives grants from various other donors and i s subject to special reporting requirements which it has always met. However, it i s important to note that C Icould be ina position that would constitute a conflict o f interest as it will be allowed to compete for the position o f RIT, ina competitive process. The organization fulfilling the position o f RIT ina region, whether C I or another organization, i s not allowed to receive grants inthat region- see Annex 6 on Institutional Arrangements which addresses conflict o f interest issue. Inregions where C I i s not the RIT it is allowed to apply for grants. Inthe case C I applies for the position o f RIT, the C Irepresentative inboth Working Group and Donor Council will recuse himself from participating inthe decision to approve the selection o f the RIT. Inregions where another organization serves as the RIT, all decisions inregardto grants to C Ibelow $20,000 will be made by the RIT inaccordance with the ecosystem investmentprofile. For C I applications for grants above $20,000, the CEPF Secretariat would devolve review and decision-making to the CEPF Working Group, with input from the RIT, local advisory group and external review as appropriate. The C I member o fthe Working Group would recuse himself from this process. 51 16. The OperationalManual will be revisedto outline the procedures to be followed where CI i s a potential grantee to address the issue of conflicts o f interest. Adoption of the revised OperationalManual is a condition ofproject effectiveness. The table below summarizes the risk analysis. With the appropriate risk mitigation measures as outlined the overall risk assessment is moderate. Risk Risk Comment Condition of Mitigation Residual Rating Negotiations, Risk Effectiveness Inherent Risk Country M Although the 14 hotspots N Level are yet to be determined, it is inevitable that inthe targeted regions, a risk exists o f weak capacity and poor control environment. The FMcapacity o f the EUTs is likely to be relatively strong, since having an acceptable FM capacity i s one of the criteria for RIT selection. I Entity H The capacity o f the local N Level grantees i s likely be weak. The CEPF Secretariat M New grantees might lack and the RITs are experience inthe responsible for implementation o f a project. monitoring and supervising the grantees. The amended OM is intended to improve procedures for monitoring and implementation. Program M The program will be N Training on compliance Level implemented through civil with the Operational M society partnership. Manual needs to be provided to all RITs. H A highnumber o f Y, Draft community groups involved amended OM i s The internal audit will M insub-grant ready before ensure compliance with implementation, with negotiation and the OM. Bank varying degree o f capacity adoption o f OM supervision will also be and skills. Therefore, is condition of intensified. ensuring adequate effectiveness. supervision and compliance is difficult. Control Risk 52 Budgeting Spending plans prepared annually -Donor Council will only approve spending plan consistent with resources available. Delay on approval o f Annual Spending documents may delay implementation, yet no such delays have taken place during first phase o f CEPF. Accounting CI uses the Oracle N Financials software for its computerized accounting system. The Oracle's financial management package i s a robust system for reportingpurposes inCI HQandfield offices. Internal CIhas formally established Y, TOR for T o ensure adequacy o f Control an internal audit function internal audit scope and resources for M with a reportingline to the plan for CEPF internal audit function, Audit Committee o f CI's program has to the TOR, audit plan and Boardo f Directors. The be reviewed and the arrangement have to Audit Committee approved acceptable to the be acceptable to the the internal audit function Bank by Bank. and internal audit plan in effectiveness. March, 2007. The function has been outsourced to Falletti Weber Consulting. The CEPF Operational Manual describes policy and Y, Draft internal control procedures. amended OM Amended Manual will be CI conducts risk assessment will be ready adopted, including clear o fprojects before grants are before rules related to conflict awarded (Refer OM.4.2.5). negotiation. o f interest. Level o f risk determines follow-up actions including field visits. Disbursement o f grant funds can only commence after clearance byDirectors and approval o f the Executive Director. A programaudit o f CEPF-2 Y, TOR for focusing on economy, program audit efficiency, and effectiveness reviewed and will be conducted within 24 acceptable to the months from effectiveness Bank within 12 months o f effectiveness. Funds Flow Based on the successful N experience from phase 1, there i s a low risk o f 53 7 grantees not receiving funds intimely manner. See Above comment on N Accounting Auditing No qualificationhas been Y, TOR for The TOR i s expected to M providedby the external external audit to also cover a review o f auditors during the audits o f be reviewed and internal controls, fust phase o f CEPF, but the acceptable to the including administrative, scope o f audit did not cover Bank within 4 supervision, monitoring internal control and months from and oversight compliance inthe last two effectiveness. arrangement at the RITs years. A separate audit and grantee levels over opinion on CEPF fund (as the use o f CEPF funds. an accompanying fimds The audit report is to be accountability statement) i s submitted to the Bank part o f the Bank's audit within five months after requirements. close o f financial year. H-High S- Substantial M-Moderate L-Low STRENGTHSAND WEAKNESSES 17.The project has several strengths andweaknesses. A 2005 independent evaluationo fthe CEPF has been very positive which suggests that the overall strengths o f empowering NGOs, community groups and other civil society groups at local andprovincial level approach outweigh the weaknesses. However, among the recommendations o f the report are issues such as the need to strengthen performancemonitoring and to better address conflict o f interest and allocation o f financial resources for grant making. Accordingly strengthened institutional arrangements have been put inplace for CEPF-2 - see Annex 6 (Implementation Arrangements). 18. The overall development objective o fthe project emphasizes the needfor better engagement o f local civil society groups, including NGOs. Strengths include: Region-specific investment strategies (ecosystem profiles) are developed together with a wide range o f stakeholders, to ensure that regional priorities are identifiedand agreed. Community and civil society groups have stronger ownership o f project which may buildnationaland local capacity. Communities receive the finds directly in their bank account and manage implementationo fproject, minimizingthe number o f intermediate transactions. CEPF has the potential to complement conservation efforts in those Bank client countries with modest conservation finding. CEPF promotes good environmental governance. CEPF outlines guidelines for grant-makingand implementation under an Operational Manual, to be revisedand updated for CEPF-2. RITs have been very effective in linking with smaller grassroots activities and also with governments. The capacity o f RITs to supervise and assist the community 54 groups i s likely to be relatively strong. Both adequate supervision and assistance capacity are selection criteria for the RITs. 19. Some weaknesses noted inthe 2005 IndependentEvaluation, as well as inthe FM assessment, are as follows: .. Capacity o f small community organizations and NGOs to manage and implement the sub-grants may be weak. The perception o f CI's dual role/conflict o f interest. C I i s not only the CEPF .. Secretariat but it may also be eligible to be a RIT or a grantee in specific hotspots (cannot beboth insame hotspot). The multi-region grants may overlap with other projects which may create risk o f double counting. Highly automated financial system and online reporting disadvantaged the small regions with no access to internet. 20. These weaknesses may create some risks inthe project implementation. The perception o f CI's dual role is the main issue that may stand out from the rest o f the noted weaknesses. However, CEPF has strengthened its institutional arrangements to reduce potential conflict o f interest. This means that any RIT, whether C I or another organization, will not be eligible to apply for grants within the hotspot they manage. FINANCIAL MANAGEMENTARRANGEMENTS Following are the FMArrangements for the Project: 1. Implementingentity and Staffing 21. The program will be implementedby C I which i s currently hosting the CEPF Secretariat on behalf o f the CEPF donors. C Iwas incorporatedinthe State o f California on January 26, 1987 as a nonprofit charitable organization. CI's mission is to conserve the Earth's livingheritage, the global diversity, and demonstrate that human societies are able to live harmoniously with nature. C Iworks with nationals o f each country inwhich it operates to develop management capacity for biodiversity conservation, including management of protected areas andmore sustainable resource management. C I i s overseen by a Board o f Directors. It has total staff strengtho f about 1000 worldwide and i s represented in40 countries o fwhich 24 have field offices. 22. The Finance division o f C Iwhich handles all financial responsibilities for C Imeets the minimumrequirements o fthe Bank. It is responsible for financial reports on CEPF. The CEPF Executive Director, the C I Senior Vice President, i s the head o f the CEPF Secretariat, which includes 16 staff members. 23. The program will be maintained byboth C I at Headquarters and also from their field offices therefore ensuring reconciliation and counterchecking controls are inplace. The Oracle's Financials feature for development projects will provide the necessary information neededto prepare reports for the program. Signed grant commitments and disbursements are maintained inOracle andreconciled on a quarterly basis. Cash i s 55 disbursed to grantees based on acceptance o f quarterly financial reports and cash projections for the following term 30 days after the end o f the quarter. The CEPF Secretariat will review the financial reports. The IFRis prepared based on financial information from Oracle that includes signed grant agreements and cash payment to date and send to the Bank 45 days after the endo f the quarter. 2. Budgeting 24. The project will be usingCI's budgeting system which i s linkedand interfacedto its FM system -Oracle Financials. C I shall prepare an annual budget (Annual Spending Plan) for review and approval by the Donor Council taking into account the fimding levels o f the proposed spending categories for the Fundduringthe next calendar year. The Annual Spending Planwill include four categories: (a) the finding levels for each approved EcosystemProfile, together with a description o f the types of projects and activities to be financed at the programmatic level, based on the fundingstrategy inthe EcosystemProfile; (b) a Preparation Budget for new EcosystemProfiles to beprepared duringthe calendar year; (c) the OperationalBudget; and (d) a management fee for the category (c) above calculatedon thebasis o f CI's audited annual rates (indirect costs) for the previous year. 3. Accounting 25. C I uses Oracle Financials as its accounting andhuman resources software. C I field offices also maintain their financial records inOracle and submit files monthly for review and consolidation. As per CI's Record Maintenance Policy, records associated with these transactions are kept at C I headquarters and inthe field offices for no less thanthree full years after the transaction. C I undergoes annual financial and federal compliance audits conducted by an independent audit firm. Currently this i s done by Price Waterhouse Coopers. 4. InternalControl 26. The project will be implementedinthe same way as all other donor financed projects at C I and will be subject to the same control mechanisms. 27. C I conducts risk assessmentso f sub-projects before grants are awarded. The risk assessment model i s only intended to be used for projects with a proposed grant to recipients o fmore than $20,000. Grantsbelow $20,000 are awarded by the RITs. The risk assessment i s divided into two separatepartswhich i s programmatic risk and financial risk. The programmatic riskisperformedbythe RIT, andthe financial riskwill be 56 conducted by a finance staff member from CI. The assessments are byway of questionnaires as per OM 4.2.5. 28. The CEPF OperationalManual clearly defines administrative and accounting procedures hence C I should continue to use this as an effective method o f ensuring internal controls are inplace and are followed. 5. FundFlow andDisbursementarrangements 29. The fund flow for the GEF funds would be from the GEF Trust Account maintainedby the World Bank to the DesignatedAccount. C I will disburse funds directly from the Designated Account to external grantees. Subject to the RITs grant-making authority for grants o f $20,000 and less, C Iwill also disburse funds from the DesignatedAccount to grantees contracted by the RITs. C I will link grant disbursements to estimated expenses, so that excess cash i s not ingrantees bank accounts. Counterpart funds will also follow the same flow. The table below summarizes the proposeddisbursement arrangement: Disbursement Amount of the GEF ExpendituresTo BeFinanced Category Grant inUSD I Ecosystem I 26.3% I 1 Grants $20,000,000 TOTAL 1I$20,000,000 1 I 30. Disbursementmechanism for sub-grants Ecosystem Grants. The GEF funds will be disbursed from C I to the grantees against the sub-grant agreements, which specify the number o f installments, and conditions for eachpayment. The payments made to the grantees inaccordance with the sub-grant agreements are considered as eligible expenditures for disbursement purposes. Any un-used funds receivedby the grantees will be refundedto the C I fund account, and subtracted from the reported eligible expenditures. These funds are then available for other grants inthe approved region. 6. FinancialReporting 31. The project shall be requiredto submit the quarterly Interimun-audited FinancialReport (IFR)which consists o fat least: 1. Quarterly Sources andUses o fFunds; 2. Project Cash Forecast; and 3. Designated Account Activity Statement 7. Audit Arrangements 32. InternalAudit (IA). There i s no formal independentInternal Audit unit for this project. However, C I i s inthe process o f formally establishing an internal audit function for C I 57 with a reporting line to the Audit Committee o f CI's Boardo fDirectors. The Audit Committee approvedthe internal audit function andinternal audit planat their meeting in March, 2007. The function has been outsourced to Falletti Weber Consulting firm, and the program has already been launched. 33. ProgramAudit. Inlieu o f a regular internal audit o f CEPF-2, a program audit o f CEPF-2 will be conducted within 24 months from the date o f effectiveness inaccordance with a TOR acceptable to the Bank, including reviewo f economy, efficiency and effectiveness in relation to the objectives o f the CEPF program. A copy o f the report will be furnished to the Bank. Inaddition there will be regular monitoring o fprojects by CEPF Secretariat, supervisionvisits from the Bank andthe annual external audits. 34. ExternalAudit. The consolidated annual audit o f C I i s beingcarried out by an external auditor, currently Price Water House Coopers, LLD.The audit i s being presented on the accrual basis o f accounting. CEPF has its records, accounts and financial statements audited annually, inaccordance with appropriate auditing principles consistently applied, by an independent auditor (currently Price Waterhouse Coopers). Inaddition, CEPF's risk assessmentprocedures require that all grantees receiving over $100,000 and all highrisk grantees over $20,000 provide annual independent audits to CEPF. 35. A separate audit opinion on the CEPF annual fund accountability statement will be conducted inaccordance with the TOR acceptable to the Bank and submitted to the Bank as part o f the Bank's audit requirements. The CEPF audit report will be submitted within five months after the end o fthe financial year. 8. ActionPlan 36. Followingi s the mitigating FMactionplan: Action Plan ExpectedOutput I DueDate . , Revised OM to include procedures to be followed Final draft OM for review by BY by all implementingunits o f the project. the Bank Negotiations This should include all financial management and (Completed) disbursement procedures for this project at all level o f implementation o f the project, covering operations for phase 11, including procedures for (a) conflict o f interest, (b) financial management Adoption o f final OM BY and disbursement, particularly related to advances acceptable to the Bank as Effectiveness and their accountability procedures), (c) project evidenced through a Letter o f cycle management, (d) grant management, No-Objection. including grant agreement and reporting templates, and (e) the terms o f reference and selection process for Regional Implementation Teams, (9 IFR formats, (g) CI and RIT's supervision o n project implementation by local grantees, and (h) internal audit arrangements. 58 B. Training Training for RITs' staff who will require the OM training Training will necessary slulls to carry out respective duties as be conducted described inthe OM to individual RITs witlun 90 days o f appointment. C.Internal Audit 1. Establishment o f internal audit function for CI -Internal audit function - BY with adequate TOR, work program, and reporting established(incase that the Effectiveness. line to the audit committee consistent with function i s outsourced, the international best practices. TOR, audit plan and the arrangement have to be acceptable to the Bank). Adoption o f final Operational - BY Manual, acceptable to the Bank. Effectiveness. 2. Agreement on TOR for program audit to assess Within 12 economy, efficiency and effectiveness in relation months from to achieving the CEPF objectives. effectiveness. 3. Completion o f a program audit o f CEPF 2 in -A comprehensive programaudit Within 24 accordance with theTOR acceptable to the Bank o f CEPF. months from effectiveness D.AnnualAudit 1.Adoption o fa time bound action planto address CI audit recommendation action Completed outstanding audit recommendations arising from plan acceptable to the Bank. 2006 audit. 2. Satisfactory implementationo f outstanding Confinnation from the auditor Annual Basis external audit recommendations. on the completion o f all audit recommendation. 3. Arrangement o f the project annual audit in TOR for external audit Within 120 accordance with a specific TOR acceptable to the acceptable to the Bank. days form Bank. The TOR is expectedto also cover a review effectiveness. o f internal control, including administrative, supervision and monitoring arrangements at the RITs and sub-grantee levels, over the use o fthe grants. The audit expected to be conducted by independent auditors acceptable to the Bank and the audit report expected to be submitted to the Bank within five months after the closing o f the financial year. E.Donor Council Clarifying the role andresponsibility o f the Donor Adoption o f f i a l OM BY Council, particularly with respect to oversight o f acceptable to the Bank as effectiveness audit, including approvinglendorsing scope o f evidenced through a letter o f no- external and internal audit plans. Any deviation objection. from the agreed scopes must be concurredendorsed by the Donor Council. 59 EffectivenessConditions: This Agreement shall become effective on the date that evidence in form and substance satisfactory to the IBRD shall have been furnished to the IBRD demonstratingthat: a. the Donor Council has approvedthe fund-raising strategy referred to in Section 5.01 o f the Financing Agreement; b. the Donor Council has approved an indicative list o f Biodiversity Hotspots selected for investmentunder the Fund; C. the Donor Council has approvedthe revised OperationalManual; d. C I has established an internal audit function, with staffing, resources and functions based on terms o freference satisfactory to IBRD; and e. Execution and delivery o f the Agreement on behalf o f C I has been duly authorized by all necessary corporate action and, upon execution and delivery, the Agreement shall constitute the legal, valid, bindingand enforceable obligation o f each Partyhereto. DatedCovenant: a. Adoption o f TOR for external audit acceptable to the Bank, within 120 days o fproject effectiveness. b. Agreement on TOR for program audit to assess economy, efficiency and effectiveness in relation to achieving the CEPF objectives, within 12 months o fproject effectiveness. c. Completion o f a program audit o f CEPF by the internal auditor within 24 months o f project effectiveness. 9. SupervisionPlan 37. The program that is ending didnot include Bank Financial Management Specialist inits supervisionmissions. Therefore it i s critical for this proposedprogram to include a FMS in the supervisionmission so as to ensure that the grant proceeds are usedfor the purposes for which it was granted with due regard to economy, efficiency and the achievement of the program's objectives and the FMrisk o f the project. 38. The nature o fthis review would include a review o f a sample o f completed projects including their validation with comparison to the corresponding cost and funds spendon them. Reasonablenessofthe funding shouldbe checked. An overall review o fprogram contracts as well as the physical accomplishments and funds disbursed should be made. The supervision should addressthe total project financial arrangements. 39. The overall risk rating for the project i s Moderate and it i s envisaged that FM monitoringhupervisionmissions would be requiredat most on a semi-annual basis. The supervision should be conducted by at least a qualified FMS. 60 Annex 8: ProcurementArrangements GLOBAL: Second CriticalEcosystemPartnershipFundProject Since the GEF funds will b e disbursed as Ecosystems Grants, the procurement arrangements are outlined inthe Annex 6: ImplementationArrangements. 61 Annex 9: Economicand FinancialAnalysis GLOBAL: Second CriticalEcosystemPartnershipFundProject This annex is not requiredfor this project. 62 Annex 10A: SafeguardPolicyIssues GLOBAL: Second CriticalEcosystemPartnershipFundProject 1. The project falls under the World Bank environmental category "C" classification. O fthe World Bank's ten safeguard policies, OPBP 4.01 on Environmental Assessment, OP/BP 4.12 on InvoluntaryResettlement, OP/BP 4.10 on Indigenous Peoples, and OP/BP 4.36 on Forests are triggered. Although OP/BP 4.04 on Natural Habitats and OP/BP 4.1 1on Physical and Cultural Resources are not triggeredby this project, they are included here for completeness. A process framework (PF) for involuntary restrictions and an Indigenous Peoples PlanningFramework (IPPF) have beenprepared. An Operational Manual provides guidance and criteria for evaluation, management and implementation o fthe grants under CEPF-2, including compliance with the Bank's safeguard policies. 2. CI's Boardo fDirectors adopted an Indigenous Peoples policy in2003. All CEPF operations are guided by the Operational Manual and relevant safeguard policies are incorporatedinto project development andmonitoring processes. 3. Environmentalassessment (OP 4.01). The project will address priority conservation objectives and i s thus expected to have a highlypositive environmental impact. If implemented as planned, the project would have no significant adverse environmental effects. Project activities will be selected on a competitive basis according to criteria that will ensure that resources are directedto the most important biodiversity issues while ensuringminimumadverse environmental effects. Current screening criteria outlined in the operational manualwill identifyprojects with potential adverse impacts at the grant proposal stage. 4. NaturalHabitats(OP 4.04) and Forests(OP 4.36). This project is fully consistent with the Bank's Natural Habitats and Forest policies. It would not cause, nor facilitate, any significant loss or degradation o f forests or other natural habitats. By design, CEPF would finance activities that promote conservation o fnatural habitats and threatened species. The project i s intendedto prevent, or reduce, habitat loss or degradation by providing strategic assistance to engage NGOs, community groups, and other civil society partnersin conservation inbiodiversity hotspots. 5. Project activities will focus on conservation and more sustainable management o f forests andother naturalhabitats and all project activities willbe consistent with conservation priorities. Projects are expected to promote positive environmental benefits and conservation o fbiodiversity through creation o fnew protectedareas, strengtheningo f protected area management, promoting sustainable use andmanagement o f natural resources and creation o f conservation partnerships for more effective management both withinprotected areas andimportant biological corridors. It is expected that any activity funded by CEPF would be consistent with existing protected area management plans or other resource management strategies are applicable to local situations. Beyond the selection criteria for identifying project activities, it i s not anticipatedthat any additional measures will be required underthis policy. 63 6. Socioeconomic impacts.The first phase o f the CEPF program awarded grants to more than570 civil society partnersin 15regions, rangingfrom internationalandnational NGOs to local communities, indigenous groups and the private sector. CEPF-2 would replicate this successful implementationmodel inat least 14 hotspots. Inorder to give explicit attention to social safeguards issues, a desk review was undertakenon current CEPF projects with the objectives to assess their potential social impacts, to consider measures to address such impacts and to consider eligibility criteria for the screening process for CEPF-2. Eighteenprojects were reviewed along with the Operational Manual and FiveYear Assessments andother project documents. This review informed a set o f recommendations for revisions to the OperationalManualto address the requirements o f the World Bank's social safeguard policies, particularly the Indigenous Peoples Policy (OP 4.10) and the Involuntary Resettlement Policy (OP 4.12). 7. Many o f the projects under CEPF-2 are expected to be small-scale andprovide positive impacts for local communities, including greater empowerment o f local civil society groups to participate inactive conservation and natural resource management. Direct positive impacts include creating employment opportunities, promoting community management o fnatural resources, development o f ecotourism and capacity building. However, some projects may have the potential for adverse impacts on the livelihoods o f local populations, particularly inthe short term prior to implementation o f more sustainable management practices. These include projects that result insome form of restrictions o f access to natural resources, projects that induce changes inlivelihood and natural resource practices, and projects that affect Indigenous Peoples. 8. InvoluntaryResettlement(OP/BP 4.12). This policy covers both impacts from activities that require resettlement or landacquisition, andprojects that result inrestrictions of access to legally designated parks andprotected areas. Activities involvingresettlement or land acquisition are not allowed under the CEPF program. Restrictions o f access to resources are addressed through preparationo f a Process Framework that describes the process andprinciples for determining restrictions and mitigation measures with the participation o f affected persons. All project applications will be assessedfor potential to reduce access to resources. The process for preparationo f an Involuntary Restriction Framework, with appropriate off-set management or compensation measures i s outlined in the revised Operational Manual - see Annex 1OC. 9. IndigenousPeoples (OP/BP 4.10). Many o f the world's remaining areas o fhigh biodiversity overlap with lands occupied and utilized by Indigenous Peoples. Final selection o f CEPF hotspots i s dependent on Donor Council decisions but CEPF-fbnded activities could impact indigenous communities inseveral potential hotspots. Individual project activities would be selected at the ecosystem level but it i s expected that Indigenous Peoples, as well as other civil society actors, will particip'te inidentifying conservation priorities and have access to CEPF grants. The project would explicitly encourage proposals that support Indigenouspeoples and other local communities in community-basedconservation and activities that enhance local communities tenure and sustainable resource management. Additionally, all projects proposedfor CEPF funding 64 would demonstrate that they have made provisions for evaluating the potential impacts on indigenous communities and site-specific action plans maybe required. 10. PhysicalCulturalResources(OP4.11). CEPF-2 project proposals are unlikelyto have any adverse impacts on physical cultural resources (defined as movable or immovable objects, sites, structures, and natural features and landscapes that have archeological, paleontological, historical, architectural, religious, aesthetic, or other cultural significance). These may, however, be present inproject areas and measures should be inplace to ensure that they are identified and adverse effects avoided. This i s particularly relevant for projects which support development o fmanagement plans and other landandnatural resource use planning, projects that support alternative livelihoods, andprojects that include infrastructure construction, however minor (e.g. park shelters, boundary markers). These requirements are described inthe Operational Manual. 11.Basedon review o flessons from the CEPF program to date, explicit guidance and clarity on the application o f safeguard policies have been prepared for CEPF-2, including an Indigenous Peoples Planning Framework (IPPF) and Process Framework for Involuntary Restrictions. These frameworks include the requirementfor Regional Implementation Teams (RITs) to consider alternatives to minimize adverse safeguard-related impact in their decision on grant applications. The IPPF and Process Framework for the overall CEPF-2 project and for individual ecosystem profiles and sub-projects will be disclosed at the Bank's Infoshop. As needed, specific instruments will be developed for sub-projects fundedby CEPF-2. 12. Clear requirements and guidelines for projects affecting resource use and Indigenous peoples have been incorporatedinto the revised Operational Manual. Specific revisions include greater emphasis on consultation and participation. EcosystemProfiles would include descriptions o f local communities and other key stakeholders, land tenure and customary use rights issues. To further strengthen openness and transparency, there will be fulldisclosure ofecosystemprofiles andprotected areaprojectswith all affected communities. Under CEPF-2 there will also be a greater emphasis on stakeholder participation informulating indicators and monitoring and evaluation o fproject outputs and outcomes. 13. Procedures to address safeguards issues inindividual projects are outlined inthe Operational Manual. Grant applicants would first assess whether their projects may pose safeguard issues with additional screening by CEPF RITs and Grant Directors as part o f proposal review, with mitigation measures put inplace as needed. Grant application forms have beenrevisedas have the sections dealing with decision making andrisk analysis. CEPF staffwill also monitor for potential safeguard issues during implementation. As part o f start up operations, safeguard training will be providedby Bank staff to key CEPF secretariat staff including regional Grant Directors and the head o f the Grants Management Unit,who routinelymonitor compliancewith CEPFpolicies andprocedures. Training will also be provided on safeguards issues for the Regional ImplementationTeams ineach selected ecosystem. 65 Annex 10B: SummaryIndigenousPeoples PlanningFramework GLOBAL: Second CriticalEcosystemPartnershipFundProject 1. Manybiodiversity hotspots overlap with lands or territories traditionally owned, customarily usedor occupied by Indigenous Peoples. Duringthe first phase o f CEPF individualprojects have provided positive impact on indigenous communities, e.g. support to community based management o fprotected areas or indigenous territories. It i s expected that Indigenous Peoples, as well as other civil society actors, will participate in identifyingconservation priorities andhave access to CEPF grants duringCEPF-2. However, as CEPF aims to protect critical ecosystems, the possibility remains that some project activities might affect the current livelihoods o f Indigenous Peoples. These include projects that adversely affect Indigenous Peoples' particular rights (formal and/or customary) to the land and natural resources, and projects that induce change inlivelihood and natural resource use practices. 2. Key requirementso f the Indigenous Peoples Policy include: (i) a social assessment; (ii) a process o f free, prior and informed consultationwith the affected Indigenous Peoples' communities to fully identify their views and to obtain their broad community support to the project; (iii) preparationo f anIndigenousPeoples Plan or anIndigenous Peoples the PlanningFramework; and (iv) disclosure o fthe Indigenous Peoples Plan or Planning Framework. 3. The Planning Framework outlines the key guidingprinciples, criteria andprocedures which the project will follow in such cases, to ensure that eligible, affected persons are assisted intheir efforts to restore or improve their livelihoods ina manner which maintains the environmental sustainability andterritorial integrity o f the relevant protected areas. These requirements are described below and shouldberead together with the Operational Manual as well as the Process Framework for Involuntary Restrictions. Screeningfor IndigenousPeoples 4. CEPF applicants are requiredto screen for the presence o f Indigenous Peoples early on in project preparation. This could be done whenpreparingthe Letter o f Inquiry,but should otherwise be done as preparation o f a project proposal application begins. The characteristics o f Indigenous Peoples mentioned inOP 4.10 will be used. Ifit i s uncertain whether local communities can be considered as IndigenousPeoples, applicants should consult with the communities, local NGOs, knowledgeable experts and government representatives as appropriate. Insituations o f disagreement or controversy they may seek guidance from CEPF staff, who may seek guidance from the World Bank as needed. Social assessment 5. Where IndigenousPeoples are present inthe project area, the Applicant assesses the particular circumstances o f affected indigenous communities. The social assessment includes the project's potential positive andadverse impacts, andi s usedto inform project preparationto ensure that project activities are culturally appropriate, will enhance benefits 66 to target groups and are likely to succeed inthe given socio-economic and cultural context. The level o f detail o f the social assessment depends on project activities and their impacts on local communities and should be agreed between the Applicant and CEPF staffbefore proceedingwith the project application. Ifthe project i s small and has no or few adverse impacts, this assessment i s done as part o f early project preparation by the Applicant, mainly based on secondary sources andthe Applicant's own experience working inthe area. Inlarger andmore complex projects, the assessment may be a separate exercise done bythe Applicant or contracted experts as appropriate andmay include primaryresearch. 6. The findings o f the social assessment are described in a separate report and reflected inthe project proposal application. For small scale projects with no direct impacts on indigenous communities, the report i s short and includes a briefoverview of the indigenous communities, project activities as they relate to the local communities, how project implementationwill address the particular circumstances o f Indigenous Peoples, and how they will participate andbe consulted duringimplementation. For more complex projects a more elaborate report i s required,which should include the following elements: a description o f the legal and institutional framework applicable; baseline information on the demographic, social, cultural andpolitical characteristics o f the affected indigenous communities, and the territories and natural resources on which they depend and which they traditionally own, use or occupy; a description o fkeyproject stakeholders and an elaborationo f a culturally appropriate process for consultation and participation during project implementation; and the conclusions o f the free, prior andinformed consultation with the affectedindigenous communities. Free, prior andinformedconsultation . The Applicant undertakes a process o f free, prior and informed consultation with the affected Indigenous Peoples' communities duringproject preparation. Inmost cases, this process i s best done as part o f the social assessment although consultations are likely to continue after completion o f this assessment. The extent o f consultations depends on the project activities and the circumstances o f affected Indigenous Peoples. For projects with no impacts or direct interventions with the indigenous communities, indigenous communities are informed about the project, asked for their views, and assured that they will not be affected duringproject implementation. For projects affecting indigenous communities, whether positively or adversely, a more elaborate consultation process is required. This may include, as appropriate: information about project objectives and activities; discussion o f possible adverse impacts andways to avoid or mitigate them; discussion o f potential project benefits and how these can be enhanced; assessment o f land and natural resource use and how management may be enhanced; identifying customary rights to land and natural resource use; identifyingand discussing (potential) conflicts with other communities and how these mightbe avoided; ways to elicit and incorporate Indigenous Knowledge into project design; facilitating the affected communities' broad support to the project; developing a strategy for indigenous participation and consultation duringproject implementation, including monitoring and evaluation. 67 8. All project information provided to Indigenous Peoples should be in a form appropriate to local needs. Local languages should usually be used and efforts should be made to include all community members, including women and members o f different generations and social groups (e.g. clans and socio-economic background). Indigenous Peoples Plan 9. Basedon the consultation and social assessment processes, project design i s refined and particular measures and instruments are prepared to address issues pertaining to Indigenous Peoples. This may be done incombination with instruments addressing involuntary restrictions on access to natural resources (a Process Framework) in accordance with OP 4.12 on Involuntary Resettlement. The documents are prepared with the participation o f affectedindigenous communities during the consultation process. 10. The instrumentto address the concerns andneeds o f Indigenous Peoples i s usually an Indigenous Peoples Plan (IPP). Inthe case o f a project such as CEPF-2, with multiple sub- projects not identified duringpreparation, an Indigenous Peoples Planning Framework (IPPF) describes the planning and implementationprocess. Where "Indigenous Peoples are sole or the overwhelming majority o f direct project beneficiaries," the elements o f an IPP should be included inproject design. Inthis case a separate IPP is not requiredbut the project application provides details on how Indigenous Peoples' issues will be addressed duringimplementation. 11.The contents ofthe IPP dependon the project activities and impacts on Indigenous Peoples. It may be appropriate to include a process o f further social analysis and consultations duringproject implementation to determine specific activities. At minimum the IPP should include a description o f the Indigenous Peoples affectedby the project; summary o fthe proposed project; detailed description o fthe participation andconsultation process duringimplementation; description o fhow the project will ensure culturally appropriate benefits and avoid or mitigate adverse impacts; budget; mechanism for complaints and conflict resolution; and the monitoring and evaluation system that includes monitoring o fparticular issues andmeasures concerning indigenous communities. The following elements andprinciples may be included inthe IPP, as appropriate: ....Specific measures for implementation, with clear timetables o f action and financing. Formal agreements reached duringthe free, prior and informed consultation duringproject preparation. Clear output and outcome indicators developed with affected Indigenous Peoples. Project design should draw upon the strengthso f IndigenousPeoples Organizations and the affected communities and take into account their languages, cultural and livelihoodpractices, social organization and religious beliefs. It should avoid introducing changes that are considered undesirable or unacceptable to the Indigenous Peoples themselves. 68 Efforts should bemade wherever possible and appropriate to incorporate, Indigenous Knowledge and local resource management arrangements into project design, including special measures for the recognition and support o f customary rights as appropriate. Special measures concerning women andmarginalized generational groups. Capacitybuildingactivities for the indigenous communities to enhance their participation inproject activities may be u s e h l or necessary; this may include general literacy courses. Grievance mechanism taking into account local dispute resolution practices and norms. Participatory monitoring and evaluation adapted to the local context and capacity. Disclosure 12. Before finalizing an IPP (or IPPF) a draft should be disclosed together with the social assessmentreport (or its key findings) ina culturally appropriate manner to the affected IndigenousPeoples. Language i s critical and the IPP should be disseminated inlocal languages or other forms easily understandable to affected communities, including oral communication. 13. After the CEPF Secretariat has reviewed and approved the IPP andproposedproject for hnding, the Grantee shares the final IPP (or IPPF) again with affectedcommunities. The final IPP (or IPPF) is also disclosed at the CEPF website. Roles and Responsibilities 14.Applicants, and subsequently Grantees, are responsible for following the requirements o f the World Bank's Indigenous Peoples Policy as described inthis IPPF. They will ensure that IndigenousPeoples are consulted and benefit inculturally appropriate ways. They will avoid adverse impacts on indigenous communities, or, where this i s not possible, develop with the affected communities measures to mitigate andcompensate for such impacts. Grantees are responsible for reporting to both affected indigenous communities and the CEPF Secretariat on project progress and any unexpected and unintended events affecting Indigenous Peoples. 15. The CEPF Secretariat has the overall responsibility for the implementation o f the IPPFto ensure that CEPF-2 grants encourage the participation o f IndigenousPeoples inproject activities inculturally appropriate ways. The specific responsibilities o f the Secretariat and Grantees are described inthe CEPF-2 OperationalManual. Budget,Monitoringand Evaluation 16. Grantees are responsible for ensuringadequate budgetsfor implementingIPPs and other measures concerning Indigenous Peoples. 69 17. The CEPF Secretariat i s responsible for setting aside sufficient fbnds for implementingthis IPPF. This includes costs for providing information about the IPPF, reviewing and monitoring o f CEPF-2 projects, and costs for consulting Indigenous Peoples on the Ecosystem Profiles. GrievanceMechanism 18. Indigenous Peoples and other local communities and stakeholders should be able to complain at all times to Applicants / Grantees andthe CEPF Secretariat about any issues covered inthis IPPFand the application o fthe World Bank's policy on Indigenous Peoples. Affected communities should be informed about this possibility and contact information o f the respective organizations at relevant levels should be made available. 19.As a first stage grievances should bemade to the Applicant / Grantee. The Applicant / Grantee i s requiredto respondto grievances inwriting (supported by other forms o f communication as needed) within fifteen working days o f receipt; claims should be filed, included inproject monitoring, and a copy o f the grievance should be provided to the CEPF Secretariat. Ifthe claimant i s not satisfied with the response, the grievance may be submittedto the CEPF Secretariat. The Secretariat is required to respond within fifteen working days o freceipt; claims should be filed and included inproject monitoring. 70 Annex 1OC: SummaryProcessFrameworkfor InvoluntaryRestrictions GLOBAL: Second CriticalEcosystemPartnershipFundProject 1. Manyprojects under CEPF-2 would be relatively small inscale andmay benefit local communities through support for community-based conservation. Nevertheless potential adverse social impacts could arise from projects that restrict access to natural resources, projects that induce changes inlivelihoods and resource use, andprojects that affect Indigenous Peoples. 2. CEPF projects triggeringthe World Bank's policy on Involuntary Resettlement include projects that introduce involuntary restrictions o f access to legally designated parks and protected areas or support efforts to improve enforcement o f existing restrictions. This may involve restriction to resources such as wildlife, non-timber forest products (NTFPs) and production areas (including rotational (swidden) agricultural plots in active use or temporarily fallow). 3. The Framework does not apply to projects that provide incentives to change livelihood and natural resource use practices on a voluntary basis. However ifalternative livelihoods do not materialize or are inadequate to maintainthe same level o f livelihood, local communities may be adversely affected. Insome cases it would be useful to develop a Process Framework. Inany case, adverse social impacts on local communities should be avoided or appropriately mitigated. 4. The requirements o f the World Bank's policy include (1) the development o f a project- specific Process Framework duringproject preparationwhich describes the project and implementationprocess, and(2) the development o f a Plano f Action duringproject implementationwhich describes the agreed restrictions, management schemes, measures to assist the displaced persons and the arrangements for their implementation. ProcessFramework 5. Participation o f affected communities i s the key element o fthe Process Framework, as stressed inthe World Bank's policy OP 4.12. Affected communities have the right to participate indeciding the nature and scope o f restrictions and the mitigation measures, and should participate inthe drafting o f the Process Framework. The CEPF Secretariat will provide guidance as appropriate to Grantees duringthe process and will review and approve the final Framework prior to approving the final project proposal application. 6. The level o fdetail o fthe Process Framework may vary depending on project activities, characteristics o f restrictions and their impacts, andthe number o fpersons affected, and should be agreed between the Applicant and CEPF staff duringthe project preparation process. Insome cases a simple Framework can be prepared by the Applicant with input from local communities. Inmore complex or larger projects, the preparation o f the Framework may be supported by social analysis or surveys duringpreparation to assess the local context, particularly land andnaturalresource use practices andmanagement 71 systems. Input from other organizations and experts knowledgeable about the communities may be useful. 7. The Process Framework will describe the project and how restrictions o f access to natural resources and measures to assist affectedcommunities will be determinedwith the participation o f affected communities. The Process Framework should include the following elements: A. ProjectBackground 8. The Framework will briefly describe the project and local context, how the project was prepared, including the consultations with local communities and other stakeholders, and the findings o f any social analysis or surveysthat informed project design. Itwill describe project activities and potential impacts from these. B. ParticipatoryImplementation 9. This section will detail the participatory planning process for determiningrestrictions, management arrangements and measures to address impacts on local communities. The roles and responsibilities o fvarious stakeholders and the methods o fparticipation and decision-making should be described; decision-making may include the establishment o f representative local structures, the use o f open meetings, and involvement o f existing local institutions. Methods o f consultation andparticipation should be ina form appropriate to local needs, including local languages, and efforts should be made to include all community members, including women andmembers o f different generations and social groups. 10. Any decisions should bemadebased on well-founded understandings o fthe biological and socio-economic contexts. It i s common to include some form o fparticipatory social assessmentto inform the decision-making process to develop a more in-depth understandingo f (a) the cultural, social, economic and geographic settingo fthe communities inthe project areas; (b) the types and extent o f community use o fnatural resources, and the existing dejure and de facto rules and institutions for the use and management o fnatural resources; (c) identification o f village territories and customary use rights; (d) local and indigenousknowledge o fbiodiversity andnaturalresource use; (e) threats to biodiversity from various activities inthe area, including those o f local communities; (f) the potential livelihood impacts o fnew or more strictly enforced restrictions on use o fresources inthe area; (g) communities' suggestions and/or views on possible mitigation measures; (h) potential conflicts over the use o fnatural resources, and methods for solving such conflicts; and (i) strategies for local participation and consultation during implementation, includingmonitoring and evaluation. 11. It is important to payparticular attentionto landtenure issues, including traditional land rights and obligations and use o fnaturalresources by different local communities. Areas usedto collect non-timber forest products (NTFP) and for shiftingcultivation should not be exposed to restrictions unless this i s necessary for the conservation o f important 72 biodiversity and appropriate agreements with local communities can bemade. Biological assessmentsand threat analysis are useful tools to ensure that restrictions will be informed by real threats rather than assumptions about the impacts from local communities' natural resource use practices. C. Criteria for eligibility of affected persons 12. The Framework describes how the local communities will participate in establishing criteria for eligibility for assistanceto mitigate adverse impacts or otherwise improve livelihoods. Incases with significant consultations and social analysis duringpreparation these criteria may be included inthe Framework, but inmost cases they will be developed, or at least refined, during implementation as part o f a participatory social assessment process. 13. The eligibility criteria would determine which groups andpersons are eligiblefor assistance and mitigation measures. The criteria may exclude certain persons or groups from assistancebecause their activities are clearly illegal, unsustainable and destructive (e.g. wildlife poachers, dynamite fishers). The criteria may also distinguishbetween persons utilizing resources opportunistically and persons usingresources for their livelihoods, and between groups with customary rights and non-residents or immigrants. 14. The Framework should identify vulnerable groups, including forest dwellers, Indigenous Peoples, and groups or households highlydependent on natural resources, and describe special measures to ensure that these groups will participate in, andbenefit from, project activities. D. Measures to assistthe affected persons 15. The Framework should describe how groups or communities will be involved in determining measures that will assist affected persons inmanaging and coping with impacts from agreed restrictions. The common objective is to improve or restore, inreal terms, to pre-displacement levels, their livelihoods while maintaining the sustainability o f the protected area. Insome circumstances affected communities may agree to restrictions without identifyingone-for-one mitigation measures as they may see the long term benefits o f improved naturalresource management. Possible measures to offset losses may include, inter alia: special measures for the recognition and support o f customary rights to land and natural resources; transparent, equitable and fair ways o f more sustainable sharing o f the resources; access to alternative resources or functional substitutes; alternative livelihood activities; health and education benefits; obtaining employment, e.g. as park rangers or eco-tourist guides; and technical assistance to improve land and natural resource use. These measures should be inplace before restrictions are enforced, although they may be implemented as restrictionsare being enforced. The Plano fAction shouldbe approved by the CEPF Secretariat before beingimplemented. 73 E. Conflictresolutionandcomplaintmechanism 16.The Framework should describe how conflicts involving affectedpersons will be resolved, and the processes for addressing grievances raisedby affected communities, households or individual regardingthe agreed restrictions, criteria for eligibility, mitigation measures and the implementation o f these elements o f the Process Framework. The procedures should take into account local disputeresolution practices and norms. F. ImplementationArrangements 17. The Framework should describe the implementation arrangements for the project and roles andresponsibilities of different stakeholders, including the Grantee, affected communities andother relevant agencies, including those agencies involved inthe implementationo f mitigation measures, delivery o f services and land tenure, as appropriate andto the extent that these are known at the time o fproject preparation. 18. Monitoring and evaluation arrangements will also be described inthe Framework, with more specific details for the Plan o f Action designed duringimplementation. The Framework should include a budget for its implementation. It would also be appropriate to identify sources o f fundingfor mitigation measures identified duringpreparation o f the action plan Plan of Action 19.Duringimplementation, a Plan o fAction is developed together with affected communities to describe the agreed restrictions, management schemes, measures to assist the displaced persons and the arrangements for their implementation. The action plan may simply describe the agreed restrictions, persons affected, measures to mitigate impacts from these restrictions, and monitoring and evaluation arrangements or it may take the form o f a broader natural resources or protected areas management plan.. . 20. The following elements may be included inthe plan, as appropriate: project background and how the plan was prepared, including consultations with local communities and other stakeholders; socio-economic circumstances o f local communities; the nature and scope o f restrictions, their timing as well as administrative and legal procedures to protect affected communities' interests ifagreements are superseded or renderedineffective; the anticipated social and economic impacts o f the restrictions; the communities or persons eligible for assistance; specific measures to assist these people, along with clear timetables o f action, and financing sources; protected area boundaries and use zones; implementation arrangements, roles and responsibilities o f various stakeholders; arrangements for monitoring and enforcement o frestrictions and natural resource management agreements; clear output andoutcome indicators developed inparticipation with affected communities; special measures concerning women and vulnerable groups; capacity buildingo fthe Grantee or other implementing agencies; capacity buildingactivities for the affected communities to enhance their participation inproject activities; grievance mechanism and conflict resolution ;andparticipatorymonitoring and evaluation exercises adapted to local 74 context, indicators and capacity. Monitoringwill include the extent and significance o f adverse impacts as well as the outcome o fmitigation measures. Disclosure 21. A draft Process Framework is sharedwith (potential) affected communities to informthem about the project andget their input to project design and the Framework. Once the project, with the Process Framework, has beenapproved, the final Framework is again disclosed locally as well as at the CEPF website. 22. The Plano fAction i s prepared with the participation o f affected communities. A draft should be disclosed, ina culturally appropriate and understandable manner and local language, together with the findings o f any social analysis to the persons affectedby the project. 23. After the CEPF Secretariat has reviewed and approved the Plan o f Action, the Grantee discloses the final planto affected communities and other stakeholders. The final Plan o f Action i s also disclosed at the CEPF website. Roles and Responsibilities 24. Applicants, and subsequentlyGrantees, are responsible for following the requirements o f the World Bank's Involuntary Resettlement policy as described inthis Framework. Applicants and Grantees will ensure that local communities are consulted and participate duringpreparationandimplementationo fframeworks andactionplans. They will avoid adverse impacts on affected communities, or where this i s not possible develop with informed community participation measures to mitigate such impacts. Finally, they are responsible for reporting to bothaffected communities and the CEPF Secretariat on project progress and any unexpected and unintendedevents affecting local communities. 25. The CEPF Secretariat i s responsible for the implementation o fthis Framework. The Secretariat's responsibilities include: informing Applicants and other stakeholders, including local communities and organizations, o f the Process Framework andpolicy requirements; assisting Applicants, and subsequently Grantees, inthe implementation o f the Process Framework and policy requirements;screening for projects which may affect local communities through restrictions o f access to natural resources; reviewing and approvingproject proposals, ensuring that they adequately apply the World Bank's Involuntary Resettlement policy; assessingthe adequacy o f the assessment o f impacts and proposed measures to address such impacts, including social risks, circumstances o fthe affected communities, and the capacity o fthe Applicant to implement the measures; assessingthe adequacy o f the consultation process;and reviewing and approving project specific action plans prepared duringproject implementation. 26. Grantees are responsible for ensuringadequate budgets for implementingthe planning process, includingimplementation o f the Plan o f Action and any compensation and/or development measures this planmay entail. They will include appropriate monitoring and 75 evaluation o fproject implementation, including o f adverse impacts on local communities and the effectiveness o f mitigation measures. Monitoring and evaluation exercises should be designed to allow the participation o f affectedcommunities. 27. The CEPF Secretariat i s responsible for setting aside sufficient funds for implementingthis Process Framework. This includes costs for reviewing and monitoring required action plans duringimplementation o f approved projects. The Secretariat will monitor and describe the application o f this Framework and lessons learned inprogress andmonitoring reports. Grievance Mechanism 28. Local communities and other stakeholders should be able to complain at all times to Applicants / Grantees and the CEPF Secretariat about any issues covered inthis Framework andthe application o f the World Bank's policy on Involuntary Resettlement. Arrangements should be described inthe project specific frameworks and action plans, with contact information o fthe respective organizations. 29. As a first stage grievances should be made to the Applicant / Grantee. The Applicant / Grantee i s requiredto respondto grievances inwriting (supported by other forms o f communication as needed) within fifteen working days o f receipt; claims should be filed, included inproject monitoring, and a copy o f the grievance should beprovided to the CEPF Secretariat. Ifthe claimant i s not satisfied with the response, the grievance may be submitted to the CEPF Secretariat. The Secretariat i s required to respondwithin fifteen working days o f receipt; claims should be filed and included inproject monitoring. 76 Annex 11:ProjectPreparationand Supervision GLOBAL: Second CriticalEcosystemPartnershipFundProject Planned Actual PCNreview March 13,2006 March 13,2006 InitialPID to PIC March 20,2006 March20,2006 InitialISDS to PIC March 20,2006 March20,2006 Appraisa1 June, 2007 June 12,2006 Negotiations June, 2007 June 29,2007 BoardRVP approval December 18,2007 Planneddate of effectiveness February,2007 Planneddate of mid-termreview June, 2010 Plannedclosing date December, 2012 Keyinstitutions responsible for preparation ofthe project: Conservation International (CEPF Secretariat) and World Bank. Bank staff and consultantswho worked on the project included: Name Title Unit Kathy MacKinnon Lead Biodiversity Specialist ENV Susan Shen Lead Ecologist EASRE Albert0 Ninio Lead Counsel LEGEN Charles DiLeva Chief Counsel LEGEN Tony Whitten Senior Biodiversity Specialist EASRE NurulAlam Senior Procurement Specialist EAPCO Behdad M.H.Nowroozi Senior Financial Management EAPCO Specialist NoviraKusdartiAsra Financial Management EAPCO Specialist Junxue Chu Finance Officer LOAGl SvendJensby Social Scientist EASES Katharina Gamharter Legal associate/counsel LEGEN Marieke van der Zon Junior Professional Associate ENV Nina Queen ProcurementAssistant EASRE Grace Aguilar Program Assistant ENV Bank funds expendedto date on project preparation: 1. Bank resources:$ 75,860 2. Trust funds: $ 20,000 3. Total: $ 97,860 EstimatedApproval and Supervision costs: 2. Remaining costs to approval: $30,000 3. Estimated annual supervision cost: $ 80,000 77 Annex 12: Documentsinthe ProjectFile GLOBAL: Second CriticalEcosystemPartnershipFundProject 1. Project Concept Note 2. Project Concept Note Data Sheet 3, Project Appraisal Document (Concept Stage) 4. Project Information Document (Concept Stage) 5. Concept Review Package 6. CEPF2 concept review - initial safeguards screening 7. CEPF2 concept review comments received 8. CEPF2 concept review - response to comments 9. Request for Comments on the Concept Stage ISDS 10. Social safeguards consultancy for CEPF 11.PCNSafeguards Meeting Minutes 12. Updated milestones 13, Work Program Entry GEF SEC review 14. Project Appraisal Document Data Sheet 15. Work program entryUNEP comments 16. Minutes o f Concept Review 17. IntegratedSafeguards Data Sheet (Appraisal Stage) 18. Process Framework for Involuntary Restrictions 19. Indigenous Peoples Planning Framework 20. GEF Council Comments 21. GEF approval to work program 22. Quality Enhancement Review package 23. Quality Enhancement Review meeting minutes A. Bank StaffAssessments --- Pre-appraisal PCN-March 2006 mission: Aide-Memoire dated May 2007 Decisionmeeting Minutes dated June 2007 -- Minuteso fNegotiations dated June 2007. Appraisal mission: Aide-Memoire dated June 2007 B. Other -- Social safeguards reports Ecosystem profiles for IndoBurma (Indochina region), Western Ghats and Sri Lanka (W Ghats region) and Polynesia-Micronesia - ICR for GEF Grant for first phase o f CEPF, June 2007 78 Annex 13: Statementof Loans andCredits GLOBAL: Second CriticalEcosystemPartnershipFundProject Difference between expectedand actual Original Amount in US$Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Fm. Rev'd PO75776 2006 Africa StockpilesProgramme- Project 1 0.00 0.00 0.00 21.74 0.00 3.50 0.33 0.00 PO73195 2001 Critical EcosystemPartnershipFund 0.00 0.00 0.00 25.00 0.00 5.59 5.59 -1.87 Total: 0.00 0.00 0.00 46.74 0.00 9.09 5.92 - 1.87 WORLD STATEMENT OF IFC's HeldandDisbursedPortfolio InMillionsofUS Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2003 AIM-ACCION 0.00 3.OO 0.00 0.00 0.00 2.31 0.00 0.00 2004 BANQUE BELGOLAIS 60.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 BTC Pipeline 125.00 0.00 0.00 125.00 125.00 0.00 0.00 125.00 2002 CIF'EF IV 0.00 30.00 0.00 0.00 0.00 11.84 0.00 0.00 Centerra 0.00 3.57 0.00 0.00 0.00 3.57 0.00 0.00 2005 FIM Bank 0.00 4.00 6.00 0.00 0.00 4.00 6.00 0.00 2003 GlobalMEF 0.00 0.00 4.00 0.00 0.00 0.00 4.00 0.00 1996 IFC 0.00 0.00 0.00 6.95 0.00 0.00 0.00 4.86 1994 Index Fund 0.00 9.02 0.00 0.00 0.00 9.02 0.00 0.00 2005 Melrose Resource 21.67 0.00 3.33 0.00 20.00 0.00 3.33 0.00 2003 Novica 0.00 1.50 0.00 0.00 0.00 1.50 0.00 0.00 2005 OrientExpHotels 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2005 PimcoDebtFund 0.00 14.93 15.00 0.00 0.00 14.93 13.00 0.00 2005 PlanetFinance 0.00 2.68 0.00 0.00 0.00 0.99 0.00 0.00 2000 Procredit World 0.00 1.73 0.00 0.00 0.00 1.73 0.00 0.00 2002 ProCreditWorld 0.00 0.38 0.00 0.00 0.00 0.38 0.00 0.00 2003 Procredit World 0.00 4.58 0.00 0.00 0.00 4.58 0.00 0.00 2003 ShoreCapIntl 0.00 2.50 0.00 0.00 0.00 0.93 0.00 0.00 2004 Small Cap Fund 0.00 9.00 0.00 0.00 0.00 9.00 0.00 0.00 2004 TCW GEM VI1 0.00 27.59 0.00 0.00 0.00 27.59 0.00 0.00 Totaluortfilio: 231.67 114.48 28.33 131.95 145.00 92.37 26.33 129.86 79 ~ Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2005 GTFP 0.50 0.00 0.00 0.00 2002 GWRF 0.00 0.01 0.00 0.00 2006 InfraCo 0.03 0.00 0.00 0.00 2003 GlobalMEF 0.00 0.00 0.00 0.00 2003 Ascent Fund 0.00 0.01 0.00 0.00 2005 PlaNetBank 0.00 0.00 0.00 0.00 2004 IntesaBciEM 0.00 0.00 0.05 0.00 2005 ACCION Facility 0.00 0.01 0.01 0.00 2006 ISCH 0.04 0.00 0.00 0.00 Totalpendingcommittment: 0.57 0.03 0.06 0.00 80 Annex 14: Countryat a Glance GLOBAL: SecondCriticalEcosystemPartnershipFundProject Not applicable. 81 Annex 15: IncrementalCost Analysis GLOBAL: Second CriticalEcosystemPartnershipFundProject Background 1. The Millennium EcosystemAssessment showed that over the past 50 years, humanactivities have changed ecosystems more rapidly and extensively than at any comparable period o f time inhumanhistory. These changes have contributed too manynet gains inhumanwell- being and economic development but have been achieved at growing environmental costs, biodiversity loss andthe exacerbation o fpoverty for some groups o fpeople. The degradation o f ecosystem services could grow significantly worse during the first halfo f this century and i s a barrier to achieving the Millennium Development Goals (MDGs). Unless addressed, these problems will substantially diminishfuture options andthe ecosystem goods and services available to future generations. 2. The Earth's biologically richest ecosystems, the 34 "biodiversity hotspots," are also some o f the most threatened. Together, these biodiversity hotspots harbor more than 75 percent of the most threatened mammals, birds, and amphibians yet they have already lost 86 percent o f their original habitat. These critical areas for conservation are also home to millions of people who are impoverished andhighly dependenton healthy ecosystems for their survival. 3. Protectiono fthe Earth's biological diversity is one o f the topmost priorities for global well- being. Inresponse to the growing threats to species andhabitats, the Critical Ecosystem Partnership Fund(CEPF) was launched in2000 to provide strategic assistance to engage non-governmental organizations (NGOs), community groups, and other civil society partners inconserving Earth's biodiversity hotspots. CEPF i s a partnershipbetween ConservationInternational (CI), the Global Environment Facility (GEF), the World Bank (Development Grant Facility), the Government o f Japan, and the John D. and Catherine T. MacArthur Foundation, with each organization committed to provide $25 million to the program for a total o fUS$125 million ingrant funding. Current CEPF funding from the World Bank and GEFwill finish inearly 2007. 4. The first phase o f CEPF supported 15 grantprograms within 14 o fthe original 25 hotspots. Bythe end o f2006, nine o fthese grant programs closedafter five years o fimplementation. A 2005 independent evaluationofthe CEPF global program was highlypositive and recommendedthat the donors seek further expansion opportunities. Although the CEPF program has been shown to be highly effective, there are still significant conservation needs, both inthe original 14 hotspots and inother critical ecosystems that have not yet benefited under the program. Ofthe 34 hotspots identifiedby CI, 30 include countries eligible for Bank and GEF support. 5. The proposed CEPF-2 project would replicate and expand successful civil society implementation models for biodiversity conservation within at least 14biodiversity hotspots. It wouldbuild on the lessons learnedunderthe first phase o f CEPF as well as recommendations from the independent evaluationto further strengthen the program within 82 existing hotspots by expanding activities to new sub-regions and marine ecosystems. CEPF- 2 would also expand civil society support and capacity buildingto additional hotspots. It would complement government-led conservation efforts, byproviding a streamlined, agile, mechanism for capacity buildingand engagement o f a wide range o f local civil society actors, including local community groups, NGOs and the private sector, many o f whom are outside the reach o f traditional fundingmechanisms. With its tight geographical focus on a small number o fthe most valuable and critical ecosystems the project would maximize overall impact. 6. Recent estimates have suggested that investment o f as much as $160 millionper hotspotper year may be necessary to strengthen protection andmanagement o f key biodiversity areas and to close shortfalls inexistingprotectedareabudgets. Fundingand capacity needs vary considerably between individual countries and hotspots. As the exact ecosystems for investmentarenot yet known, this analysis focuses onthe baseline scenario for the global project and the GEF Alternative that would enable CEPF to a) consolidate activities within some o f the current target hotspots by expanding programs into new regions and key conservation corridors, including trans-national initiatives, b) expand conservation funding to new hotspots and marine ecosystems within target hotspots for a more holistic approach to conservation and c) strengthen local civil society capacity within the hotspots for more effective Conservation efforts and sustainability o f conservation outcomes. Baseline Scenario 7. The first phase o f CEPF supported grant programs in 15 regions within 14 hotspots. For smooth and effective implementation, preparationo f ecosystem profiles and grant-making programs have been staggered with activities started inthree hotspots inyear 1, six hotspots inyear 2, 1hotspotinyear 3,2 hotspots and one additionalregionwith another hotspotin year 4, and an additional two hotspots inyear 5. Within the larger hotspots, grant programs have focused on specific geographic sub-regions, landscapes orjust a few countries for more targeted and effective conservation efforts. Thus within the Sundaland Hotspot the first phase o f CEPF focused only on the island o f Sumatra, with the expectation that later initiatives would target conservation needs inother highpriority regions within the hotspot, such as Borneo. 8. All ecosystem programs are designedto cover a five-year period o f grant making. The first three grant programs approvedinDecember 2001 (Guinean Forests o f West Africa, Madagascar, and the Tropical Andes) have already come to the end o ftheir active investment period and another six closed inDecember 2006 (Atlantic Forest (Brazil), Cape Floristic Region, the Philippines, Southern Mesoamerica; Sundaland (Sumatra), and Tumbes-Choc6-Magdalena). Other hotspots with active CEPF programs (Northern MesoAmerica, Succulent Karoo, Caucasus, Himalayas, Southwest China and Eastern Arc Mountains and Coastal Forests o f East Africa) will graduate to this phase o f implementation insubsequentyears. CEPF has also beensuccessful inleveraging some other additional resources for specific interventions. Thus a $1 million donation to CEPF from the Government o f Australia has enabled some limited start-up operations inPolynesia- Micronesia for activities targeted towards invasive alien species. CEPF management will 83 continue to facilitate these sorts o f synergistic opportunities. Nevertheless, without additional GEF and other donor support through a CEPF-2 project, it i s expected that the CEPF grant-making program would be completed by 2009. From the end o f 2006 CEPF operations would beginto wind down, with declining inputto civil society groups as well as CEPF management and monitoring, both at the global and local levels. 9, Biodiversity inall hotspots will remain under pressure from a variety o f threats that include habitat loss and fragmentation, overexploitation, invasive alien species, pollution (especially aquatic systems) and expanding infrastructure and development - see Annex 1.Under the Baseline Scenario, it i s expected that national governments, donors and NGOs, including CI, would maintain commitments to protectedareas andbiodiversity conservation, including support through GEF programs implemented under the new Resource Allocation Framework (RAF).Under this scenario, itis expected that there wouldbe substantial biodiversity investments, including GEF investments, ina few highbiodiversity countries but less access to external conservation funding for many other countries, including many o f the smaller and least developed countries with greatest capacity needs. Overall, there couldbe a leveling-off or reduction inbiodiversity spending with mucho f the funding focused on government-led initiatives and a few key protected areas. Some countries that would be eligible for CEPF funds may also benefit under the UNDP Small GrantsProgrambut that program does not focus exclusively on biodiversity. Overall there are expected to be fewer opportunities and financing for local civil society groups to participate in, and influence, biodiversity conservation, especially where such groups fall outside the reach o f traditional financing mechanisms. 10. Incrementalcosts analyses were prepared for each o f the 15 critical ecosystems targeted in the 14 hotspots duringthe first phase. The total baseline investment across these 15 regions was $4.2 billion (including a $3 billion government project inChina alone), but an extremelysmall percentage o fthis is for civil society. The incremental CEPF cost was $100 million. While it i s clear that there will be limitedresources for national and local civil society engagement inconservation inthe future, it i s almost impossible to determine a baseline cost for biodiversity investments for the CEPF-2 project at this time, especially since only 3 o f the target hotspots have been selected. For each critical ecosystem targeted for CEPF-2 investment,incremental costs analyses will also be conducted as an integral part o f the ecosystem profilingprocess. GEFAlternative 11. The CEPF-2 project would support civil society conservation efforts inat least 14 o fthe 30 revised hotspots (see Annex 1).These 30 hotpots include more than 90 countries eligible for GEF and Bank assistance, ranging from species-rich megadiversity countries to small island states (SIDs) and centers o f endemism. Under CEPF-2, choice o fnew hotspot, and region, investments will bebased on biodiversity status, conservation needs, social and political enabling environments and complementarity and added value to other donor efforts. Thus CEPF-2 has the potential to complement conservation efforts inthose countries with high biodiversity but modest conservation funds, to fill ingaps, andparticularly to focus resources to civil society and private sector conservation efforts that may not otherwise be 84 supported. The CEPF ecosystem approach also provides the opportunity for international collaboration insupport o fmulti-country transboundary conservation efforts, often neglected innationalplans. 12. The CEPF-2 project would expand civil society activities to new hotspots, new regions within existinghotspots andnewhabitats, including marine ecosystems, within hotpots where conservation interventions targetingbothland and aquatic systems would increase overall effectiveness. Ecosystem profiles have already beenpreparedfor 3 new regions (the Polynesia-MicronesiaHotspot; the Indochinaregion o fthe Indo-Burma Hotspot; and the Western Ghats region o f the Western Ghats and Sri Lanka Hotspot). Implementation o f these ecosystem profiles i s dependent upon approval o f a second phase o f the CEPF; once fundingis available grantprogramswould be initiatedinthese hotspots. Expansioninto new critical ecosystems such as the Polynesia-Micronesia Hotspot will expandthe opportunities to small islanddeveloping states. 3. As part o fthe assessment process in"completed" ecosystem programs, the CEPF Secretariat andWorking Group will develop explicit criteria for exit andor re-entry strategies into hotspots which have already received five years o f CEPF investments. Futureinvestments would be based on conservation needs, likelihood o f success and complementarity, with specific targeting to civil society initiatives inhighbiodiversity sub-regions and ecosystems (e.g. marine) that have not yet benefited from CEPF investments. Investments would build on and supplement activities undertaken inthe first phase o f CEPF with explicit activities to replicate best practice and cross-learning within, and across, hotspots. 14. The GEF Alternative provides an opportunity to build on existing governmental and donor efforts incritical ecosystems by identifyinga strategic and complementary role for civil society involvement through targeted conservation investments. Each CEPF investment strategy developed together with stakeholders and approved bythe CEPF Donor Council will also be endorsedby the relevant GEF focal point to ensure consistency with country biodiversity priorities, as outlined innational Biodiversity Action Plans and country programmatic frameworks. By focusing at the ecosystem rather than country level, the project will be able to support a landscape approach to conservation including support for international trans-boundary initiatives. GEF funding would also enable the program to broaden partnerships and further strengthendevolution o froles and responsibilities to national and local levels, to increase transparency, strengthen capacity and build greater ownership and sustainability o fconservation efforts. 15. The CEPF-2 program would contribute to strengthened involvement o f civil society in strengthened protection, management and support for keybiodiversity sites and thereby contribute to achievement o f the 2010 targets o fthe Convention on Biological Diversity. Specific activities would be selected on a competitive basis at both the global and ecosystem-profile level but are expected to include the following components and expected global benefits. 85 Component1: Strengtheningprotectionand sustainablemanagementof globally significantbiodiversity 16. CEPF-2would support civil society projects that focus on keybiodiversity areas and address threats to biodiversity across broad landscapes that include a matrix o f land uses, including protected areas, biological corridors and highvalue conservation sites inproduction landscapes. CEPF-2will contribute to the strengthened protection, and management o fmore than20 millionhectares ofkeybiodiversity areas, including at least 8 millionhectares of new conservation areas, including legally designated protected areas, indigenous reserves, and community and private landsmanaged for conservation. The GEFAlternative will also support more effective community stewardship programs with local communities and indigenous groups, including land-use planningfor conservationand sustainable use. Special focus will beplaced on ensuringthe long-term sustainability o fthese initiatives through capacity building, technical assistance, awareness raising and innovative management and financial mechanisms. The incrementalcost of this component comparedto CEPFbaselineexpendituresand investmentsin strengtheningprotectionand sustainablemanagementof globallysignificant biodiversityis $52.1million, ofwhich GEFwould contribute$13.22 million. Component2: Increasinglocalandnationalcapacityto integratebiodiversityconservation into developmentandlandscapeplanning. CEPF-2will buildupon lessons learned to further build local andnational capacityto act in favor o fbiodiversity conservation, particularly to influence local and national governments and other sectors inintegratingbiodiversity conservation into development and landscape planning.CEPFwill consolidate support to some current civil society partners andexpand support to hundredso f others within critical ecosystems to increase local and national capacity to integrate biodiversity conservation into development and landscape planning. The GEF Alternative will support consolidation o fbiological corridors and mainstream conservation into production landscapes through support for more effective land-use planning, collaborationwith the private sector and landscape-scale management efforts, including trans-boundary coordination. Activities will support integration o fbiodiversity conservation into production systems and sectors, including enabling civil society groups to plan, implement, and influence biodiversity outcomes as effective partners insustainable development. Such participation will buildon local knowledge and technical expertise, and leverage social capital to bringinnovative ideas to solving local problems. The focal approach would be to strengthen protection o f critical biological corridors that link key biodiversity areas within a multiple use landscape. The project would support promotion of supportive policy and legislative frameworks; more sustainable resource management linked to livelihoods; and measures to control andmanage invasive alien species inregions where these are a particular threat. Support for capacity building, partnerships and advocacy and outreach will strengthen local ownership and significantly increase the scale o fpotential impact and sustainability. 86 The incremental cost o fthis component compared to CEPF baseline expenditures and investments inincreasing local and national capacity to integrate biodiversity conservation into development and landscape planning is $23.9 million, o fwhich GEF would contribute $6.78 million. Component3: Effectivemonitoringandknowledgesharing,includingsystematic analysis anddocumentationof CEPF resultsand experiences. 19. The GEF Alternative includesbuildingupon the current CEPF participatory monitoring and hotspot-level implementationprograms to support improved learning, replication and scaling up o fpromising models and approaches from components 1and 2. GEF support will enable a strengthened monitoring system, particularly at the hotspot level as well as more effective analysis and documentation and dissemination o f experiences, best practices and lessons learned to enhance the project's potential to act as a conservation mechanism for the conservation community as a whole. These activities are expected to leadto further generation, adoption, and application o fbest practices to conserve critical ecosystems and strengthen civil society's essential role within them. The incrementalcost of this component comparedto CEPFbaselineexpendituresand investmentsin monitoringandlearningis $4.5 million,with no GEF contribution. Component4: Ecosystemprofiledevelopmentandprojectexecution. 20. This component would support development o f the ecosystem profiles by civil society groups as strategic business planningand implementation documents for the partnership and wider conservation community; the grant-making responsibilities o fthe Regional Implementation Teams at the hotspot level; and also overall execution and administration of the global programbyCI. Activities would include developing the ecosystem profiles as shared strategies together with stakeholders ineach hotspot. This component also includes a subcomponent covering CI's administration and execution o fthe global program, including hosting the CEPF Secretariat, employing CEPF Secretariat staff, and ensuringthat all funds are managed with due diligence and efficiency. The incrementalcost of this component comparedto CEPFbaselineexpendituresand investmentsin monitoringandlearningis $19.5 million,with no GEF contribution. 21. Cost. The total costs o fthe GEF Alternative is estimated over a five year period at the level o f at least $100 million with a CEPF-2 program targeting civil society interventions to supplement national government and other donor efforts. GEF is requested to contribute $20 million that will leverage funds from other donors. It is expected that support from GEF duringthe secondphase o fCEPF would leverage additional fundingfrom among the original partners as well as from other MDBs, bilateral agencies, and foundations. ConservationInternational has committed to providing another $25 million for a second phase o f CEPF as co-funding for the GEF grant. AFD will also contribute $25 million to enable a seamless transition to the second phase. The MacArthur Foundationis expected to contribute $15 million. Other donor partnersare expected to review continued support as 87 their current contributions end. The World Bank i s considering options for support to a second phase, after completion o fthe current round o f DGF funding. The GEF funds will be deposited to the CEPF account, but a separate ledger account will be maintained to track the receiving and uses o fthe funds. 22. Expectedglobal benefits will arise inat least 14biodiversity hotspots from the increased national and local civil society capacity to manage and deliver small conservationinitiatives inanefficient andeffective manner under agreed strategic frameworks to better integrate biodiversity conservation into development and landscape planning.These interventions are expected to lead to a strong civil society constituency for biodiversity conservationwithin the hotspots as well as generation, adoption, adaptation, and application o f lessons for improved biodiversity conservation outcomes, relevant bothto CEPF and the broader Bank and GEFbiodiversity portfolios as well as to other small- and medium-size grant programs and donor community-driven development initiatives. The Baseline Scenario, GEFAlternative andincremental costs, as well as correspondinglocal, national and global benefits are displayed insummary form inthe following table. Component cost USD Domestic Benefit Global Benefit Category Million 1. Strengthening Baseline Baseline to National programs Fundstargeted to a few protection and be supported at current globally important management of determined levels. biodiversity sites, especially globally significant at hotspot protected areas, dependent biodiversity level x 14 on funding availability. hotspots GEF Baseline + Additional civil Strengthenedprotection and Alternative 52.1 society activities to management o f globally provide greater significant habitats in protectionand eligible countries in 14 management o f hotspots, including protected important biodiversity areas, key biodiversity area, including corridors and production protected areas and landscapes. Greater production landscapes. sustainability o f Enhanced conservation outcomes due empowerment and to more effective civil capacity o f local and society involvement and national civil society. ownership inconservation initiatives. Total Incremental I 52.1 2. Increasing local Some limited Limited local and national and national capacity participation o f civil civil society mobilization to integrate society in for conservation and biodiversity conservation and sustainable resource use. conservation into mainstreaming o f development and biodiversity, within landscape planning scope o f existing resources. 88 GEF Strengthenednational More effective civil society Alternative Baseline + and local capacity to conservation within globally 23.9 design, implement and important areas in 14 monitor conservation hotspots, especially among activities and to small NGOs, local influence development communities, indigenous and planning groups and private sector. decisions. Effective alliances for advocacy, influence and ownership contribute to sustainability of conservation impacts. Total Incremental 23.9 3. Effective Baseline Baseline to Limited monitoring Limitedawareness and monitoringand be andexchangeof implementationo f lessons knowledgesharing determined experiences. learned and good practices at hotspot level x 14 hotspots GEF Baseline + Enhanced information Strengthening monitoring Alternative 4.5 and capacity at and evaluation, leading to national level, more targeted and adaptive including engagement management to best meet o f civil society. conservation needs within highbiodiversity areas. Systematic analysis and documentation and dissemination o f CEPF results and experiences for effective replicationand enhanced conservation within andacross hotspots. Total Incremental 4.5 4. Ecosystemprofile Baseline Baseline to development and be project execution determined at hotspot level x 14 hotspots 89 GEP Baseline + Development o f Alternative management tools, assessments and business Ecosystem 2.6 plans for strategic, cost profiles effective and targeted interventions to support FUTS 4.6 conservation and grant- biodiversity management in making global hotspots CEPF 12.3 Effective and well Secretariat coordinated global program, to bring strategic and complementary conservation resources to globally important biodiversity sites in14global hotspots. Total I Incremental 19.5 Totals Baseline Baseline to be determined at hotspot level x 14 hotspots GEF Baseline + Alternative 20.0 (+80.0) Incremental 100.0 90 Annex 16: STAPRoster Review GLOBAL: Second CriticalEcosystemPartnershipFundProject A. Key Issues: 1. Assessmentof scientific andtechnicalsoundness of the project. 1. Generalassessment.Duringits first phase (2000-2005), the Critical Ecosystem Partnership Fund(CEPF) has proven to be a highly important mechanism for fbndingo f strategic biodiversity programs andprojects inbiodiversity hotspots, providing assistance to NGOs, community groups and civil society partners that otherwise have limited access to resources. The approach has recently (late 2005) been subject to a thorough independent evaluation that concluded that CEPF was highlysuccessful, andthat support should be continued. The present proposal i s aimed atjust that: continuation o f CEPF ina second phase. 2. The focus on biodiversityhotspots.i s a well-founded approach. Such sites harbor the world's greatest concentrations o f globally significant biodiversity, while at the same time they are often also regions where poverty reigns. Investmentsinbiodiversity will helpcurb environmental degradation that may otherwise worsen poverty levels, while poverty alleviation programs may also support environmental sustainability. Duringphase 1,the CEPF targeted 15 regions in 14 o f the original 25 biodiversity hotspots. The latter have recently beenexpanded to 34, o fwhich 30 are eligible for GEF andWorld Bank support. Duringthe second phase, CEPF will focus on investments incritical ecosystems inat least 14 biodiversity hotspots inWorld Bank countries that have ratified the CBD. What i s not clear is which proportion of these 14 inCEPF-2 will benew, i.e. not having received fundingunderCEPF-l? The proposal states that choice (of hotspot regions) will bebased on biodiversity status and threats, assessment o f CEPF progress incurrent hotspots targeted, and current or planned investments by other donors. The proposal should provide an indication o fwhere the priorities are likely to be, and the 16 `new' hotspots not funded under CEPF-1 should be prioritized accordingto biodiversity and degree o fthreat. Incidentally, the CEPF website states that the fundhas up to now operated in 16 biodiversity hotspots and not 14 as stated inthe proposal. 3. Co-financingl DuringCEPF phase 1,GEF co-financing was provided by World Bank, MacArthur Foundation, ConservationInternational and the Government o f Japan, inequal shares o f US$25 million each. CEPF-2 co-financing will be provided again by ConservationInternational and MacArthur Foundation, now together with the Government o f France (via the bilateral agency AFD), with each again contributing US$25 million. Why is there no World Bank co-financing for CEPF-2? This is unusual, given that the World Bank President (or his designee) chairs the CEPF Council, and should be explained. The Table on p. 14 (ExSum) states that the status o fMacArthur Foundationco-financing i s "To be considered at MarchBoard meeting." This appears uncertain -what will happen if the Board decides against co-financing, or decides to delay it until 2008? 91 4. Position of Conservation International. One point o f criticism (e.g. inthe 2005 independent evaluation) on CEPF-1 has been the position o f CI, andpotential conflict o f interest. CEPF i s managed from within CI, whose Board o f Directors has fiduciary responsibility for the program. Also, innineo f the 15 regions inwhich CEPF-1 operated, the local Coordination Unit (renamed Regional ImplementationTeam inCEPF-2) was providedby CI. According to the 2005 independent evaluation, there initially was considerable pressure on CEPF staffto support funding for relatively large C Iproposals. Inresponseto criticism, amorebalanced approachwas taken, andthe share ofCEPF grants to C I fell from 50% to a cumulative 35% by mid-2005. The evaluation team recommended that a global limit be set for C I grants that is lower thanthe current limit o f 50%. However, this has not been addressedinthe proposal for CEPF-2, and should be taken up. The proponents should also bear inmindthat proposed funding for the RITs also amount to $10 million or 10% o f CEPF-2 funding(see g), below), which i s inaddition to the grants provided. 5. Peer review of proposals. Relatedto point d), the 2005 evaluationteam recommended that all grant proposals submittedby C I should be submitted to peer review, including CoordinationUnits(RIT) grants. The proposal for CEPF-2 states (para. 48 o f the Executive Summary): "The Regional Implementation Team or advisory committee ineach hotspot will review the proposal and, where appropriate, formally write ajustification for approval. As recommendedbythe independent evaluation, this step would ensure more systematic and independent peer reviewso f all proposals from C I and other international organizations and more systematic use o f advisory committees to advise on international proposals." C Iproposals reviewedbythe RIT can hardly be regardedas an independent peer review, as the RITs are recruitedby, and answerable to CI. 6. Incremental Cost Analysis. CEPF grants are to (co-)finance as yet undetermined biodiversity projects inat least 14o fthe 30 targeted biodiversity hotspots. Under such circumstances, conducting an I C A for CEPF-2 i s a theoretical exercise, as baselines remain unknown untilthe second phase o f the fund becomes operational andproposals are submitted and selected. This places an extra responsibility on the CEPF Council, who are to ensure that these funds do not replace other funding sources, and only cover incremental costs associated with conservation o f globally significant biodiversity. Paragraph 10 inthe I C A (Annex A o f Executive Summary) states "Total incremental costs o fthis proposed project-the difference between the baseline scenario andthe GEF alternative-are calculated to be $100 million, o fwhich $25 million i s beingrequested from the GEF". This "calculation" is unlikely, as the baseline could not havebeen calculated -it is largely unknown. 7. Management costs. The independent evaluationmentions (p.2 o f executive summary) that CEPF "portfolios typically consist o f a few relatively large grants for program coordination and leadership, several medium-sized grants to relatively capable national andinternational NGOs for strategic, high-priority projects, and a larger numberof smaller grants (manyunder $20,000) to emergingcivil society organizations carrying out an impressiverange o f grassroots activities, some o fwhich are thematically clustered." This observation by the 2005 evaluation team suggests that a significant percentage o f CEPF 92 funds are going to C I andthe RITs (formerly the CUs) for coordination purposes. The current breakdown o f the budget(ExSum p.9, PAD Annex 5, p.32) does not specify management and overhead costs, but states that RIT costs are included in2A, 3 A and 3B to a total o f almost $10 million, or about 10% o fthe total costs. While $10 million i s a large sum, 10% does not seem an extraordinary proportion for management. . 8. Minor points: ExSum,p.4,point 7/PADp.2: ResourceAllocation Framework. Shouldmention . that the RAF i s a program o fthe GEF. ExSum.p.4,point 1O/PADp.5point3/PAD Annex 3 Results Framework & Monitoring; CEPF-2 will focus on at least 14biodiversity hotspots. How many o f these will be new hotspots? CEPF-1 focused on 14 o f the 30, and intheory CEPF- 2 could continue inthe same 14 and still meet the requirement. Need to specify . how many o f these 14 will be inaddition to the original 14 under CEPF-1. ExSump4. point 1l/PAD ; `Ineach hotspot, disbursement o f grants will be guided by ecosystem profiles based on a stakeholder-driven prioritization process to identifyconservation targets, major threats, socioeconomic factors, current threats and conservation investments.' Giventhat 35% o f the cumulative CEPF-1 funds have up to now been granted to C Iproposals, one may questionthe stakeholder- . drivenness. ExSump.8,point 18; "CEPF resources are targeted within critical ecosystems ...inWorld Bank client countries that have ratified the CBD." Do the MacArthur Foundationandthe FrenchAFD have focal countries as well? Ifso, shouldn't this . be given consideration as well? ExSump.11,point 24/PADp.3; US$ 1 million pledged from Australian government -this may be small compared to other inputs, but should be included inlist ofco-financing sources. ExSum,p.12,point 30; "Monitoring of conservation targets is currently being implementedinabout halfo fthe current CEPF investment regions, but this will be expanded to all investmentregions inthe future." A date should be set by . which these are to be included. Need to provide full text o f some abbreviations: e.g. CAS and PRSPs (p. 14 of ExSum), MDBs(ExSum p. 27); this may not been needed for some widely used . abbreviations (such as TOR, NGO and CBD). ExSump.15,point 45: it is mentioned here that the Coordination Unitso f CEPF-1 are the same as the Regional Implementation Teams, already mentioned on p.6. This shouldbe mentioned on p.6 as well, to avoid confusion. 93 . ExSump.32,point 5: GEF Biodiversity Tracking Tool. It i s proposedhere that the GEF SP1tracking tool be usedfor monitoring Component 1.Why not use the . SP2 tracking tool for Component 2? This would seem both logical and useful. ExSump.33/PADp.24 Arrangementsfor results monitoring. Under outcome 1, the first outcome indicator reads"At least 12 critical ecosystems receive support for strengtheningprotected areas systems to ensure long-term sustainability." Shouldn't this figure be 14, i.e. the same as the number o f critical ecosystems receiving support from CEPF? Evaluationof the identificationof globalenvironmentalbenefitsand/or drawbacksand risksofthe project 9. As under CEPF-1, the second phase o f CEPF is envisaged to have significant global environmentalbenefits for the targeted biodiversity hotspots. There are no apparent environmental drawbacks or added global environmental risks because o f the CEPF, although the CEPF Council i s to remain vigilant to ensure that CEPF hnds do not end up simplyreplacingor displacing other funds. Evaluationof the project's complianceor fulfillment of the goals of GEF 10.The CEPF targets various Operational Programs o fthe Biodiversity Focal Area, including OP1 Arid & Semi-arid Zone Ecosystems, OP2: Coastal & Freshwater ecosystems; OP3: Forest Ecosystems and OP4: Mountain Ecosystems. The Project will contribute to the GEF Business Plan and three o fthe four Biodiversity Strategic Priorities: Catalyzing Sustainability o fprotectedAreas (SP-1); MainstreamingBiodiversity inProduction Landscapes and Sectors (SP-2) and Generation and Disseminationo fBest Practices for Addressing Current and EmergingBiodiversity Issues (SP-4). Assessment of how the projectfits withinitsregionalcontext 11.CEPF focuses onbiodiversityhotspots and takes an overwhelmingly regional approach in its strategies. Ineachhotspot, CEPF uses an Ecosystem Profile methodology to analyze threats andopportunities, identifythe ecological baseline for measuringprogress, and provide clear strategic directions to guide grant making. These EcosystemProfiles are developed together with a wide range o f stakeholders, which ensures that regional priorities are flagged, and ultimately addressed. Ineach hotspot wherein it operates, CEPF i s organized via so-called Regional ImplementationTeams (formerly known as CoordinationUnits), and as the name implies, these take a broader view than one that i s site or location based. Evaluationof the replicabilityof the project 12. Component three Effective monitoring, knowledge sharing and outreach of CEPF focus on monitoring, learning, replication and scaling up o f promising models from Components 1 and 2. Replication i s therefore firmly embedded inthe project, as inaddition to promotion 94 o f ideas, CEPF can provide grants for implementation o f proposals for replication. CEPF contributes to the GEFs Strategic Priority SP-4 Generation and Dissemination of Best Practicesfor Addressing Current and Emerging Biodiversity Issues through an explicit replication strategy to promote cross-learning anduptake o f best practice at both the hotspot and overall program level. Evaluation of the sustainability of the project 13. CEPF aims at achieving sustainability at various levels, including ecological, social and . financial sustainability: Ecological sustainability. The fundamental premise o f CEPF is that large-scale actions to protect biodiversity are more likely to succeed ifthey are both influenced and supported by civil society. Through its capacity buildingprogram it therefore aims at building an effective and aligned civil society sector to mainstream biodiversity, building strategic and effective alliances to increase impact and sustainability. CEPF contributes to the sustainability o f PA networks and landscapes by also supporting landscape-level conservation outcomes and cross- . border initiatives. Social sustainability. Through its grants and the work o f its staff and locally based Regional Implementation Teams, CEPF-2 will empower a wide variety o f civil society actors to directly assist inbiodiversity conservation, acquire a positive stake in sustainable development programs, and become sources of improved design, support and durability for those efforts. Financial sustainability. Sub-component 1d focuses specifically on developing and identifyingInnovativefinancial mechanismsfor sustainability. Under consideration are the introduction and use o f conservation financing tools such as payments for environmental services and economic incentives for conservation. CEPF-2 will further strength joint efforts with governmental partners, the private sector and other funding mechanisms. B. Secondary issues: 2. Evaluation of linkages to other focal areas (international waters, climate change, etc...) . 14. The following linkages to the other GEF focal areas exist: Prevention or reduction o f further loss o f forested ecosystems in the biodiversity hotspot areas - one o f the main aims o f CEPF - will directly contribute to the Climate Change focal area. There i s a strong link with the Land Degradation focal area, not only though prevention o f loss of forests (as mentioned above), but because CEPF also aims to achieve greater sustainability o f production landscapes and prevent further decline in biodiversity insuch areas. The program aims to achieve this through strengthenedcivil 95 society capacity, and by working with the private sector and other civil society actors . to influence regional and national development programs andpolicies. CEPF-1 primarily targeted terrestrial ecosystems, but CEPF-2 will also invest in marine ecosystems within and adjoining hotspots, and as such may contribute to the . InternationalWaters focal area, where these are o f a transboundary nature. There i s a weak link with the Persistent Organic Pesticides (POPS)focal area, as CEPF aims to increase agricultural sustainability - agriculture is seen as one o f the main threats in many o f the hotspot regions. Although not specifically stated, one o f the strategies may be reduction o f pesticides use. Overall, the impact o f the project inthis focal area i s expected to be modest. Evaluation of linkages to other programs and action plans at the regional and sub- regional level 15. As recommended by the independent evaluation, CEPF-2 will strengthen operational collaborationwith the donor partners (GEF andWorld Bank are bothrepresented on the CEPF Donor Council and Working Group) as an explicit priority during implementation. Activities are to include engaging regional andnational representatives o f the partners and implementing agencies at a much greater level inthe participatory planning process for each ecosystem, and developing mechanisms for regular sharing o f information and exploration o f collaboration opportunities. Cooperation with the regional operations o f the World Bank will focus on strategic opportunities identified duringa series o fregional meetings in2005, to improve collaboration between CEPF andthe World Bank at the country and hotspot level. 16. As duringCEPF-1, a wide variety o f grantees will become recipients o f CEPF-2 fhds; these grantee agencies will create operational linkages within their own programs andwith CEPF donor partner institutions and implementing agencies nationally and across the hotspot, as well as with governments andother sectors inthe hotspots. The RITs will serve to build linkages with relevant programs, strategies and actions plans across the hotspot. Assessment of other beneficialor damaging environmental effects 17. The CEPF i s envisaged to have very significant environmental benefits across a wide range o f ecosystems andregions, both for biodiversity and the environment ingeneral (e.g. bypromoting sustainable landuse). Additionally, CEPF aims at replication, among others bybuildingcapacities incivil society and withNGOs, so the positive effects are likely to be felt over an even wider area inthe recipient countries. 18. Damaging environmental effects due to the implementation o f the CEPF are not anticipated, Most projects carried out under CEPF focus on capacity buildingand empowering stakeholders, andthe few projects that might potentially have (some) negative impacts will be subject to World Bank (and national) regulations for environmental 96 assessment andmanagement. These are to be summarized inAnnex 10 o fthe PAD, on Safeguard Policy Issues (not present indocuments submitted to STAP reviewer). Evaluation of the degree of involvement of stakeholders in the project 19. The PAD does not include a stakeholder involvement plan, but it i s clear from the project documents that key stakeholder involvement on the CEPF is by means o f their intensive participation inthe design o f the EcosystemProfile andthe investment strategy. The strategy development process i s ledby C I or other civil society groups, who promotewide participation and transparency among stakeholders to reach consensus on the highest priorities for conservation andthe CEPF investment strategy. The process enables key communities, including indigenous and ethnic groups within the focal areas, to take part in determining priority actions. Civil society groups, including NGOs, community groups, the private sector and other civil society institutions, will also be the direct beneficiaries o f all CEPF grants. CEPF will build on pilot models where local groups directly manage small grants programs to address specific strategic directions within an ecosystem profiles. At the ecosystem level, civil society groups andother partnerswill be directly involved in monitoring and assessingprogress, andrefining the investment approach during implementationinindividual hotspots Assessment of the capacity building aspects 20. CEPF is largely a capacity buildingprogram, as the three components all have a major (component 1) or explicit capacity buildingfocus (components 2 & 3). Component 1on Strengthening protection and management of globally signipcant biodiversity supports civil society efforts to catalyze improved management and expansion o f existing PAS(1a), support civil society activities to strengthen protection o f critical biological corridors (lb), assist communities and other partners inmanagement and stewardship o fbiologically-rich lands (1c), and achieving financial sustainability for biodiversity conservation(1d). All of these sub-components will have a major capacity buildingfocus. Component 2 Increasing local and national capacity to integrate biodiversity conservation into development and landscape planning and Component 3 Effective monitoring, knowledge sharing and outreach focus entirelyon capacity building, training, creating awareness, education and outreach. Innovativenessof the project 21. The CEPF is a highly innovative program within the GEF, being the only major grant- lendingprogram within the GEFthat specifically targets biodiversity hotspots, and provides small-sized grants in support of biodiversity conservation to a wide range o f actors within each hotspot, aimed at a common, hotspot-wide strategy developedby a wide range o f stakeholders. 97 CONCLUDINGREMARKS 22. CEPF-2, like its predecessor CEPF-1, provides an excellent andtimely opportunity for effective conservation o f highlythreatened, globally significant biodiversity inthe world's major hotspots. The grant-lendingapproach based on regionally developed strategies and coordinated via decentralized Regional Implementation Teams, i s innovative andhas provento behigheffective duringphase one. There are no obvious reasons for changing the general modus operandi, as the model appears to be sound and successful. No major risks or problems are envisaged, and the issues outlined above (see la-lg) can easily be addressed. Wim Giesen Ulft,8thMarch2006 Task Team Response to the STAP Reviewer 23. The Task Team found the STAP review very helpful andhighly supportive o f the CEPF-2 project. The team has prepared the following clarifications and responses to the STAP reviewand ensuredthat the project document includes these points. Selection of Hotspots to be funded under CEPF-2 24. The first phase o f CEPF funded 15 regions in 14 o f the original 25 hotspots identifiedby ConservationInternational. In2005 based on new research, C I revisedhotspot boundaries and increased the number o f hotspots to 34; the website reflects these revisions i.e. investments were made within 16 o fthe new 34 hotspots. For example, the original Eastern Arc Mountains and Coastal Forests o f Tanzania and Kenya Hotspot have now become two hotspots: the Coastal Forests o f Eastern Africa and Eastern Afromontane hotspots. 25. At least four o fthe 14critical ecosystems to be targeted duringa second phase will be new (see text inthe introductionto the section on components). Investment strategies have already been developed for PolynesiaMicronesia, Indochina, Sri Lanka, and Western Ghats and would be implemented underphase 2 o f the CEPF program. Implementation will beginas soon as fundingis available; the AFD fundingis expected to provide a seamless transition into second phase hotspots. Other critical ecosystems for investment will be chosen based on criteria such as biodiversity status, conservation needs, social and political enabling environment and availability o f other conservation funding. Hotspots and focal regions within hotspots would be chosen to complement government and other donor fbnding, including GEF investments under the new Resource Allocation Framework * 98 Cofinancing 26. A letter o f commitment for second phase cofinancing has already beenreceived from CI. Letters are expected from AFD andthe MacArthur Foundationprior to CEO Endorsement. The World Bank is consideringoptions for renewed Bank support after the current DGF grant closes inFY07. The CEPF Secretariat will continue to seek additional co-funding and opportunities to leverage parallel fbnding to support the next phase o f the CEPF program. Investments inhotspots will be staggered inline with fbndingavailability and sequencing and implementation capacity. 27. The $ l m grant from the Government o f Australia (Natural HeritageProgram) has already beenprovided to CEPF for specific activities andwould not be co-financing for CEPF-2. However, inproviding this finding, the Australian government does hope to catalyze fbll implementation o fthe ecosystem profile for the Polynesia-Micronesia Hotspot under the second phase o f the CEPF program. 28. Underthe secondphase o fthe CEPF program, the Donor Council may also decide to establish new hnding windows outside the WB/GEF CEPF-2 Project to accommodate the strategic interests o f specific donors. Funds available to CI and potential conflict of interest 29. The first phase o f CEPF had a 50% cap on global grants available to C I although the evaluation found that approximately 35% went to C I and 59% to international organizations overall. Duringthe preparation o f CEPF-2, the team took note o f the views and recommendations o f the independent evaluation team inregard to need for greater transparency to avoid perceptions o f conflict o f interest. The team considered a cap on the amount o f global grant finding available to C I and/or other international organizations but this option was rejected as there i s weak local capacity for conservation insome hotspots and international NGOs, including CI, may still need to take a leadrole. Instead, the project design incorporates specific steps to ensure further transparency, devolution and effective decision-making as well as additional steps to avoidpotential conflict o f interest. For example, the Regional ImplementationTeams, whether international NGOs or other locally-based organizations, will play a much greater role indecisions with regard to grant making within their specific ecosystem but neither the RITs, nor other offices and programs o f those organizations, would be eligible for additional grants within that particular hotspot. 30. See section 5, Alternatives considered and reasons for rejection, and section C on Implementation. Peer review of proposals 31.All proposals by international organizations, including CI, will be subject to peer review. Additional steps have also beenincluded to ensure effective decision-making as well as to avoid potential conflict o f interest. See section C on Implementation. 99 32. All grants will be awarded on a competitive basis. Specific steps related to grants to international organizations will also include: rn The existingprograms andpotential role o finternational organizations ineach hotspot . will be documented as part o fthe ecosystem profilingprocess. All international groups, including CI, will be requiredto demonstrate a comparative advantage intheir grant application. Proposals designedand implemented with a local partneror incorporatingstrongcapacitybuildingwould be given preference. rn The RegionalImplementationTeam or advisory committee ineachhotspot will review the proposal and, where appropriate, formally write ajustification for sole source approval. Incrementalcost analysis 33. The STAP reviewer queries the "calculation" o f $1OOmas incremental cost as unlikely, as the baseline could not have beencalculated - it i s largely unknown. The Task Team agrees that it i s extremely difficult to calculate baseline finding and incremental costs on such a global project, especially when target hotspots are still to be finalized. Nevertheless, incremental costs analyses were prepared for each o f the 15 critical ecosystems targeted in the 14hotspots duringthe first phase and these costs are detailed inthe IncrementalCost section. Inaddition, incremental cost analyses will be prepared for each critical ecosystem as an integral part o fthe ecosystem profilingprocess duringthe CEPF-2 project... Global estimates suggest that finding levels muchhigher than currently available are needed to strengthen biodiversity conservation and management. It seems fair to suggest that all of the $100 millionto be mobilized by this project to support civil society conservation activities would be incremental. The GEF i s requestedto provide $20 million, which will leverage at least another $80m o f other donor co-funding. Managementcosts 34. Management and overhead costs are now directly reflected inComponent 4c, Secretariat o f the Project Costs detailed inAnnex 5. Stakeholderdrivenness 35. The CEPF-2 project design includes specific activities to enable locally-based civil society groups, including national and local groups, to play a greater role indecisionmaking duringproject design andimplementation. Effortswill bestrengthened to encourage even greater participation o f all relevant stakeholders, including local communities and indigenous groups, to participate inthe development o fthe ecosystem profiles and strategies. All grants would be awarded on a competitive basis, with more decision-making devolved to Regional Implementation Teams and local advisory committees. Regional 100 ImplementationTeams would be selected on a competitive basis andcould not compete for additional grants within their hotspots - see Implementation Arrangements. Monitoring 36. Specific conservation targets andrelated indicators will be developed as an integral part o f the ecosystem profilingprocess for each ecosystem. Progress at the ecosystem/ hotspot will be monitoredbythe Regional ImplementationTeams and measured against these expected outcomes and results frameworks. Individual projects that focus on protected areas and/or mainstreaming biodiversity inproduction landscapes will apply the GEF SP1 and SP2 tracking tools. 101 Annex 17: IndependentEvaluationExecutiveSummary GLOBAL: Second CriticalEcosystemPartnershipFundProject Background 1.The Critical EcosystemPartnership Fund(CEPF) is ajoint initiative o f Conservation International(CI), the Global Environment Facility (GEF), the Government o f Japan, the John D.andCatherine T. MacArthur Foundationandthe World Bank.Eacho fthese donor partners committed to a $25 million investment over 5 years: CI, GEF andthe World Bank from 2000, the MacArthur Foundation from 2001 and the Government o f Japan from 2002. 2. CEPF was conceived as a model to demonstrate the effectiveness o fmobilizing innovative alliances among NGOs to achieve conservation objectives. The objective o f CEPF is to provide strategic assistance to nongovernmentalorganizations (NGOs), community groups and other civil society partners to help safeguard Earth's biodiversity hotspots, i.e., the biologically richest yet most threatened ecosystems. CEPF had progressively established active grant makingprograms in 15 regions covering 34 countries within 16 hotspots by June 30,2005. CEPF had committed grants o f $68 millionby this date, o f which $47 million had been disbursed from an overall grant makingbudget o f $100million. 3. CEPF is managed as a semi-autonomous unit within CI, whose Board o fDirectors has fiduciary responsibility for the program. CEPF i s supervised by a Donor Council, representing each o f the donor partners, supported by a CEPF Working Group comprising CEPF management and technical staff from the donor partners. CEPF has selected one or more NGOs as a Coordination Unit inmost o fthe active hotspot regions, to represent the program and to manage grant making. C I i s CEPF's single largest grantee, providing a variety o f coordination, implementation, scientific and administrative services at bothheadquarters and field levels. 4. Eventhough CEPF has completed five years o f operations, the program i s still developing. Slightly less than half o f the available grant funds hadbeen receivedby grantees when this evaluationbegan, while projects amounting to slightly less than $20 million or 20% o f the total grant funds had actually beencompleted. Ofthe 15 active grant makingprograms, three had been active for 4.5 years, seven for 3-4 years and five for less than 2.5 years. 5. The CEPF donor partners initiated an independent evaluation o f CEPF which began on August 15,2005 and focused on grant making through June 30,2005. The Evaluation 6. The evaluation terms o f reference (TOR) are explicit on the approach to be followed, stating that the emphasis "should be on the initiative as a whole, not on the effectiveness o frespective field programs". The TOR also specifies that the evaluation "should not assess the effectiveness o f independentprojects but rather the strategic orientation o f the portfolios vis-& vis the larger strategic mission o fCEPF". The evaluation was carried out by a team o fthree independent consultants, the authors o f this report. The needed tasks were planned and 102 implementedon an accelerated schedule inorder to provide timely inputs to the donors considering imminent refinancing o f CEPF. 7.The evaluation focused on ten o f the 15 active fundingregions. Eachwas visited during September-October 2005,generally for 7-10 days, following guidelines developedby the evaluationteam. The visits included field visits to selected projects, extensive interactions with local coordination mechanism staff, interviews andworkshops with grantees andother key stakeholders, and discussions with CEPF's regional Grant Directors. Outstanding cooperation was received from all CEPF staff, grantees andpartners infacilitating these visits at short notice. Overall Findings 8. CEPF has made strong progress overall duringits first five years. While achieving gains in biodiversity conservation within hotspot regions is a long-term challenge, a solid foundation has been laid for the future. The overall performance from a global perspective has been excellent, even though there i s some variation inthe performance o f individual hotspot programs. . 9. Particularly significant progress has beenmade inthe following areas: A coherent planningprocess to guide grant making at the hotspot levelhas been developed and applied. The EcosystemProfile methodology has improved significantly over the life o f CEPF after a variable start, with strong scientific support from CI. The more recent Profiles have included thorough analyses o f threats and opportunities, identified the key elements o f an ecological baseline for measuringprogress, and provided clear strategic directions to guide grant making. The later Profiles have been strengthened bybroader and more effective stakeholder consultations. Insome cases the Profiles have been usedsuccessfully to encourage the participation of other donors and . coordinate the resulting additional investments. The hotspot grant portfolios are well aligned with the strategic priorities set out inthe Ecosystem Profiles, most o fwhich are expressed in fairly general terms. The portfolios typically consist o f a few relatively large grants for program coordination and leadership, several medium-sized grants to relatively capable national and international NGOs for strategic, high-priority projects, and a larger number o f smaller grants (many under $20,000) to emergingcivil society organizations carrying out an impressive range o f grassroots activities, some o fwhich are thematically clustered. While the aggregate early gains from such diverse initiatives are difficult to assess, the overall picture that emerges i s that the projects fit together ina coherent way and that most o f the hotspot portfolios are well integrated and o f significant strategic value for biodiversity conservation. While individual projects were not a primary focus o fthe evaluation, design and . implementationgenerally appears to be sound. The characteristics and capacity o f the civil society constituency being supported by CEPF vary significantly betweenthe hotspot regions, with the result that the term `civil society' embraces a very broadrange o f organizations. The evaluation field visits 103 provided ample evidence that the CEPF model is sufficiently flexible to effectively identify and support a range o f civil society organizations o fdifferenttypes invarying contexts. Few o fthese grantees, particularly the less experienced emerging organizations, have access to alternative sources o f funding. The most significant direct impacts from grant makingto civil society have been: (i) capacity building among local andnational conservationNGOs; (ii) contributions to extendingandstrengthening protectedareanetworks: (iii) broadening environmental awareness through effective communications; (iv) enabling local, national and internationalpartnerships to support biodiversity conservation; (v) effective advocacy by grantee organizations inconnectionwith infrastructure and other development projects; and (vi) contributions to sustainable financing for conservation. The portfolios also contain a significant number o fprojects that combine community development and livelihood opportunities with biodiversity conservation, thereby contributing to poverty mitigation. Significant indirect impacts should also result from grants, notably when a particular approach tested or demonstrated successfully by a CEPF project is replicated or scaled up. Otherindirect impacts canbe expected to include: (i) changes by governments policy or new approaches by donors inspiredby grantees; (ii) NGO grantees going on to more influential activities as a result o f capacitybuildingand experience gained duringa CEPF project; (iii) local communities initiating new environmentally-friendly activities or obtaining services or action from government as a result o f increased self reliance and organizational skills acquired duringa CEPF project; (iv) institutional project partners such as research institutions, local governments and national environmental funds adopting CEPF approaches andintroducing them to larger communities. Some o fthese benefits may not become evident untilseveral years after the activity that stimulated them and are difficult, ifnot impossible to measure. That does not diminishtheir value, .however. The CoordinationUnits, CEPF's representatives and grant managers on the ground, have provided highquality local program implementation services. The CoordinationUnits have effectively identified and supported emerging civil society organizations, especially those with little previous proposal development or project management experience, many o fwhich are scattered widely inremote locations. C Iprovides the Coordination Unit at 9 o f the 15 hotspot programs, although 4 o f the last 5 programs activatedhave drawn on other NGOs inan impressively diverse range o f local institutional arrangements. Although these arrangements have not beenproblem free, they have worked very well overall. Withroles that go well beyond grant program administration, the CoordinationUnits have emerged as one o f the key strengths o f CEPF. With support from CEPF in Washington, especially the respective GrantDirectors, these Units have been particularly effective inlinking smaller grassroots activities, larger projects, policy initiatives, international collaboration, sustainable financing and other key elements o f comprehensive, vertically-integrated conservation portfolios. The CUs have been 104 particularly adept at pursuingconstructive partnershipswith governments - insome cases multiplegovernments -while simultaneouslysupportingcivil society organizations which sometimes have uneasy relations with their governments as a result o f their conservation advocacy activities. The label o f Coordination Unit does not do justice to the contribution o fthese key strategic partners. PerformanceMeasurement 10. The approach to performancemonitoring has evolved andimproved since CEPF was launched in2000 anditis acontinuingwork inprocess. CEPF is addressing large scale issueswith its partners andhas a budgetthat i s only generous by previous NGO conservation standards. Expectationson what can be achieved at the hotspot level within short time periods should therefore be kept within modest bounds, despite the relentlessly success-driven discourse o f the conservation and development communities. 11.It is extremely difficult to determine how specific investmentsor projects o f CEPF affect long term conservation outcomes ina corridor, protected area, nation or regionbecause such outcomes are usually the result o f efforts o fnumerous government agencies, communities, NGOsand donors over an extended period and are not easily attributedto a specific short-term investment by one program. An overemphasis on generating short-term (e.g., less than 10 year) conservation successes on a broad front can be hazardous insofar it tends to constrain risk and innovation, andrestrict the freedom needed to explore more riskyundertakings or those requiring more time. 12. CEPF does not regularly assess or report progress at a hotspot level against either the conservation outcomes or the other goals identified inthe log frames within each o f the ecosystem profiles. While the CUs have done very good work, they have not focused on analyzing the overall performance o f their hotspot grant portfolios. Exceptional work has been done incommunications, but the overall impacts o f the portfolios andprogress towards the conservationoutcomes hadnot been systematically compiled and assessed. CEPF does plan to compile a formal report on progress against the log fi-ames for each funding region at the close o f the initial five-year fundingperiod, starting early in2006. 13. Most conservation outcomes are unattainable within a five year period. Effective management o fprotected areas and especially largecorridors must continue indefinitely as there will always benew threats andconflicts. Active civil society involvement ingovernance is essential for equitable and transparent decision-making and accountability, even though conservation outcomes may not be these organizations' immediate or major priority. Therefore, to improve performance and evaluation, targeted conservation outcomes require an explicit subset o f short-term benchmarks and targets that can track progress towards the species, site and corridors outcomes. While aiming for these long-term conservation outcomes, the process and implementation o f CEPF grants generates considerable socio-economic, governance, livelihood and related impacts that are not effectively captured inthe current performance and evaluation framework. 14. Monitoringinthe form o f site visits bythe CUs appears inconsistent across the hotspots. The CUs do not perceivetheir performance monitoring roles clearly, mainly emphasizing 105 conservation actions and management o f grant funds. The overall responsibility for project monitoring as a support function as well as monitoring o fprogress towards outcomes requires furtherclarification. While CEPF has developed impressive grant management andgrant application software, there i s no comparable system for monitoring and evaluation, andno automatic or other compilation of project site visit observations or the progress reportedby individual projects against the targeted outputs at the portfolio level. The viability o f developing and introducing an integratedmonitoring and evaluation system should be assessed. Care needs to be taken, however, not to impose a monitoring structure that i s so rigid as to inhibit the vital innovationneeded to pushthe boundaries o f current approaches. Relationship with Conservation International 15. The relationship with C I provides substantial benefits to CEPF. C I co-initiated, launched and manages CEPF, its Boardo fDirectors has fiduciary responsibility for CEPF, its Center for AppliedBiodiversity Science provides technical services, and several o fits regionalprograms and Centers for Biodiversity Conservation are local coordinators for CEPF. C I also provides a range o fmanagement, administrative and information technology services inaddition to having committed $25 million to CEPF as an initial investment. Two C I funds, the Global ConservationFundand Verde Ventures, as well as C I country programs have provided funding for grant applicants that CEPF was unable to support and have co-financed certain CEPF grants. C I therefore has an extremely close relationship with CEPF on several different fronts. Start-up Phase 16. CI's dual role as manager of the grants program and as a potential grantee presents a potential conflict o f interest. C I i s the largest grantee o f CEPF andby June 2005 had received a total o f $29 million inhotspot coordination grants, project implementation grants and management fees. Recognizingthis issue, CEPF's Financing Agreement limits grants to C I to 50% of the total available, with specific Donor Council approval, and the CEPF Operations Manual requires all grant proposals, whether from C I or from external groups, to be subject to the same decision-making process. 17. As originally requiredby the CEPF Donor Council, the initial CEPF Spending Plan attached to the FinancingAgreement in2000 included grants to C Ithat equaled 50% o f the available resources of $11.6 million allocated to the first three hotspots, without the projects concerned having been specified or developed indetail. Subsequently, there was considerable pressure on CEPF staff to support funding for relatively large C Iproposals, particularly duringthe first few years o f CEPF. Although the pre-allocation requirement was subsequently changed by the Donor Council in2001 at the request o f CEPF management, these factors contributed to a widely-held perception that C Iwas being awarded significant CEPF grants without other options or considerations beingfully explored, to the detrimento f the overall program. 18. From CI's perspective, they were successfdly engaging a range of new donors insupporting valuable conservation initiatives with an exciting new focus on civil society. CEPF hadmade a strategic decision to beginwork in areas where C I already had a strongpresence and existing relationships to buildupon, so it was not surprisingthat their country and regional programs would lead the initial CEPF effort. However, this interpretationwas not shared widely among 106 the technical staff o fdonor partners,many external stakeholders or the broader conservation community. 19.These issues havereceived continual attention from the Donor Council, the CEPF Working Group and CEPF management, who have all worked hard to overcome the negative impacts o f these early developments. RecentDevelopments 20. Subsequent developments related to these issues were examined closely duringthe evaluation . and some important trends became clear: The share o f CEPF grants to C I fell from the initial 50% level to a cumulative 35% by June 30, 2005, and continues to decline. This trend is largely explained by CEPF expanding into new areas where C I does not have experience or a comparative advantage, andthe consequent need to engage with and support newpartners and Coordination Units. 9 The evaluationteam has concludedthat C Ihas generally done an excellent job with the funds ithas received from CEPF. The coordinationandproject implementation services from C I regional programs and Centers for Biodiversity Conservation, the scientific and technical support from the Center for AppliedBiodiversity Science, as well as the administrative, management and information technology services from CI's headquarters have all been o fhighquality and have provided essential support to CEPF's civil society . grant making. All transactions and financial flows with C Iappear to have beentransparently reported, . even though some o f these are relatively complex. The pressure on CEPF staffto support C I grant proposals as well as the expectation among C I staff that they should have priority access to CEPF funds has clearly reduced . over time, although it has not been eliminated. While C Ihas generally done an excellent job with the grant funds it has received, it would be hardto argue convincingly that C Ihas been treated like any other potential . grantee, as requiredby the CEPF Operational Manual. Insome hotspots itis difficult to assesswhethercertainprogramactivities carriedout by C I staffwith CEPF grant support "should" have beenpaid for by C I or by CEPF, with . viable arguments on both sides. C I itselfhas recently committed to shiftingtowards a strategy of re-grantingsubstantial proportions o f its revenues to support strategic partnerships, rather than tryingto "do it all" with their own field offices andpersonnel. This style o f operating i s much closer to the CEPF model, which gave C I one o f its first experiences o f an explicit focus on makinggrants to civil society with an emphasis on partnerships and alliances. 107 21. Despitethese generally very positive developments, externalperceptions continue to be negatively shaped by the earlier events. Furthermore, the rules and disclosure requirements governing CEPF grants to C Ihave not so far overcome the potential conflict o f interest when a grantee i s competing with other organizations for grants from a fund which it manages. Our conclusion i s that a reorientation o f the CEPF-CI relationship i s needed, to set further limits andto further improve transparency. The result shouldbeto strengthen the credibility o fthe arrangement inbothreality and perception. 22. Major realignments inthe CI-CEPF relationship were considered bythe evaluation team, including makingCEPF independent o f C I or making CI ineligiblefor CEPF grants. However, such extreme measures do not appear necessary and it is evident that such changes would have an enormous negative impact on CEPF's capacity to operate effectively and to continue developing the highly promising model that has emerged. Instead, the Donor Council may wish . to consider the following elements: A global limit for C I grants that is lower than the current 50%. More systematic and independent peer reviews o f all grant proposals from CI, including . Coordination Unit grants (this should apply to all international NGO proposals). More consistent use o f local independentadvisory committees to advise on grant . proposals (this should apply to all international NGO proposals). The Executive Director o f CEPF to report to the Chairman and CEO o fCI, who represents C I on the CEPF Donor Council. Governance Donor Council 23. The Donor Council has played an active role inaccordance with its assigned responsibilities. The guidance and oversight provided by the Donor Council with the support o fthe Working Group appears to have beeneffective and timely, and the Donor Council has made important contributions to fundraising. CEPFWorkingGroup 24. The Working Group has played an active role inseveral o fthe improvements to CEPF and provided useful input and guidance to the CEPF on important issues. Continuing efforts to catalyze or facilitate operational collaboration between their own organizations and CEPF need to be strengthened, as described below. CEPFManagement 25. CEPF management has faced a challenging set o f strategic and operational issues duringthe first five years. Most o f these challenges have been met with great skill and there i s clear evidence o f management's capacity to learn from experience and adapt to new situations, notably inthe selection and management o f local coordination units. CEPF is clearly a 108 responsive organization that appears to operate efficiently. Duringthe evaluation management and staff demonstrated an exceptional capacity to respond to a myriad of requests for data and to rapidly generate products for review. The people engaged as staff, partners and grantees are, almost without exception, capable and impressive. 26. CEPF communications i s exceptionally strong, particularly at a global level. For example, duringthe 12months to June 30,2005 visitors to the CEPF Web site downloaded over 65,000 copies o f final project reports, probably drawn by the marketing o f these reports inthe CEPF newsletter. These visitors came from at least 130 countries andintotal downloaded more than 418,000 CEPF documents andreports. Engagementwith Donors 27. As an investment, CEPF provides all o f its donors with a relatively agile, flexible and fast- moving fundingmechanismthat supports civil society organizations inareas o f global biodiversity significanceby disbursing funds insmaller amounts than these organizations generally deal with. CEPF's emphasis on employing good science, engaging stakeholders, buildinglocal capacities, mainstreamingbiodiversity andharmonizing donor investments in biodiversity i s also o f considerable strategic value to these organizations, while the capacity to support regional environmental collaborationinvolving multiplecountries provides an important contrast to the more prevalent single country donor model. 28. CEPF's activities are consistent with and supportive o f the poverty mitigation focus o f the World Bank andthe Government o f Japan as well as the sustainable development focus o f GEF.There appears to be a strong overlap betweenthe CEPFhotspots andconcentrations o f rural poverty, suggestingthat those projects supporting alternative livelihoods are likely to be benefiting the poorest o f the poor, many o fwhom depend directly on the services providedby the same ecosystems that CEPF is helpingto conserve. It seems evident that conservation programs such as CEPF are considerably more cost-effective than the massive investments that would be needed to restore such ecosystems ifthey were to become degraded and lose the ability to provide essential services to the poor (e.g., water, fuelwood, fodder, and flood protection, etc.). WorldBank 29. The potential for operational collaboration with the World Bank was originally highlighted as one o f the key opportunities provided by CEPF's innovative donor partnership. The potential for such collaboration has not diminished, and appears even greater now that CEPF has implementeda series o f convincing fieldprograms and can share knowledge and lessons learned. Potential aside, however, there has so far been little effective operational collaboration between the World Bank and CEPF at the field level. CEPF i s perceived a C Iprogram and not part ofthe Bank's country programs. Consequently, some important opportunities to build linkages and to broaden CEPF's impact are being missed, although there are signs that this may be starting to change. GlobalEnvironmentFacility 30. GEF has two funding windows providing resources directly to NGOs for biodiversity conservation: the GEF Small Grants Program (SGP) and the GEF Medium-Sized Projects 109 (MSPs). So far there have been surprisingly few interactionsbetween CEPF and SGP. There are some important complements inthe operational models o f CEPF and SGP which could provide the basis for productive collaboration and cross learning.The MSPs have represented an important opportunity for NGOs to access GEF resources andthere may be opportunities to scale up promising CEPF projects through MSPs. 31. GEF's recent adoption o f the Resource Allocation Framework i s expected to significantly change the nature o f GEF operations. There may be a reduction inGEF fundingto NGOs as well as fewer opportunities for MSPs to be developed. This suggests that CEPF is unlikely to decline interms o f its relative importance to GEF as an NGO funding delivery mechanism, and may represent an increasinglyvaluable opportunity to support civil society with an approach that complements but certainly does not duplicate SGP. MacArthur Foundation 32. Grants made bythe Foundation andby CEPF tendto bebroadly complementary. Ina few cases, earlier grants from MacArthur have been consolidated by subsequent CEPF grants. While there may some similarities and overlaps, redundancies are not apparent. There are some key differences ingrant making.For example, the Foundation does not have an on-the-ground presence corresponding to CEPF's coordination units. Also, the Foundation has gradually moved towards larger grants, and currently supports few projects corresponding to CEPF's smaller grants. At present, there is limitedinformation flow between the Foundation and CEPF, although Foundation staff have providedvaluable inputs to EcosystemProfile drafts. Opportunities for improved information sharing should continue to be assessedand Foundation staff should be encouraged to participatewhere appropriate once collaboration betweenthe World Bank and CEPF starts to take off. Government of Japan 33. The Government o f Japan appears to value its investment inCEPF for many o f the same reasons as the World Bank and GEF. The Japanese Ministryo f Finance has also been particularly concerned that CEPF grant programs demonstrate a positive contribution to poverty mitigation. As CEPF analyses have suggested and the findings o fthis evaluationhave confirmed, CEPF i s supporting long-term poverty mitigation efforts on several fronts. ProgramPriorities 34. The CEPF model o f support to civil society for biodiversity conservationinhotspots has made a very promising start and the experience to date does not suggest any need for radical changes instrategy or approach. Assuming that CEPFreceives further financial resources to continue beyondthe five year start-up period, priorities do need to be determined for the next phase. 35. The evaluation findings suggest a cautious approach. While the progress made inCEPF's first few years has beenvery positive, it i s still too early to assess the sustainability o f impacts. CEPF's ambitious long-term goals cannot be met inone or even a few five-year periods. Even though CEPF works mainly with and through civil society, many o f the challenges being addressedby CEPF programs will ultimately require major changes inpolicies andbehavior by 110 governments and other actors, none o fwhich can be brought about rapidly or without continued attention. 36. This suggests that consolidation and gradual expansion should be the strategic priorities for the next phase, to ensure that: (i) benefits gained so far are nurtured and sustained; (ii) the lessons from experience to date are identified and reflected incontinuing operations; (iii) the tools and methodologies for monitoring performance are developed further; (iv) the relationship with C I is optimized and (v) operational collaboration with donor partners i s strengthened. Recommendations Allocationof Resources 37. Broad decisions will need to be made on how andwhere new financial resources for grant making are to be allocated across the global program. Key decisions will include: (i) whether to reinvest inthe initial CEPF fundingregions, (ii) to expand the number o f active whether hotspots andbyhow many; (iii) the level o fresources to be allocatedto individual hotspots; (iv) whether to expand the scope o fCEPF to include new geographic areas or land use designations beyond the current focus on terrestrial hotspots. 38. Followingthe proposedprinciple o f consolidation and gradual expansion, considerable care should be taken not to dilute the clear and transparent mission o f CEPF, which i s relatively easy to communicate and provides clear direction and inspiration to staff, partners and 'grantees. 39. Discontinuing support for any region does not seem warranted at this early stage inthe development o f CEPF, particularly as manyo fthe conservation outcomes have an anticipated time frame o f considerably more than five years. As this report has emphasized, significant, long-term progress towards these outcomes requires sustained investments. 40. The evaluation team was asked to consider the option o f concentrating significantly more financial resources inindividual hotspots with the aim o f achieving greater impacts. While such decisions shouldbe made on a case-by-case basis, we have concluded that there are some disadvantages to such an approach: CEPF's ability to use resources effectively i s limited by the absorptive capacity o f local civil society grantees. Inthe hotspots visited, even though some grant funds appeared to be oversubscribed after their initial call for proposals, there seemedto be a reasonably good fit betweenthe available CEPF grants resources and the viable project concepts . being put forward by local civil society organizations. CEPF's influence appears to owe more to its excellent people, astute decisionmaking, leverage and flexibility rather than the sheer amount o f financial resources that it can bringto bear.A significant increase ingrant resources would require more staff and a greater management effort from the Coordination Unitsto maintain the current high levels o f technical support provided to grantees - one o f the clear strengths o fthe program. While the CUs are proving very capable intheir current role, to significantly 111 and suddenlyupgrade their grant management capacity could place excessive demands . on these organizations. Increasingthe duration o f the program, i.e., going well beyond five year periods, would appear a more productive investment and one more consistent with the time frame likely to be needed to generate sustainable gains at a significant scale. 41 Conversely, an alternative approach which spreadsresources over more regions than at present also has drawbacks. It i s evident that CEPF senior management spends a considerable amount o f time refining strategies, makingcritically-important decisions andproviding other inputs to each hotspot region, especially duringthe start-up phase. Senior management also invests considerable effort inseeking new donor partners, negotiatingglobal grants, securing cofinancing and supporting new trust funds. This level o f effort per hotspot seems related to the number of hotspots and the diversity o f institutional and management challenges they represent rather thanthe level o f financial resources available for grant making. Inother words, a significant element o f fixed management costs are incurred by operating at each hotspot site. It can therefore be anticipated that a rapidand significant expansion inthe number o fhotspots would require at least a proportional expansion inCEPF's senior management capacity. Performance Monitoring 42. A priority for the next phase o f operations will be to strengthen performance monitoring at a hotspot level intwo specific directions. First, both the Grant Directors and CUs need to be more involved inportfolio performance reporting on a regular basis. Second, the use of conservation outcomes as long-term operational targets should be complementedby the development and adoption o f socio-economic, political and civil society measures and indicators that will provide more feedback on CEPF's interim progress towards these outcomes. 43. The performance assessmentso f each o f the hotspots that are plannedto start in2006 represent an important opportunity that will probably require considerable resources, andthis needs to be plannedandimplementedwith considerable care ifit is to prove o f significant value to the program. A strategic and programmatic approach i s needed to these assessments, that should constitute a major activity o fthe second five years for CEPF. Some o f the key issues that should be taken into account are: (i) connecting these assessmentsto updates o f the Ecosystem Profiles for programs that are to berefinanced; (ii) linkingthese reviews with the development and testingo f new performance monitoring methodologies andsystems, includingindicators to reflect the nature o f and changes induced incivil society to complement the conservation outcomes; (iii) ensuringthat portfolio-level lessons are identified and disseminated; (iv) ensuring the reviews are participatory by involving grantees andother partners; and (v) exploring opportunities for cross-learning betweenportfolios to help achieve global program synergies. Ecosystem Profiles 44. The Ecosystem Profiles have proven to be an effective tool for planning and guiding grant making, and have improved over time as lessons from the earlier experiences have been applied.The Profiles are reviewedcarefully by the CEPF Working Group and eventually 112 approved by the Donor Council, thereby providing these bodies with their most important opportunity to influence site level grant making. 45. The completed EcosystemProfiles have strategic priorities expressed infairly general terms. This has so far provedto be an advantage, byproviding the flexibility to make decisions on the ground as local grant making knowledge and experience accumulates and the capacity o f each CoordinationUnit grows. Now that the existing CUs have greater capacity and an enhanced understanding o f local civil society grant making, consideration should be given as to whether strategic priorities should: (i) become more specific and targeted based on a better understandingo fthe local grant makingopportunities; or (ii) more general to encourage remain decentralized decision making. Site-specific, case-by-case solutions will probably be required, based on a clear appreciationo fthe capacities o fboth the C U and local civil society organizations. 46. UpdatedEcosystemProfiles and revised strategic directions and investment priorities may indicate the need for grant portfolios to berealigned infundingregions to be refinanced. Future Ecosystem Profile preparationprocesses should include consideration o fpoverty issues, payments for ecosystem services and the value o f ecosystem services, reflecting the findings o f the Millennium EcosystemAssessment and consistent with the U.N.Millennium Project. CoordinationUnits 47. The CUs have been highlightedas a major strengtho f CEPF, demonstratingthe viability o f an innovative range o f institutional arrangements and providing services that go well beyond grant program administration. The role and functions o f the CUs could still be definedmore explicitly, however, including their responsibilities for project monitoring and portfolio performance reporting. The C U selection process should be opened up further to consider more national organizations, and consideration shouldbe given to the use o fmore open bidding processes for new coordination grants. The coordination arrangements inthe first three funding regions (Guinean Forests, Madagascar and Tropical Andes) should be reassessed as their initial five year funding cycle is completed in2006 and, inthe case o f Tropical Andes, should be reestablished. 48. It will become increasinglyimportant to consider the long-term future o f the CUs once they emerge successfully from the early phases o f grant making.There is a clear need to develop the capacities o f local and national NGOs, as CEPF i s already doing, andto seek opportunities to delegate increasing authority andresponsibilityto these organizations to increase the local ownership of conservationprograms. Onthe other hand, a too-rapid wind down by the C U can jeopardize the sustainability o f the gains made to that point. Integrationwith Donor Partners 49. Strengtheningthe operational collaboration with donor partners should be an explicit and early priority o f the next phase o f CEPF. Inorder to be effective, this will require considerable efforts on behalf o fboth CEPF and the donor partner organizations. 113 Grantsto InternationalNGOs 50. Within the current portfolio, international NGOs have made important contributions not only as CUs but also by implementing strategic projects andmanaging small grant funds as intermediaries between the CUs and some o fthe smaller and more scattered or remote grantees. Intotal international NGOs had received 59% o f CEPF's grants through June 30, 2005 (including CI's 35% share). CEPF management and some o fthe donor partners have expressed the importance o f gradually reducing the proportion o f grants going to international rather than local and national NGOs.Having studied the grants data, the evaluation team concurs. However, this issue has some complex aspects and care needs to be taken before imposing arbitrary limits on CEPF grant making to international NGOs. The international conservation NGOs often have significant capacities and experience inorganizational management, communications, fundraising and negotiating transboundary issues. Insome contexts, they can also negotiate more effectively with governments and large private sector firms than national organizations. While we strongly support further decentralizationo f decision making within CEPF as the capacities o f local and national organizations grow, there are clear conservation benefits to be derived from the participation o f the international NGOs. Such decisions should again bemade on a case-by-case basis. SharingKnowledgeand Lessons 51.Although excellent work has been done indeveloping and disseminatingcommunication materials for non-technical and non-specialist audiences, more attention needs to be given to the systematic analysis and documentationo fCEPF results and experiences. Lessons learned are not emerging at the portfolio level yet, probably because o fthe general lack of emphasis on portfolio-level performancereporting at this early stage inthe majority o fportfolios and because o f reluctance to acknowledge or document problems and difficulties, even ifthese eventually became important learningexperiences that have ledto a stronger program. 52. While CEPF is exceptionally strong incommunications, it has not found it easy to identifyand disseminate lessons. While CEPF has clearly adapted its approach and learned from experience, this has taken place as a result o f informal information sharing within the organization combined with skillfully adaptive management. Eitherthrough C I or independently, CEPF should enhance its capacity to conduct more balanced analyses o f its experiences that i s distinct from communicating conservation successes. OperationalRecommendations 53. Certain operational areas have beenidentifiedwhere improvements can be made: Insomehotspotsthere issomeduplicationofeffortbetweenthetaskscarriedoutbythe local Coordination Units and those o f CEPF's US-based Grant Directors, most o fwhich could be addressedby further decentralizationo f decision makingto the local level. In general, there appear to be good opportunities for decisionmaking to be further decentralized once hotspot grant programs have demonstrated their capabilities by successfully progressing beyond their start-up phase, although such delegation o f authority and responsibility should be approached cautiously on a case-by-case basis. 114 . CEPF headquarters negotiates and arranges multiregional grants to single donors that are intendedto complement grant made locally through the Coordination Units. Such grants have sometimes been able to provide comparable services to multiple hotspots or to take advantage o f significant cofinancing opportunities, particularly with the private sector. However, insome cases the cost-effectiveness o f these grants i s not evident and key management information has not always beencommunicated effectively to the respective local CoordinationUnits. Insuch cases the CUs are unclear about their responsibilities for monitoring and supervision, and there i s a lack o f integrationwith the rest o f the hotspot portfolio. CEPF's grant applicationprocedures are demanding, so much so that they represent a severe challenge to many potential grantees. Although the applicationprocedures have . been simplified, there is room for further streamlining. The use o f CEPF's grant management systemby the CUs i s variable and appears to face a variety o ftechnical constraints that require continued attention. Overall Message 54. The donors have launcheda very promising andspecial program inCEPF. This innovative model fills a unique niche ininternational biodiversity conservation and is being implemented by a veryprofessionalglobal team pluspartnerswho havemade excellent early progress towards their long-term goals. We have no hesitation inrecommending that the donor partners continue funding the program and seeking further expansion opportunities. 115 MAPSECTTON, IBRD 35366 CRITICAL ECOSYSTEM PARTNERSHIP FUND TARGETED BIODIVERSITY HOTSPOTS Greenland (Den) Iceland Norway Sweden Finland Russian Federation The Netherlands Estonia Canada Denmark Russian Latvia Fed. Lithuania United Ireland Kingdom Germany Poland Belarus Belgium Ukraine Luxembourg CAUCASUS Moldova Kazakhstan Mongolia TARGETED BIODIVERSITY HOTSPOTS France Italy Romania Switzerland PROJECT AREAS WITHIN HOTSPOTS Bulgaria Georgia Uzbekistan Kyrgyz Armenia Azer- Rep. Dem.People's United States Spain Portugal Turkey baijan Turkmenistan Rep.of Korea Tajikistan Greece Japan Cyprus Syrian China Rep.of Malta Arab Islamic Rep. EASTERN Korea Tunisia Lebanon Rep. of Iran Afghanistan Iraq HIMALAYAS MOUNTAINS Israel Morocco Kuwait OF SOUTHWEST West Bank and Gaza Jordan CHINA Algeria Bahrain Pakistan Bhutan Nepal Libya Arab Rep. Qatar The Bahamas Former of Egypt Spanish Saudi Sahara Arabia Bangladesh Mexico United Arab Emirates India Cuba Myanmar Mauritania Lao Haiti Oman Cape Verde P.D.R. N. Mariana Islands (US) Belize Jamaica Mali Niger Chad Eritrea MESOAMERICA Guatemala Rep. of Yemen Honduras Senegal Thailand Vietnam Sudan PHILIPPINES The Gambia Burkina Guam (US) El Salvador Nicaragua Cambodia Guinea-Bissau Faso Djibouti Philippines Guinea Federated States of Micronesia Panama Benin Marshall Islands Costa Rica Nigeria R.B. de Ethiopia Sri Guyana Sierra Leone Côte Ghana Central EASTERN AFROMONTANE Venezuela African Lanka Suriname d'Ivoire Brunei Darussalam Liberia Republic Palau French Guiana (Fr) GUINEAN FORESTS Cameroon Somalia Malaysia TUMBES-CHOCÓ-MAGDALENA Colombia OF WEST AFRICA Togo Equatorial Guinea Maldives Uganda São Tomé and Príncipe Kenya Kiribati Congo Nauru COASTAL FORESTS Singapore Ecuador Gabon Rwanda Kiribati Dem.Rep.of Burundi Seychelles Congo Tanzania Comoros SUNDALAND Indonesia Papua New Guinea Tuvalu Samoa Peru Brazil Timor-Leste French Polynesia (Fr) Angola Malawi Zambia Mayotte American (Fr) Fiji Samoa (US) Bolivia Mozambique Fiji TROPICAL ANDES Zimbabwe Madagascar Tonga Mauritius Namibia Botswana Paraguay Réunion (Fr) New Caledonia Australia (Fr) ATLANTIC FOREST Swaziland MADAGASCAR AND South Lesotho SUCCULENT KAROO Africa INDIAN OCEAN ISLANDS Uruguay Chile Argentina CAPE FLORISTIC REGION New Zealand This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. JUNE 2007