Fiduciary Principles & Standards of the GCF Obadiah K. Mungai - - PowerPoint PPT Presentation

Fiduciary Principles & Standards of the GCF

Obadiah K. Mungai Chief Environmental Economist & Chair NIE/AE Steering Committee, NEMA November 2017

Introduction

Entities seeking accreditation to the GCF in order to access its resources will be assessed against:

q GCF’s initial fiduciary principles and standards (including the Interim Policy on Prohibitive Practices) q GCF’s interim environmental and social safeguards (ESS) (including GCF’s Information Disclosure Policy with requirements to disclose E&S reports for certain categories of E&S risk), and q GCF’s gender policy .

Visit theAccreditationSelf-assessmentTool

GCF’s Fiduciary Standards:

qThe Fund’s fiduciary principles and standards form the fiduciary criteria of the Fund to assess Implementing Entities (IEs) and intermediaries for accreditation to the Fund, and will be applied according to the fit-for-purpose accreditation approach. qOnce accredited, IEs and intermediaries will be required to fully meet these criteria for as long as the entity intends to retain its accreditation status with and commitments to the Fund.

GCF’s Fiduciary Standards:

GCF_B.07_11 – Decision of the Board – Seventh meeting of the Board – 18- 21 May 2014 – Annex II – Initial fiduciary principles and standards of the Fund – to be reviewed within three years Basic Fiduciary Standards qKey administrative and financial capacities qT ransparency and accountability

Specialized Fiduciary Standards qProject management qGrant award and/or funding allocation mechanisms qOn-lending and/or blending Refer to page 15 of GCF/B.07/11 on the purpose and scope of the FSs

* For more details, refer to the Fiduciary Standards

Basic Fiduciary Standards

Required Competency Underlying Principles Specific Requirement scope

Key administrative & financial capacities

Financial inputs and outputs are properly accounted for, reported and administered transparently in accordance with pertinent regulations and laws, and with due accountability § General management and administrative capacities- Clear and formal definition of the main “corporate governance” actors of the entity and of their respective roles and responsibilities § Financial management and accounting (GAAP-IFRS or IPSAS or equivalent standards) § Internal and external audit § Control frameworks – a process to provide reasonable assurance regarding the achievement of

• bjectives in the following stated categories:

effectiveness and efficiency of operations; reliability

• f financial reporting; compliance with applicable

laws and regulations; risk assessment processes; defines roles and responsibilities pertaining to the accountability of fiscal agents and fiduciary trustees; and defines internal control activities, amongst

• thers

§ Procurement – covering both general operations of the entity and the implementation/execution of the activities funded by the Fund Information relating to the entity’s overall administration and management is available, consistent, reliable, complete and conforms to the required fiduciary standards The entity’s operations show a track record in effectiveness and efficiency

Transparency & accountability

Protection and commitment against mismanagement and fraudulent, corrupt and wasteful practices. § Disclosure of conflicts of interest - a disclosure policy, or equivalent administrative provisions to this effect, that establishes the necessary mandatory financial disclosures § Code of ethics - a documented code of ethics that defines ethical standards to be upheld § Capacity to prevent or deal with financial mismanagement and other forms of malpractice § Investigation - independent and objective investigation of allegations of fraudulent and corrupt practices § Anti-money laundering and antiterrorist financing Disclosure of any form of conflict of interest (actual, potential or perceived). Code of ethics, policies and culture that drive and promote full transparency and accountability.

Specific Fiduciary Standards

Required Competency Underlying Principles Specific Requirement Scope

Project Management

Ability to identify, formulate and appraise projects or programmes

§ Project preparation and appraisal (from concept to full funding proposal) § Project implementation, oversight and control § Monitoring and evaluation § Project-at-risk systems and related project risk management capabilities

Competency to manage or oversee the execution of approved funding proposals, including the ability to manage EEs or project sponsors and to support project delivery and implementation Capacity to consistently and transparently report on the progress, delivery and implementation of the approved funding proposal

Required Competency Specific Requirements

Grant award mechanisms and/or funding allocation mechanisms

§ Transparent eligibility criteria and evaluation § Grant award decision and procedures § Public access to information on beneficiaries and results § Transparent allocation and implementation of financial resources § Good standing with regard to multilateral funding (e.g. through recognised public expenditure reviews)

On-lending and blending

§ Appropriate registration and/or license from a financial oversight body or regulator in the country and/or internationally, as applicable § Track record, institutional experience and existing arrangements and capacities for on-lending and blending with resources from other multilateral sources § Creditworthiness of the institution making on-lending or blending arrangements § Due diligence policies, processes and procedures in place § Financial resource management, including analysis of the intermediary’s lending portfolio § Public access to information on beneficiaries and results § Investment management, policies and systems, including portfolio management § Capacity to channel funds transparently and effectively, and to transfer GCF’s funding advantages to final beneficiaries § Financial risk management, including asset liability management § Governance and organisational arrangements, including relationships between the entity’s treasury function and the operational side § For intermediaries or IEs that blend grant awards:

• clear procedures about the grant award rules that the implementing partner is required to apply, or
• if the intermediary or IE uses its own rules, satisfactory minimum requirements.

Fiduciary Functions:

projects/programme s.

Entities will be required to be ac undertake the relevant fiduciary credited function s against certain fi duciary standards in

• rder to

* Assessment of the entity against this standard will take into account whether the entity is overseeing or implementing

Accreditation Required Against

Examples of fiduciary functions

Basic Fiduciary Criteria Specialized Fiduciary Criteria for Project Management* Specialized Fiduciary Criteria for Grant Award and/or Funding Allocation Mechanisms Specialized Fiduciary Criteria for On- lending and/or Blending

Strengthening institutional and regulatory systems

ü

Implementing projects usingGCF’s resources, where the entity itself executes the project

ü ü

Implementing projects usingGCF’s resources, where the project is executed by another entity

ü ü

Awarding grants

ü ü ü

Managing lines of credit using the GCF’s resources

ü ü

On-lending

ü ü ü

BlendingGCF’s resources with other sources of funding

ü ü ü

UsingGCF’s resources for guarantees

ü ü

UsingGCF’s resources for equity investments

ü ü

Fast-track Accreditation Process:

q Certain entities may be eligible to apply under the fast-track accreditation process, as approved by the Board: q Recognizing that certain entities have completed the accreditation process of other funds/institutions against fiduciary and environmental and social standards that may be comparable to theGCF’s fiduciary standards and ESS, the fast-track process allows for eligible entities to focus their application on theGCF’s accreditation requirements (gaps) that have not been assessed in other accreditation processes. q The fast-track process also allows for the accreditation review to focus on how the entity addresses the gaps.

q Global Environment Facility (GEF) q Adaptation Fund (AF) q Directorate-General for Development and Cooperation – EuropeAid of the European Commission (DG DEVCO)

Fast-track Accreditation Process:

Global Environment Facility entities

Global Environment Facility (GEF)-accredited entities

Eligible if: 1. InGCF Board decisions,

B.08/03, B.10/06, B.12/30, B.14/09 or B.15/09

2.Accreditation date, and

Up to 14 December 2016

• 3. In full compliance with

GEF’s Minimum FiduciaryStandards and Minimum Standards on ESS

Gaps to be addressed by entity: Fiduciary gap(s)

1. Anti-money laundering and anti-terrorist financing (basic fiduciary criteria for the purpose of transparency and accountability)

ESS gap(s)

1. Have the capacity to assess and manage relevant elements of Performance Standards 1-4 and 6 environmental and social risks and impacts in line with theGCF's ESS through an ESMS Fast-track accreditation against:

Basic fiduciary criteria and ESS

Yes (except for the gaps above to be addressed)

Specialized fiduciary criteria for project management

Yes

Specialized fiduciary criteria for grant award and/or funding allocation mechanisms

No

Specialized fiduciary criteria for

• n-lending and/or blending

No

Fast-track Accreditation Process: Adaptation Fund entities

7

Adaptation Fund (AF)-Accredited Entities Eligible if:

• 1. In GCF Board decisions,

B.08/03, B.10/06, B.12/30, B.14/09 or B.15/09

• 2. Accreditation date, and

Up to 14 December 2016

• 3. In full compliance with

AF’s fiduciary standards

Gaps to be addressed by entity:

Fiduciary gap(s)

• 1. Have publicly available terms of reference that outline the purpose,

authority and accountability for the investigation function (basic fiduciary criteria for the purpose of transparency and accountability and scope of investigation) 2.Ensure functional independence by having the investigations function headed by an officer who reports to a level of the organization that allows the investigation function to fulfil its responsibilities objectively (basic fiduciary criteria for the purpose of transparency and accountability and scope of investigation)

• 3. Publish guidelines for processing cases, including standardized

procedures for handling complaints received by the function and managing cases before, during and after the investigation process (basic fiduciary criteria for the purpose of transparency and accountability and scope of investigation) 4.Anti-money laundering and anti-terrorist financing (basic fiduciary criteria for the purpose of transparency and accountability) ESS gap(s)

• 1. Have the capacity to assess and manage relevant Performance Standards 1-8

environmental and social risks and impacts in line with theGCF's ESS through an ESMS

Fast-track accreditatio n against:

Basic fiduciary criteria and ESS Yes (except for the gaps above to be addressed) Specialized fiduciary criteria for project management

Yes

Specialized fiduciary criteria for grant award and/or funding allocation mechanisms

No

Specialized fiduciary criteria

No

Fast-track Accreditation Process: DG DEVCO Entities

Directorate-General for Development andCooperation – EuropeAid of the EuropeanCommission (DG DEVCO) entities Eligible if:

• 1. InGCF Board decisions,

B.08/03, B.10/06, B.12/30, B.14/09 or B.15/09 2.Accreditation date, and Up to 14 December 2016

• 3. In full compliance with

EU DEVCO’s fiduciary standards under the 6-pillar assessment for all 6 pillars Gaps to be addressed by entity: Fiduciary gap(s)

• 1. Anti-money laundering and anti-terrorist financing (basic fiduciary

criteria for the purpose of transparency and accountability) ESS gap(s)

• 1. Have the capacity to assess and manage relevant Performance

Standards 1-8 environmental and social risks and impacts in line with theGCF's ESS through an ESMS Fast-track accreditation against: Basic fiduciary criteria and ESS Yes (except for the gaps above to be addressed) Specialized fiduciary criteria for project management No Specialized fiduciary criteria for grant award and/or funding allocation mechanisms Yes Specialized fiduciary criteria for on-lending and/or blending No

SIZE DESCRIPTION EXAMPLES OF AEs MICRO Total Project Cost up to USD 10 M § Acumen Fund § NEMA § WFP SMALL Total Project Cost between USD 10 M and 50 M § UNEP § World Meteorological Organization (WMO) § Ministry of Natural Resources of Rwanda (MINIRENA) § Ministry of Finance & Economic Cooperation of the Federal Republic of Ethiopia (MoFEC) MEDIUM Total Project Cost between USD 50 M and 250 M § FAO § IUCN § IFAD § WWF § Conservation International Foundation (CI) § GIZ LARGE Total Project Cost above USD 250 M § AfDB § AFD § Africa Finance Cooperation § European Investment Bank (EIB) § IFC § WB § JICA § KfW

Accreditation by Project Size

Readiness Support: Institutional GapAssessment and Action Plan

Gap assessment SiteVisit Action Plan Kick Off Call Completeness Check

Survey and Call with the Entity

1

Objectives

Initial contact with entity and plan site visit Gather information on the entity’s fiduciary, ESS and gender management processes Gather evidence to prepare gap assessment and action plan Communicate where and what the gaps are, and provide specific actions the entity may choose to undertake to address the gaps Receive feedback from the entity and understanding of next steps to proceed to apply for the accreditation process Key activities q Conduct ‘kick off’ telephone conference q Engage with entity to confirm review scope and priorities q Confirm key documentation requests and site visit plan with entity management q Receive and review initial documentation from the entity (e.g. governance structures, policies and procedures) q Review any relevant public information to understand the entity’s track record q Understand activities and product lines q Understand key additional documents required for review q Identify key management/staff to be interviewed during the site visit q Conduct management/staf f interviews q Collect and review detailed documentation where available q Discuss the fiduciary and ESS management approach with a sample of projects from the various portfolios (e.g. grants, loans, equity, guarantees, etc.) q Prepare the draft the gap assessment and action plan for each entity q Seek additional documentation or further clarification from the entity where required q Revise and finalize gap assessment and action plan following feedback from the entity on the initial draft Outputs

q Site visit meetings plan q Baseline documentation received and reviewed q Confirmation of meetings with entity’s management and site visit logistics q Initial feedback and observations conveyed to the applicant q Initial draft gap assessment and action plan to entity q Final gap assessment and action plan to entity

Readiness Support: Institutional GapAssessment and Action Plan

Gap Assessment Site Visit Action Plan Kick Off Call Completeness Check Survey and Call with the Entity

1

Objectives Initial contact with entity and plan site visit Gather information on the entity’s fiduciary, ESS and gender management processes Gather evidence to prepare gap assessment and action plan Communicate where and what the gaps are, and provide specific actions the entity may choose to undertake to address the gaps Receive feedback from the entity and understanding of next steps to proceed to apply for the accreditation process Key activities

q Conduct ‘kick

• ff’ telephone

conference q Engage with entity to confirm review scope and priorities q Confirm key documentation requests and site visit plan with entity management

q Receive and review initial documentation from the entity (e.g. governance structures, policies and procedures) q Review any relevant public information to understand the entity’s track record q Understand activities and product lines q Understand key additional documents required for review q Identify key management/staff to be interviewed during the site visit q Conduct management/st aff interviews q Collect and review detailed documentation where available q Discuss the fiduciary and ESS management approach with a sample of projects from the various portfolios (e.g. grants, loans, equity, guarantees, etc.)

q Prepare the draft the gap assessment and action plan for each entity q Seek additional documentation or further clarification from the entity where required q Revise and finalize gap assessment and action plan following feedback from the entity on the initial draft

Outputs

q Site visit meetings plan

q Baseline documentation received and reviewed q Confirmation of meetings with entity’s management and site visit logistics q Initial feedback and observations conveyed to the applicant q Initial draft gap assessment and action plan to entity q Final gap assessment and action plan to entity

Question & Answer

Thank You