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Integrating climate information into green growth finance in Rwanda

Rwanda has made significant progress in financing local green growth initiatives. However, integrating climate risks into project design remains a challenge. SouthSouthNorth (SSN), under Future Climate For Africa (FCFA), is assisting Rwanda’s national climate and environment fund (FONERWA) to ensure that green growth projects consider the risks and opportunities that climate change presents.

Rwanda is at the forefront of promoting green growth initiatives in Africa, through its recently established environment and climate change fund, FONERWA. With a value of approximately US$49 million, FONERWA. has approved 33 projects across Rwanda with values between US$500,000 and US$5 million since 2014. The fund is open to both public and private sector applicants under the following investment priorities: conservation and sustainable management of natural resources; research & development, technology transfer and implementation; environment and climate change mainstreaming; and environmental impact assessment monitoring & enforcement.

FONERWA has the potential to play a leading role in attracting private sector investment for green growth initiatives that are climate resilient. However, Rwanda’s private sector has low awareness of climate risks and adaptation options. FONERWA has trained 723 prospective local applicants in proposal development, but the fund’s capacity to screen project proposals for climate risks remains limited. There are many cases where funded projects are not considering or appropriately integrating current or future climate risks into project design. For example, some community based agricultural projects had not accounted for how climate change might affect the proposed agricultural investment, risking decline in crop yields or incorrect farming practices. This means that there is a potential risk of failure or sub-optimal return over project lifespans.

A central question for support to FONERWA is how to engage a small national fund, where there is limited additional funding for costly screening and adaptation design options, to consider climate risks and do “light touch” approaches to climate risk screening and adaptation.

There are two key parts to the solution: develop the capacity of the project appraisal team to perform a rudimentary screening, and provide them with information they can share with applicants to consider. Providing salient, legitimate, and accessible climate information to the project appraisal team and project applicants is a first step towards integrating appropriate adaptation options into project design.

The process of supporting FONERWA began with a simple factsheet on Rwanda’s climate, which was aimed at testing the type of climate information that the fund staff required. A subsequent workshop drew out rich discussions on the type of information FONERWA needs internally, and to communicate with the applicants. Workshop discussions highlighted the need for climate maps (historical and future) as well as detailed information on the impacts across various sectors. In order to make sense of the climate information, the impacts need to be relevant and succinct.

Following this, applicants received face-to-face advisory support as part of more general fund application process, in which climate risks were identified for the majority of proposals. This technical workshop further highlighted the need for a detailed understanding of climate impacts amongst the FONERWA staff as well as the project applicants. The projects were broadly categorised under the agriculture, energy, tourism, infrastructure and private sectors.

FONERWA coordinator Alex Mulisa officially opens the FCFA training workshop.

 

In order to address the lack of understanding around climate impacts, an agriculture decision support tool is being created. The tool consists of a collection of climate information (historical and future) as well as narratives that explain the impacts for six key export crops and livestock under different generalised climate scenarios. The tool will provide succinct and understandable information on linking the climate to practical impacts. This will help FONERWA appraisal staff to appropriately risk-screen projects, and assist project applicants to consider different climate risks and make sense of the complicated information around climate impacts.

Current SSN support is expected to continue through May 2018. Following the development of the impact narratives, the content will be “ground-truthed” by experts in-country, after which a training workshop will be held to facilitate the effective use of the tool prior to the FONERWA project application workshop. The workshop will be the space where FONERWA staff help applicants to identify risks (climate, financial etc.) and further develop their proposals.

It remains to be seen to what extent the provision of accessible, salient climate information influences project design and finance in a complex decision-making environment, and whether we can demonstrate its contribution towards climate resilient projects. A capacitated FONERWA could facilitate increased private sector investment, and public-private partnerships, in climate resilient projects.

This blog was written by Julio Araujo and Jean-Pierre Roux. For more information on the support being provided to FONERWA, please contact Julio Araujo julio@southsouthnorth.org