' NORDIC PUBLICDEVELOPMENTFUND

PROJECT PROPOSAL FOR SMALL GRANTS FACILITY

Regional AsiaEnhancing Readiness of ADB Developing Member Count~~ies for Scaled Up Finance

EUR 0.5 million

PROJECT SUMMARYSector: Environmental Policy. CRS code 41010

Rio Markers: Mitigation 1 and Adaptation 2

Partner Country: Two NDF prioritized countries in South and South EastAsia, tbd.

Previous NDF Credits/Grants to Total to the above mentioned countries:

Country: Credits: MEUR 138.80; MSDR 36.60NDF Grants: MEUR 45.88 (incl. MEUR 21.22 for regionalprojects)NCF Grants: MEUR 3.09

Partner Agency: ADB. NDF will contribute one third of the total TA cost.

Mode of Financing: Joint co-financing.Relevance for NDF Strategy The TA is in line with the new strategy for 2016 onwards as

it contributes to increased capacity for scaled up climatechange finance, both for mitigation and adaptation activities.It focuses on project preparation which is well in line withthe strategy.

Climate Change Screening: The NDF funding will be targeted towards theidentification, development and preparation of 2-3 priorityinfrastructure investment projects with significant climatemitigation and/or adaptation benefits in the additional twocountries. Under the existing TA which is currently beingimplemented by the ADB, work is ongoing in threecountries: Fiji, Myanmar and Bangladesh. A projectdeveloped in Fiji was among the first to be approved forfunding by the GCF. One direct objective of the proposedNDF funding is to develop projects that can be presented tothe GCF as well as other potential external financiers,including from the private sector, for co-funding. Further,NDF will contribute to the development of a climate changeproject guarantee facility as well as a climate changeinnovativeness call for proposals.

Status: The NDF component will allow for the addition of two NDFprioritized countries to an ongoing ADB-led TA. Additionalfunding from the ADB's internal Climate Change Fund hasalready been approved (USD 250,000), and activities can

start in the additional two countries once NDF has approvedthe funding.

Project Period: It is proposed that the TA completion date be extended to 31December 2017.

Cost Estimate and Financing Plan: The total cost of the TA will amount to USD 1,500,000, ofwhich NDF will contribute USD 500,000. The original TAcost of USD 750,000 has already been approved from theADB Technical Assistance Special Fund (2013) for theongoing components of the TA. The additional USD750,000 (USD 500,000 from NDF and USD 250,000 fromthe ADB Climate Change Fund) will cover the additionaltwo countries. The NDF funding will be earmarked for partsof Outputs 2 and 3 of the ADB TA (i.e. the identification,development and preparation of 2-3 priority infrastructureinvestment projects and the dissemination and presentationof results) whereas the additional ADB funding will targetOutputs 1 (identification of opportunities for new and scaledup climate finance operations) and 3 (enhanced awarenessof investment opportunities in low-cazbon, climate resilientinfrastructure). NDF will also provide in-kind contributionsthrough the role as a knowledge partner.

Project Objective(s): The three outputs under the overall TA aze:

Output 1: Identification of opportunities fornew and scaled up climate financeoperations;

ii. Output 2: Identification of priorityinfrastructure investment projects andcapacity building needs; and

iii. Output 3: Enhanced awareness of investmentopportunities in low-carbon, climate resilientinfrastructure.

The expected outcomes are:

a. Increased capacity in the selected countries to plan,design, finance and implement climate changeprojects;

b. A number of infrastructure investment projects withsignificant climate change mitigation and/oradaptation benefits implemented after having beenidentified (output 2);

c. Final design and start-up of the Asia ClimateFinance Facility (AC1iFF).

The NDF funding will be earmarked for parts of Output 2and 3, i.e. the identification of 2-3 priority infrastructureinvestment projects in the two selected countries andpresentation and dissemination or results through nationalworkshops, aiming also to bring together potential investorsand other relevant stakeholders. It is expected that theprojects will be developed so as to promote co-investmentfrom other sources, such as the GCF. NDF will also providein-kind contributions through its experience and knowledgein clunate change finance guarantees and calls for proposalsfor innovative climate change solutions.

Project Description: The current status of the ADB TA is as follows:

Under Output 1, the TA aims to develop at least 3conceptual proposals describing long-term strategicopportunities to engage in low-cazbon, climate-resilientinfrastructure financing. The TA is currently supporting thedevelopment of the following conceptual proposals:

Paper on ADB Climate Change Program -MatchingActions with Need. The TA supported the contracting of agroup of senior international consultants to draft a strategypaper which provides an independent look at the ADBexperience, potentials, and steps that may assist ADB inreaching its potential as a long-term, large-scale leader insupporting climate action and accessing or enabling accessto climate finance for its DMCs. A number of strategicopportunities were described, including green bonds). Thepaper has been shared with NDF.

Unlocking Innovation for Development (CfP). ADB'sKnowledge Services and Support Center has developed aspecific TA on "Unlocking Innovation for Development" toimplement this search model. Under this existing TAsupport to the contracting of a consultant to draft adocument on public sector innovation prizes as a method forsourcing innovative business models and technologies fromexternal parties, including private sector entrepreneurs andcivil society organizations, was provided. The documentanalyzed the experience of over 300 innovation awards,many of which centered on low carbon technology. Thisdocument was used to inform the design of the "UnlockingInnovation for Development" TA, which now includes acomponent on crowdsourcing innovative developmentsolutions.

Under Output 2, based on discussions with regional

departments, the TA has identified Bangladesh, Myanmar,and Fiji as its target DMCs. Following the accreditation ofADB by the Green Climate Fund (GCF) in March 2015, theTA has initiated activities in the named countries.

The TA supports the targeted DMCs to identify 2-3 priorityinfrastructure projects with (i) climate mitigation and/oradaptation benefits, (ii) other development benefits/impact,and (iii) co-financing potential. With respect to the latter,the TA will also assist in developing proposals forsubmissions to the Green Climate Fund or other climatefinance sources. A $31 million adaptation grant for the FijiUrban Water Supply and Wastewater Management Project,prepared under this TA, was the first ADB project to beapproved GCF funding.

Under Output 3, the TA will organize a national workshopin each of the targeted DMCs to present the results of thestudies produced under Output 2 to stakeholders from thepublic and private sectors, civil society, and developmentpartners who would be instrumental for implementation ofthe identified priority investment projects. A regionalworkshop at ADB will be held to present the results of thestudies to representatives of other DMCs and potentialfinancing and implementation partners.

In addition to the above, the TA is supporting theformulation of a proposal for the establishment of a multi-donor fund (AC1iFF) hosted by ADB, and to which NDFhas been invited as a partner. ACIiFF will provide partialguarantees to facilitate local bank lending for climatechange investments. NDF will provide in-kind support tothe development of both AC1iFF and the CfP.

Description of NDF Components: The NDF funding will contribute to the addition of twocountries to part of Outputs 2 and 3 of the TA, allowing forthe identification and development of, and securingfinancing for, 2-3 priority infrastructure investment projects.It is expected that the identified investments will be deemedbankable, thereby allowing for identification of suitablefinancing for the investment projects and subsequentimplementation. The GCF will be approached forinvestment funding if deemed feasible. NDF will follow theidentification and due diligence closely to ensure thatadequate measures are taken to pursue the identifiedinvestment opportunities. Further, ADB is well aware ofNDF's priorities in terms of climate change mitigation andadaptation, and are thus expected to only pursue projects

that correspond well to these.

Further, NDF will be a knowledge partner in thedevelopment of AC1iFF and the CfP, further outlined later inthis document.

Gender Marker: 0Implementation Arrangements: Joint co-financing.Procurement: Procurement of consultants for the identification and

development of investment projects will follow relevantADB guidelines.

Nordic Interest: With NDF involvement the identified and selected priorityinvestments may be targeted towards areas and technologieswhere Nordic companies are especially strong, such asenergy efficiency. There may also be interest among Nordicinvestors for the resulting investment projects. The Nordicconsultancy market in the climate change sphere is welldeveloped.

NDF's Added Value and Comparative The NDF-funding will add two NDF-prioritized countries toAdvantage: the list of beneficiaries under this TA, thereby contributing

towards the identification and development of priorityinfrastructure investments in these countries. NDF also has avast network of financiers and can thus help in securingfinancing for the resulting investment projects. Further,NDF experiences from facilities similar to AC1iFF and theCfP, as well as overall climate change project financeexperience, will contribute to the development of thesefacilities.

Recommendation for Manageme~tt resolution:

Management approved grant financing of up to EUR 0.5 million to t{te project Enl:anci~:gReadi~:ess of ADB Developing Member Countries for Scaled Up Finance.

Helsinki, 16 March 2016

Erik HolmqvistProcurement Specialist

Approval of grant financing ojup to EUR 0.5 million to the project Ei:l:ancing Readiness ofADB Deve%ping Member Cor~ntries for Scaled Up Fina~:ce.

Helsinki, 16 March 2016

/~• ~~~i

Pasi HellmanManaging Director

PROJECT SUMMARY

ADB approved a Regional Technical Assistance Enhancing Readiness of ADB Developing MemberCountries for Scaled Up Finance on 20 December 2013 for a total amount of USD 750,000financed by the ADB Technical Assistance Special Fund. It is being implemented by ADB'sClimate Change and Disaster Risk Management Division (SDCD). The TA aims to help build thecapacity of ADB developing member countries to access critical financing for scaling up climatechange actions. In its current form, the TA aims to help 3 such countries to develop the capacity toidentify priority infrastructure investment projects that mitigate climate change and/or supportadaptation to climate change, while creating development co-benefits. One of these priorityinvestment projects (in Fiji) has been approved for support from the GCF. All investment projectsidentified under this TA will be developed so as to maximise the potential for investment from theGCF and other donors, as well as from multilateral development bank and private sector actors. TheTA will help developing member countries to conceptualize financing strategies for theseinvestments, identify capacity gaps and barriers that impede the flow of climate finance, and raiseawareness on climate finance.

The TA also aims to help identify new opportunities for scaling up climate investments more ingeneral, which is particulazly timely given ADB's recent commitment to double clunate financingto USD6 billion annually by 2020. As mentioned above, two concrete proposals are the AC1iFF andthe climate challenge through a call for proposals (Unlocking Innovation for Development, the CfP).These are being developed as part of the ongoing TA.

Key outputs under the TA are summarised below:

iv. Output 1: Identification of opportunities for new and scaled up climate financeoperations;

v. Output 2: Identification of priority infrastructure investment projects and capacitybuilding needs in selected countries; and

vi. Output 3: Enhanced awazeness of investment opportunities in low-carbon, climateresilient infrastructure.

The NDF funding will contribute mainly to the addition of two countries to Outputs 2 and 3 underthe TA, with a focus on the identification of 2-3 physical priority infrastructure investment projectswith significant climate change mitigation and/or adaptation benefits. It is expected that theidentified investments will be pursued by ADB, NDF or another donor/investor and deemedbankable, thereby allowing for identification of suitable financing for the projects and subsequentimplementarion. NDF will follow the identification and due diligence closely to ensure thatadequate measures aze taken ta pursue the identified investment opportunities.

NDF also works closely with the ADB to ensure that NDF priorities in terms of climate changemitigation and adaptation are key criteria in the selection of projects. Further, NDF will act as aknowledge partner to develop AC1iFF and the CfP, based on experience from other similar facilitiesas well as climate change investments in general.

TABLE OF CONTENTS1. INTRODUCTION AND PROJECT BACKGROUND ...............................................................1

2. RELEVANCE AND RATIONALE .............................................................................................2

2.1. Project Relevance ..................................................................................................................2

2.2. Relevance to NDF's Mandate and Strategy ..........................................................................4

3. THE PROPOSED PROJECT ....................................................................................................... 5

3.1. Objective (s) .......................................................................................................................... 5

3.2. Project Activities /Outputs . ...................................................................................................5

3.3. NDF Components ..................................................................................................................6

3.4. Cost Estimates and Financing Plan ....................................................................................... 6

3.5. Nordic Interest .......................................................................................................................7

3.6. NDF's Added Value and Comparative Advantage ............................................................... 7

4. IMPLEMENTATION ARRANGEMENTS .................................................................................7

4.1. Technical Aspects ..................................................................................................................7

4.2. Institutional Aspects and Project Organization .....................................................................7

4.3. Procurement and Contract Structure ..................................................................................... 7

4.4. Risk Analysis .........................................................................................................................7

4.5. Monitoring and Evaluation ....................................................................................................8

5. ECONOMIC AND SOCIAL ASPECTS ......................................................................................8

5.1. Economic Justifcation .......................................................................................................... 8

5.2. Social Aspects ....................................................................................................................... 8

6. CONCLUSION .............................................................................................................................8

1. INTRODUCTION AND PROJECT BACKGROUND

ADB approved a Regional Technical Assistance on 20 December 2013 for a total amount of USD750,000 financed by the ADB Technical Assistance Special Fund. The name of the TA isEnhancing Readiness of ADB Developing Member Countries for Scaled Up Finance, and it is beingimplemented by ADB's Climate Change and Disaster Risk Management Division (SDCD). It aimsto help build the capacity of ADB developing member countries (DMCs) to access critical financingfor scaling up climate change actions. In its current form, the TA aims to help 3 DMCs to developthe capacity to identify priority infrastructure investment projects that mitigate climate changeand/or support adaptation to climate change, while creating sustainable development co-benefits.One of these priority investment projects (in Fiji) has been approved qualified for support throughthe GCF. All projects identified under this TA will be developed so as to maximise the potential forinvestment from the GCF or other donors, as well as from multilateral development bank andprivate sector actors. The TA will help DMCs to conceptualize financing strategies for theseinvestments, identify capacity gaps and barriers that impede the flow of climate finance, and raiseawareness in climate finance.

International Financial Institutions and the public investment project cycleInternational Financial Institutions (IFIs), which include the large Multilateral Development Banks(MDBs), provide significant funding towazds public infrastructure investments in developingcountries and emerging mazkets (as well as in developed countries). The main proceeds come fromlending operations, either on concessional ("soft loans") or commercial terms. For publicinfrastructure (as well as other) investments in developing countries, much of the projectpreparation activities fall on the IFIs themselves, rather than the clients. This is often true from thevery onset, where similar to commercial banks these IFIs have to do a lot of "selling" of theirproducts to get clients on board. However, whereas commercial banks will mainly engage in sellingto increase the organization's profit, IFIs generally have other objectives such as development,environmental and climate issues etc. To get developing nations and their various authorities toborrow money for e.g. environmental investments such as sewage treatrnent and solid wastemanagement can be challenging, seeing as it incurs costs on the borrower and may not be politicallypreferred. Nevertheless, IFI owners and donors that cooperate with these IFIs tend to prioritizedevelopmental, environmental and climate issues and are willing to provide concessional financeand grants to facilitate such investments.

Given the lack of funds/unwillingness to borrow for such investments, as well as an often presentlack of skills among these clients, IFIs usually have to engage in hands-on project prepazation. Afteridentifying a potential public investment project together with a client, and including this in anagreed pipeline/work plan, the IFI will engage in project prepazation activities.Generally, project identification and preliminary screening should be part of an IFIs core activitiesand thereby be done by bank staff. However, this TA targets specifically very climate changeimpactful projects which may therefore be more innovative than classic infrastructure investmentprojects. The aim is to identify and prepare such projects for funding not only from the ADB orWorld Bank, but also from facilities such as the GCF. This is important because the GCF is still inits start-up phase, and developing nations as well as institutions in the developed world are trying tofmd the most appropriate means and ways of securing finance from the fund.

After project identification, project preparation will typically include apre-feasibility and/orfeasibility study, which if comprehensive may include, in addition to the identification of abankable priority investment programme, components such as financial, environmental and socialdue diligence, preliminary designs with cost estimates, TOR for design supervisions consultants etc.Based on the study, the IFI and the client can better assess the investments and decide whether tosign a loan agreement, as well as negotiate its terms. This is where this TA will play an importantrole, the identification and preparation of very climate change specific projects is often not apriority for developing countries struggling to make budget ends meet, nor is it yet a core activityfor many IFIs, including the ADB. The objective is therefore for this TA to prepare suchinvestments for funding from the ADB, GCF and other (including private sector actors such asimpact investors), while at the same time building capacity both within the partner countries and theADB on such project identification and preparation (including funding requests).

It should be noted that projects identified and developed under this TA may well (if not likely) besuitable candidates for further assistance under the Readiness Improvement for Sustainable Projects(RISP) facility proposed for NDF funding. The RISP facility will be managed by the ADB and willprovide support towards the preparation further downstream of climate change investment projects.

It is quite common for donors to provide grant funds towards the cost of these types ofinfrastructure investments. Grant proceeds are then often used for either part of the physicalinfrastructure (loan grant blending) or technical assistance/technical cooperation (such as feasibilitystudies, detailed design, project implementation support, capacity development for theowners/managers of the physical assets).

It should also be mentioned that as part of the existing TA, the ADB has assisted a privatePhilippine energy company (Aboitiz Power Renewables Inc.) to issue the first individual bond everin an emerging market to be climate certified (this bond was certified under the InternationalClimate Bond Standards and Certification Scheme). The ADB Private Sector Department (PSOD isproviding a 75% partial credit guarantee in respect of the 10-year Peso 10.7 billion project bondswhich have been issued by the company, anda 5-year Peso 1.8 billion project loan). The raisedcapital will target geothermal energy investments in the country.

2. RELEVANCE AND RATIONALE

2.1. Project Relevance

While infrastructure investment needs in Southeast Asia are huge, it is costly and complex toproperly prepare such investments. Adding to this are requirements to ensure that any investmentstoday are climate proofed and climate neutral, at least. While the ADB has recently decided todouble its climate investments, covering both mitigation and adaptation projects, climate changemitigation and adaptation is not yet at the core of its business, and thus the institution needsassistance to build capacity and identify and properly prepare such investments. This project willspecifically identify and prepare 2-3 priority infrastructure investment projects in two countriesmuch affected by climate change, with a specific focus in mitigation and/or adaptation. It will

further present the findings to potential investors and other stakeholders to enhance the chances ofactual implementation. The NDF will further contribute in-kind support through its experience andlessons learned from investing in climate change projects all over the world.

Further, this TA supports the development of ACIiFF, which is a new type of facility for the ADBand also quite innovative in the region. AC1iFF is similar to the AGF in that it is proposed to haveone TA fund for advisory services both to end-borrowers and intermediary banks, as well as forgrants/loans and other special initiative, and one guarantee window for partial guarantees of privatesector bank lending for climate-friendly investment projects (Green Guarantee Fund). NDF willoffer mainly in-kind support to the set-up of ACliff based on experiences from other similarfacilities, as well as from climate change screening criteria and climate projects more in general.NDF may also consider becoming a (founding) donor in ACIiFF once it is ready for launch,depending on the outcome of the preparatory work and NDF experiences from other similarfacilities.

Technical ACIiFF

Assistance Management Team Green Guarantee------ --------------------- ------ Fund (GGF)Trust Fund

TA, Grants GuaranteeComprising segregated accounts &Loans Support ,- GGF assists banks to upscale fundingto fund: for green/ctimate-friendly investment• A dedicated Facility p~~~,Management Team "

• Advisory services to prepareprojects, screen guaranteeproposals 8 build capacity.

• Special Initiatives (e.g., faAdaptatån, Green SMEs,Food Security, Climate-Friendy Infrastructure, etc.).

The Fund's guarantees are backed byrisk-sharing commitments from ACIiFFDonors. Key features of GGF:

• Partial Credit Guarantees to banksfor clenate positive projects

• Emphasis on Co-guaranteetransactlonsto spread risk

• Income generation from guarantee• Grants and/or Loans (on ' fees.

terms and conditions to be Primary ;Outputapproved by ACIiFF Donors). Capacity Building for partner banks.

•

Bankable and Climate-Friendly Investment Projects ~

NDF will also be a knowledge partner on the CfP mentioned earlier. The Midterm Review ofADB's Strategy 2020 and the Bank's Knowledge Management Directions and Action Plan 2013-2015 recommended expanding ADB operations for innovation and pilot testing by evaluating thefeasibility of a search model for innovative solutions to development challenges. ADB'sKnowledge Services and Support Center is currently developing a TA on "Unlocking Innovationfor Development" to implement this search model. This TA has supported the contracting of aconsultant to draft a document on public sector innovation prizes as a method for sourcinginnovative business models and technologies from external parties, including private sectorentrepreneurs and civil society organizations. The document analyzed the experience of over 300innovation awards, many of which centered on low carbon technology. This document was used toinform the design of the "Unlocking Innovation for Development" TA, which now includes a

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component on crowdsourcing innovative development solutions. So while no longer an active partof this TA, it will be through this engagement that NDF's provides its support (in-kind) to thedevelopment of the CfP.

2.2. Relevance to NDF's Mandate and Strategy

The TA is in line with the new strategy for 2016 onwards as approved by the Board in November2015 as it contributes to increased capacity for scaled up climate finance, both for mitigation andadaptation activities, as well as focuses on project preparation. This facility comes in far upstream,however the proposed focus on identification and preparation on 2-3 investments is intended toensure impact of NDF funding and make the financing specific and measurable. The contribution tothe development of AC1iFF will further enhance the upstream project preparation work as the NDFwill be engaged in the development of a potentially very impactful facility focusing on climatechange finance. The TA thereby reflects several of NDF's strategic focal areas.

Catalytic Role and Leverage

The TA will prepare bankable investment projects for financing from external investors such as

MDBs, GCF, donors and private investors. It may also prepare PPP projects. Therefore the project

will have a clear catalytic role for investments, and leverage significant amounts of investment

funding.

Project Preparatory Funding

Project preparation is one if the NDF strategic focal areas. This TA aims to develop a number of

bankable investment projects with significant climate benefits for investment from ADB, GCF and

other investors, including from the private sector.

Support for Innovation and Piloting of Interventions with a High Risk Level

NDF will encourage ADB to use this TA to develop innovative solutions to climate issues faced by

their DMCs. While the bank's core funds have significant restrictions in terms of risk taking, NDF

funding can aim to assist partners to test solutions which may be on the market but not yet tested in

the relevant context.

Bankable projects will also have the added benefit of attracting private investors, either as

financiers or as project partners through e.g. PPPs.

Innovative technological or financial solutions would generally carry greater risk, and is therefore in

need of risk finance in order to be properly tested. With "traditional" bank or donor funds, such

solutions may not be pursued at all as the resulting investment would also be deemed risky.

However, if NDF funding can assist in the development of innovative, high risk projects, impact

investors and others who may accept higher risk lower yields in favour of the triple bottom line

could set of funds towards the testing of such solutions, given that the positive climate,environTnental and social impacts would be great.

3. THE PROPOSED PROJECT

3.1. Objective (s)

Identify, prepare and present 2-3 priority infrastructure investment projects in two countries muchaffected by climate change, with a specific focus in mitigation and/or adaptation. These projectsshould be deemed bankable and be properly prepared to attract sufficient investment. As part of theidentification and prepazation of projects, capacity development for both partner countries and ADBstaff will be provided through on the job training. Specifically, partner countries will gain skills inidentifying and preparing projects for GCF and other similar funding, and in preparing fundingrequests for such institutions. It is also important to point out that this TA will further raise the issueof climate change on the ADB's and partner countries' agendas, and if successful should show thebenefits from including climate change aspects in core operations.

NDF will provide in-kind contribution to the ADB as a knowledge partner in the development ofAC1iFF, based i.a. on experience from other similaz facilities. NDF's experience from working withclimate investment projects will also be very useful in the development of project criteria as well asmonitoring and evaluation.

3.2. Project .Activities/Outputs

The overall TA will assist 5 countries (existing 3 +additional 2) to increase the readiness forclimate financing through identification and preparation of potential investment projects, capacitybuilding and the development of the ACIiFF as well as the Cfl' facility, as above. Main outputs willbe 2-3 identified climate change investment projects with pre-feasibility or feasibility studiesprepared in order for the partner countries to take them forward for investment finance. ADB shouldbe driving the further development of these investments and would be a most likely primaryinvestor, but GCF and other financiers will be approached as appropriate to increase the financingof climate change components to increase their impact.

Another expected output is a proposition for the set-up of AC1iFF, where NDF may be interested tobecome a founding partner. During the implementation of the TA, NDF will work closely withADB to develop AC1iFF and may also assist in approaching other potential donors.

3.3. NDF Components

NDF funding will be earmarked for parts of Outputs 2 and 3 under the project, i.e. theidentification, preparation and presentation of 2-3 priority infrastructure investment projects with aspecific focus in mitigation and/or adaptation. Pre-/feasibility studies will be developed in order toprepare relevant documentation for potential investors, lenders and donors. Capacity building willbe done as part of the identification and preparation, mainly through on the job training for bothpartner country and ADB staff.

Further, support to the AC1iFF, while not financial, will be given by NDF as a kind of knowledgepartner.

3.4. Cost Estimates and Financing Plan

The following cost estimates are in USD, as they are made by the ADB. However, the NDFapproval would be in EUR, where with the current exchange rate USD 500,000 correlate toapproximately the same in EUR. The payment to ADB will however be USD SOO,000m only.

The total cost of the TA will amount to USD 1,500,000, of which NDF will contribute USD500,000. The original TA cost of USD 750,000 has already been approved from the ADB TechnicalAssistance Special Fund (2013) for the ongoing components of the TA. The additional USD750,000 (USD 500,000 from NDF and USD 250,000 from the ADB Climate Change Fund) willcover the additional two countries. The NDF funding will be earmarked for parts of Outputs 2 and 3of the ADB TA whereas the additional ADB funding will target Outputs 1 (identification ofopportunities for new and scaled up climate finance operations) and 3 (enhanced awareness ofinvestment opportunities in low-carbon, climate resilient infrastructure).

Amount Additional AdditionalItem

(ADB) Cost (CCF) Cost (NDF)

1. Consultants 600.00 200.00 404.00a. Remuneration and per diem

i. International consultants 300.00 140.00 360.00ii. National consultants 240.00 30.00 50.00

b. International and local travel 60.00 30.00 60.002. Seminars, workshops, and conferences 100.00 30.00 0.003. Miscellaneous administration and support costs 10.00 2.00 5.004. Publications 15.00 4.00 0.005. Contingencies 25.00 14.00 25.00

Total 750.40 250.00 500.00

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3.5. Nordic Interest

With NDF involvement the identified and selected priority investments may be targeted towards areasand technologies where Nordic companies are especially strong, such as energy efficiency.

3.6. NDF's Added Value and Comparative Advantage

The NDF-funding will add two NDF-prioritized countries to the list of beneficiaries under this TA,thereby contributing towards the identification and development of priority infrastructure investments inthese countries. NDF has also been much involved in developing the objectives of the additionalfinancing for this TA.

NDF will be a knowledge partner in the development of AC1iFF based on NDF experience from similarfacilities as well as more in general from climate change investments globally. NDF will also support in-kind the planned CfP, where experience from i.a. NCF will be valuable.

4. IMPLEMENTATION ARRANGEMENTS

4.1. Technical Aspects

The TA will be implemented by ADB. ADB will likely use external consultants for theidentification and preparation of investment projects. An external consultant is assisting with thedevelopment of AC1iFF, and NDF should engage with this consultant as well as with ADB staff asa knowledge partner.

4.2. Institutional Aspects and Project Organization

This is additional financing to an existing ADB TA, in order to allow for the addition of two NDFcountries as beneficiaries. It is joint co-finance meaning that ADB will fully administer andimplement the TA. ADB will share terms of reference on the specific assignments, as well asinformation and reports with NDF. Potential projects will be discussed with NDF beforehand toensure alignment with NDF criteria.

4.3. Procurement and Contract Structure

ADB will procure consultants using the ADB guidelines for selection of consultants. Noprocurement schedule has been prepared.

4.4. Risk Analysis

The main risk lies with the identification of bankable climate change mitigation and/or adaptationprojects. Mainly in terms of adaptation, infrastructure investment projects often yield little or no

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return. Given that the beneficiary countries are among ADB's DMCs, there is also little financialroom for taking on significant loans. This however increases the importance of grant funding forproject preparation, as such funding make possible infrastructure investments that may otherwise bevery unlikely to happen.

There is also a great risk that ADB procurement is delayed, leading to overall delays in theimplementation of the TA.

4.5. Monitoring and Evaluation

ADB will monitor and evaluate the TA as per their usual procedures, and share reports with NDF.As NDF funding is earmarked for the preparation of projects, the deliverables will be quite straight-forward in terms of (pre-)feasibility studies, and therefore success of the TA as such can bemeasured.

Success of the NDF investment should be measured by the number and success of climate changeinvestment projects actually being successfully implemented as a longer-term result of the TA.

Further, as a knowledge partner for AC1iFF and the CfP, NDF will have good insight in thedevelopment of these initiatives. The launch of either/both will be regarded in the evaluation of thisTA.

5. ECONOMIC AND SOCIAL ASPECTS

5.1. Economic Justification

The NDF funding is likely to result in the identification of 2-3 bankable priority infrastructureinvestment projects with climate change mitigation and/or adaptation benefits. As such, the leveragecould be significant. Further, ACIiFF would as a guarantee facility leverage significant privatesector funding on a commercial basis.

5.2. Social Aspects

For any identified investment projects, ADB will apply their regular requirements regardingenvironmental and social due diligence.

6. CONCLUSION

This NDF funding should lead to the identification and preparation of 2-3 priority infrastructureinvestment projects with significant climate change mitigation and/or adaptation benefits, in twoNDF countries. The projects will be developed so as to maximise the potential for investments,including from the GCF, to ensure sustainability. ADB will be a driver in terms of taking these

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investments forward, and will likely be a primary source of funding; however, other sources like

GCF and private sector investors etc. will be specifically targeted. The NDF components will also

provide on the job training for capacity development of partner country and ADB staff to develop

skills to identify and prepaze climate change specific investments, and target funding institutions

such as the GCF for financing. It should be noted that the overall TA includes components

specifically targeting capacity development as well.

NDF will also be a knowledge partner and thereby contribute in-kind to the development of

ACIiFF, as well as assist with the preparation of the CfP.

NDF has been involved in the development of the objectives of the additional finance. This is

overall specific and measurable funding with clear targets, and fills a clear gap and need in terms of

climate change and infrastructure finance. Projects identified and prepared under this TA could be

candidates for further preparation under the NDF-funded RISP facility.

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ADB Monitoring Framework for the TA

DesignSummary

ImpactIncreased accessto internationalclimate financeby selectedDMCs

Performance Targets andIndicators with Baselines(bold indicnles change fi•onr

current TA)

By 2020:At least 50% of submittedpriority projects successfullyaccessed climate finance(baseline: zero)

Data Sources andnortin~ Mechanisms

National reports of DMCs

Donor country reports andreports from climate financemechanisms (e.g., GCFreports)

Assumptions and RisksAssumptionsSelected DMCs are committedto low-carbon, climate-resilientdevelopment

Climate finance mechanisms(including in particular, theGCF) come on stream asplam~ed

Developed (donor) countriesprovide financial resourcesthrough the GCF and othermechanisms in a timely fashion

Risks

Climate finance project cycledoes not match investmentproject cycles

Processes and tirning of nationaland subnational planning doesnot allow for effectiveintegration of climate financeconsiderations

Insufficient buy-in by the privatesector in the priority projects

OutcomeIncreasedreadiness ofDMCs to accessclimate finance

By ?016:At least one priority project perDMC submitted for financingthrough international climatesources (total of 4-S newprojects)

National reports of DMCs

Donor country reports andreports from climate financemechanisms (e.g., GCFreports)

TA progress reports

Assumptions

DMC governments are willing toengage with internationalclimate finance sources andmobilize private sectorinvestment in support of low-carbon, climate-resilientinfrastructure projects

DMC investment priorities andmechanisms correspond to thosetargeted by climate financesources

Risk

Technical challenges of projectformulation

10

DesignSummary

Performance Targets andIndicators with Baselines(bold indicn(es changefronr

c:~rrent TAData Sources and

Re ortin Mechanisms Assum tioos and Risks

Outputs Assumption1. Opportunities At least S conceplua! TA progress reports, DMCs and stakeholders willingfor new and proposals, oj w/ricll 2 sleould feedback from concerned to provide information and

scaled up be detailed proposals, DMCs and other collaborateclimate finance describi~rg loirg-term strategic stakeholdersoperations opportuirilies for ADB taidentified elgage i~r low-carbon, climale-

resilient infrastructurefr~rairciirg

2. Priority S country reports (1 per TA progress reports,infrastructure selected DMC) describing the feedback from concernedinvestment following: DMCs and otherprojects and (i) a portfolio of 2-3 priority stakeholderscapacity low-carbon, climate-building needs resilient infrastructureidentified inveshnent projects with

the potential to accessinternational climatefinance and multilateraldevelopment bankfinancing, with privatesector participation

(ii) strategies andrecommendations to(a) enhance participation inclimate financemechanisms; (b) improveclimate finance deliverysystems and scale upprivate sector investments;(c) address gaps in

institutional or technicalcapacity

3. Awareness of S iir-country workshops and 1 TA progress reports.investment regional workshop conducted workshop reportsopportunities inlow-carbon, At least 150 representativesclimate from the public and privateresilient sector, development partners,infrastructure and nongovernmentenhanced organizations participating at

each workshop