Project

Technical Support to the Rwanda National Fund for Environment and Climate Change (FONERWA) Facility

At a Glance

Start Date Q1 2017
Funding Source Core
Approved Budget USD 1 811 000
Status Active
Thematic Area
  • Cross Cutting

Project Rationale

Established in 2012, FONERWA aims to mobilize domestic and international climate finance, and secure sustainable financing to support projects toward the implementation of the GGCRS. As a cross-sectoral national financing mechanism, FONERWA is the vehicle through which environment and climate financing is channeled, programmed, disbursed, and monitored.

FONERWA has been successful in its objective of mobilizing climate finance for Rwanda with total direct capitalization of approximately $89 million19 from DFID, the German Development Bank (KfW), the Government of Rwanda (GoR), and the Least Developed Countries Fund (LDCF) of the AfDB.

The key priority of the Fund’s operations is to ensure a sustained and effective delivery that continues to incrementally commission projects, build capacity of potential applicants to access funding, commit finance and quality assure implementation of funded projects. Additionally, operations aim to enhance FONERWA’s role in addressing wider national strategic needs related to the environment and climate change. This will necessitate technical support to the GoR to adequately resource the Fund, build capacity and execute its mandate.

Building on 2015-16 Work

This project will build on GGGI’s work in 2016 that conceptualized the establishment of a Technical Support Facility to provide technical and operational support to the Secretariat, as well as direct support to the GoR in mobilizing and channeling funds for climate change and environment projects beyond the Fund.

GGGI supported development of a business plan in 2016 that underscores the strategic role of the Technical Support Facility in delivering on the Fund’s mandate to mobilize resources for further Fund capitalization, facilitate access to international climate finance, and strengthen the staff capacity of the Secretariat for Fund management. The business plan reinforces GGGI’s operational support to the FONERWA Secretariat in consultation with other partners.

Strategic recommendations of the draft FONERWA Business Plan that will be considered for possible uptake during the remaining period of 2016 include:

  • The need for the Fund to upscale to larger programmatic activities through earmarked (targeted) calls while maintaining the current, demand-led Fund;
  • Replenish the Fund’s capitalization and carry out further resource mobilization through bilateral funds, Climate Investment Funds, as well as the Green Climate Fund, among others;
  • Increase the Fund’s management fee to 10%, in line with the standards of similar challenge funds internationally;
  • Support the implementation of the full range of recommendations in the private sector strategy, including the diversification of the financial instrument, which will include Viability Gap Funding (VGF), to increase private sector engagement and leverage; and
  • Explore restructuring of the Secretariat to respond to emerging needs and ensure it is “fit for purpose” in terms of administrative and management support to scale up FONERWA.

Although the following sections highlight the planned results, it should be noted that the Business Plan is still under discussion and will be finalized by October 2016. More comprehensive follow up actions for GGGI will be identified and implemented, in consultation with the GoR toward the third quarter of 2016.

Delivery Strategy

PROJECT OUTPUTS FOR 2017-18:

  • Deliver technical assistance to strengthen capacity of FONERWA Secretariat in line with the approved business plan
  • Support FONERWA to develop bankable projects and programs and broadly seek international financing
  • Document results and lessons from the implementation of FONERWA to support resource mobilization and knowledge sharing efforts

PROJECT OUTCOMES FOR 2017-18:

  • Increase in financial contributions to FONERWA from domestic and international sources
  • Increase in funds disbursed from FONERWA for approved projects

 

Planned Results

A key outcome of the project is to mobilize green growth and climate financing aligned to Rwanda’s Green Growth and Climate Resilience Strategy and EDPRS II objectives through FONERWA. To achieve this, GGGI will focus on enhancing FONERWA Secretariat’s capacity in areas of fund management, project development, and resource mobilization. This will ensure long-term sustainability by supporting replenishment of the Fund’s initial capitalization through the Technical Support Facility for resource mobilization, strengthening of the project pipeline for FONERWA in high-priority sectors, and enhancing knowledge and results management and reporting to boost investor confidence in the Fund.

The project will deliver the following outputs:

Technical assistance to strengthen capacity of FONERWA Secretariat delivered in line with the approved business plan delivered. The business plan drafted in June 2016 was developed to ensure that a sustainable plan is in place to facilitate effective continuation of current portfolio management responsibilities, as well as the scale-up of targeted, programmatic resource mobilization. In line with this, GGGI support will continue the development of a Technical Support Facility for resource mobilization housed within the Fund. This is critical as the Fund’s initial capitalization is already fully committed. Technical Support Facility interventions will work to reinforce the management capacity of the Secretariat, particularly in areas of proposal development, targeting sources of international climate finance, implementation support, and results reporting management. Additionally, GGGI support will strengthen the Fund’s engagement with the private sector in order to leverage resources, including potential development of a VFG tool, in line with the business plan and FONERWA’s private sector strategy.

Support to FONERWA in the development and financing for bankable projects delivered. GGGI will continue to provide project origination support to the Secretariat in priority sectors, and continue to contribute to the strengthening of the Fund’s strategic project pipeline, across its funding windows. This support will go to the development and implementation of a pilot green city project (as envisaged in the EDPRS II), guided by the GCP roadmap, initially through the design of a conceptual master plan that will inform the investment requirements and allow FONERWA to mobilize resources for implementation. In addition, the work will further inform synergies with GGGI’s secondary cities roadmap prepared for the GoR and technical assistance to be provided in developing a secondary city bankable project for GGGI’s “Rwanda Climate Resilient Green Cities” project in 2017-18.

Provided there is sufficient alignment with the objectives of FONERWA, project pipeline development support for the energy sector will also be explored, initially focusing on Rwanda’s micro-hydro resources. This is in response to high levels of demand for renewable energy project financing that currently exceeds the Fund’s fully committed resources.

Knowledge management and lessons from the implementation of FONERWA documented to support resource mobilization and knowledge sharing efforts. To meet FONERWA’s resource mobilization needs and contribute to the Fund’s transformational objectives for green growth, lessons and experiences from fund management project development and implementation, as well as accessing finance from national and international resources, need to be captured and shared. Moreover, a high level of awareness on FONERWA driven results is critical to retain and expand the base for traditional and non-traditional investors, as well as public and private project promoters. Toward this, GGGI will support development of knowledge management tools, including a national management information system for tracking Rwanda’s environment and climate change initiatives and results. This will in turn support the Fund’s more strategic approach to resource mobilization, project/program development and ultimately results demonstration to investors.

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