Over the next 15 years, the global economy will require $89 trillion for infrastructure investments in cities, energy, and land-use systems, and $4.1 trillion incremental investments in low-carbon transitions to limit the global temperature rise within 2°C. Channeling international finances into green growth sectors is challenging, especially within the complexity of development architecture.

Innovative NFVs provide a one-stop solution to the development complexity by streamlining finances, procedures, coordination, and costs via a single mechanism. In essence, NFVs simplify the process by channeling bi/multilateral aid, private sector investments, capital markets, and national budgets into the government-led pooling mechanism to implement national development priorities.

As a result of the streamlined process, development actions are more cost-effective, coordinated, and synergistic. For example, less development financing is wasted through misaligned activities from the broader national development strategy. Bureaucratic and overheads costs are minimized through a single pooling system. And, perhaps most critically, NFVs ensure that nations are empowered to lead their development agenda in a complex development landscape.

GGGI provides NFV development services where requested by governments through a successfully deployed methodology. Although always adapted to a specific context, this standardized model for designing and operating NFVs has five stages: Setup, Assessment, Concept (business plan development), Design, and finally Operations support.

Costs associated with each stage vary; indicative costs are presented below. Because of the specialized nature of skills associated with the development of such vehicles, GGGI expects to incur a relatively higher share of outsourcing costs when compared to GGGI’s more typical outputs.

Standardized process for NFV development. (Costs indicated are outsourcing and professional costs.)

NFV projects are allocated either to (1) country budget, (2) global budget, and/or (3) the envelope budget. The allocation is determined primarily by assessing in which phase the NFV is positioned. The timeline for in-country programs and the global NFV program is outlined in Figure 5.

• Country budget. NFV work that is relatively mature (i.e. past the assessment and concept stages) is allocated at the country level, the rationale being that there is sufficient certainty in both its viability and stakeholder buy-in. GGGI does not initiate any NFV work unless there is an explicit demand from the government, usually in the form of an official letter. NFVs that fall under this budget for 2017-18 are those in Jordan, Mongolia, Rwanda, and Vanuatu.
• Global budget. NFV work that is in the early stages of development (usually in stages 2 or 3) is allocated to the global budget. This is a precautionary measure to ensure that country budgets are utilized only when there is a requisite degree of certainty on implementation. NFVs that fall under this category for 2017-18 are Philippines and Senegal. In addition, this budget will cover all consultancy costs related to NFVs in Jordan, Mongolia, Rwanda, and Vanuatu.
• Budget Envelope. NFV work that is in stage 1 (Setup) or earlier, with strong demand from line ministries of governments based on initial ongoing consultations, will be sourced from this budget envelope. The rationale is similar to the above – apart from the rapid increase in government demand for NFVs, it will be challenging to determine budgetary requirements given nascent stage of discussions. This budget envelope, therefore, is integral for GGGI to conduct further scoping work in a timely and effective manner. NFVs that potentially fall under this category for 201718 are those in Bangladesh, Colombia, Fiji, Indonesia, Lao PDR, Mozambique, Myanmar, and Vietnam.

NFV In-Country and Global Programs

PROJECT OUTPUTS FOR 2017-18:

• Operational design and financing arrangements for 2 NFVs prepared and submitted to government
• At least 5 project proposals per year that are submitted for financing by the national financing vehicle are supported and assessed

PROJECT OUTCOMES FOR 2017-18:

• Government approves 2 NFVs to commence operations
• Approved NFVs are provisionally capitalized with at least $1 million of initial investment

This global project proposes to design and support operations for two NFVs in support of national green growth objectives. The project will support government coordination and ownership to improve the mobilization of private and/or public capital for green growth objectives in the targeted country.

In order to deliver the results, GGGI will first develop the framework for NFVs through scoping and assessments. This will ensure the viability of a financing mechanism within the countries’ development context and capacities. This work will involve supporting the targeted country to establish appropriate management mechanisms for operating the NFVs. This includes appropriate structures and capacity to ensure an accountable management of funds, including monitoring, evaluations, and reporting. The designed models will be embedded in local legislature to ensure strong ownership.

The overall result is to ensure commencing of operations by these NFVs with initial seed capitalization of $1 million.

Objectives and sample activities of NFV stages