Financial Mechanism and Resources

Financial Mechanism and Resources
Monday // 4.20.2020
Advancing More, Better and Faster Financing for Biodiversity and Nature

Financial Mechanism and Resources

Operations of the Financial Mechanism

Articles 20 and 21 of the Convention on Biological Diversity, Article 28 of the Cartagena Protocol on Biosafety and Article 25 of the Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization set out the framework of financing agenda under the Convention. The Memorandum of Understanding between the Conference of the Parties to the Convention and the Council of the Global Environment Facility, contained in decision III/8, provides legal basis for the relationship between the Convention and the Facility, including the role and responsibilities of each institution. The Conference of the Parties, supported by the Secretariat, keeps under review the implementation of financing provisions of these Articles and the agreement at its ordinary meetings.

Article 21, paragraph 1: "There shall be a mechanism for the provision of financial resources to developing country Parties for purposes of this Convention on a grant or concessional basis the essential elements of which are described in this Article. The mechanism shall function under the authority and guidance of, and be accountable to, the Conference of the Parties for purposes of this Convention. The operations of the mechanism shall be carried out by such institutional structure as may be decided upon by the Conference of the Parties at its first meeting. For purposes of this Convention, the Conference of the Parties shall determine the policy, strategy, programme priorities and eligibility criteria relating to the access to and utilization of such resources. The contributions shall be such as to take into account the need for predictability, adequacy and timely flow of funds referred to in Article 20 in accordance with the amount of resources needed to be decided periodically by the Conference of the Parties and the importance of burden-sharing among the contributing Parties included in the list referred to in Article 20, paragraph 2. Voluntary contributions may also be made by the developed country Parties and by other countries and sources. The mechanism shall operate within a democratic and transparent system of governance."

The Memorandum of Understanding between the Conference of the Parties to the Convention and the Council of the Global Environment Facility, contained in decision III/8, provides legal basis for the relationship between the Convention and the Facility, including the role and responsibilities of each institution. The relationship with the Global Environment Facility has evolved as follows:

Reporting from the GEF Council


Determination of funding needs
In anticipation of the replenishment of the GEF Trust Fund, the Conference of the Parties makes an assessment of the amount of funds that are necessary to assist developing countries, in accordance with the guidance provided by the Conference of the Parties, in fulfilling their commitments under the Convention over the next GEF replenishment cycle. The second determination of funding needs was completed by the thirteenth meeting of the Conference of the Parties, in time for the launch of the seventh replenishment negotiations for the GEF. The fourteenth meeting of the Conference of the Parties will need to consider the terms of reference for assessing funding needs during the eighth replenishment period of the GEF, so that the fifteenth meeting of the Conference of the Parties will undertake the third determination of funding needs, for the eighth replenishment negotiations for the GEF Trust Fund.
The negotiation towards the seventh replenishment of the GEF Trust Fund was initiated by the 51st meeting of the GEF Council in October 2016, and planned to conclude in April 2008.

Go back to top

Policy, Strategy and Programme Priorities for Utilizing GEF resources

Article 21, paragraph 2: "2. Pursuant to the objectives of this Convention, the Conference of the Parties shall at its first meeting determine the policy, strategy and programme priorities, as well as detailed criteria and guidelines for eligibility for access to and utilization of the financial resources including monitoring and evaluation on a regular basis of such utilization. The Conference of the Parties shall decide on the arrangements to give effect to paragraph 1 above after consultation with the institutional structure entrusted with the operation of the financial mechanism."

Guidance to the financial mechanism, for a specific replenishment period, consists of a consolidated list of programme priorities that defines what to be financed, and an outcome oriented framework of programme priorities related to utilization of GEF resources for biodiversity.

The latest consolidated list of programme priorities is contained in Decision XIII/21. The fourteenth meeting of the Conference of the Parties will adopt additional guidance and the fifteenth meeting will consider a further consolidation of decision elements related to the financial mechanism.

The latest four-year outcome-oriented framework of programme priorities related to utilization of GEF resources for biodiversity during its seventh replenishment period is contained in Decision XIII/21. The fifteenth meeting of the Conference of the Parties will adopt a four-year outcome-oriented framework for the eighth replenishment of the Global Environment Facility Trust Fund.

In accordance with the Memorandum of Understanding, the GEF Council reports on its financed project activities to the ordinary meetings of the Conference of the Parties. The programme and project funding information is thus available from these reports.

CBD/COP/14/8 Financial mechanism: review of effectiveness and preparation for the determination of funds required for the eighth replenishment period

Decision 14/23 Financial mechanism

Go back to top

GEF Effectiveness Review

Article 21, paragraph 3: "3. The Conference of the Parties shall review the effectiveness of the mechanism established under this Article, including the criteria and guidelines referred to in paragraph 2 above, not less than two years after the entry into force of this Convention and thereafter on a regular basis. Based on such review, it shall take appropriate action to improve the effectiveness of the mechanism if necessary."

The performance of the financial mechanism has been under multi-layered reviews by the GEF agencies, the GEF Evaluation Office and the Conference of the Parties, in accordance with their distinct mandates and institutional interests. The review of the effectiveness of the financial mechanism undertaken by the Conference of the Parties is conducted every four years and this review coincides with the ordinary meeting of the Conference of the Parties.
The Conference of the Parties conducts a review of the effectiveness of the financial mechanism every four years. In accordance with the terms of reference, the fifth review of the effectiveness of the financial mechanism will take place at the second meeting of the Subsidiary Body on Implementation, and subsequently at the fourteenth meeting of the Conference of the Parties.

Decision XIII/21 sets out the terms of reference for the fifth review of the effectiveness of the financial mechanism.

In Recommendation 2/7 on review of implementation of financial mechanism (Article 21), the second meeting of the Subsidiary Body on Implementation regrets that the terms of reference for the fifth review of the financial mechanism were not implemented due to lack of funding (paragraph 3), and invites Parties and Governments, as well as relevant stakeholders, to submit views and other information on the sixth overall performance study of the Independent Evaluation Office of the Global Environment Facility, and the summary of evaluation results of the Global Environment Facility Independent Evaluation Office, to the Executive Secretary by 15 September 2018 (paragraph 4). The Subsidiary Body on Implementation requests the Executive Secretary to prepare a compilation of submissions received from Parties as well as the information derived from the sixth overall performance study of the Independent Evaluation Office of the Global Environment Facility, which will be the basis for the fifth review of effectiveness of the financial mechanism to be performed by the Conference of the Parties at its fourteenth meeting (paragraph 5).

GEF/A.6/07: Sixth Overall Performance Study of the Global Environment Facility: The GEF in the Changing Environmental Finance Landscape, Prepared by the Independent Evaluation Office of the Global Environment Facility, 24 June 2018

CBD/SBI/2/INF/25: Summary of evaluation results of the Global Environment Facility Independent Evaluation Office, 31 March 2018

Independent Evaluation Office of GEF

Submissions on the fifth review: Colombia; Syrian Arab Republic; The European Union and its Member States

Review Reports
Fourth review: Summary of the fourth review of the effectiveness of the Global Environment Facility (UNEP/CBD/WGRI/5/5/ADD1, 17 April 2014): اللغة العربية, 中文, English, Français, Русский, Español; UNEP/CBD/WGRI/5/INF/10: Fourth review of the effectiveness of the financial mechanism

Third review: Review of the effectiveness of the financial mechanism (UNEP/CBD/COP/9/17; 26 April 2008) (ar en es fr ru zh) and review of the effectiveness of the financial mechanism: the report of the independent evaluator commissioned to carry out the third review of the effectiveness of the financial mechanism (UNEP/CBD/COP/9/INF/20; 26 February 2008)(en)

Second review: Executive summary of the report of the independent evaluator for the review of the effectiveness of the financial mechanism (UNEP/CBD/COP/6/13/Add.1; 12 December 2001) (ar en es fr ru zh) and (UNEP/CBD/COP/6/INF/4; 14 January 2002) (en)

First review: Review of the Effectiveness of the Financial Mechanism (UNEP/CBD/COP/4/16; 5 February 1998) (ar en fr ru zh)

Reference: Budget and staffing of Evaluation Systems in Development Co-operation - 2016 Review by OECD

Go back to top

Relevant Financial Institutions

Article 21, paragraph 4: "The Contracting Parties shall consider strengthening existing financial institutions to provide financial resources for the conservation and sustainable use of biological diversity."

The term “financial institutions”, referred to in Article 21, paragraph 4, of the Convention, has not been explicitly defined so far for purposes of implementing this provision. In the business world, a financial institution is an establishment that conducts financial and monetary transactions, such as deposits, loans, investments and currency exchange. The major categories of financial institutions include banks, asset management companies, insurance companies, brokerage firms and investment dealers. According to Canada’s Office of the Superintendent of Financial Institutions Act of 2 July 1987, the scope of financial institutions includes all federally chartered, licensed or registered banks, insurance companies, trust and loan companies, cooperative credit associations, fraternal benefit societies and private pension plans.

A development finance institution provides finance that promotes development and helps the private sector to invest, especially in the developing countries. Development finance institutions are mostly backed by Governments, especially by Governments with developed economies, including multilateral development banks, bilateral development banks, microfinance institutions, community development financial institution and revolving loan funds. A national development bank is a finance institution, created by a country's government, which provides financing for the purposes of economic development of the country. An international development financial institution is a financial institution that has been established (or chartered) by more than one country, such as multilateral development banks, Bretton Woods institutions, regional development banks, bilateral development banks and agencies, and other regional financial institutions.

According to the various documents prepared for the previous meetings of the Conference of the Parties, including monitoring of funding status and trends for biodiversity, the following financial institutions have been of particular importance to financing for biodiversity and associated ecosystem services: (a) Global Environment Facility - a systemically important financial institution, which would pose a serious risk to the Convention in the event of its collapse; (b) Green Climate Fund - an increasingly important financial institution, which can finance the interface between climate change and biodiversity; (c) Development financial institutions - a potentially important set of financial institutions, which can finance biodiversity and ecosystem services, both directly and indirectly; (d) Market-based financial institutions – an ultimately important set of financial institutions, which remain to be tapped at a meaningful magnitude; (e) Institutionalized funds - an optionally important set of multi-donor nature funds, single donor nature funds, and environment funds, that can be tailored to fit with specific requirements of various public and private donors.


Australia
Mongolia
Go back to top