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Udenrigsudvalget 2014-15 (1. samling)
URU Alm.del Bilag 78
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Business Case and Intervention Summary

Intervention Summary

Title: Support to the Global Green Growth Institute (GGGI)

What support will the UK provide?

The UK will provide up to £14.9 million over three years (2014/15, 2015/16 and 2016/17) from the

International Climate Fund (ICF) to support the Global Green Growth Institute (GGGI). The

support package includes core funding for GGGI operations for three years to be disbursed on the

basis of organisational performance and poverty-focus, plus provision for DFID to actively follow-

up on the findings of a due diligence assessment and to evaluate performance.

Why is UK support required?

DFID’s vision is for poorer countries to achieve a secure, self-financed, timely exit from

poverty.

Economic development is central to this process, and takes place when a country

achieves sustained, high rates of economic growth

and

when this growth is accompanied by a

wider economic transformation that shares prosperity, benefitting the poor.

Economic growth is vital for creating productive jobs and increasing the tax revenues that

help developing countries fund their own services.

Supporting the transformation of

economies ensures that we are not only helping the poor where we find them, but generating a

sustained transition out of poverty that creates new and long term opportunities for improved

incomes.

As articulated in the Economic Development Strategic Framework (EDSF) this requires:

(i)

high and sustained growth rates; (ii) policies and investments that encourage inclusive, broad-

based economic growth and are founded on sustainable use of natural resources; (iii) removal of

the structural barriers that stop individuals benefiting from economic development and keep

people in persistent poverty.

Growth is sustained in the long term by supporting inclusive political and economic institutions,

and

through responsible management of natural resources and managing dangerous

climate change. Revenues from assets that will run out should be invested well and

renewable resources used sustainably.

Economic development which integrates environmental considerations is therefore critical.

This is because economies need to find patterns of development that take account of their natural

capital, and reduce rather than exacerbate their vulnerability to future climate change. Otherwise

growth may not be sustained over the longer-term and development gains can be easily eroded.

‘Green Growth’

is growth that takes into account its impact on natural wealth or assets and the

environment. . This definition recognises the need to balance short-term drivers of growth and

longer-term global environmental constraints and that trade-offs exist. It also recognises that green

growth paths may not be in all countries’ interests to pursue at all stages of their development,

given their relative impact on poverty and shared prosperity.

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There is a dearth of evidence and policy advice for developing country governments

consider and understand their options for national decision making, and the potential impacts they

might have. Whether it is the trade-offs that taking a greener approach might have on economic

growth or the potential lock-in issues associated with alternative growth paths, which are

irreversible.

DFID is in a strong position to support this agenda – through the UK International Climate

Fund (ICF). This fund allows DFID to generate evidence on what works well (and less well)

for green growth.

It is important to know where these trade-offs exist to ensure that the

environmental gains achieved reinforce growth and poverty reduction. This is especially important

for low-income countries.

10.

Developing countries need better information on which interventions achieve

environmental objectives without compromising growth and poverty reduction.

The need for

and impact of green growth vary between contexts. It is dependent on the state of development

and will vary between sectors of their economies. The evidence is weak on when and how poor

countries should prioritise green growth. In addition, countries’ ability to implement even priority

green growth actions are constrained by limited resources and implementation capacity and

political capital.

11.

This programme therefore combines support to country governments to make their own

well-informed decisions about growth paths with work to build the evidence base on green

growth.

Its goal is to provide independent demand-led policy advice on green growth that is clear

about the trade-offs but also clear about the potential opportunities.

12.

The Global Green Growth Institute (GGGI) is a new multilateral that helps governments

devise and implement green growth plans.

Unlike other green growth institutions, GGGI’s clear

technical entry point is economic growth, as the main engine for poverty reduction. This is its

unique selling point. It operates where there is strong demand for its independent advice. GGGI’s

teams are normally located in government ministries, making them well placed to incorporate the

environment into budgeting and policy making and avoid creating parallel and ad hoc processes.

GGGI’s operational model is summarised in the figure in the Appendix to the Business Case.

13.

Although a young institution, GGGI has already demonstrated an ability to convert analysis

and research into policy change in developing countries.

In Ethiopia GGGI has helped the

government develop and implement a Climate Resilient Green Economy (CRGE) Strategy. GGGI

provided the analytical basis to prioritise policy options using clear institutional arrangements that

cut across government. GGGI also helped to develop a facility to finance the implementation of

CRGE priorities. This has already received $26m of funding from UK and Austria. GGGI has also

demonstrated results in Energy Efficient Building and Housing in Rwanda; and the agricultural

sector in Karnataka. They are helping the East African Community develop a Renewable Energy

Master Plan before supporting investment analysis for renewable energy projects in 2015-16.

14.

GGGI recognises that green growth requires the private sector to be a key driving force if

scale is to be achieved,

seeking to catalyse private sector investment and ensure strong

feedback (in both directions) between the private and public sectors. The private sector focus is

also reflected through GGGI’s governance, which includes a business council with 19 private

sector members, including Siemens, KPMG and Deutsche Bank. GGGI also has partnerships with

a number of global initiatives including Finance for Resilience (FiRe) together with Bloomberg and

Rockefeller Foundation, a private sector-led platform that aims to drive global investment in clean

energy.

The results of this work to engage the private sector can be seen on the ground.

Thailand GGGI has helped establish a compliance based carbon market and in Mongolia public

private partnership has been developed for green infrastructure.

15.

GGGI offers the best VFM option for DFID, outperforming alternative delivery options.

DFID

advisers could not provide the sustained, technical engagement needed with national institutions

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and the private sector to deliver on this agenda. DFID lacks the existing networks in which to

engage the private sector. There is a risk that stand-alone studies will provide a piece-meal

approach to developing the evidence base. And delivery through a multilateral, such as the World

Bank, would miss the opportunity to capitalise on the reputation that GGGI has developed as a

trusted adviser, and would require a major scale up by the Bank in this area.

16.

Support to GGGI would also help to leverage the impact of DFID’s other investments in

knowledge generation around ‘green’ patterns of development.

DFID currently invests in the

Climate Development Knowledge Network (CDKN). An independent review of CDKN has found

that the demand for knowledge and support for practical action on green growth exceeds the

supply capacity of CDKN. Moreover, CDKN as a climate focused organisation, providing targeted

research, information and knowledge products in response to demand. In contrast, GGGI provided

a more strategic, ongoing broader policy advice to Governments focused more broadly on green

growth, whilst at the same time engaging with the private sector to identify bankable projects that

will impact positively on green growth.

17.

GGGI has a pipeline of activities that it does not have the resources to meet and has

significant scope to scale-up activities in low-income countries, especially DFID focus

countries.

It is clear that GGGI has a pipeline of activities, identified by developing and emerging

economies, related to green growth policy research and support to implementation, and at current

levels of donor funding, the GGGI does not have the resources to meet the level of demand for its

services.

18.

GGGI developed from a Korean NGO. Given its origins and the fact that it has programmes

in six member countries of the G20

as well as eight G20 donors

, GGGI is placed in an

influential position to shape international negotiations on climate change.

GGGI fills a clear

gap in being the only organisation working on green growth to be governed and ‘owned’ by an

equal partnership between developing and developed countries. Not only does this governance

structure greatly increase GGGI’s credibility in the eyes of developing country governments – but

also allows unique opportunities for north-south and south-south learning across member

countries.

19.

The UK was one of eighteen founding members of the GGGI,

with the Deputy Prime Minister

representing the UK at the agreement of its establishment in Rio de Janeiro in 2012. The UK sits

on the assembly of GGGI. DFID has not provided core funding to GGGI but DFID Ethiopia has

provided £900,000 for its in-country work and advice. DFID Ethiopia does not plan to continue

funding given this proposal to provide core funding to GGGI.

20.

GGGI operates in a full-range of developing countries, including both low and middle-

income countries. DFID intends to increase the number of tier 1 countries that GGGI

operates in, and our funding will depend on this.

This will complement the efforts of other

donors, some of whom have also made their continued support conditional upon GGGI increasing

its number of operations in low income countries in its next 5 year strategy (2015 – 2020).

21.

We have a unique opportunity to shape the nature and focus of countries within the GGGI

portfolio.

We have already started to work with GGGI to build up a potential pipeline of low-

income countries, especially in DFID focus countries, and this will remain a priority. In addition,

our first disbursement will depend on a commitment from GGGI in the new strategy to be agreed in

November that at least 50% of GGGI’s portfolio will be in low income countries. Our second

disbursement will be dependent of evidence that this material shift has occurred.

22.

The inclusion of Middle Income Countries (MICs) and Tier 2 countries in GGGI’s portfolio is

strategically useful, however, and supports DFID’s poverty related objectives in a number

Brazil, China, India, Indonesia, Mexico and South Africa

Australia and South Korea, alongside Denmark, Germany, Norway, Qatar, Switzerland and UAE.

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of ways.

Firstly, evidence from MICs is relevant for low-income countries (LICs), providing

examples of how countries can leap-frog resource intensive growth and help avoid serious lock-in.

Secondly, this helps generate a South-South dynamic which is appreciated by partner countries

who look towards countries such as Korea and Vietnam as a source of inspiration. Thirdly many of

these MICs also contain a large number of poor people and are a large source of carbon

emissions. It should also be noted that a large part of the financing for programmes in MICs is

provided separately from core-donor funds in earmarked funds, meaning that DFID’s contribution

to GGGI’s core budget will be disproportionately allocated towards activities in LICs (as compared

with the full profile of GGGI activities)

23.

Alongside LIC and poverty focus, funding levels will be determined by a wider set of Key

Performance Indicators (KPIs), to ensure DFID funding to GGGI continues to provide good

value for money.

These KPIs focus on fully addressing financial management – the residual

issues raised an overall positive due-diligence assessment. We are confident that these will be

met as external assessments have commended GGGI’s strong agility to respond to external

demand. Other KPIs relate to important themes such as GGGI’s approach and capability on

gender.

24.

Gender will receive stronger focus in GGGI’s next medium term plan.

KPIs to ensure GGGI

makes progress on its performance on gender dimensions of green growth policy will ensure

gender is embedded in its results framework and a dedicated gender specialist is recruited to

develop an initial gender action plan for GGGI by mid-2015.

25.

As GGGI is a demand-led model, it first requires a high-level and strong political

commitment by the partner country. We will work with DFID country offices to ensure they

are aware of the services of GGGI.

DFID will also work through internal and external DFID

channels, including across-HMG, in order to stoke demand from partner countries.

26.

GGGI is viewed as a strategic organisation for HMG international objectives on green

growth and we will use GGGI to help inform cross-Whitehall discussions.

GGGI is a valuable

partner for DECC in climate change negotiations. Green growth and GGGI is an important

dimension of UK’s bilateral relationship with Korea. DFID will also continue to work with FCO to

take guidance on governance issues. This Business Case has been developed in close

collaboration with FCO and with DECC.

What are the expected results?

27. This programme will provide practical support to implement high quality green growth policies in

developing countries. It will also improve knowledge and evidence on green growth policies and

their implementation across developing countries.

28. The programme outcomes will be: (i) policy-makers and private sector actors have better access

to knowledge and evidence about green growth policies and programmes (including on trade-offs);

(ii) governments and firms have the capacity, tools, and information required to implement green

growth policies and programmes; and (iii) where appropriate, green growth principles are

integrated into wider development planning. These programme outcomes are expected to make a

strong contribution towards the ICF objectives around transformational change

Earmarked donors are: EBRD, Germany, Switzerland and UAE

Transformational change is defined as change which catalyses further changes, enabling either a shift from one state to

another (for example from conventional to lower carbon or more climate-resilient patterns of development) or faster

change (for example speeding progress on cutting the rate of deforestation).

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29. The programme results will be delivered under three outputs. GGGI’s current work plan includes

targets up to 2016. It will be updated when GGGI’s new medium term strategic and results

framework is completed later in 2014. DFID will contribute to the following results by GGGI::

30.

Output 1:

Country Driven green growth strategic plans developed, and accompanied, where

necessary, by legal and institutional framework and investment plans for their adoption. This will

include support to policy makers; including for example improved data on development progress

beyond GDP, institution building, training, lesson-sharing between countries and practical advice

to overcome governance or political economy barriers to implementation of green growth policies

and programmes. Results under this output, by 2016, will include:



GGGI will have provided policy advice and supported the development of 10 local, national,

regional or sectoral green growth plans.

GGGI will have supported the design and/or review of 10 legal and institutional frameworks

surrounding the aforementioned green growth plans.

GGGI will have developed 10 sectoral/subsector or locality based investment plans.

GGGI will have mobilised up to $10m of public finance for climate change purposes

31.

Output 2:

Robust research and evidence for policy-makers on the costs and benefits of green

growth policy measures; grounded in strong empirical work based on country experiences.

Evidence has a strong focus on what works well (and less well) in different contexts, and identifies

potential policy trade-offs (for example between growth, resource depletion and poverty reduction).

Results under this output by 2016, will include:



GGGI will have published a combination of 30: tools and methodologies; peer-reviewed

research papers; policy guides and other knowledge products based on GGGI’s country

experience.

20 governments using GGGI produced evidence and analysis

A 50% acknowledgement of using GGGI products by the academics, practitioners and policy

makers surveyed.

GGGI’s work will have been presented at 50 high level forums or workshops in the past year.



32.

Output 3:

Providing a robust enabling environment in GGGI’s client countries (and globally) for

private sector investments aligning with green growth principles. Results under this output by

2016, will include:



4 Governments will have accepted GGGI recommendations on risk reducing instruments for

further action.



4 Governments will have accepted GGGI recommendations on other incentive initiatives for

further action.

10 forums established or supported that bring private sector and government officials together

on establishing an enabling environment for green growth investments.

5 investment vehicles/tools/instruments designed to finance green growth plans developed with

the support of GGGI

Link companies to developing country governments that are seeking private sector finance,

technology and expertise to accelerate implementation of their green growth economic

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development plans

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Strategic Case

Context and need for a DFID intervention

The problem:

33. There is clear evidence to show that economic growth is the principal enabler of long-term poverty

reduction

. Where it has been achieved, high sustained growth has usually resulted in mass job

creation which in turn has raised wages and spread the benefits of growth more widely. Developing

countries have the potential to achieve far higher rates of growth than was possible during

comparable stages of development in OECD countries.

34. High growth is necessary to transform a society and create an exit from poverty, but it is not

sufficient. Growth needs to be inclusive and ultimately sustainable, otherwise groups excluded from

the growth process will remain in poverty, and future generations risk remaining in, or falling back

into poverty.

35. There is a risk that patterns of economic development that degrade the natural environment and

deplete natural resources may be difficult to sustain in the long run and/or will not be pro-poor

Growth patterns that are potentially unsustainable include: (i) growth that is driven by exploitation of

the natural resource base or wasteful use of natural resources; (ii) carbon intensive growth, which

can lock countries into high-carbon futures, and increase rate of climate change; and (iii)

development paths that fail to build resilience to future environmental shocks or trend changes. At

the local level, the poor are more reliant on easy access to environmental resources. Poor people

are often rely on ‘common property’ natural resources such as forests, fish stocks, pasturelands and

wetlands for their livelihoods

- for example for food, fuel and for small enterprises. Evidence and

potential risks associated with these three patterns are explored below.

Pattern 1: Growth that depletes natural capital

36. Some countries have followed patterns of economic growth that are driven by depletion of the stock

of natural resources. For example recent GDP growth in some African countries has been driven by

oil and mineral exports. Over the period 2005 – 2013, resource-rich countries in Sub Saharan Africa

had higher average growth rates than non-resource-rich countries

. According to the World Bank,

strong growth in Sub-Saharan Africa has been underpinned by strong export growth – much of

which is driven by exploitation of the region’s natural resources

37. However, the methodology used to measure economic growth – Gross Domestic Product (GDP) –

takes inadequate account of degradation of natural capital. There are limits to how well GDP growth

on its own measures progress of societies and welfare

. Its focus on present income leads to a

need to keep present consumption levels up, but runs the risk of funding present consumption by

Whilst policy can make some impact on poverty without growth, and certainly increase the effectiveness with which growth reduces

poverty, there is strong evidence that growth is the principal enabling factor. (DFID Growth Refresh, 2012). See for example cross-

country analysis by Kraay (Kraay, A. (2006), “When

is Growth Pro-Poor? Evidence from a Panel of Countries”,

Journal of Economics 80,

198-227) which suggests that over longer horizons, between 69% and 97% of cross-country differences in poverty changes can be

accounted for by growth.

See World Bank (2012)

Inclusive Green Growth, The Pathway to Sustainable Development

(World Bank, 2012)

World Bank (2013)

Africa’s Pulse,

Volume 8 October 2013, page 9

Oil, metals, and other mineral exports in Sub-Saharan Africa increased from $56 billion in 2002 to $288 billion in 2012

Stiglitz et al. (2009)

Report by the Commission on the Measurement of Economic Performance and Social Progress (

2009); Thomas, J. &

Evans, J. (2010) There’s

more to life than GDP but how can we measure it?,

(Economic & Labour Market Review, 4(9))

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running down wealth and hence reducing the capacity of the economy to continue generating

income in the long run. The World Bank finds that countries with strong GDP growth rates such as

Nigeria, Angola, Uzbekistan, and Azerbaijan have negative ‘genuine’ saving rates when depletion of

natural resource capital is taken into account. GDP figures therefore do not indicate whether growth

can be sustained in the long run.

38. Sustainable development is about enhancing well-being through time

. Some economists have

argued in the long run, simply running down the stock of natural resources cannot sustain growth.

Economic theory tells us that to sustain growth over time (i.e. for consumption per person to

continue indefinitely) – the receipts from extraction of natural resources need to be reinvested into

man-made capital so that the total capital stock remains constant

12, 13

. Collier (2010) recommends

that non-renewable assets should be governed by the custody principle

whilst renewable natural

assets should not be harvested below sustainably regenerating levels.

Pattern 2: Carbon intensive growth

39. Patterns of economic growth that result in greenhouse gas (GHG) emissions may be difficult to

sustain in the long run because they can lock countries in to (potentially expensive) high carbon

futures and lead to climate change

40. As economies grow, governments and firms will make investment decisions about infrastructure

that will last for many years into the future and about how to produce energy. Therefore there is

need for action and planning today if we desire a low carbon future. This is particularly relevant for

developing countries, where most of the infrastructure and cities will be built in the next few

decades

. “Carbon lock-in” occurs when investments in long-lived projects and infrastructure result

in countries being geared towards a higher carbon intensity path economy. Investments in high

carbon infrastructure mean that the future costs of decarbonising an economy are increased. In

addition to the economic lock-in of infrastructure there is likely to be political and behavioural lock-in

that will increase the transaction costs associated with reducing carbon intensity in the future.

Individuals in society also may become accustomed to a certain way of living their lives that might

lead to resistance to later change.

41. There is strong evidence to suggest that carbon intensive growth patterns are leading to man-made

changes in the climate, which will make it more difficult to sustain economic growth in the future.

changing climate and increased frequency of climate related disasters matters for economic growth

in the short and long run.

In the short run, poorer countries sustain greater negative impacts from

World Bank (2003)

World Development Report - Sustainable Development in a Dynamic World: Transforming Institutions, Growth and

Quality of Life

(The World Bank 2003)

The economic theory was first explored by Hartwick, J (1977)

Intergenerational Equity and the Investment Rents from Exhaustible

Resources

(American Economic Review, 67, December pp. 972 – 74). Also see de Bruin (2000) Economic Growth and the Environment

(Springer, January 2000).

Hartwick’s sustainability theory assumes that different types of assets can be substituted for one another perfectly.

The custody principle states that each generation bequeaths assets to the next generation of value at least equivalent to those

bequeathed to it. Collier, P (2010): The Plundered Planet.

Parry, Martin L., ed. Climate Change 2007: impacts, adaptation and vulnerability: contribution of Working Group II to the fourth

assessment report of the Intergovernmental Panel on Climate Change. Vol. 4. Cambridge University Press, 2007.

Hallegatte, S. et al (2013)

From Growth to Green Growth – A Framework;

World Bank Policy Research Working Paper 5872, World Bank

Washington DC

There is evidence to show that that climate change has already affected the magnitude and frequency of some climate extremes and

these are likely to increase further in the future IPCC SREX Extreme Events Report (2011) Summary for Policymakers

See DFID’s ‘How To note on climate resilient growth’ (November 2010) for more detail.

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weather events, related to their lower resilience

Growth is affected in the long run because

resources that could have been used (more productively) elsewhere to stimulate growth will be

absorbed by relief, recovery and adaptation efforts

. Climate change will also affect several drivers

of long run economic growth: capital accumulation; infrastructure; human health; and productivity

growth in energy and agriculture sectors. In addition, these adverse impacts are also likely to put a

strain on governance and institutions

42. To ensure long run, pro-poor growth, there is therefore a need to decouple economic growth from

GHG emissions at a global level. This is challenging because modern sources of energy are critical

for economic growth - historically no country has grown its economy without increasing

emissions. There could be a trade-off between avoiding carbon lock-in and the rate of growth

More research is needed to establish whether those trade-offs may be avoided in practice.

43. Opportunities for avoiding the trade-offs may be increasing as the economics of low carbon

technology change, driven by the falling costs of renewable technology. The minimum price at

which energy must be sold for an energy project to break even – its levelised cost - continues to fall

for a range of renewable technologies. In a recent report UNEP find that the levelised cost of

infrastructure scale solar photovoltaic (PV) systems was 40% lower in 2012 than in 2011 and

residential PV systems were 30% lower. Those for on-shore wind also fell in 2012, though only by

3-4%. A study by the International Renewable Energy Agency (IRENA) found that most renewable

technologies can produce electricity cheaper than diesel generators, often making them the

technology of choice for consumers not connected to electricity grids.

44. Developing countries are not in the same position as developed countries in dealing with these this

trade-offs. Developing nations account for a small share of total emissions (although this proportion

will change over time, as developing countries are experiencing higher levels of growth). As a

result, DFID focal countries (especially the poorest) tend to have less need to reduce emissions–

although they need to consider the effect of global emissions on their economies (by adapting and

improving resilience). Because of their relatively low emissions and strong need for high and

inclusive growth, DFID should not pressure low-income countries to pursue growth paths with lower

carbon intensity (e.g. with a higher share of energy from rewenables) However, where countries

want to explore lower carbon patterns of growth, DFID should be ready to support and work with

them

45. A number of developing countries already see some benefits to a move to patterns of growth that

are less carbon intensive. For example The Government of Ethiopia has developed a

Climate

Resilient Green Economy Strategy

, and The Government of Rwanda a

Green Growth and Climate

For example, during the period from 1970 to 2008 over 95% of deaths from natural disasters occurred in developing countries (Cavallo

and Noy, 2010; CRED, 2010).

Some economists have suggested that natural disasters could create a sort of ‘creative destruction’ by wiping our inefficient

infrastructure that will be rebuilt (see Skidmore, M., and H. Toya. 2002.

Do Natural Disasters Promote Long-Run Growth?

Economic

Inquiry 40 (4): 664–87.). However more recent research has discredited this theory, funding that disasters do on the whole damage

growth in the short and long run (see Hallegatte, S., and P. Dumas. 2009.

Can Natural Disasters Have Positive Consequences?

Investigating the Role of Embodied Technical Change.

Ecological Economics 68 (3): 777–786.).

Vivid Economics (2010)

Promoting Economic Growth when the Climate is Changing

(DFID, 2010)

Shafik, Nemat. 1994.

Economic development and environmental quality: an econometric analysis.

Oxford Economic Papers 46

(October): 757–773

Where there are localised effects due to poorer countries own emissions and other pollution, they should address these.

Federal Democratic Republic of Ethiopia (2011)

Ethiopia’s Climate-Resilient Green Economy, Green economy strategy

(Addis Ababa,

2011)

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Resilience Strategy

. Part of the appeal is the range of co-benefits associated with low carbon

development that countries can exploit. For example, there is huge scope for cost-saving energy

efficiency in all countries; there health gains from cleaner energy sources for cooking and lighting;

and some research suggests that innovation in new technologies be a source of growth in itself

More research is clearly needed to identify where ‘win-win’ policies exist and to compare their costs

and benefits.

Pattern 3: Climate-vulnerable growth patterns

46. Climate change will have negative impacts on economic growth, but at the same time levels and

patterns of growth will determine the level of vulnerability that countries have to the impacts of

climate change. Discussions around ‘green growth’ often focus on low carbon development – but

resilience is important too. The pattern of economic development (geographic, sectoral) will

determine the economy’s resilience to shocks – its ability to recover, and the speed with which it

does. Growth and poverty reduction has been found to be important for increased climate change

adaptive capacity.

47. Research

indicates that the level of vulnerability that a country has to shocks from climate

extremes depends on the stage of a country’s development. At very low levels of development, the

absolute monetary value of losses from extreme events is likely to be small (though it may be large

in terms of poverty impact and even lives lost). As economies become more complex, they are

typically more integrated sectorally and geographically than simple ones. This increases the

multiplier effects of shocks in a particular sector or region. In the later stages of development, the

relative scale of the economic impacts of disasters is likely to decline again as countries build

capacity to adapt and their economics are diversified in ways that allow them to absorb and contain

shocks.

48. To ensure sustainable long run pro-poor growth, economies therefore need to find patterns of

development that reduce rather than exacerbate their vulnerability to current weather variability and

future climate change.

The concept of ‘green growth’

49. Green growth policies should aim to make sustained (long term) pro-poor growth, which is more

resource efficient, and cleaner, without necessarily slowing down growth (in the short term) but

these should be based on a clear and robust evidence base

50. For countries with a large proportion of its population below or close to the poverty line will need to

ensure a primary focus on policies that reduce poverty (including broad economic growth). Low

Republic of Rwanda (2011)

Green Growth and Climate Resilience National Strategy for Climate Change and Low Carbon Development

(Kigali, October 2011)

See Hallegatte et la. (2013) page 9, for a discussion

Noy (2009) showed that higher GDP per capita, as well as better institutional and human development indicators reduced losses from

climate-related disasters (Noy, I. 2009. “The Macroeconomic Consequences of Disasters.” Journal of Development Economics 88 (2009):

221–231). de la Fuente and Dercon (2008) use micro-data show that those with more assets can cope better with severe shocks (de la

Fuente, A. and S. Dercon. 2008. “Disasters, growth and poverty in Africa: revisiting the microeconomic evidence. ” Background Paper

for the 2009 ISDR Global Assessment Report on Disaster Risk Reduction. Washington D.C.: World Bank)

Benson, C. and Clay, E., (1998);

The Impact of Drought in Sub-Saharan African Economies;

World Bank Technical Paper; No. 401; World

Bank; Washington DC.

Various policies and programmes labelled as ‘green growth’ should not automatically be assumed to meet the three

requirements of good for growth, good for the environment and good for poverty reduction and they should scrutinise

closely any trade-offs.

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Income Countries should not be bound to minimise carbon emissions, but rather they should be

encouraged to pursue growth and development paths that preserve options. As developing

countries get richer they will generally become more resilient and better resourced to both (i)

withstand more volatile and extreme climatic conditions and (ii) able to invest in adaptation and

have a phased entry into mitigating climate change.

51. Green growth work is helping to identify programmes and policy that use aid resources and

influence to promote climate-resilience are justifiable where they both deliver short-term poverty

reduction impacts, and Help avoid serious lock-in or irreversibility in local or national development

paths in terms of future growth and poverty for a country.

52. It is important that the international community should continue to invest in knowledge of what

works, which has the potential to increase the set of ‘win-win’ opportunities and associated

investments.

53. Green growth policies and strategies can be taken forward by both the public and private sectors.

For business and industries, actions will include improving resource efficiency in production,

reducing waste, and reducing the carbon-intensity of production. For the public sector, actions will

include for example



Collecting data ‘beyond GDP’ in the national statistics to measure changes in natural capital, and

using that information to guide decision making – for example for public works projects



Developing policies that help the private sector to fully value natural capital. For example by

pricing pollution or natural resource use through taxes or tradable permits. Governments can

also remove subsidies to industries that encourage pollution or over-extraction of natural

resources.

Fostering ‘green’ innovation by funding research into technology development, reducing barriers

to foreign investment, and by enforcing intellectual property rights,

Providing information and sharing good practice with consumers and firms to help them to use

natural resources more efficiently, and reduce waste and pollution.



54. There are a number of barriers to the implementation of green growth policies, however, are

summarised in Table 1 below.

Table 1

Barrier to green growth

Information failures

(public sector)

Information failures

(private)

Governance failures

Explanation

There is not yet robust evidence base on green growth policies, the extent to

which they are transferrable, and how they can be implemented in practice.

Private companies and industries lack information on low carbon technologies and

on how to be less wasteful in their production.

There is a lack of practical experience amongst policy makers in planning and

implementing green growth policies and strategies. Changes in the natural capital

stock are often not captured in national statistical accounting systems – this

makes it harder to take natural capital into account in decision making

There may be vested interests (for example links between politicians and fossil

fuel companies, the mining industry or energy intensive industries) that make it

even more difficult for policy makers to implement policies that support low carbon

development

. Policies that aim to reflect the ‘real’ price of environmental goods

and services may be difficult to implement because the benefits are usually diffuse

Governance failures

See OECD

Towards Green Growth,

Chapter 2 for a comprehensive discussion of green growth policies

OECD Towards Green Growth,

page 35. Also see the WAVES Partnership brochure

World Bank (200x)

The Global Partnership on Wealth Accounting and the Valuation of Ecosystems Services, Annual Report 2013

(2013)

Ellis, K, Cambray, A and Lemma, A (2003)

Drivers and Challenges for Climate Compatible Development

CDKN working paper, 2013.

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and hard to quantify, but the costs are immediate, visible and often concentrated

on a vocal minority

Behavioural barriers

(public sector)

Decision makers tend to develop polices based upon past experiences by others,

rules of thumb, and the information that they have to hand

. Because green

growth policies are not the norm, policy makers may suffer from inertia or be

adverse to the risks associated with trying out new approaches.

Green Growth requires changes in behaviour by industries and financial markets

(for example to adopt resource efficient technologies) but there are barriers to

engaging the private sector, particularly in developing countries.

Behavioural barriers

(private sector)

55. However, while green growth can have benefits, there are many areas where there will be trade-offs

between emissions reductions and a greener growth on the one hand, and alternative forms of

growth that might be more effective in poverty reduction. Indeed, future resilience of countries

depends to a large extent on their ability to create wealth and build up human capital now. Dercon

(2012, 2014)

discusses potential consequences of implementing ‘green growth’ policies which fail

to account for the sectoral and spatial processes behind effective poverty reduction. Dercon argues

that without a sufficient evidence base, we risk asking the poor to pay the price for greening the

planet.

56. Without a well-developed evidence base, we lack the ability to judge where these trade-offs lie in

individual country-contexts. This suggests that it is important to build the evidence base on the

circumstances under which green growth interventions might be appropriate (as whilst there is an

expanding evidence base on green growth policies

, and proposed methodologies for approaching

policies

, it remains limited), while supporting country governments to make their own appropriate

decisions.

57. An improved understanding of the short-run costs of green growth policies will be one of the outputs

of this programme. The programme will aim to better understand costs and benefits of green growth

policy measures over time - examining effects on growth, resource depletion and poverty reduction

- and grounding those findings in strong empirical work based on country experiences.

Need for DFID intervention

58. The UK is committed to spending £3.87bn through the Investment Climate Facility (ICF) between

2011/12 and 2015/16 to help the world’s poorest adapt to climate change and promote cleaner,

greener growth. If the interventions from this fund are not based on robust analysis and evidence,

we may face a trade-off in overcoming the twin challenges of world poverty and climate change.

59. The UK is in a strong position to support this agenda. Through the ICF we are using climate finance

to generate evidence on what works well (and less well) for low carbon, climate resilient

development. Actions to tackle the barriers associated with green growth policy making will make

an important contribution towards our efforts to achieve the ambitious goals of the ICF.

60. The ICF aims to bring about transformational change in its focus countries, defined as change

World Bank (2012)

Inclusive Green Growth, The Pathway to Sustainable Development

(World Bank, 2012); page 12

See Kahneman, Dl (2001)

Thinking fast and slow.

(Macmillan, 2011)

38 Dercon, Stefan. "Is green growth good for the poor?." (2012); Dercon, Stefan ‘Climate Change, Green Growth and Aid in Poor

Countries’ (2014 – Forthcoming)

See UNDP (2012) Case studies of sustainable development in practice, triple wins for sustainable development

A methodology for assessing green growth polices is however presented in: De Serres et al (2010),

A Framework for Assessing Green

Growth Policies,

OECD Economics Department Working Papers, No. 774, OECD, Paris.

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which catalyses further changes, enabling either a shift from one state to another (for example from

conventional to lower carbon or more climate-resilient patterns of development) or faster change

(for example speeding progress on cutting the rate of deforestation). Improved knowledge on green

growth policy design and implementation is critical to the wider success of ICF programming.

61. DFID acknowledges that for many focus countries, their priority is economic growth, as the main

engine for poverty reduction and human development. As such, green growth strategies should

work with government institutions concerned with developing and executing growth and

development plans.

62. The information failures, governance constraints and behavioural barriers set out in Table 1

together generate a strong case for public intervention in the green growth policy sphere. And there

is a good case for early action to address the barriers to green growth. Because some decisions

today (for example the design of infrastructure investments or which cities develop) can lock

economies in to high carbon or less resilient development pathways. Careful planning now to avoid

‘lock-in’ can have big implications for growth in the future.

63. One way in which DFID is already helping to develop knowledge, evidence and practical experience

on green growth is through the Climate Development Knowledge Network programme (CDKN)

CDKN aims to help decision-makers in developing countries design and deliver ‘climate compatible

development’ (a model of development consistent with green growth as set out above).

64. An independent review of CDKN

has found that the demand for knowledge, evidence and support

for practical action on green growth exceeds the supply capacity of CDKN. The Global Green

Growth Institute (GGGI) has a pipeline of activities, identified by developing and emerging

economies, related to green growth policy research and support to implementation. At current levels

of donor funding, the GGGI does not have the resources to meet the level of demand for its

services. There is therefore a good case for DFID to increase support these types of activities. A

series of options as to how this could be achieved are explored in the Appraisal Case.

Gender equality

65. Green growth policy has wide economic, social and environmental impacts and the gender

dimension central to these. Channels include differential impact of policies (e.g. removing kerosene

subsidies) and effect of policies on economic assets and opportunities (e.g. women’s rights over

land, access to jobs). There is scope for stronger gender budgeting on green growth policies and for

building gender into applied research green growth topics.

66. The Appraisal Case below looks at how DFID will ensure gender dimensions are prioritised

following identification of the preferred option.

Impact and Outcome that we expect to achieve

67. The theory of change for this programme is that supporting policy design and implementation and

improving knowledge and evidence on green growth policies will help decision makers to move

More information on CDKN can be found here: http://cdkn.org/

ITAD (2013)

External Evaluation Report of the Climate Development Knowledge Network,

ITAD 2013. The mid term review of CDKN

found that, “As GGGI is currently working in a handful of developing countries and CDKN aims to concentrate on up to 14 deep

engagement countries the need for both organisations vastly outweighs their combined capacities.”

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towards more sustainable patterns of development that contribute towards poverty reduction.

Impact

(i)

Policy-makers have better access to knowledge and evidence about planning and

implementing transformative, economy-wide green growth strategies (including on trade-

offs);

(ii)

Governments have the capacity, tools, and can leverage the finance required to implement

green growth policies and programmes;

(iii)

The private sector is directly engaged in developing and implementing green growth plans.

Outcome

(i)

Green Growth strategies and implementation plans are adopted and implemented by

governments and other stakeholders with adequate financing, institutional support, and

technical expertise;

(ii)

Relevant, high quality research is available and used to explore green growth and guide

policymakers and others;

(iii)

Private sector is directly engaged in developing and implementing green growth plans.

68. The impact and outcomes of the programme will be achieved through support to three outputs;

indicators are set out in the log-frame.

(i)

(ii)

(iii)

Output 1:

Country driven green growth strategies developed, accompanied by, here

necessary, legal and institutional frameworks and investment plans for their adoption.

Output 2:

Robust research and evidence is available on cost and benefits of green growth

policy measures.

Output 3:

A robust enabling environment is created in countries (and globally) for private

sector investments aligning with green growth principles. Companies are linked to

developing country governments that are seeking private sector finance, technology and

expertise to accelerate implementation of their green growth economic development

plans. (Examples include: investment analysis for sustainable energy projects

country/state energy and other sector plans involving private sector consultation, private

sector involvement in urban planning.)

69. The expected results from the preferred option will be outlined following the appraisal case. These

are set out in section H below alongside the theory of change for the preferred option.

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APPRAISAL CASE

A. What are the feasible options that address the need set out in the Strategic case?

70. The Strategic Case set out the rationale for UK Government intervention in activities that help

countries to move towards patterns of development that are sustainable in the long run and reduce

poverty. The solution proposed is to support a green growth policy that integrates the environment

into economic decision making.

71. The Strategic Case also identified a series of barriers that prevent policy makers (particularly in less

developed countries) and firms from implementing green growth policies. These included

informational failures, governance failures and behavioural barriers.

72. The programme will therefore need to overcome these barriers by delivering practical support to

policy makers and companies to implement proven approaches, improving the knowledge and

evidence base on green growth policies specific to particular country circumstances and be effective

at disseminating evidence globally. Table 2 lists the delivery options have been identified as part of

the scoping exercise for this Business Case:

Table 2: Options identified during scoping exercise

Option 1

No further support to green growth policy research and implementation

Option 2

Expand the remit of the DFID supported Climate Development and Knowledge Network

(CDKN). This option could include a networked approach to green growth policy research,

similar to the Low Emissions Development (LEDS) Global Partnership managed by CDKN.

Support green growth research to be led by a research institute such as the International

Growth Centre (IGC), the Overseas Development Institute (ODI) or the International Institute

for Environment and Development (IIED)

Directly commission and support a series of stand-alone research studies, led by DFID Policy

Division. Set up a new body to work with policy makers and the private sector in developing

countries to disseminate research and provide support to implementation.

Finance green growth research and support to implementation by the World Bank or other

interested Multilateral Development Banks.

Support GGGI to work with developing and emerging economies to implement green growth

policies, to undertake green growth policy research and disseminate evidence

Option 3

Option 4

Option 5

Option 6

73.

Option 1

would imply no additional UK support to green growth policy development and

implementation. UK work on green growth would comprise existing support to the CDKN programme

(more information under option 2 below). Studies could be undertaken to synthesise findings from

across programmes implemented under the International Climate Fund to draw some conclusions

on promising policy recommendations about how to implement successful low-carbon or resilience

building projects. However, this option is unlikely to deliver a robust or systematic evidence base on

green growth policy making, and there would be no provision for evidence dissemination yet alone

practical support to developing countries to implement better policies. There would be no support to

governments or private actors to implement green growth actions. This option is therefore rejected

on the grounds that it fails to address the need identified in the strategic case.

74.

Option 2

is to increase UK support to the Climate Development and Knowledge Network (CDKN)

programme. CDKN supports decision-makers in designing and delivering “climate compatible

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development” – a model of development that is similar to green growth but narrower in its focus on

climate change, development and growth. CDKN aims to provide developing country policymakers

with access to high quality research and policy advice on climate change and development. CDKN

delivers its work through a portfolio of country technical assistance, research, and knowledge

management.

75. DFID has recently agreed an extension to CDKN of £40 million designed to maintain the

organisation’s operational budget and extend the initial 5-year phase of the programme by a further

2 years

. The progress and value for money of CDKN will be reviewed in financial year 2016/17,

after which decisions about future UK support to CDKN will be made. Further support to CDKN is

therefore rejected as part of this programme. However it will be important that any further support to

green growth research and policy implemented under this programme complements and

strengthens the outputs delivered by through CDKN.

76. GGGI’s approach is long-term and relationship intensive, with a strong local presence and a focus

on the county’s mainstream, end-to-end planning and implementation processes. CDKN is a third-

party provider of technical support, with a project based approach designed to accelerate progress

in specific high-priority initiatives. These basic differences in strategic approach and delivery model

allow the two organisations to work in tandem, and they have shown an ability to collaborate

effectively and to enhance each other’s outcomes in countries where both are present. (Further

discussion of the differences and complementarities between CDKN and GGGI are in Box 1.)

77.

Option 3

is for DFID to provide support to green growth policy advice and research through a policy

research institute such as the International Growth Centre (IGC), the Overseas Development

Institute (ODI) or the International Institute for Environment and Development (IIED). All three

organisations already receive support for their research efforts from DFID

. Whilst all three of these

institutions have a track record in the provision of policy relevant research, it is not clear that any

have the capacity to deliver in-country support to policy makers and the private sector of the scale

and type envisioned by the programme theory of change. This option is therefore rejected on the

grounds that it fails to address the need identified in the strategic case.

78.

Option 4

is to design a new DFID led programme of support to green growth research and policy

design from scratch. Under this option DFID would commission a series of stand-alone research

studies, designed and managed by staff in DFID. The research could be undertaken by a third party

agency (or series of agencies) identified through competitive tender. Under this option DFID would

need to set up a new body that would disseminate research, create networks of practice, and work

in collaboration with decision makers in developing countries to support implementation. Support

could in principle be linked to the DFID County Office network. This option will be explored further in

appraisal section G below.

79.

Option 5

is to deliver support to green growth policy research and implementation through a

Multilateral Development Bank such as the World Bank, using a model akin to existing DFID

programmes of support to the World Bank's Knowledge for Change Program (KCP) or the UN

University World Institute of Development Economics Research (WIDER). MDBs are likely to have

technical staff with strong expertise in relevant fields, plus they have the benefit of an existing

network of contacts with decision makers in government. This option will be explored further in

Analytical work by DFID considered a range of VFM criteria such as absorptive capacity, pipeline of activities and UK

burden share in order to establish the appropriate level of funding for CDKN in this tranche.

Insert figures, IGC xx; ODI accountable grant; IIED accountable grant.

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appraisal section G below.

80.

Option 6

is for DFID to provide direct support to the GGGI to develop green growth policy advice

and research, to disseminate that research, to work with developing countries to implement green

growth policies, and to work directly with the private sector. Set up in 2010, GGGI’s core mandate is

to, “advance the practice and theory of green growth by helping to develop, implement and deepen

understanding of green growth strategies”. This option will be explored further in appraisal section G

below.

81.

Options 4, 5 and 6 have been identified as the feasible options and will be explored further

below.

B. Assessing the strength of the evidence base for each feasible option including delivery routes

82. Table 3 below lists the quality of evidence for each delivery option in delivering the outcome is rated

(either Very Strong, Strong, Medium, Limited or No Evidence).

Table 3

Option

Option 4

– DFID managed

studies and capacity building

programme

Evidence rating

Medium.

DFID could undertake a project design phase in

order to improve knowledge on the potential costs and

benefits of this option. DFID can draw upon experience from

other programmes – for example the design and

implementation phase of CDKN.

Medium.

DFID can draw upon experience from existing

programmes of support to multilateral organisations for

growth research. Evidence from the Multilateral Aid Review

can be utilised. However, scoping and design work would

need to take place in order to estimate the costs and

benefits of this option.

Strong.

DFID can draw upon a recent multi-donor review of

the GGGI. DFID has good working relationships with GGGI

staff who are able to provide evidence to support the

appraisal case. Some scoping work will still need to take

place to identify the correct level and type of funding

required.

Option 5

– Delivery through

multilateral development bank

Option 6

– Support to the GGGI

C. For each feasible option, what is the assessment of local capacity? Is the intervention likely to

strengthen capacity in a durable manner?

83. A key outcome of any intervention is that ‘Green Growth strategic and implementation plans are

adopted and implemented by governments and other stakeholders with adequate financing,

institutional support, and technical expertise’. Therefore it is vital that any option taken strengthens

capacity in a durable manner. Therefore, this plays an integral part of our assessment into how each

delivery option will achieve the planned outputs (see Annex I)

Categorise as A, high potential risk / opportunity; B, medium / manageable potential risk / opportunity; C,

low / no risk / opportunity; or D, core contribution to a multilateral organisation.

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Table 4

Climate & Environment Category

Option

Climate

change

and Climate change and

environment

risks

and environment opportunities,

impacts, Category (A, B, C, Category (A, B, C, D)

4 - DFID

5 - Multilateral

6 - GGGI

84. The programme has the potential to facilitate the move to environmentally sustainable and climate

resilient growth. The main climate and environment opportunities will therefore be proportionate to

the ability programme to deliver on its objectives. There are three main factors which will affect this

delivery:

ii.

iii.

Ability to deliver high quality policy advice and research and analysis tailored to the needs of

users;

The ability to retain political neutrality and credibility; and

The ability to deliver in timely manner over the next 2-3 years, given the need for evidence to

support national e.g. NAMAs and climate resilient development policies; and international

processes, e.g.: UNFCCC negotiations and Sustainable Development Goals.

Table 5

Option/Ranking

4 - DFID

5 - Multilateral

6 - GGGI

Quality/Demand Neutrality/credibility Delivery/Timeliness

Responsiveness

85. The Appraisal Case below finds that GGGI support comes out best in terms of maximising its impact

on green growth thinking, largely due to its specialised mandate and ability to deliver tailored, timely

support, that responds to demand and facilitate its adoption e.g. into national planning processes.

There are a number of risks to the approach:

ii.

Most fundamental is that the evidence does not support, or is not of good enough

quality/credibility, to support policy making, undermining the case for Green Growth.

The focus on growth may reduce the amount of focus on wider environmental issues such as bio-

diversity and non-carbon pollution and preservation of landscapes, that should form part of an

overall sustainable development strategy.

86. The programme must therefore ensure that its design and operational strategy addresses these

issues. In addition, although the programme will have limited environmental impacts it is important

that GGGI has in place a set of climate and environment policies and guidelines that meet

international standards and ensure that GGGI requires its partners to work to similar standards.

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D. If any, what are the likely major impacts on social development

87. An underpinning aim of the GGGI proposal is that green growth should contribute to poverty

reduction, and as such can help transform a society if that growth is sustained and inclusive.

88. The analysis of best practice, good models and support for implementation will cover not only the

potential risks, but the opportunities for different approaches, policy and programming choices

present for women, the poor, and excluded. For instance, interventions which open up employment

in non-traditional fields can create opportunities for women in the supply chain (eg SE4All salt pans,

GACC clean cookstoves, India, barefoot solar engineers, and lighting a billion lives).

89. A second key issue for targeted analysis is the extent to which the protection and preservation of

natural capital both helps maintain these assets for future generations, and enables poor people and

groups to engage in the management of these resources without prejudicing their access, or

excluding them from their prime source of livelihood and livelihood protection.

90. Thirdly, the project aims to synthesise experience across countries to contribute to evidence

generation, models and best practice in this field, and to strengthen understanding of the

growth/environment/poverty nexus. It will also support the implementation of policies with decision-

makers. An ability to consider the differential impact of policies on different groups of poor people,

on social exclusion and on women and girls will be a critical part of this analysis, and there will be

much to learn from the methodologies and studies pioneered by the MDBs and IMF on ex-ante

poverty and social impact analysis.

91. The recent joint donor review highlighted a number of areas where GGGI could strengthen its

approach to the production of quality analytical products and implementation. Particular care will be

taken to ensure that GGGI implements good practice on stakeholder engagement, understands the

importance of building broad based constituencies for change (as evidenced by experience on

PSIAs, World Bank 2008, DFID 2006), and can advise decision-makers on communications

strategies for build ownership of difficult reforms.

92. To ensure high quality analysis and implementation, GGGI will also ensure that it contains the

relevant expertise both centrally and in country offices to undertake analysis of ex-ante policy

impacts on poverty, exclusion and women and girls.

E. For fragile and conflict affected countries, what are the likely major impacts on conflict and

fragility, if any?

93. Climate change increasingly undermines human security in the present day, and will increasingly do

so in the future, by reducing access to, and the quality of, natural resources that are important to

sustain livelihoods. Climate change is also likely to undermine the capacity of states to provide the

opportunities and services that help people to sustain their livelihoods

. Migration may be another

response of people whose livelihoods are undermined by climate change. Whilst climate is unlikely

to be the only ‘push’ factor in migration decisions, it may increase the risk of conflict in host

communities. ‘Green Growth’ strategies can help countries alleviate the effects of climatic shocks

and distributional struggles over scarce resources.

These are shortened version of the climate and environment, and social development assessments. To see the

full versions please see Annex III

Barnett, Jon, and W. Neil Adger. "Climate change, human security and violent conflict." Political geography 26.6 (2007): 639-655.

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F. What are the costs and benefits of each feasible option? Identify the preferred option.

94. The Strategic Case gives the economic justification for government support activities that help

countries to move towards patterns of development that are sustainable in the long run and reduce

poverty.

95. Where programmes work in a defined context, the usual approach to the economic appraisal is to

present and compare the additional costs with the additional benefits of the proposed set of

activities, and subject these to sensitivity analyses. However, through support to green growth

research and implementation, this programme proposes to support a range of capacity building

projects with country-specific as well as global benefits, research and its dissemination. The specific

costs and benefits of individual components are uncertain. Therefore a comprehensive cost and

benefit analysis is neither possible nor proportional, and has not been undertaken for the following

reasons:



The exact nature and scope of the questions to be considered are often defined during

the research programme itself.

The knowledge outputs are non-commercial global public goods, so do not have a

market price to use for quantification.

Development impacts of research can take many years as there is a large gestation

period before evidence is reflected in policy and implemented.

There are many factors contributing to policy decisions so attribution to research is very

difficult to determine.

The results chain for research is non-linear, indirect and contains a lot of externalities,

so an accurate estimation of impact is nearly impossible to establish.

There are still many unknowns in climate change science and economics, so it is hard

to estimate what future probabilities and levels of cost will be.

96. Instead the approach is to assess each delivery option according to how well we expect it to achieve

the planned outputs. Each deliver option is given a score of 1 (low) – 5 (high) on how they are

expected them to perform against:



Output 1: Country driven green growth strategies developed, accompanied by, here necessary,

legal and institutional frameworks and investment plans for their adoption.

Output 2: Robust research and evidence is available on cost and benefits of green growth policy

measures.

Output 3: A robust enabling environment is created in countries (and globally) for private sector

investments aligning with green growth principles.

97. The expected costs of delivering the outputs were also assessed. The full assessment of each of

these options are detailed in Annex I. The summary conclusions are as follows:

98.

Option 4: delivery by DFID in house potentially drawing in expertise from across HMG.

DFID

does not currently have the capacity to provide high-quality demand-led advice on green growth

planning and implementation. Demand-led planning and implementation is a specialism in its own

right, and it is hardly feasible to have 40 DFID advisers learning independently throughout the world.

Further, it is unlikely that DFID would be able to embed staff within national ministries as GGGI has

been able to do. For research, DFID staff would design and commission a series of green growth

policy evidence papers. As there are insufficient resources in house, these would need to be

contracted out to a third party (or parties). It would be possible to bring in good technical expertise,

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however there is a strong risk that stand-alone studies will not be systematic and will provide a

piecemeal approach to developing the evidence base. There will be limited opportunity to learn from

different contexts – particularly those beyond DFID focus countries and limited opportunity to

develop networks and communities of practice for dissemination. In terms of engaging the private

sector, DFID does not have existing networks on which to build, so it may take some time to build

relationships and have impact.

We anticipate that there would be large up-front costs associated with the design and creation of a

new body to carry out capacity building activities and there would be large burden on DFID staff

time. On the other hand, DFID funds could be directed solely at DFID focus countries and would

avoid the large fixed costs problems associated with new departments, such as HR and IT.

99.

Option 5: delivery by an

MDB

such as the World Bank.

The analysis proceeds with the World

Bank in mind as a delivery agent, but the conclusions would largely hold if a different MDB were

selected. The overall performance against programme outputs is fairly strong. The World Bank has

solid expertise in relevant technical fields and has demonstrated thought leadership on green

growth. There is however a risk that the Bank would skew research outputs towards its own interests

(for instance prioritising research relating to infrastructure development) and some developing

countries might not feel that policy advice was completely impartial. Thus this deliver route would not

be independent or demand-led. This lack of trust may hinder their ability to embed themselves with

National Ministries as GGGI has been able to do.

The World Bank has a good track record in the delivery of outputs similar to those proposed under

this programme at reasonable cost (for example Knowledge for Change and WAVES). However, the

programme would require the Bank to set up a new dedicated project unit to implement this

programme. At first instance, this would probably mean a large number of advisers flying from a

Washington base to provide advice. If this was then to move to a country or regional model, there

would be large sunk costs associated with set-up of a new body.

100. Option

6: delivery by GGGI.

The option displays strong performance against all of the programme

outputs. GGGI have demonstrated expertise in green growth policy research, and in Ethiopia they

have translated policy analysis into practical advice and capacity building with government,

culminating in the development of the new

Climate Resilient Green Economy

Strategy. GGGI works

in a mixture of developing and emerging economies, meaning there is good potential for less

developed countries to learn from the experiences of countries further along their development path.

Whilst progress on GGGI’s private sector pillar has been fairly slow to date, the structures are in

place to carry out work with the private sector, and there is scope to scale up these activities under

this programme.

Delivery through GGGI would benefit from the structures and systems needed to deliver the

programme outputs already being in place. GGGI has recently transformed from a Korean based

NGO to an international organisation, and as a result it has significantly expanded its activities since

2010. There are sunk costs associated with the new management and administration systems that

GGGI has put in place (for example the HR department, and IT and financial management systems).

We anticipate that these overhead costs will decline over time relative to programme activities as

GGGI expands its programme into more focus countries and accelerates measures to cut costs.

Risks of delivery through GGGI include need for: strengthened financial management and delivery

systems and capacity; greater poverty focus in its programming; and need for strengthening its

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planning and delivery on gender. GGGI’s senior management has put in place a reform programme

on financial management issues. (As GGGI is the preferred option, these risks and the use of KPIs

as well as focusing programme management on these areas, is discussed in the Management

Case.)

101. Chart 1 summarises the finding from stage 2 of the appraisal. Option 6: delivery through GGGI, was

the highest scoring option against the planned programme outputs. GGGI is also expected to be the

lowest cost of the three options. Support to GGGI is therefore the recommended option.

Chart 1: Summary VFM analysis

* Maximum benefit score = 16; cost scores range from 1 (low cost) to 3 (high cost)

102. An independent review of CDKN

has found that the demand for knowledge, evidence and support

for practical action on green growth exceeds the supply capacity of CDKN. In the Strategic Case,

we discussed the reasons why additional funding for CDKN would not be a preferable option in the

short-term. Here we discuss why funding both GGGI and CDKN will represent complementary

initiatives, with distinct but compatible approaches that will provide further leverage for the UK

government in meeting the need addressed in the Strategic Case.

Box 1: GGGI and CDKN: Why invest in both?

100. GGGI’s clear technical entry point is economic growth, as the main engine for poverty reduction.

This is its unique selling point. It operates where there is strong demand for its independent

advice. GGGI’s teams are normally located in government ministries, making them well placed to

ITAD (2013)

External Evaluation Report of the Climate Development Knowledge Network,

ITAD 2013. The mid term review of CDKN

found that, “As GGGI is currently working in a handful of developing countries and CDKN aims to concentrate on up to 14 deep

engagement countries the need for both organisations vastly outweighs their combined capacities.”

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incorporate the environment into budgeting and policy making and avoid creating parallel and ad

hoc processes.

101. This is a fundamental difference between CDKN and GGGI. GGGI sees economic growth, as the

main engine for poverty reduction and human development; GGGI aims at working with those

government institutions concerned with developing and executing growth and development plans.

CDKN’s entry point is climate compatible development; ‘development that minimises the harm

caused by climate impacts, while maximising the many human development opportunities

presented by a low emissions, more resilient, future.’ Institutionally, GGGI’s operating model

involves their presence being requested by governments and housed in appropriate ministries.

This embedded model increases the chances of high quality advice being adopted.

102.

GGGI is a treaty based, multi-partner institution, ‘owned’ by its country partners, and working with

them in a long-term programmatic effort, with a fully-integrated set of support services. As such,

GGGI’s approach is long-term and relationship intensive, with a strong local presence and a focus

on the county’s mainstream, end-to-end planning and implementation processes. CDKN is a third-

party provider of technical support, with a project based approach designed to accelerate progress

in specific high-priority initiatives. These basic differences in strategic approach and delivery

model allow the two organisations to work in tandem, and they have shown an ability to

collaborate effectively and to enhance each other’s outcomes in countries where both are present.

103. For instance, through GGGI’s knowledge networking and sharing initiatives such as the Green

Growth Knowledge Platform (GGKP) and the Green Growth Best Practice Initiative (GGBP),

GGGI provides a platform for the dissemination of green growth policy relevant research, case

studies and best practice. This ensures GGGI’s work achieves the maximum ‘demonstration

effect’, facilitating replication of its experience in other countries. GGGI and CDKN have

collaborated successfully on these initiatives, which have strengthened CDKN’s work on

supporting developing country negotiators to the UNFCCC. As opposed to creating duplication or

overlap, support to GGGI would help to leverage the impact of CDKN research and maximise its

relevance, applicability and availability in developing and emerging countries.

104. The geographical scope of CDKN and GGGI country programmes is complementary rather than

overlapping. In cases where CDKN and GGGI do work in the same country, they have aligned

according to comparative advantage and have worked effectively together (Ethiopia). There is

further potential to build on this going forward.

105. Working with both CDKN and GGGI can actually provide further leverage to the UK Government

by helping ensure even stronger collaboration and a complementary focus. The closer the

organisations are able to work together, the greater the potential impact of the respective

initiatives, through transfer of knowledge and tools and coordination based on comparative

advantages. A full discussion of GGGI’s and CDKN’s comparative advantages is attached in

Annex II.

What DFID support to GGGI will deliver

103. GGGI works across three pillars of activity designed to address these barriers: green growth

planning and implementation, research and public-private cooperation.

104.

Green Growth Planning and Implementation:

GGGI embeds staff within developing country

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government departments to assist in government-led processes relating to green growth. This model

allows GGGI to act effectively as a trusted, neutral partner to governments that request its services.

The 2013 Joint Donor Review (JDR) found that ‘[GGGI] country teams have established themselves

as trusted advisors to the respective governments, and appear to have exploited this well to take the

green growth policy process forwards. They have achieved direct access to top leadership levels in

ways that development partners may not be able to access (according to the development partners

themselves).

105. This method of operation has allowed GGGI to achieve a number of positive results, despite being a

relatively young institution. For instance, the Government of Ethiopia have commended GGGI’s

support to their Climate Resilient Growth Economy (CRGE) planning process and have continued to

work with GGGI on the implementation phase. This has led to the creation of a CRGE facility to help

finance the implementation of the CRGE priorities and to which DFID Ethiopia has committed £15m.

This transformative approach developed by the Government of Ethiopia will provide a clear example

of green economic transformation, not only in Africa but across the world (see Box 2 below). Other

examples of GGP&I results include:



In Rwanda, GGGI have assisted with the policy and legal framework for energy efficient and

affordable housing in Kigali. This is part of their wider work on urban development with the

Ministry of Infrastructure. The ministry of Economics and Finance hopes to integrate the

results of this into the 2014-15 national budgeting process.

In Karnataka, three key recommendations from GGGI’s agricultural sector analysis have

been incorporated into the state budget and rain-fed farming policy.

In Mongolia, GGGI have drawn together an advisory committee to produce three green

energy scenarios, the results of which have been used by Ministry counterparts into the

amendments to the Renewable Energy Law.

Development of the Renewable Energy Master Plan of the EAC



Box 2: GGGI in Ethiopia

The CRGE vision, which was launched in November 2011, sets the ambition of Ethiopia having a middle income

status by 2025 while building resilience to the shocks of climate change and achieving growth with a zero net

increase in carbon emissions from 2010 levels. For the past two years, GGGI Ethiopia has been working closely

with the government in all the stages of planning and strategizing how best to bring this vision to reality on the

ground. The 2013 Joint Donor Review found that GGGI had ‘achieved direct access to top-leadership levels in

way that development partners may not be able to access [according to the development partners themselves]’.

At two workshops in October, Ethiopia unveiled the Sectoral Reduction Mechanism (SRM) Framework, which

outlines the mechanism for implementation of the CRGE; the Operational Manual for the CRGE Facility that sets

out the detailed mechanics of a new institution that will attract, pool and deploy funding to meet the CRGE vision;

and the Climate Resilience Strategy for agriculture that analyses the risk posed by climate change and outlines

priority strategies building climate resilience in the critical agriculture sector. In essence, the SRM Framework

outlines the process by which line ministries should develop plans for funding from the CRGE Facility, which in

turn is the pooled financing mechanism of the government.

UK Funding

UK Aid – DFID Ethiopia is contributing GBP 15 million (USD 24 million) to the CRGE Facility to support the

Government of Ethiopia in its ambition to build a Climate Resilient Green Economy. These funds will be used to

support the implementation of the Sector Reduction Mechanism’s process: to generate and fund high quality

strategic investments that respond to the priorities of the Government of Ethiopia. This finance will be used to

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support the Government of Ethiopia to build a Climate Resilient Green Economy across different sectors. This

transformative approach developed by the Government of Ethiopia will provide a clear example of green

economic transformation, not only in Africa but across the world. Feedback from DFID Ethiopia is that GGGI do

an excellent job in policy terms, they are a key strategic partner and are doing really interesting and important

work with Government.

106.

Public-Private Cooperation:

GGGI will catalyse private sector initiatives in a way consistent with

green growth policy work stream. This will include work on (a) risk reduction and financial

instruments; (b) incentives and (c) sustainable consumption and impact investments. As an example

the private sector will be involved in developing investment guidelines for implementation of green

growth projects and in designing policy frameworks. GGGI convenes a Business Council and

partners with Siemens, KPMG and Deutsche Bank among others. The four main thematic areas with

which the business council focus are: technology; global value-chains; institutional investors and

energy efficiency finance.

107. Public Private Cooperation (PPC) also works in collaboration with GGGI’s country activities, this

includes its work in Thailand, where it aims to establish a compliance-based carbon market. This will

use the Korean experience of its own carbon market as a template. In Mongolia, a project in

consultation with the Ministry of Economic Development is developing a framework for Public-

Private Partnership (PPP) in green infrastructure.

108. GGGI also works with a number of global private-public sector initiatives. These include the G20

Green Growth Action Alliance which works with the World Economic Forum’s Environmental

Initiatives; Bloomberg and Rockerfeller Foundation in order to mobilise climate finance; and The

Sustainable Infrastructure Foundation to further develop project design templates in compliance with

MDB standard practices.

109.

Knowledge Development & Management (KDM):

GGGI’s research is grounded in the needs of

practitioners based on the first two work streams. KDM brings feedback from the field on what

further knowledge development is required by policymakers and practitioners, bridging the frequent

disconnect between research and practice. Evidence is disseminated through networks such as the

Green Growth Knowledge Platform (GGKP) and Green Growth Best Practice (GGBP).

110. Table 6 summarises GGGI’s programme activities. The results and logframe reflect selected

indicators and targets from GGGI’s current work programme. Full work programmes are in GGGI’s

work plan and budget for 2014-16.

Table 6 - GGGI pillars of activity

Pillar

Green

Growth

Planning

and Implementation (GGP&I)

(70% programme)

Description



Expert advice and capacity building in developing and emerging country

governments to improve design and implementing green growth plans.

Works in close collaboration with national governments through ministries

and by providing support to government led processes such as green

growth plans at the national level or subnational level.

Works effectively in-country with other NGOs/experts providing climate-

related expertise

[2]

CDKN’s mid-term review offers evidence of the early stages of practical CDKN-GGGI cooperation (In Ethiopia):

http://cdkn.org/wp-content/uploads/2010/10/2012-077-CDKN-MTR-Final-Report-15March-2013.pdf

[2]

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

Knowledge Development and

Management (KDM)

(15% programme)

Public-private

co-operation

(PPC)

(15% programme)



Only operates in countries with high-level commitment to transforming

green growth policy making, and where GGGI can leverage significant

impact e.g. policy change, mobilising resources

High-quality research building the evidence basis for green growth in

GGP&I programmes and more widely.

Research agenda is geared towards priorities in: delivery of GGP&I

programmes; and by senior economic policymakers and growth

economists in developing countries.

Research draws on lessons from in-country GGP&I experience, identifying

where gains are replicable in other focus countries.

GGGI manages global platforms for disseminating green growth research

on critical aspects of green growth:

- Green Growth Best Practice : seeks to improve quality and

effectiveness of green growth planning and implementation

internationally. It facilitates peer learning, compiling, analysing and

broadly disseminating best practices at all levels of government, the

private sector and civil society

[3]

- Green Growth Knowledge Platform

[4]

with OECD, UNEP and World

Bank, an online platform on green growth theory and practice.

Linking companies to developing country governments that are seeking

private sector finance, technology and expertise to accelerate

implementation of their green growth economic development plans

Building intra- and cross-industry programs of cooperation, and linking

them to relevant intergovernmental processes, to expand markets in

developing and emerging countries for resource-efficient products,

services and industrial processes.

Address issues from a private sector point of view: risk reduction; financial

instruments; incentives; sustainable consumption and impact investment

111. GGGI will directly enable 10-15 geographically and economically diverse developing countries to

address these three barriers and so demonstrate available paths to rapid poverty reducing growth

with simultaneous strong environmental and emissions reducing performance. Concrete positive

examples in selected partner countries will provide evidence and role models for others to replicate

success across other countries. Successful action should also help to move the polarized North-

South politics of sustainable development and provide important evidence and impetus to help the

international community to integrate the economic and environmental pillars of sustainable

development.

112. In order to achieve these goals the GGGI has been set up as a specialized enabling institution for

green growth. It is a multi-stakeholder international organization, with a mission is to advance the

practice and evidence of green growth by helping to develop, implement and deepen understanding

of green growth strategies, focusing on integrating green growth into economic policy and business.

These green growth plans will seek to take opportunities that others may miss due to a lack of

knowledge in this area or due to a lack of long term and trusted engagement and deep

understanding of the economy and society. The GGGI will provide countries with frameworks,

evidence and advice to make decisions that consider a broad range of economic, social and

environmental impacts that will deliver development and the GGGI will follow this through to action.

The GGGI will increasingly be able to leverage experiences and lessons from this work to catalyse

larger change.

113. Chart 2 sets out GGGI’s the planned budget from 2014 to 2016 against the programme and

[3]

For Synthesis of Key Findings, please refer to:

http://ggbp.org/wp-content/uploads/2014/02/GGBP-Synthesis-

of-Key-Findings.pdf

[4]

http://www.greengrowthknowledge.org/

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management budget lines. Reflecting DFID’s priorities for the next medium term strategy, DFID

wants to see support to green growth policies increasing in poor countries in 2015 and 2016. We will

incentivise this with the key performance indicators for DFID funding. We also want to see work with

the private sector scaled up and this can be seen in the increasing spend for Public Private

Cooperation.

114. Administrative costs are clearly high, especially in 2014/15. The importance of reducing

administrative costs and the ways that targets will be set and monitored are discussed in the VFM

section below. The nature of GGGI’s business – delivering quality evidence and advice rather than

financial aid – means that administrative costs appear high. It is important that these demonstrate a

downward trajectory as a share of total costs. The use of annual tranches and key performance

indicators builds in an exit strategy to the programme if performance is poor on technical or

management grounds.

Chart 2: GGGI Planned expenditure by budget line

Source: Corrigendum to the GGGI Draft Workplan and Budget 2014 – 2016, December 2013

115. The programme will be able to report against a number of the ICF criteria. These are set out in Table

7 and in the logical framework. GGGI monitoring approach and DFID’s approach to monitoring are

set out in the Management Case.

Table 7: GGGI expected results against ICF criteria

Expected results

We anticipate that a commitment from DFID will encourage other donors to

confirm their commitments and to mobilise additional funding to GGGI. We

also expect that partner governments in GGGI focus countries will provide

some match funding for green growth activities (which include actions on

climate change).

Through the GGP&I activity pillar, GGGI will support governments to

integrate green growth into their national and sector level economic

development strategies through provision of analytical tools, capacity

building and communities of practice. The programme will be able to report

ICF Criteria

ICF Criteria 11:

Volume of

public finance mobilised for

climate change purposes

as a result of ICF funding

ICF Criteria 13:

Level of

integration of climate

change in national, sectoral

or institutional planning as

a result of ICF support

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against the scorecard indicator at a country or sector level.

ICF Criteria 14:

Level of

institutional knowledge of

climate change issues as a

result of ICF support

Under the knowledge development activity pillar GGGI will develop a

range of economic research into green growth policy and practice. Under

the GGP&I pillar GGGI will help partner governments to improve their

institutional knowledge of green growth. GGGI also supports the online

‘Green Growth Knowledge Platform’ which aims to share green growth

related tools and methodologies and to make them more directly available

to developing countries. The programme will be able to report against the

scorecard indicator at a country or sector level.

GGGI will be able to report against the criteria scorecard for

transformational change. We expect that GGGI will make progress against

all of the scorecard criteria:

- Fostering political will to act on climate change: GGGI will build

communities of practice on green growth and improve the global

knowledge base (for example through the green growth knowledge

platform).

- ICF-supported activities are enhancing local capacities to act on climate

change GGGI will build capacity in partner governments (national and

local) on green growth planning and implementation.

- HMG-supported activities are encouraging innovation and testing new

approaches and ideas GGGI research activities will develop and test

new ideas and approaches. Green growth activities actions and

strategies will be tested in a range of contexts through the programme.

- HMG-supported activities are creating the incentives for others to act on

climate change: GGGI aims to create incentives through knowledge and

demonstration on successful green growth actions (in both the public

and private sectors).

- HMG-supported activities are being replicated by others: If the GGGI

programme is successful, it will demonstrate the benefits of green

growth activities to countries beyond its direct partner countries.

- Activities are likely to be sustained once HMG funding ends: In the

concept note for the new GGGI strategy 2015-2020, GGGI sets out

how it aims to build a partnership model with client countries in order to

sustain long term impact. The organisation plans to build long-term

relationships with core donors in order to ensure predictable and reliable

funding.

ICF Criteria 15:

Extent to

which ICF intervention is

likely to have a

transformational impact

What is the appropriate level of funding to the preferred option?

116. At present there are 5 core donors supporting GGGI, (Korea who have contributed $10 million per

year, and Australia, Denmark, Norway and Qatar who each have each contributed $5m per year). A

UK contribution would display commitment to tackle the barriers identified in the strategic case and

may help to leverage more predictable support from other donors.

117. The ICF technical panel suggested in their feedback that the UK provide £12-£15m over a 3-year

period to GGGI, with an option to discontinue funding or expand in the future dependent on

performance. The panel noted that the UK should ensure that it maximises its influence within GGGI

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and that the organisation gave a stronger poverty focus.

118. An annual UK contribution to GGGI of $5 million (£3.1m

) would be in line with the scale of

commitments by other core donors such as Norway and Denmark. A contribution of this scale over

the three years of planned implementation (2014-16) would help to improve the predictability of

GGGI’s funding and give the organisation space to source other predictable core donors.

119. The recommended funding profile is shown in Table 8, in dollars then in sterling. DFID’s funding is

designed to support progress on governance and management improvements are on track and to

support a significantly more poverty-oriented programme by GGGI in its next medium term plan and

evidence of this shift within the timeframe of this project.. It will be disbursed as either further core

funding or as earmarked funding, depending on what mechanism is judged to have the greatest

leverage on the overall poverty profile of GGGI’s strategy and spend.

120. Funding will be 11% ($5m/£3.2m) of GGGI spend in 2014 rising to 13% ($7.2m/£4.3m) in 2016,

approximately 16% ($9m/£5.4m) in 2015 and 19% ($10.8m/£6.4m) in 2016. These percentages are

upper limits. GGGI’s financial year runs from January to December. If GGGI performance is strong

in terms of organisation improvements and poverty focus but capacity to spend is not increasing as

hoped, DFID will have the option to manage its exposure by disbursing part of the 2016/17 tranche

in support of GGGI’s 2017 budget. This could prevent DFID funding too high a share of GGGI’s

overall programme.

Table 8: Summary of DFID expenditure

2014/15

2015/16

$000's

Funding to GGGI

Total ($)

$:£

£000's

Funding to GGGI

Strategy, due diligence follow-up, evaluation

Total (£)

Memo:

GGGI Budget plans

DFID %

$5,000

1.68

2014/15

£2,976

£30

£3,006

$9,000

2015/16

£5,357

£35

£5,392

2016/17

$10,800

2016/17

£6,429

£75

£6,504

Total

$24,800

Total

£14,762

£140

£14,902

47.2

11%

54.8

16%

57.1

19%

121. The annual base tranches will also only be disbursed following satisfactory performance against key

indicators, which have been identified based on the findings of the due diligence assessment. The

framework is set out in the Management Case and will be referred to in the MoU. If performance is

mixed, DFID will be able to provide part of the funding if appropriate.

122. Assessing the full poverty impact of GGGI’s programmes requires looking beyond the income status

of countries GGGI is active in. Table 9 below shows the share current profile of GGGI countries.

Based on an exchange rate of £1:$1.635

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Several countries are middle income but contain large numbers of poor people. Furthermore,

evidence from MICs are relevant for LICs – providing the take-up of lessons from GGGI

programmes and research takes place. While few DFID Tier 1 countries are included, GGGI is

active in several very important and influential Tier 3 countries. However, the fact remains that few

GGGI countries are at present low income whereas the theory of change is most clear and direct for

GGGI operations in LICs. We have addressed this in programme design.

Table 9: Profile of GGGI’s country focus (Green Growth Policy and Implementation work stream)

Low income

Lower-middle

Upper-middle

Other/N/A

Countries/

Regions

Cambodia

Ethiopia (NORAD,

DFID)

Rwanda

India

Indonesia

Mongolia

Philippines

Vietnam

Brazil

China

Jordan (BMU/Germany)

Kazakhstan (EBRD)

Mexico

Peru

S. Africa

Thailand (BMU/Germany)

Central Asia

Mekong

MENA (UAE)

East Africa

Community

% of

27%

35%

30%

budget

Note: agencies in brackets are or have provided earmarked funding to GGGI’s work in a specific country

123. Our first disbursement will depend on a commitment from GGGI in the new strategy to be agreed in

November that at least 50% of GGGI’s portfolio will be in low income countries. Our second

disbursement will be dependent of evidence that this material shift has occurred. By withholding part

of the contribution, this will allow DFID to ensure that GGGI gives a stronger poverty focus. GGGI’s

portfolio is currently weighted towards upper-middle and lower-middle income countries. It is in

DFID’s interest for GGGI to pursue a greater low-income focus in its Green Growth Planning and

Implementation work-stream. There is an emerging consensus with other donors, that poverty focus

needs to be increased. the KPIs will provide DFID with sufficient leverage to ensure not only are

these low-income countries but also to fill gaps in the GGGI portfolio which are of specific interest to

DFID e.g. West Africa. This may be earmarked or as additional core funding depending on DFID’s

assessment of how best to secure additional GGGI work in LICs.

124.

125. As GGGI is a demand-led model, it first requires a high-level and strong political commitment by the

partner country. DFID will work through internal and external DFID channels, including across-HMG,

in order to stoke demand from partner countries.

G. Theory of Change for Preferred Option

126. Figure 1 below sets out GGGI’s theory of change, linking its activities to the overall outcome of more

sustainable and equitable growth – growth that will remain the main driver of poverty reduction in

developing countries. The Theory of Change also shows how providing evidence and supporting the

practical implementation of more sustainable growth policies GGGI will make an important

contribution to the ICF ambition to support transformational change to more sustainable growth and

poverty reduction.

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Figure 1: GGGI Theory of Change

127. The key assumptions behind the theory of change are that:



Policies and programmes that are simultaneously good for economic development, take the

environment into account and reduce poverty do exist.



Policies are not implemented at present because policy makers and private actors do not have the

information necessary (for example on their costs and benefits) or practical experience needed to put

them in place.

Some policy makers must be willing to experiment with new green growth approaches in order that

others can learn from their experiences.

Some private sector actors are forward thinking and are willing to test new business models.



128. The theory of change assumptions will be tested and revised through routine programme monitoring

and through programme evaluation.

129. DFID’s objectives through GGGI require achieving influence through dialogue and through UK

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participation in governance structures. The Management Case describes these structures and which

committees the UK will prioritise.

H. What measures can be used to monitor Value for Money for the intervention?

130. The following section summarises what we will look at to monitor VFM and at GGGI's ability to report

against DFID’s VFM framework at economy (inputs), efficiency (activities/outputs) and cost

effectiveness (outcome) levels.

131. It also refers to several key performance indicators that will be used in programme management as

disbursement triggers for DFID funding. These include: credible budget setting; linking results and

budgets; identifying cost savings and achieving these; and monitoring adherence to travel policy.

The specific indicators for the second tranche are detailed in the Management Case.

Economy

132. Economy is the extent to which GGGI is purchasing inputs at the right price and quality. We will

monitor GGGI’s economy by ensuring:

a. Policies governing major cost drivers (e.g. salaries, consultants, travel) are in line with practice in

other international organisations

b. Budgets are reported in a way which enables scrutiny of overheads and cost drivers

c. Ambitious targets for improving cost economy are set and monitored at the level of the whole

organisation and at division/department level.

a. Policies governing major cost drivers

133. The main expenditure line items are governed by a series of policies approved by the Council.

GGGI has implemented procurement, recruitment, travel and financial management policies,

benchmarked against other international organisations that ensure it is able to secure inputs at the

best possible prices without compromising quality. All policies are available at:

http://gggi.org/gggi-

regulations-policies-guidance-notes/

134. GGGI has shifted away from a consultancy based model in order to improve effectiveness and to

manage costs. Staff costs are benchmarked against other international organizations, through a

thorough HR and Management Establishment Project conducted in cooperation with PwC. Staff

grade and salary bands have been established based on research into the HR systems of other

international organizations (World Bank, ADB, UN and others) and a strategic analysis of the

implications of such HR systems and structures. Procurement policies are based on an exercise

conducted by UNOPS, benchmarking GGGI procurement against the World Bank, UNDP, AusAID,

EBRD and IRENA.

135. GGGI’s consultancy fees have been based on comparison with other organisations for specified

levels of qualifications and experience. GGGI only uses external consultants for expertise

unavailable from their network of expert partners (LSE, Indian Institute of Science). For a project in

Karnataka, 2,300 days were sourced at a unit cost of $227. The average cost for consultants in this

project was $550 (over 327 days).

136. GGGI’s travel policy has come under the spotlight during 2013/14. Specific cost management steps

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related to travel in the 2014-16 plan include:



Promoting the expanded use of information technology (IT) facilities including videoconferencing

for consultations with project offices.



Containing business travel expenses through travel policy reforms, including stricter

implementation of the existing travel rules and vigorously monitoring business travel expenses

based on enhanced quarterly monitoring by the OEMG.

Monitoring and rationalising travel for conferences, seminars and meetings.

Encouraging stricter enforcement of cost-effective flights and improvements in booking practices.



b. Budgets are reported in a way which enables scrutiny of overheads and cost drivers

137. GGGI’s own systems require the organisation to present budgets and report on implementation and

expenditure at the corporate and project level.

138. GGGI’s own systems require the organisation to present budgets and report on implementation and

expenditure at the corporate and project level. Parameters for the main expenditure line items are

governed by a series of policies approved by the Council, including procurement, recruitment and

financial management processes.

139. The current organisational reforms are improving GGGI’s abilities to manage costs and monitor

delivery/performance. Measures include:



Cost savings, including reducing use of consultants using its own staff, outsourcing only where

this provides access to expert resources in a cost-effective manner;

Monitoring business travel;

Further strengthening of the link between the budget and results;

More rigorous monitoring and implementation of the budget, further prioritisation and new

efficiency initiatives, rationalisation of business travel;

Improvements in the scrutiny of project selection; and

Regular and rigorous monitoring and review.

c. Targets for improving cost economy are set and monitored

140. The GGGI Management and Administration Department have developed a number of aggregate

VFM indicators to measure its performance from 2014-2016 (set out in Table 10). GGGI is a

relatively new and expanding organisation. The indicator ‘Policy and programmes as % of total

costs’ is therefore low at this stage (68% in 2014). This will increase as investment in system

improvements are completed, as programme expenditure increases and as additional efficiency/cost

saving measures are implemented (to 77% in 2016).

141. Such indicators are not readily comparable to other institutions – for problems that are well known

from the MAR process. For instance, GGGI’s programmes are knowledge and human-resource

intensive; GGGI does not disburse on bed nets, text books or infrastructure that would mean higher

programme costs in other multilaterals. It is meaningful, however, to monitor this indicator over time

for GGGI, and to scrutinise the cost drivers that underpin it. The overall approach to monitoring VFM

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will provide this assurance. We will push for an target rate of savings that is both meaningful and

easily communicated e.g. a specified percentage or amount per year.

142. DFID will track performance against these indicators over the programme lifetime on an annual

basis. These indicators should be regarded as headline indicators. GGGI’s Work Plan and Budget

documents contain an impressive degree of detail of the cost components of different departments

and offices. This transparency will enable DFID and existing contributors to push for meaningful

discussions on cost drivers in GGGI’s budget. A KPI is the identification of cost saving measures by

Division (see Management Case).

Table 10: GGGI Management and Administration key performance indicators and targets

2014

2015

2016

% of staff female

% of staff at HQ

% of staff in international offices

% of staff in programme countries

Management and admin as % of budget

Policy and programmes as % of overall budget

GGGI governance as % of total costs

International office cost as % of total budget

Capital investments as % of total budget

Average length of time between receipt of invoice to

payment (work days)

50%

60%

17%

23%

21%

68%

5.9%

1.5%

4.2%

50%

55%

17%

28%

18%

76%

3.6%

1.5%

1.3%

50%

17%

33%

17%

77%

3.5%

1.4%

0.5%

Source: GGGI Draft Workplan and Budget 2014-2016; adapted by DFID to reflect latest GGGI budget

Efficiency

143. To gauge efficiency we will monitor how well GGGI converts programme inputs into the planned

outputs.

144. GGGI’s outputs are often major activities such as delivering Green Growth Strategies. Taking the

example of Green Growth Strategies, GGGI has demonstrated that it understands the expected

costs of these strategies and that it has a systematic approach for budgeting, monitoring and

revising costs. The expected cost of each sector, country or regional strategy varies from $0.5m to

$3m depending on its scope and complexity and duration. The costs of components of these

strategies (scoping, cross-sectoral analyses, appraisal of specific investments) are also known for

different countries and further detail available on the cost drivers of these components.

145. Proactive cost management: Cost control of projects is embedded within Core Operating Processes

– GGGI’s project management procedures. Budgets are set at the outset based on expected

quantity, quality and unit costs of inputs (a summary budget for a cross-sectoral analysis in

Karnataka has been provided as an example with justification for the HR costs that make up 70% of

the costs). Quarterly reviews, portfolio reviews, the requirement for variations to be approved by

management committee and the role of the new internal audit function provide mechanisms for

oversight of finance and results.

Effectiveness

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146. Effectiveness is the extent to which the outputs of the programme are expected to achieve the

desired programme outcomes. GGGI’s operating model aims to ensure outputs can be converted

into outcomes in the following ways:



Building long term relationships using embedded teams of its own staff, with projects continuing

for 3-5 years from initial scoping and analysis to mobilisation of investment funds

GGGI aligns with national governments through relevant ministries and by providing support to

government led processes such as green growth plans at the national or subnational level. In this

way, GGGI is not developing parallel processes but rather supporting already ongoing or planned

processes and activities

Once robust, cost-effective strategic plan have been designed, GGGI supports their

implementation through attracting public and private investment, supporting technical policy

design and human and institutional capacity building

Knowledge sharing activities to enable developing countries to leverage the lessons learned from

its work elsewhere. For example, projects in Latin America will benefit from the experience on

forestry in Indonesia as project teams share experience, models, data, networks etc.

Compared with the typical project-by-project development assistance approach, GGGI’s deep,

long-lasting engagement and cross-fertilisation of experience enhances the value for money of

what could otherwise be independent and difficult to connect projects.



147. In November 2013, GGGI published a concept note which will inform the development of its new

strategic plan for 2015-2020. DFID will invest significant time in influencing this strategic plan

through in the Informal Working Group that has been formed to consult on and develop the

document. The strategic plan will set out three different levels of results: (i) global goals (or impact);

(ii) organisational and functional outcomes and (iii) organisational outputs

148. From informal meetings with existing core donors, including Denmark and Norway, it has been

evident that DFID’s priorities for GGGI’s 2015-2020 Strategic Plan align with priorities of other

donors.

149.

The strongest of these priorities is that funding for the organisation can only be fully justified

if the country mix adjusts to secure a higher representation of low-income and DFID-focus

countries.

In addition to this, DFID would like to see GGGI’s 2015-2020 Strategy: (i) addresses

gender equity, social and environmental safeguards in each of the programmatic pillars; (ii) ensure

predictability in the sources and timing of funding and (iii) to deepen focus in country level practical

implementation. . The June Informal Working Group on the new strategy revealed consensus that

GGGI’s operations should be more focused on low income countries.

150. GGGI’s preparations for its new strategic plan show its intent to improve its understanding of how its

activities lead to quality outputs and deliver outcomes. As part of the next strategic plan, a new

results-framework is being developed, based on a revised theory of change. The theory of change

(set out in section H above) aims to establish links between the three different levels of result and

demonstrate how integrated work across the three activity pillars will lead to ‘transformational

pathway changes’ in focus countries. The planning and monitoring framework set out in Figure 2

GGGI (2013)

Concept Note for Preparing GGGI Strategy 2015-2020,

November 2013

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shows how GGGI monitoring and evaluation activities will be linked to its work planning and levels of

activity. The organisational outputs will measure the direct contribution of GGGI makes in terms of

processes, products and services to its strategic outcomes. They will represent the results

attributable to GGGI at the global, regional and national levels and the tangible delivery of GGGI’s

interventions.

Figure 2: GGGI Planning and Monitoring Framework

Source:

Concept Note for Preparing GGGI Strategy 2015-2020, November 2013

151. To assess impact, DFID will monitor progress against the new GGGI “global goals”. The global goals

will measure GGGI’s development impact over 6 years, in countries, regions and globally; reflecting

progress against GGGI’s vision and mission

. To assess outcomes, DFID will monitor progress

against GGGI’s “strategic outcomes”. The strategic outcomes will measure GGGI’s development

outcomes that contribute towards the achievement of the global goals. As part of the new strategic

plan the strategic outcomes will be developed for each of the three core work-streams of GGGI and

measured every 3 years. The project logframe will be revised at the conclusion of the 2015-2020

Strategy in late-2014.

152. In summary the case for GGGI developed in the Appraisal Case is based on:



Excellent fit with our objectives on green growth:

GGGI sees economic growth and the private

sector as clear entry points for green growth policies, recognising the role of growth in poverty

reduction. GGGI has proven itself able to implement research by embedding itself within government

ministries. This engagement is crucial if we are to get the most value from the £3.87bn spend of the

International Climate Fund (ICF).

Achievements at this level cannot be attributed to any given development partner, but are the result of interventions of

an array of stakeholders. GGGI will contribute to achieving progress in line with its mandate, but at this highest level of

results, there can be no direct attribution of causality.

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

Clear mandate on green growth Difference from other existing organisations:

GGGI fills a clear

gap in the international architecture on climate change and the environment – it fills a real gap. GGGI

helps open up opportunities to more fully mainstream climate mitigation and adaptation policies by

linking them to the core (usually higher priority) development objectives.

A credible demand-led model with strong performance in the countries it works in:

GGGI

works with government departments responsible for growth and development plans. This model

avoids developing parallel processes but supports core GGGI is regarded as a trusted and

competent adviser in its partner countries. It has established valuable global partnerships across

traditional divides of developed/developing countries and private/public sectors.

Emphasis on implementation and policy rather than research:

An operating model that bridges

the gap between evidence and implementation effectively. GGGI’s focus is on policy implementation,

not just research and analysis – this is what DFID requires as it addresses the identified gap in green

growth policy and practice.

Involvement of emerging powers:

GGGI involves a number of emerging powers due to its Korean

HQ and non-traditional members and donors. Partner countries include six members of the G20

(Brazil, China, India, Indonesia, Mexico and South Africa). There are also three G20 donors

(Australia, Germany and South Korea) alongside Denmark, EBRD, Norway, Switzerland, Qatar and

UAE. GGGI is governed and ‘owned’ by an equal partnership between developing and developed

countries. The demonstration effect of middle income/emerging economies is expected to be strong

for currently low income countries.

Importance GGGI attaches to strong financial management and VFM:

GGGI is taking reforms to

its financial management systems seriously, especially demonstrating value-for-money. The bulk of

this Business Case and the structure of DFID’s support to GGGI deals with the financial management

changes underway and how DFID will implement this.



GGGI and Gender equality

153. DFID have received a commitment at the Informal Working Group meeting on the next GGGI

Strategy that GGGI will strengthen gender considerations in their next Work Programme and Budget

(2015-2017) to be published in October. We and other donors have sought these assurances

because GGGI has not yet prioritised gender in its work. This section summarises GGGI’s practices

to date and how GGGI will make significant steps to improve its ability to address gender over the

next year.

154. GGGI’s business requires supporting the implementation of policies with decision-makers at the

heart of government. An ability to consider the differential impact of policies on different groups of

poor people, on social exclusion and on women and girls will be a critical part of this work.

Is GGGI’s current and planned approach adequate

155. GGGI’s policy and existing work plan and systems reflect its intent to tackle gender but we along

with other donors recognise their efforts have to be deepened and accelerated. GGGI monitors

internal gender indicators including the gender balance of its staff with an aim of gender parity and is

developing a gender action plan. For its programmes, the Environmental and Social Safeguards

Policy states:

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The

GGGI, in all its work streams, will carry out, careful analysis on understanding the mechanisms

through which policies, financing and technologies related to green growth affect women and gender

balance in the community, the labour market and the family.

156. But this Policy does not yet reflect institutional performance on gender. A Joint Donor Review

(Australia, Denmark, Korea, Norway) in 2013 covering a wide range of aspects of GGGI did not find

strong evidence of gender sensitivity in programming, noting that responsibilities were too narrowly

focused and there wasn’t wide awareness of social issues.

157. The 2014-16 work plan commits to ensuring that best practice on gender and safe guards is

mainstreamed in all country level projects and has a safeguard’s Advisor to monitor this. GGGI is

developing tools for programme staff to address safeguards on environment, social and gender

issues in GGGI’s programme activities. Assessments will happen as part of the context analysis at

scoping stage of interventions. A routine evaluation template for all ongoing projects is being

developed by the Organisational Delivery Unit based on DAC standards that includes reporting on

gender impact. It is expected that the tools will provide for assessments of social, environment and

gender issues using a “traffic-light” system that defines remedial measures based on the

assessments. These will be presented to the Council in December 2014.

158. GGGI’s interventions can be strengthened by linking with gender budgeting initiatives in partner

countries and by considering green growth and gender research.

How is DFID going to ensure gender is addressed during implementation

159. GGGI is managing a very wide range of institutional reforms which are also priorities for us, including

to its financial management and human resourcing systems. DFID will support GGGI make progress

on its performance on gender dimensions of green growth policy:

a) by prioritising GGGI’s performance on gender during negotiations on the next medium term

strategy during 2014;

b) including a specific gender KPI (relating to strengthening gender indicators in the revised results

framework by mid-2015); and

c) requiring a dedicated gender specialist to be funded in the 2015 budget with the objectives of

putting GGGI’s work on gender on a new trajectory. This person would develop an initial gender

action plan for GGGI by mid-2015. The plan would map out how GGGI (i) strengthens the gender

dimension of country level strategies (ii) builds capacity at HQ and in country offices for best

practice in green growth products and services and (iii) improves knowledge of how to monitor

gender in GGGI activities cost effectively.

J. Summary Value for Money Statement for the preferred option

160. GGGI delivers the best value for money solution for delivering DFID’s objectives on green growth.

GGGI has a good and complementary fit with other DFID initiatives (e.g. CDKN, IIED), it has an

international mandate for green growth policy in developing countries and is recognised as

performing well by country governments, the private sector and other international organisations.

GGGI’s delivery model – focusing on policy implementation, not just research and analysis – is what

DFID requires as it addresses this gap in green growth policy and practice. Aspects of its operating

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model such as embedding in host governments and its strong links into private sector, think tank and

academic networks would be difficult to replicate or substitute for in another organisation and risk

duplication.

161. GGGI’s model works for developing countries including many of the world’s poor in low and middle

income countries; however, DFID will seek to increase this poverty focus. The structure of DFID’s

contributions to GGGI are intended to underpin delivery of GGGI’s existing work plan and reforms,

but also to incentivise greater poverty focus in the next medium term strategy.

162. GGGI’s negative publicity over the last six months concerned its travel policy and how this was

implemented. This publicity as well as a Joint Donor Review highlighted the range of cost-related

issues that GGGI has had to strengthen to transition from NGO to multilateral organisation.

163. During appraisal, including preparation of a due diligence assessment, GGGI has demonstrated to

DFID its seriousness on value for money. GGGI has a strong awareness of the costs of its major

activities and cost drivers at a division and organisational level. It has modernised the policies

governing its systems and main cost categories. It has explained how it budgets for projects (such

as a green growth strategy in a country) and how it monitors costs. It has a working definition of

administrative costs that it can monitor as a proportion of total costs over time and presents data in a

way that cost drivers such as salaries and travel can be monitored e.g. at the divisional level.

164. GGGI’s programme costs as a % of total costs are monitored and expected to increase from 68% in

2014 to 72% in 2016. This is an organisation level target. Cost drivers of major components such as

salaries and travel will also be monitored and targets set and monitored at divisional level.

165. DFID’s management arrangements include KPIs that will govern future disbursements demonstrate

how monitoring GGGI’s targets for continued progress on value-for-money will be built into

programme management.

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Commercial Case

Direct procurement through a contracted supplier

A. Clearly state the procurement/commercial requirements for intervention

166. There will be no direct procurement requirement for the support as the preferred delivery option

is to contribute to GGGI using a Memorandum of Understanding with GGGI. The GGGI will

ensure good value for money is obtained by following international standard procurement

guidelines, as set out their procurement rules. As part of its membership of the GGGI Council

DFID will monitor the adherence to guidelines and expect to see evidence of procurement

performance as part of GGGI’s annual reporting.

Delivery through a third party entity (multilateral organisation; civil society organisation

or support to government)

A. Why is the proposed funding mechanism/form of arrangement the right one for this

intervention, with this development partner?

167. The appraisal of options identified the GGGI to be best placed in terms of results and value for

money to deliver the outputs required. The most appropriate funding mechanism to use is

DFID’s Memorandum of Understanding for contributions to international organisations. This will

enable the UK to provide multi-year funding, as one of several international donors. This

document will clearly set out the understanding reached by DFID and the GGGI on how we will

work together and is not a legally binding aid exchange. This agreement will give us the

flexibility to modify or terminate our financial contribution to the project, if any changes occurred,

which, in DFID’s opinion, significantly increased or impaired its development value. The MoU

will also ensure that UK funding is available for the purposes of achieving the outcome and

outputs set out in the business case, which will be attached to the document and reference,

when presented for signature.

168. DFID has conducted a Due Diligence Assessment. The findings of this assessment have

informed the analysis in this Business Case including the design of Key Performance Indicators.

The proposed contribution will enable the UK to use its role on the GGGI’s Council to improve

the focus on results, for example by driving improvements in project cycle efficiency, and the

reporting of results which has significantly improved recently due to GGGI’s response to the

Joint Donor Review.

B. What assurance has been obtained on capability and capacity to deliver?

Core competences of organisation to deliver in-country:

169. As a young organisation there is not yet a large body of evidence on GGGI’s success in

delivering long term transformational change. Where the GGGI has been working however it

has shown its ability to demonstrate very positive results and has achieved many key results

milestones. These achievements have been well documented in: GGGI’s Annual Reports; Joint

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Donor Reviews; External Assessments; Letters of Support from Government Ministries; and

communications with DFID counterparts who have seen the outputs that GGGI have produced.

170. GGGI has prepared technical and financial project reports to external project donors on a

number of projects initiated and implemented in the last 2 years that have been already

approved. Some of the donors are BMU (Bundesministerium fur Umwelt, Naturschutz und

Reaktorsicherheit), and the Norwegian Ministry of Foreign Affairs.

171. GGGI’s ability to deliver is also supported by third party endorsements received from one of its

largest programmes in Ethiopia (see Annex V).

172. A Joint Donor Review (JDR) of September 2013 identified a number of areas for GGGI to

strengthen systems and performance and GGGI continues to address the recommendations that

were made. As a result, a number of changes are taking place to both its policies and systems.

For example, a risk management framework is currently being developed and is strengthening

its financial management by introducing an Enterprise Resource Planning (ERP) tool that will

enable real time budgeting and reporting.

173. Guidelines on the application and implementation of the anti-corruption policy are currently

under development and scheduled to be finalised within the first half of 2014. This will help to

ensure that DFID is advised of any potential fraud against their funds. The analysis of GGGI’s

financial stability concludes that the organisation is financially viable and that sufficient controls

are in place.

174. In addition, monitoring processes that track activities, outputs, outcomes, and indicators have

been implemented, In addition project spending and contract information relating notably to

institutional buy-in, risk analysis, proactivity, legal covenants, and reporting obligations to donors

have been put in place.

175. Continued DFID funding as set out in the Memorandum will be subject to continued progress

implementing the recommendations of the Joint Donor Review and satisfactory performance

against annual key performance indicators (KPIs). These are set out in the Management Case of

this Business Case, which underpins our financial contribution and will be the reference

document to the signed Memorandum of Understanding.

Delivery of outputs:

176. DFID will be able to monitor results by both conducting its own reviews of the organisation, and

also by working closely with GGGI’s Organisation and Delivery Unit (ODU) who will monitor,

evaluate and report on GGGI’s organisation and delivery.

177. A key component of the ODU’s ability to effectively monitor GGGI’s performance will be the new

enterprise resource planning tool (ERP) alongside the operation of a new Results Framework.

Whilst DFID understands that both of these will take time to implement, they are included as Key

Performance Indicators for release of the second tranche of funding in July 2015.

Technical capability and sources of expertise:

178. The Executive Management Group is composed of the Director General (Yvo de Boer), Deputy

All of these are included in the Annex IV.

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Director General – Management and Administration (Robert Dawson), Deputy Director General

– Green Growth Planning and Implementation (Mattia Romani), Assistant Deputy Director

(Nikolaus Schultz), Chief Financial Officer (Munehiko Joya) and Director and Strategy, Policy

and Communications (Hyoeun Jenny Kim). All of the Executive Management Group have

substantial experience in their relevant areas. Full details on all members of the Executive

Management group, including academic qualifications can be found at:

http://gggi.org/about-

gggi/people-3/executive-management/

179. GGGI currently has a staff of 71 (professional) and 43 (general) staff professionals all with

significant relevant professional and/ or academic experience. Given that DFID’s contribution to

GGGI is proposed to be as core funding, all staff will be involved with the programme.

180. The funding agreement between GGGI and DFID would be overseen and managed by GGGI’s

Strategy, Policy and Communications team composed of 12 full time professional staff. This

would be supported by the Organisational Delivery Unit (4 full time professionals) with regard to

project and programme monitoring and evaluation.

Procurement capability:

181. GGGI has approved procurement rules and guidelines, based on the following principles:



Accountability: responsibility for the actions and decisions taken in relation to procurement

and for the resulting outcomes.

Effective Competition: Encourage competitive and non-discriminatory processes

Fairness and Transparency: Treat all suppliers in a fair and equal manner and take steps to

enable appropriate scrutiny of procurement activity;

Sustainability: Meet the needs for goods, services, works and utilities whilst generating

benefits not only to the organisation but also to the society and the economy and minimising

damage to the environment;

Best Value for Money: Use resources in an efficient, effective, economical and ethical

manner.



182. The procurement process includes checks to ensure that the policy has been implemented

effectively and correctly – the process is reviewed by the Procurement Officer, Contracts Review

Committee (as appropriate) and is signed off according to the appropriate level of delegated

authority.

183. A Procurement Audit may be in the work programme of the Office of Internal Audit and Integrity

audit programme for 2015 within GGGI – this will evaluate compliance with the procurement

policy.

106. GGGI now has a procurement team in Seoul headed by a Senior Procurement Expert. Their

work programme includes the development of user friendly procurement guidelines for both

internal and external use and the training of staff. The internal audit team is also responsible for

the development of a full procurement strategy and plan which is aligned to GGGI’s strategic

objectives and specifically addresses value for money.

184. GGGI procurement rules are designed to ensure transparent and fair procurement through

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controls around content and publishing of Invitation to Tender, stipulations around number of

suppliers/ bids received, bid opening procedure, Bid security, bid evaluation, announcement of

the bid evaluation result and award of contract.

185. The procurement rules clearly state the procurement ethics designed to ensure that GGGI treats

all Suppliers in a fair and equal manner in accordance with the principles of fairness, integrity

and transparency.

186. The Procurement Rules state in Rule 2.5 GGGI’s Complaints and Appeals Mechanism: ‘A

Supplier that claims to have suffered or claims that it may suffer loss or injury because of the

alleged non-compliance of a decision or action of the GGGI with the provisions of these Rules

may challenge the decision or action concerned. A two-tier mechanism shall be set up for the

Complaints and Appeals Mechanism whereby the protest shall first be submitted to the

Procurement Officer, who shall provide a written decision stating the basis upon which it was

made. The protestor has the right to file a written appeal to an internal Independent Review

Committee, whose decision will be final and conclusive. The decisions of the Independent

Review Committee will be published’.

Risks:

187. GGGI has developed a comprehensive set of rules and policies to safeguard its activities from

inappropriate or non-compliant acts or omissions.

188. GGGI’s staff rules and regulations and the Code of Conduct cover fraud, bribery and corruption

issues. A formal anti-corruption policy was also approved on 7 November 2013 and is available

on the GGGI website at:

http://gggi.org/wp-content/uploads/2013/12/Anti-Corruption-Policy.pdf.

The policy includes information on prevention and control of fraudulent practice and details

around reporting of coercive, collusive, corrupt and fraudulent practice. This included

implementing a full White blower policy, available online at:

http://gggi.org/wp-

content/uploads/2013/11/Whistleblower-Policy.pdf

189. GGGI also has policies and procedures in place for HR, Procurement, Finance and the Core

Operating Processes, all of which are backed up by the Delegation of Authority which specifies

roles and segregation of duties. Again, all policies are available online at:

www.gggi.org/gggi-

regulations-policies-guidance-notes/

190. Although yet to be institutionalised, GGGI is in the process of developing a comprehensive risk

management framework. This will include a risk register with risk rating based on the probability

of the identified risks occurring and their possible impacts on GGGI projects, as well as the

organisation as a whole. The risks will be monitored on a quarterly basis and the register will be

updated accordingly.

191. Risk management has been embedded throughout the organisation’s project operations through

the compiling of Quarterly Implementation Reports sent by the project teams, which are

analysed and reviewed by the Organisation and Delivery Unit, and summarised for Directors and

the Programme Sub-Committee for assessment/feedback. Any identified risk is then managed

through regular meetings of the Executive Group.

192. With regards to ethics, GGGI have a Code of Conduct (Annex 2 to the Staff Rules and

Regulations) which clearly states GGGI’s policy on Conflict of Interest in Paragraphs 34 – 55.

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GGGI’s Procurement Rules also clearly state requirements for declaration of any conflict of

interest.

DFID relationship

193. DFID will ensure the main risks identified in the Due Diligence Assessment are followed up

through its Key Performance Indicators which will determine whether additional tranches of

funding are to be released after the identified ‘trigger points’ in the project.

194. DFID also have an informal agreement to become a member of GGGI’s Audit and Finance

sub—Committee (AFSC) subject to membership approval. This will allow DFID to push for

greater efficiencies through this body, which has been seen to be working effectively since its

inception in January 2013.

195. DFID will also play an integral part of the Informal Working Group (IWG) which will help shape

GGGI’s strategic plan in the years 2015-2020 as discussed above. DFID has also joined a core

donor group with Danida and Norad to support its effective engagement with GGGI technical

staff and management. This group will undertake a further joint donor review at some point in

2015. DFID’s priorities in the strategy process will include:

(i) Deepening the poverty focus of GGGI’s portfolio and presence in low income countries,

(ii) Ensuring the strategy addresses gender equity, social and environmental safeguards in each

of the programmatic pillars

(iii) Improving predictability in the sources and timing of funding; and

(iv) Deepening GGGI’s focus in country level practical implementation in regions which are of

strategic interest to DFID.

196. The Council meets twice a year. DFID will be represented by a senior HMG official from London

or Seoul supported by GRD technical staff.

C. Is there an opportunity to negotiate on anticipated costs?

197. DFID will continue to use its role on the GGGI Council to continually challenge costs. We will

also ensure that funds earmarked for specific activities deliver best value for money.

198. However, GGGI has standard global fee rates and management charges. Global fee rates are

set in GGGI's individual consultant policy (31st July 2013). These fees are based on a

benchmarking exercise against other International Organisations including UN, UNDP and

IRENA. At the 3rd Session of the GGGI Council in June 2013 an agreement was reached to

apply a minimum of 7% of overhead cost recovery rate to earmarked funded projects. GGGI's

overall overheads in 2013 are 12.6% of budget with a planned decrease to 11% over the next

three years as GGGI develops economies of scale. This is similar to other organisations in their

early years of operation.

199. As set out in the value for money analysis (section I), GGGI’s systems require the organisation

to present budgets and report on implementation and expenditure at the corporate and project

level. Parameters for the main expenditure line items are governed by a series of policies

approved by the Council, including procurement, recruitment and financial management

processes. There are a number of main cost items that will be monitored over time and against

comparator institutions. DFID will work to improve on these levels of economy where possible.

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Financial Case

A. Who are the recipients of all proposed payments?

200. GGGI will be the recipient of the majority of payments from DFID. GGGI will be responsible for the

use of and accounting for these funds. A small amount of the funds will be retained by DFID to

contract supporting activities directly.

B. What are the costs to be incurred directly by DFID?

201. The total cost to DFID will be up to £14.9 million for the period 2014/15 – 16/17. The £14.9 million

will come from the £2.9 billion International Climate Fund (ICF) as resource expenditure. A cost

break down is set out in Table 11. The Key Performance Indicators in Table 15 in the

Management Case show the criteria for disbursements.

Table 11: Summary of programme expenditures

2014/15

£000's

Funding to GGGI

Strategy, due diligence follow-up, evaluation

Total (£)

£2,976

£30

£3,006

2014/15

2015/16

£5,357

£35

£5,392

2015/16

2016/17

£6,429

£75

£6,504

2016/17

Total

£14,762

£140

£14,902

Total

202. Management of our GGGI contribution and participation in the GGGI Council will require

administrative resource from DFID. Necessary resource is estimated to be 0.2 FTE A2 Adviser,

0.2 FTE Programme Manager and 0.05 FTE other advisory resources. This is an increase on

existing resource but can be absorbed within existing administrative budgets. Specialist resources

will also be sourced from CED and PSD on climate change policy and financial/private sector

engagement. The budget line for due diligence follow-up and evaluation will be used as described

in the Management Case.

203. DFID has funding for the GGGI is not considered novel, contentious, repercussive, or politically

sensitive and does not exceed DFID’s delegated limit of £150 million, therefore will not require

approval from HM Treasury.

C. Is the required funding available through current resource allocation or via a bid from

contingency? Will it be funded through capital/programme/admin?

204. This programme will be funded using 100% current programme resources available from the ICF

budget. The contribution would need to be RDEL as the funds provide only grants, and support

research and projects which can include a mixture of types of investment for example research,

capacity building, institutional strengthening and awareness raising. This is exogenous i.e.: at the

point of contribution we would not know to what extent the funds would be used for capital

projects.

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F. What is the profile of estimated costs? How will you work to ensure accurate forecasting?

205. The contributions to GGGI will be disbursed in a way that will maximise DFID influence. This will

include using KPIs to ensure that tranches of funds are only released once DFID are assured that

GGGI have performed to the standards expected of them.

206. The timing of the payments will be set out in a Memorandum of Understanding between DFID and

the GGGI. It is anticipated that the first payment will be in July 2014 with subsequent

disbursements being in July 2015 and July 2016.

207. The Programme Manager will ensure accurate forecasting through developing a strong working

relationship with GGGI, enabling effective engagement on programme issues including financial

management and reporting issues.

GGGI’s financial stability

208. As of 31 December 2012 the GGGI’s total assets totalled $16,385,401, which is 12% more than

the total assets as at 31 December 2011 ($14,578,532) and almost twice the total assets as at 31

December 2010 ($8,426,610). A ratio analysis of the GGGI’s audited financial statements is in

Table 12:

Table 12: ratio analysis of GGGI’s audited financial statements

Ratio analysis

Current ratio

Acid test

Total liabilities to total assets

Long term liabilities to Equity

2.69

2.42

34%

Good

209. Table 13 summarises GGGI’s expenditure, revenue and financing plans for 2014-16. The

approved budget for 2014 is $47.2m rising to $57.1m by 2016. However, expenditures will be

tightly controlled within available budget and to ensure orderly procurement and spending; in 2014

spend is currently expected to be lower (around $43m) due to expenditure processes starting later

as funds have become available later than hoped. The share of administrative/overhead costs also

decline from about 32% in 2014 to 23% in 2016 as the cost of implementing reforms declines and

programme spend increases. (Sections on VFM and KPIs describe cost reduction targets in more

detail.)

210. New donor financing each year is projected to be in the region of $40-$50m of which the

core/earmarked split is about 75:25. The ‘carry over from previous year’ ‘and carry forward’ to

following year play an important role especially in 2014 and 2015 in managing GGGI’s current

difficult cash flow. Uncertainties over donor funding is an area that GGGI want to strengthen

through (i) sound organisational systems and performance that warrant more predictable funding

from donors; and (ii) better budget and resource planning. The two carry over figures of $14m in

2014 help finance operations this year. The carryover from previous year supported expenditure in

the first half of 2014. The projected carry forward is due to expected later payments in 2014 and to

support plans in 2015. Reflecting this unsatisfactory financing situation, credibility of budget and

resource planning is part of the KPI framework. This is also a top priority of GGGI’s senior

management.

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Table 13: GGGI expenditure and financing plans 2014-16

2014

EXPENDITURE

Green Growth Policy and Implementation

22.0

Public Private Cooperation

2.8

Knowledge development and managt

4.8

GGGI Governance

2.8

Strategy policy and communications

2.3

Management and administration

9.8

Capital budget

2.0

Satellite office costs

0.7

Memo: Policy/Prog costs as % of total

TOTAL expenditure

REVENUE

Core

Australia

Denmark

Korea

Norway

Qatar

UK - if approved

New Core Donor (to be identified)

Earmarked resources from donors

Total revenue

FINANCING

Carry over/surplus from previous year

Carry forward (-) / new financing (+)

NET financing

TOTAL revenue and financing

68%

47.2

2015

26.5

5.0

7.0

2.0

3.0

9.8

0.7

0.8

76%

54.8

2016

27.0

6.0

8.0

2.0

3.2

9.8

0.3

0.8

77%

57.1

35.0

0.0

5.0

10.0

5.0

0.0

12.0

47.0

30.0

0.0

5.0

10.0

5.0

0.0

10.0

40.0

35.0

0.0

5.0

10.0

5.0

13.5

48.5

14.8

-14.6

0.2

47.2

14.6

0.2

14.8

54.8

-0.2

8.8

8.6

57.1

211. An indicative level of DFID resources of $5m (£3.2m) are reflected in this budget. Additional

resourcing will (a) help close the financing requirements after 2014 and (b) support additional high

priority and poverty-focused programming depending on the outcome of the 2015-2020 Strategy.

D. What is the assessment of financial risk and fraud?

212. A comprehensive Due Diligence Assessment has been carried out for GGGI which has shown that

GGGI is low-to-medium risk. GGGI is a relatively young organisation and its systems are still being

developed. The organisation has made efforts to strengthen its financial policies (and others) over

the past year.

213. Two recent assessments - one by Deloitte for Norway, and the other a Joint Donor Review (JDR)

– have reported that GGGI has acted on the recommendations of previous audits and are taking

has recently confirmed funding which is expected to be about $5m per year.

Norway provided $10m to GGGI in 2014 due to a delay in processing their 2013 contribution. Therefore, this

$10m represents the Norwegian contribution for both 2013 and 2014.

Ausaid

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positive steps to strengthen their policies. For example the JDR found that

GGGI’s financial

management system is marked by a number of weaknesses that are currently being addressed by

the new Executive Management Group….. The review team is confident that the Executive

Management Group is giving the highest possible priority to addressing the weakness in the

financial management system. Obtaining a comprehensive and accurate picture of GGGI’s

financial situation and transparency and accountability in spending decisions is of critical

importance, especially to the core-funding donors (p.24-25).

214. GGGI is in the process of developing a comprehensive risk management framework. This will

include a risk register with risk rating based on the probability of the identified risks occurring and

their possible impact on the GGGI projects, as well as programme as a whole. The risks will be

monitored on a quarterly basis and the register will be updated accordingly. This is already being

practiced at the project level but more emphasis will be provided on aggregating the risks to the

corporate level.

215. GGGI’s staff rules and regulations and the Code of Conduct cover fraud, bribery and corruption

issues. A formal anti-corruption policy was also approved on 7 November 2013. The policy

includes information on prevention and control of fraudulent practice and details around reporting

of coercive, collusive, corrupt and fraudulent practice. GGGI’s Procurement Rules also clearly

state policies and processes to protect against Fraud, Bribery and Corruption.

216. Guidelines on the application and implementation of the anti-corruption policy currently under

development - and scheduled to be finalised within the first half of 2014 and rolled out through

necessary dissemination and training activities - will ensure that DFID is advised of all potential

fraud against their funds. However, current GGGI Funding Agreements and MoUs do contain

language protecting donors against fraud within GGGI.

217. GGGI approved and implemented a Whistleblower policy on 8 November 2013. This includes

details around the duty of all staff members to report in writing to the Deputy Director General –

Management and Administration any suspected integrity violation of misconduct of staff and any

third parties.

218. As of December 2013, the Code of Conduct formed part of GGGI’s induction presentation

package which has been presented to all new joiners and circulated for information and review to

all existing GGGI staff members. The Office of Internal Audit and Integrity (OIAI), which was

established in April 2013, takes a leading role in investigating reported misconduct including, but

not limited to, fraud, bribery and corruption.

219. Upon receiving allegations of fraud, the OIAI have investigated all incidents and reported results

from the investigations to Management. The results and action plans were consulted with external

legal advisors. Management has taken necessary administrative actions in accordance with the

organisation’s Staff Regulations and Rules. The organisation does not tolerate any fraudulent

activities by any level of staff members.

E. How will expenditure be monitored, reported and accounted for?

220. GGGI generates the estimated budget vs. actual execution report after the monthly closing and it

is shared with the relevant programme managers / budget holders accordingly. GGGI from 2014

onwards will conduct a mid-term review of its budget whereby any variances can be investigated

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and be incorporated into the revised budget. GGGI is in the process of strengthening this

budgeting process to provide the ability to see the finer details/ variances month to month. The

latest work plan and budget is available on GGGI’s website.

221. Once the GGGI Finance Team finalises month-end closing, financial information is circulated to

each department for the purpose of budget monitoring and control. Also, the team reports

financial information to the Audit and Finance Sub-Committee (AFSC) on a quarterly basis and the

Chair on a monthly basis and shares the information at regular Management Committee Members’

(MCM) meetings.

222. GGGI management issues a monthly financial and operational key update report to the Chairman

of the Council. All management reports are published according to GGGI`s disclosure policy.

223. In terms of whether DFID and other funding sources could be separately identified, monitored and

reported, GGGI recently implemented a new EMAX financial system which allows for full

management of different funding sources via separate project profit and loss–maintained and

reported against.

224. During the fourth Council meeting in December 2013, GGGI had its finance policy and procedures

manual presented and noted to all of the Council members. The noted policy was presented to

the DG for his approval on 27 December 2013 and implemented on 1 January 2014.

225. Budget preparation and budget management is the responsibility of the programme

manager/budget holder. This is assessed through quarterly reporting through the Quarterly

Implementation Reports which track expenditure against budget. Going forward budget execution

will also be assessed by monthly reporting to budget holders. A full mid-year budget review will

also take place from 2014 onwards to check execution against plans and to make any necessary

adjustments.

226. All external audit reports are available online through GGGI’s Annual Reports. No issues have

been raised in management letters. In 2013, four internal audit projects were undertaken.

Reports for projects 1 and 2 were finalised in August and September 2013. Projects 3 and 4 have

been completed and reports are currently being finalised.

227. The target of the 2014 proposed budget compared to projection for 2014 presented in 2013, will

be achieving close to zero real growth. This will entail measures such as cost savings, further

strengthening the link between the budget and results, more rigorous monitoring and

implementation of the budget, further prioritisation and new efficiency initiatives, rationalisation of

business travel, and further improvements in the scrutiny of project selection. Regular and

rigorous monitoring and review will be ensured through active discussion with all the departments

and project offices during midyear and annual budget exercise.

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Management Case

A. What are the Management Arrangements for implementing the intervention?

DFID Management Arrangements

228. The UK was one of eighteen founding member countries of the GGGI, with the Deputy Prime Minister

representing the UK at the agreement of its establishment in Rio de Janeiro in 2012. The UK sits on

the assembly of GGGI. By end-2014 it is expected that Denmark, Australia, Republic of Korea, Norway

and Qatar will have provided core finance to GGGI. DFID has not provided core funding to GGGI but

DFID Ethiopia has provided £900,000 for its in-country work and advice. There are no other financial

relationships with GGGI across HMG.

229. DFID will make suitable management arrangements for the GGGI, including necessary staff time and

reserving funds to conduct important strategic and monitoring visits where necessary. Funding to the

GGGI will be managed by DFID’s Growth and Resilience Department (GRD). Necessary resource is

estimated to be 0.5 FTE A2/B1D Adviser and 0.2 FTE Programme Manager. Specialist resources will

also be sourced from GRD, CED and PSD on climate change policy, financial/private sector

engagement and on priority issues such as gender and political economy.

230. The £120,000 budget line for due diligence follow-up and evaluation is planned to be utilised as follows

(Table 14). £60,000 (£20,000 per year) will be to provide technical expertise in financial management

procured by Growth Team (e.g. a small contract with an accountancy firm with UK and Korean

presence. The outputs from this contract will inform DFID’s inputs on the Audit and Finance Sub-

Committee (discussed below); the products of the contract will be made available to GGGI and

members of the Audit and Finance Sub-Committee (AFSC). £10,000 has been provided for additional

DFID inputs into the important Joint Donor Review in 2015 (e.g. travel and accommodation to Seoul

and GGGI country programmes by 3 or more DFID staff or consultants). The evaluation budget is likely

to be a contribution to a wider DFID evaluation of Green Growth programmes in 2016/17.

Table 14: Strategy, due diligence follow-up and evaluation

Due diligence follow-up, evaluation

£000's

Technical support on AFSC

Participation in Strategy and Joint Donor Review

Evaluation

TOTAL

2014/15

2015/16

2016/17

Total

140

231. DFID will continue to work with counterparts across Whitehall, especially the FCO and DECC to

ensure that every opportunity is taken to maximise the impact and additionally of the GGGI. The British

Embassy in Seoul provides a valuable means of communicating with GGGI Senior Management and

representing the UK at GGGI Council and other meetings.

232. On the provision of funds DFID will draw up an MOU with GGGI. Such an agreement will include

specific criteria or outputs that the UK requires as a condition of its support.

233. Core funding will enable the UK to assume an influential strategic role on GGGI’s council. As a Council

member DFID will be in a position to scrutinise ongoing management arrangements and also influence

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the strategy, annual work program and budget, the monitoring and evaluation framework, and the

financial controls. In addition, GGGI have expressed an interest that DFID sits on the Audit and

Finance Subcommittee.

234. In addition to DFID’s role on the Council and particular sub-committees, DFID will also influence GGGI

through bilateral engagement, and through forming alliances with similarly minded donors. These

meetings have already commenced alongside Danida and Norad and are held on a monthly basis. On

providing funding DFID would become part of the Donor Consultative group and would participate in

the next Joint Donor Review in 2015.

235. DFID will engage actively on annual reviews and independent evaluations, which will be necessary as

the programme is innovative and building up credible, tested evidence on green growth will be

important to ensure the GGGI’s transformational impact. In managing the programme the Growth and

Resilience department will draw on the knowledge and experience gained from managing the

International Growth Centre and DFID’s accountable grants.

236. Progress against the key results outputs will be subject to oversight by DFID. Funds will be released

according to the KPI schedule below. Financial reports, compliance and administrative functions will

be managed by the DFID programme manager. The DFID programme management team will

coordinate component reporting as necessary to meet DFID annual review requirements. Annual

Reviews will draw on the cadre 10% contribution of advisers across DFID.

237. The DFID programme management team will work closely with related programmes including CDKN.

This will ensure that synergies between programmes are maximised including evaluation and lesson

learning and consistency in approach. The DFID Programme Manager will be Danny O’Mahony.

Governance

238. GGGI grew out of the green growth experience of the Republic of Korea. It was initially structured as a

non-profit foundation under Article 32 of the Civil Code of the Republic of Korea on 16 June 2010. It

converted into an international organization in accordance with an agreement among its major partner

governments in October 2012 following the ratification of the organization’s Establishment Agreement

by several member country governments.

239. On October 23, 2012, GGGI held inaugural meetings of its Assembly and Council in Seoul as part of

the organization’s new international governance structure. This came after a signing ceremony for the

Establishment Agreement, which was held in Rio de Janeiro, Brazil, at the United Nations Conference

on Sustainable Development (Rio+20) in June 2012.

240. Membership to GGGI is open to any member state of the United Nations that subscribes to the

organisation’s goals and objectives. Regional integration organisations –bodies consisting of

sovereign states of a given region –are also eligible for GGGI membership.

241. The GGGI’s governance structure (see below) consists of of an Assembly, a Council, an Advisory

Committee, and a Secretariat whose functions are as follows:

242. The Assembly is composed of GGGI Members and meets every two years. The functions of the

Assembly include advising on the overall direction of GGGI and reviewing the organisation’s progress

in meeting its stated objectives. The Assembly also elects Council members and appoints the Director

General (DG).

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243. The Council serves as the executive organ of GGGI and approves the organisation’s strategy, budget

and criteria for GGGI programmes. Currently, the Council has three sub-committees – a Facilitative

sub-committee, a Programme Sub-Committee, and an Audit and Finance Sub-Committee.

244. The Secretariat acts as the chief operational organ of the organisation and is headed by the DG, who

represents GGGI externally and provides strategic leadership for the organisation to carry out its

objectives.

245. The DG is nominated by the Council and appointed by the Assembly and performs his/her duties under

their guidance.

246. In addition, GGGI has established an Advisory Committee, composed of leading, relevant non-state

actors and serves as a forum for public-private cooperation on Green Growth and provides inputs on

GGGI’s strategy and activities.

247. Since its establishment over a year ago, the Assembly met once in October 2012 and again in an

extraordinary session in September 2013. The Council has already convened four times and held a

strategy workshop in mid-September 2013. The fifth Council meeting will take place in June 2014.

The three sub-committees of the Council have met frequently to discuss and have worked with the

Secretariat on a broad range of topics regarding GGGI’s operations and activity.

248. The frequency of meetings of these governing organs and the breadth of their involvement are

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evidence of the GGGI members’ deep interest and effective guidance in overseeing and leading the

newly launched international organisation to rapidly develop both internally and externally into a full-

fledged IO with effective systems in place to control operations and activity.

249. GGGI has an Audit and Finance Sub-Committee (AFSC) whose members are appointed by the

Council. The current members are Denmark (Chair), ROK, UAE, and Kiribati. They meet on a

quarterly basis and the minutes are produced and reported to the Council. The Committee has been

working very effectively since its inception in January 2013. DFID have received informal assurances

that they will be able to join the AFSC once approved to become a member of the Council.

250. All recommendations made by the AFSC are actioned immediately and evidence submitted to the

Chair of the AFSC who, if satisfied will circulate to all other members. Often these recommendations

form the basis of subsequent decisions by the GGGI Council (for example recently on Procurement

and Budgeting).

251. The Office of Internal Audit and Integrity (OIAI) was established in April 2013 under the direction of the

Audit and Finance Sub-Committee (AFSC) of the Council. The Charter for OIAI, approved by the

Director General and Chair of the AFSC, defines roles and responsibility of the office and clearly sets

out its mandate.

252. GGGI has a Program Sub-Committee whose function is to assist the Council in carrying out its

responsibilities in overseeing GGGI programmatic activities in the areas of green growth planning and

implementation, research and public-private cooperation. The Sub-Committee meet as deemed

necessary, but not less than twice per year. The current members are Costa Rica (Chair), Australia,

Indonesia, Norway and GGGI representatives.

253. GGGI also has a Facilitative Sub-Committee of the Council. Its function is to assist the Council in

carrying out its responsibilities in overseeing GGGI’s activities and facilitating matters that require

coordination with the Director-General in between Council sessions. The Sub-Committee meet as

deemed necessary, but not less than twice per year.

Past Performance

DFID Ethiopia

254. DFID have only financed GGGI to deliver one piece of work, but work with them as strategic partners

on the wider climate agenda. The Ethiopia Green Growth Planning and Implementation Programme is

a flagship GGGI programme in Ethiopia. GGGI have strong established relationships with Government

and are providing strategic, long term technical support. No other partner is delivering such high-level

or strategic support. For other countries and programmes, GGGI should build on the Ethiopian

experience, ensuring they learn lessons about what really works and what doesn’t. In-country strategic

vision and leadership is crucial.

255. GGGI effectively delivered a Climate Resilience strategy for Agriculture sector with Ethiopian Ministry

of Agriculture, funded by DFID. The analysis was robust and they developed a very effective way of

working with the Ministry.

256. GGGI tends to focus on the climate and growth elements; in low income contexts they need to ensure

they bring a sufficiently strong understanding of poverty and social development issues to make the

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links and provide analysis rooted in the political and socio-economic realities of the context.

257. Feedback from DFID Ethiopia reports that GGGI do an excellent job in policy terms, playing a key role

in Ethiopia’s National Green Growth Plan. However, corporate systems have been cited as weak and

still being developed, but that they have rapidly improved only the past year. However they have no

concerns about misspent finance or mismanagement of the programme. They did have some issues

with delayed reporting, and it took GGGI many months to request final payment.

Joint Donor Review

258. Denmark, Australia, Norway and the Republic of Korea conducted a second Joint Donor Review

(JDR) in September 2013. Concerns raised by the review team included:

259. GGGI is in a ‘double transition’ from a Korean NGO to an international organisation and between the

previous and new top management; and this double transition will continue to affect all parts of GGGI’s

operations in the coming year. However, the JDR also commended the efforts of the GGGI Secretariat

to transform the operations of the organisation within a short time frame. GGGI Management

confirmed that the reform process had already produced significant results and that it remained on

track and would continue until members are satisfied that the organisation’s work represents best

practice against international organisation benchmarks.

260. The JDR stressed the need for GGGI Headquarters to provide more support to GGGI country teams.

GGGI management agreed to this need and is in the process of strengthening contact through

improved communication and information flow. GGGI Management also agreed to give priority to

placing more qualified GGGI staff on the ground in partner countries to provide a diversified set of skills

and experience.

261. The JDR raised the need for better integration and consolidation of the organisation’s activities. GGGI

Management fully agreed with this conclusion and is working to ensure that both the country strategies

and corporate strategy integrate the three GGGI work streams.

262. GGGI needs to intensify internal and external communication at all levels and localities. GGGI

management sees communication as a key to achieving GGGI’s overall goals and fully agreed to the

JDR recommendations in this area.

263. The new Executive Management Group (EMG) clearly recognizes the problems with the administrative

systems, including the inadequate systems for country level operational needs, and much of its current

efforts go into addressing the problems, including the key issue of privileges and immunities. New

improved administrative procedures and guidelines have, or are being, developed across areas of the

organization. A new manual for delegation of authority has been developed to address the issue of

delegations to country offices, in particular to decentralize the responsibilities for key areas such as

planning, budgeting, financial management and programs. Hover, these initiatives are all new and

therefore concrete improvements were not picked up in the JDR.

264. The JDR review team found that the intense effort is a positive step, which reflects real commitment to

address the weaknesses in the systems. It will be important to communicate to country teams the

Second Joint Donor Review of the GGGI 2013, November 2013.

Available online at

http://um.dk/da/~/media/UM/Danish-

site/Documents/Politik-og-

diplomati/Nyheder_udenrigspolitik/2013/GGGI/15%20%20Joint%20Donor%20Review%20%20management%20response%

202013.pdf

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planned improvements, and efforts should be made to involve the country program staff in identifying

needs and testing the systems and procedures developed.

265. A status update on progress against the recommendations of the JDR was also prepared for and

presented at the second Donor Consultative Group meeting on 24 February 2014. Donors commented

that the EMGs efforts in addressing their concerns should be commended.

266. DFID will encourage GGGI to continue its progress against the recommendations of the JDR.

Deloitte Assessment for Norwegian Government

267. The Norwegian Government also commissioned three assessment reports, carried out by Deloitte, to

look at GGGI’s corporate functions at Headquarters level, as well as the Indonesia and Ethiopia

country programmes and offices.

268. The primary objective of these reports was to assess the effectiveness of internal controls related to

the financial management of the Norwegian funding to GGGI. The assessment was positive overall,

demonstrating that GGGI had successfully addressed issues raised in an earlier audit which covered

the period before GGGI was an international organisation but included recommendations for

improvements in GGGI’s financial management system that links with and supports GGGI country

programmes. The assessment covered the nine months to September 2013 while GGGI was rolling

out many significant changes to its accounting and controls.

269. By the last quarter of 2013, GGGI had already addressed many of the issues raised by the

assessment team including introducing new and enhanced internal controls and procedures in the

areas of budget management, procurement, contract monitoring and accounting.

Norway’s

satisfaction with the outcomes of the audit was demonstrated by its decision to release to GGGI funds

that had been temporarily frozen.

270. However, there continues to be challenges in ensuring the implementation of necessary financial

control and support rules at the country level. This was especially the case in Ethiopia, while the

situation was found to be better in Indonesia without being fully satisfactory. The management

response to the Deloitte reports shows that the GGGI management have addressed or are in the

process of addressing the identified weaknesses.

271. The full assessment and management response can be found at:

http://gggi.org/wp-content/uploads/2014/02/GGGI-Response-without-cover-letter.pdf

http://www.regjeringen.no/upload/KLD/KL/Seoul.pdf

http://www.regjeringen.no/upload/KLD/KL/Ethiopia.pdf

http://www.regjeringen.no/upload/KLD/KL/Indonesia.pdf

272. GGGI has also prepared technical and financial project reports to external project donors on a number

of projects initiated and implemented in the last 2 years that have been already approved. Some of the

donors are BMU (Bundesministerium fur Umwelt, Naturschutz und Reaktorsicherheit), and the

Norwegian Ministry of Foreign Affairs.

GGGI Response

273. The GGGI Draft Work Plan and Budget 2014-2016 identifies a number of priorities to strengthen the

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management arrangements. The most relevant priorities are recorded here.

274. Ensuring that the Management and Administration (M&A) division is fully operational and able to

deliver the administrative and support services on the basis of the principle of best VFM. This is a

centralized support function, that serves all GGGI projects for routine administrative transactional

processes, including user support, individual human resources servicing, staff recruitment, legal

support vendor management and accounts payable, as well as for sustainability and safeguards, and

project performance monitoring and evaluation.

275. The prioritisation of deploying the Global Resource Efficiency Management System (GREMS) to

ensure that corporate processes and systems are fully standardized in HQ and all projects. The

process of streamlining will involve the development of common rules and procedures to replace

various practices followed by different divisions and departments

276. The HR division will prioritise attracting, developing and retaining a skilled and diverse workforce. The

IT and legal teams will be strengthened. The Finance department will be further strengthened in 2014-

15 to better respond to the recommendations of the JDR. Priorities will include developing the highest

standard Financial Management and Reporting System (FMS) that fully integrates work program

budgets, spending, financial accounts and reporting at the Headquarters` level but also at the level of

satellite offices and in-country operations.

277. The establishment of the Organization and Delivery Unit (ODU) which is independent from the other

program divisions and will be responsible for:

–

Monitoring and Evaluation

–

Reporting

Sustainability management and safeguards

Procurement & consultants

278. These initiatives are expected to significantly strengthen the management arrangements in GGGI and

address the concerns raised by the JDR. Progress is already evident:

279. DFID will continue to scrutinise these management arrangements through its position of the Council,

through the Donor Consultative group and through bilateral engagement.

Informal Working Group on the new Medium Term Strategy

280. In November 2013, GGGI published a concept note which will inform the development of its new

strategic plan for 2015-2020. DFID will play a key role in influencing this strategic plan as it participates

in the Informal Working Group that will develop the document. The strategic plan will set out three

different levels of results: (i) global goals (or impact); (ii) organisational and functional outcomes and

(iii) organisational outputs.

281. This will consist of a six-step process which will involve representative of ministries of the member

states, external green growth experts and representatives of GGGI Secretariat. As part of this process,

there will be a strategy meeting held between Denmark, Norway, The United Kingdom and GGGI held

in May 2014 to ensure donor concerns and priorities are included in the strategy.

GGGI (2013)

Concept Note for Preparing GGGI Strategy 2015-2020,

November 2013

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Key Performance indicators

282. The annual tranches will also only be disbursed following satisfactory performance against key

indicators, which have been identified based on the findings of the due diligence assessment. Criteria

for the 1st and 2

tranche are outlined in Table 15 below, whilst the criteria for the 3

year’s funding

will be detailed during the Joint Donor Review scheduled for 2015. These are expected to be in similar

thematic areas.

283. . If performance is mixed, DFID will be able to provide part of the funding if appropriate. In the event

that GGGI does not perform to the level of expectation, DFID may modify or terminate its financial

contribution to the project giving three months’ notice in writing.

Table 15: Key performance indicators

Good

policy

framework

and

operational planning

1.1 Credible 2015-2020

Strategy agreed and

implemented



tranche – November 2014

tranche – from July 2015

Indicators:

High quality strategy finalised

following a consultative process

Strategy includes commitment

to expand share of low income

countries in GGGI portfolio from

30% to 50%

Indicators:



Evidence that GGGI’s budgeting is shifting

towards 50% of activities in LICs.

Confirmation of programmes in new LIC to

start 2015 and 2016 consistent with

strategic objective on LIC focus

MoV: Council approves Strategy

Timing: November 2014

1.2 2014-16 work plan and

budget updated. Improved

budgeting within identified

financial resources

MoV: Documentation for June 2015 Council

meeting

Timing: July 2015

Indicators:



Credible 2015-17 budget and work plan

with clear revenue and expenditures and

credible plans to close any financing gap .

Enterprise Resource Planning tool in use in

GGGI and used for planning based on

different resource scenarios



MoV: Revised annual budget submitted to June

2015 Council

Timing: June 2015

1.3 Financial planning

demonstrating value for

money

Indicators: targets for cost reductions set for

2014 based on cost saving measures specified

by Division.

MoV: Cost saving measures specified by

Division along with 2015-17 budget/work plan

approval

Timing: Nov 2014

1.4

Strengthened

Divisional

Results

Framework operational

Indicator:

GGGI’s

Corporate

Results

Framework aligned with annual work plan and

specifying results at divisional level

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MoV: Divisional Results Framework included in

work plan presented to Nov 2014 Council

Timing: Nov 2014

1.5 Improved performance

monitoring

gender

impact of programmes

Indicator: Provision for gender

specialist to be recruited in 2015

MoV: Budget and work plan

presented to Council in November

2015

Timing: November 2015

Indicators:



Routine evaluation template for all projects

monitor gender performance

Progress note presented to June Council

meeting on drafting of Gender strategy

under preparation to be discussed at

November 2015 session

MoV: Operational Delivery Unit confirms 90%

compliance from programmes

Timing: mid-2015

tranche – from July 2015

Indicator: ERP rolled out and functioning in all

GGGI countries

MoV: GGGI confirm to DFID if real time

reporting is taking place

Timing: Roll out by end-2014; ERP functioning

and used for reporting by mid-2015

2. Strengthened financial

and HR management

2.1 Enterprise Resource

Planning

tool

(ERP)

designed, rolled out and

operational

tranche – November 2014

2.2 Finance system linking

country offices with HQ in

real time

Indicator:

Quarterly

reports

including

comprehensive information from whole of

GGGI using ERP

MoV: GGGI reporting to Council

Timing: June 2015

2.3 GGGI staff based in

countries with appropriate

financial

and

other

programme management

skills

2.4 Systematic reporting

on adherence with travel

policy

Indicator: Monthly reporting by

GGGI travel management company

Deputy

Director

General

Administration

MoV: Confirmation to DFID by

GGGI

Timing: November 2014

Robust

risk

management framework

3.1

Strengthened

risk

management framework

tranche – November 2014

Indicator: Staff trained in ERP systems

MoV: Reporting

Committee

Timing: June 2015

Indicator: Report on compliance with travel

policy to Audit and Finance Sub-Committee

MoV: Audit and Finance Sub-Committee

Timing: June 2015

to Audit and Finance Sub-

tranche – from July 2015

Indicator: Approach to Enterprise Risk

Management submitted to management for

approval during 2014

MoV: Reporting to Audit and Finance Sub-

Committee

Timing: Dec 2014

3.2 Office of Internal Audit

(OIA)

and

Integrity

functioning effectively

Indicator 1: Work plan of audits on track

Indicator 2: Procurement audit included in OIA

work plan for 2015

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MoV: Reporting to Audit and Finance Sub-

Committee

Timing: June 2015

Exit Strategy

284. As set out in the Appraisal Case, in the event that GGGI does not perform to the level of expectation,

DFID may modify or terminate its financial contribution to the project giving three months’ notice in

writing.

285. If GGGI proves to be successful and an appropriate partner for DFID beyond this 2016/17, it will be a

candidate for additional support from the ICF.

B. What are the risks and how these will be managed?

Risk

In operational

countries, there

are adverse

exogenous shocks

to the economy or

to political stability,

making the case

for green growth

harder to

demonstrate.

Impact

High

Likelihood

Medium

Mitigation Measure

A significant number of countries that will be engaged

are likely to be fragile and potentially conflict affected.

Programme design will require provisions for the

challenges of operating in these countries (e.g.

security) and review the political environment for

growth policy reforms when selecting partner country

programmes.

The programme should also identify key reformers

inside and outside of government and work with them

to influence the elites in choosing policy options for

accelerating economic growth, ideally also working

with domestic think tanks in partner countries. The

stability and longevity of the programme should be

enhanced through multi-stakeholder and cross-

governmental engagement.

Residual

Risk

Medium

Poor planning and

programme

management

adversely affects

timely delivery of

outputs for policy

Medium

Lack of demand

from policy makers

in developing

countries,

especially DFID'

focus countries

Failure to attract

and maintain

expertise within

GGGI

High

Low

–

especially

post

Rio+20

The JDR found failings in the existing management

systems. However, GGGI have devoted resources to

improving these. They have rolled out the Global

Resource Efficiency Management System (GREMS)

to ensure that corporate processes and systems are

fully standardized in HQ and all projects. However

there is a residual risk that there is a lag between

having the systems in place and having staff that are

fully trained on how to use them.

Currently, demand for work on green growth from

policymakers in developing countries has been high.

The programme will need to maintain a high standard

in order to create reputation and sustain demand.

Medium

Low

High

Medium

Following the transition to a treaty based international

organisation, GGGI implemented a personnel

structure and compensation scheme that has been

benchmarked

against

other

international

organizations. Nevertheless the JDR found staffing to

be an issue and criticised the extensive use of

Medium

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Lack of political

appetite to adopt

policy

recommendations.

High

Low

Lack of capacity

within country

governments to

implement reforms

High

Medium

The speed of the

reform process

and the fact that

many new

initiatives and

guidelines are

being implemented

simultaneously.

Poor

communication

between HQ and

country offices and

disjointed

approach to green

growth

Financial

management

systems

High

Medium

High

Low

consultants that worked alongside GGGI staff. The

Draft Work Plan and Budget 2014-2016 identifies this

as a priority area and will seek to strengthen human

resources.

Selection of countries will be based on demand and

any advice will need to be strongly tailored to

country's political circumstances. GGGI is frequently

approached by governments to conduct work with

them on green growth planning and implementation.

Programs will be designed to ensure cross-

governmental buy-in and engagement at the highest

levels to ensure adoption of policy recommendations.

The Research Strategy will ensure it remains

responsive to emerging growth policy issues.

The JDR found that GGGI had successfully

established itself into a trusted adviser to the

Governments of Ethiopia and Cambodia.

The programme will need to strengthen its ability to

assess capacity upfront, before engaging. It will

assess capacity to implement policy reforms and to

ensure that capacity building will be an integral part of

the green growth planning process. The GGGI will

focus on capacity building throughout the programme.

While a number of improvements were advocated in

the JDR, the fast pace and parallel process in which

the improvements and guidelines are being

developed and introduced could risk leading to

procedures that are off target or inconsistent with

each other. GGGI have postponed plans for

expansion beyond their existing countries to

consolidate and adapt to new processes.

The JDR found that there were benefits from a

decentralized approach where country offices were

flexible and able to meet local demands but

recognised the risk that this posed to ensuring a

consistent approach. GGGI have committed to

significantly

strengthening

their

internal

communications.

GGGI is introducing a new accounting system to

enable better cash flow analysis as a basis for

simulating financial scenarios over 1-2 years. The

financial scenario analysis will help identify risk

factors and so aid measures to prevent or mitigate

risk. A spreadsheet based model will complement the

financial risk analysis relating to liquidity, currency

and contractual liabilities. Alternative funding sources

are being examined as a way of expanding resources

and mitigating emerging risks

The main climate and environmental risk is that the

programme fails to deliver its objectives. Hence the

mitigation and risk rating are the same as those for

the overall programme.

Ensuring

GGGI

has

international

standard

environmental policies and safeguards in place

Low

Medium

Low

High

Medium

Climate

and

environment risks

Overall

Climate

and

Environment

safeguards

Medium

High

Low

Medium

Low

C. How will progress and results be monitored, measured and evaluated?

Monitoring

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286. GGGI’s Monitoring and Evaluation Framework is attached at Annex VI. GGGI is in the process of

changing its results framework with a target completion date of September 2014 and would make the

monitoring framework more tightly aligned with the overarching framework at the HQ level and country

programming framework at decentralised entities. This would entail establishment of SMART

indicators with clear baseline, milestones and targets. This would be supplemented by a metadata

handbook with definition of indicators, methodology, and frequency of data collection and associated

costing.

287. Once projects have begun implementation, they are monitored on a quarterly basis. There are two

essential reporting formats that the GGGI teams are required to update on a regular basis. The first is

that teams are required to produce Quarterly Internal Reports (QIRs) within one month of the end of

every quarter. The QIRs form the basis for Quarterly Progress Reports (QPRs) which are put together

by the Organisation and Delivery Unit. The QPR is an aggregate at portfolio level of all the variables

tracked at project level.

288. Teams are also required to produce and update, on a monthly basis, project Master Decks, which

serve as the repository of the content and analytical framework of the project. Master Decks are

reviewed by Directors across departments.

289. QIRs include risk ratings that cover institutional risk assessment and political risk assessment. Risk

feedback is provided by the teams and reviewed/assessed by Regional Directors and the Deputy

Director General. This information is summarised in the QPRs, in which it is also included a “watch

list” of projects with disbursements lower than 40%, a list of projects with scoping of set-up delays, and

projects that are closing.

290. QIRs also include ratings on project performance (unsatisfactory, satisfactory, and highly satisfactory)

and on project risk (low, high, and medium). Performance ratings include disbursement, procurement,

financial management, and overall implementation progress.

291. The ERP tool that is scheduled for implementation during 2014 for GGGI will greatly facilitate

information flows, timeliness, reporting and reduce both transaction costs and the reporting burden on

teams. It will provide a single source for information For example, project work plans and contract

award and disbursement projections that are developed and approved as part of the budget process

will be used directly by ODU for monitoring and reporting purposes – allowing real-time monitoring.

Project achievements in producing outputs and reaching milestones – which they monitor as part of

effective project management – will be updated in ERP as they occur and allow ODU to generate

reports without having to revert back to the teams requesting duplicative reports.

292. This will also allow the management teams in the workstream to request and generate reports tailored

to their needs and answer key queries in real time; for example, (i) what is the status of contract

awards and disbursements against projections today?; (ii) what projects have fallen more than 30%

behind their projections and what are the causes of those delays?; (iii) what have been the key outputs

and milestones achieved in the last quarter?; (iv) what has been the breakdown of assistance by

sectors (which are now aligned with the DAC definitions); among many other possible queries. In this

regard, the process of data collection through QIRs will change dramatically as the ERP comes online.

For example, generating key achievement reports can be timed to precede key Council meetings and

disbursement / contract award report updates can be timed to precede budget reviews.

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293. In preparation for the ERP, the Organisation Delivery Unit has been working closely with the

workstreams to map the project processes, required documentation, approvals etc. which will be

integrated into the ERP system. The system will have some core project management capabilities and

allow, for example, use of the logical framework as an implementation tool.

294. DFID will continue to monitor progress being made on the updated results framework and the

establishment of SMART indicators with clear baseline, milestones and targets. DFID will also ensure

that introduction of the ERP tool progresses effectively. DFID’s logframe will be updated once GGGI’s

new strategy and results framework have been finalised in late-2014.

295. Strategic Outcome indicators will measure progress in terms of commitment and capacities that HQ

and country programs put in place to contribute to the global goals. Strategic Outcome indicators will

provide the clear basis of aggregation of results delivered in countries as well as structured profile by

country.

296. A balanced set of indicators for organisational outputs for each strategic outcome and functional

outcome will be formulated.

297. DFID will monitor progress under the GGGI with reference to the log frame, the business case, agreed

work programmes and delivery of key milestones.

Evaluation

298. As set out above GGGI and DFID are establishing sound procedures to monitor programme delivery,

management and outputs. In addition mechanisms have been established to monitor the impact and

outcome levels of the programme through the logical framework. These will be important sources of

information on which to base evaluations.

299. Annual reviews will take stock of overall progress against planned results, agree forward strategic

priorities and work programmes, identify key lessons and risks, and consider what changes are

needed to maximize the likelihood that long term outcome indicators are achieved. Annual reviews will

also focus upon progress by GGGI in undertaking key institutional reforms and strengthening their

management arrangements.

300. To ensure impartiality and to ensure GGGI’s impact is evaluated robustly an independent evaluation

will be undertaken as part of the Climate and Environment Department’s ICF Evaluation programme,

managed and funded separately from GGGI. Climate and Environment Department will explore

potential to undertake a join evaluation of GGGI with CDKN.

301. This will help ensure that GGGI’s impact and influence is evaluated as one player in the overall green

growth, sustainable development and climate landscape and will allow a degree of independent

‘benchmarking’ against similar institutions and programmes.

302. The first round of independent evaluation be undertaken in time to inform, (and as part of) the joint

donor review of the programme in 2015. This will be conducted in a similar format to the Joint Donor

Review of 2013. Terms of Reference can be found in Annex 2 of this document:

http://gggi.org/wp-

content/uploads/2013/11/GGGI-Management-Response-to-Second-JDR_Final_04112013.pdf

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Logframe

Quest No of logframe for this intervention: 4487838

Indicators in the logframe are based on the work plan for 2014-16.The logframe will be revised when the

GGGI’s medium term strategy 2015-2020 is finalised in late-2014. In particular Global Goals will be

developed in the medium strategy that will constitute impact indicators in the logframe. These will show

GGGI’s contribution to assisting national governments progress towards achieving growth and low carbon

and sustainable development objectives.

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Appendix: GGGI operational approach

Notes: GGP&I = in-country work with governments and private sector; KDM = knowledge development; PPC = public private cooperation