GREEN FUNDS MEET GREENBACKS: REDLAC IX CONSIDERS

UNCLAS SECTION 01 OF 04 SAN JOSE 002071

SIPDIS

STATE PLEASE PASS TO AID
AID FOR SLAMPMAN, JHESTER, AND JGARRISON
TREASURY FOR KBERG

SIPDIS

E.O. 12958: N/A
TAGS: SENV EAID EFIS ENRG ES XM
SUBJECT: GREEN FUNDS MEET GREENBACKS: REDLAC IX CONSIDERS
PUBLIC-PRIVATE ALLIANCES

REF: STATE 030914


1. SUMMARY: Enterprise of the Americas Initiative (EAI) and
Tropical Forest Conservation Act (TFCA) debt for nature funds met on
the margins of the ninth meeting of the Western Hemisphere Network
of Environmental Funds November 13-15. In addition to governance
issues, fund managers explored lessons learned through partnerships
with the private sector, international institutions, and civil
society. USAID's Global Development Alliance, the AID-supported
Gulf of Honduras Mesoamerican Reef project (MAR),and environmental
fund experiences in Peru, Bolivia, El Salvador and Jamaica received
particular attention. The EAI/TFCA funds provide particularly rich
opportunities for promoting mission ESTH and public outreach
priorities. END SUMMARY.


2. The Salvadoran Enterprise of the Americas Initiative Act (EAI)/
Tropical Forest Conservation Act (TFCA) Funds administrator
Enterprise of the Americas Fund El Salvador (Fondo de la Iniciativa
de las Americas El Salvador- FIAES) hosted the ninth meeting of
REDLAC, the Western Hemisphere network of environmental funds,
November 13-15 in San Salvador. The U.S. organized a November 12
side meeting for U.S.-backed funds founded under EAI and TFCA. Both
meetings focused on opportunities for promoting public-private
partnerships with the private sector and civil society.

BUSINESSES AND ENVIRONMENT FUNDS SCOUT OUT COMMON GROUND
-------------- --------------


3. AID's TFCA/EAI coordinator Scott Lampman and Global Development
Alliance coordinator Melanie Oliviero encouraged funds to
contemplate relationships with the private sector and other
non-traditional partners. Such partnerships tap changing resource
flows - the public funds/private resources ratio for financial flows
shifted from 70/30 to 15/85 between 1970 and 2005. A continuum of
environmental fund services could include managing grants, revolving
funds, loan guarantees, green investing, micro-credit, venture
philanthropy and market-based exchanges. To date, AID's GDA mounted
600 alliances with 1,700 partners, leveraging USD 5.8 billion with
an AID investment of USD 2.1 billion. Funds can take advantage of
"push" and "pull" factors that encourage the private sector to seek
out cooperation.


4. Risk is the chief "push" factor sparking private sector interest
in environmental protection. A World Business Council for
Sustainable Development representative flagged water shortages,
climate change, ocean overexploitation, and habitat and biodiversity
loss as factors encouraging companies to measure and internalize
environmental costs and benefits through cleaner production
strategies (reducing costs by reducing inputs and wastes),
environmental risk management processes, and triple accounting,
which captures the industry bottom line with regard to finances,
environment and social priorities. The Dutch Fund for Nature
Development's Ivo Mulder pointed to a growing interest among
financial institutions to take into account biodiversity risks as
businesses tap green market niches, face environmental due diligence
concerns, and freshen their corporate image. He cited incremental
but groundbreaking techniques like Rabobank's scrutiny in lending of
corporate social responsibility policies, Goldman Sach's use of
biodiversity benchmarks, or Calvert's biodiversity criteria in
casting proxy votes. (See www.biodiversityeconomics.org for
"Biodiversity: The Next Challenge for Financial Institutions.")


5. On the "pull" side, fund activities may complement core
operations of private sector partners (as well as religious
organizations, remittance senders, consumer organizations, and
international organizations),enhancing workforce development and
competitiveness; ensuring a sustainable supply of inputs; achieving
a more secure business environment and promoting sound environmental
practices; boosting local economic opportunities, creating jobs and
stabilizing local society; and improving the company's image. Funds
can offer expertise in grant-making; build capacity among community
partners; convene civil society; stimulate national dialogue; and
measure results. The Colombian EAI Fund, the Fund for Action on
Environment and Childhood (Fondo para la Accion Ambiental y la Ninez
- FPAA),explored a range of examples drawn from examples in Mexico,
Brazil and Colombia to illustrate public-private partnerships from
philanthropy (giving) through transactional (exchange of value) to
integrative (joint planning) cooperation with civil society.


6. Experiences explored in the course of the week included:

-- EAI Peru (Fondo de las Americas Peru - FONDAM) entered into an
agreement with Yanacocha Mining Company's to administer a
state-mandated USD 31 million fund. The deal boosted FONDAM's
profile, honed its skills, stimulated confidence among other
possible donors, and generated new resources.


SAN JOSE 00002071 002 OF 004


-- Peru's National Fund for Areas Protected by the State (Fondo
Nacional Para Areas Protegidas por el Estado - PROFONANPE)
highlighted its agreement with PlusPetrol Peruvian Corporation to
establish a fund linked to the controversial establishment of a
liquefied natural gas facility near Paracas National Park. It will
support implementation of a park master plan, science research,
environmental education, and tourism.

-- The Environmental Fund for Jamaica reviewed efforts to complement
the EAI fund by recruiting partners like USAID or the UNDP GEF small
grants program to support follow-on funding. The Jamaican
representative recommended educating the fund board about
partnerships, cultivating the fund image, addressing the private
sector in their own terms, and adding value by pinpointing
appropriate grantees.

-- El Salvador's SalvaNatura reviewed the evolution of its
relationship with Shell, transforming a donor into a partner
underwriting park management in El Imposible protected area and
supporting TV shorts. The relationship opened the door to Phillip
Morris and Grupo El Roble support for further land purchases in
protected areas.

-- Salvadoran geothermal power producer LaGeo, whose scientific
research defined reforestation and other mitigation priorities (risk
reduction); whose community investment programs promoted workforce
training and alternative crop promotion (improving labor quality);
and whose outreach promoted environmental education and animal
rescue centers (promoting the company image).

-- Salvadoran hydro power producer CEL. Its social programs
mitigated dam construction impact through relocation of people,
promotion of new tourism activities and fish stock replenishment.
It addressed risk by promoting wind and solar research, capturing
carbon offsets and strengthening flood control and watershed
management, and promoted cleaner production by harvesting
soon-to-be-inundated vegetation in the dam basin.


CREATING A SPLASH - A MARINE RESOURCES CASE STUDY
--------------


7. USAID official Barbara Best discussed protection of Gulf of
Honduras reefs through the Meso-American Reef Project (MAR),a
USAID-United Nations Foundation partnership implemented by the
International Coral Reef Action Network (ICRAN - itself a UNEP
project in cooperation of 6 NGOs) and 300 institutions in Mexico,
Belize, Guatemala and Honduras. Over its life, MAR administered a
USD 1.6 million fund that benefited 1,000 direct beneficiaries on
watershed management, sustainable fisheries and sustainable tourism
projects. Best focused on the Honduran lobster fishery, which is
allegedly exporting undersized lobster in El Salvador and Panama and
is allegedly poaching lobster in Nicaraguan waters in a way that
places its Nicaraguan divers at risk. Given the lack of incentives
for collaboration among Gulf of Honduras fishermen, support from
major buyers proved more useful than working with producer
organizations. In this case, donors helped broker dialogue between
the private sector and NGOs by coordinating a common "request" from
environmentalists to industry; guiding the integration of business
and environment needs; and convoking dialogue. Best cited various
lessons learned, including:

- Alliances take time and can involve high transaction costs,
steep leaning curves, and slow confidence -building among partners.
-- Agreements with a trade association and a particular industry
"champion" partner can encourage broader cooperation from other
companies.
-- Prospects for success grow when NGO personnel are familiar with
the industry, when the project reduces risks to human health or
environment, or when a sector seeks to implement international
standards to meet the scrutiny of international markets.
-- Consultative processes boost buy-in. Voluntary codes of conduct
can encourage more formal rule-making as participants subsequently
seek level playing fields.
-- Success is marked by continuing engagement after limited
commitments have ended.


8. The ALCOA Foundation, which promotes conservation and
sustainability, global education, children's health, and community
and business partnerships, provided further suggestions on
approaching the private sector:
-- Review prior projects funded by the private sector partner to
ensure an understanding of its priorities.
-- Describing proposed results in terms of outputs, short-term
impact and long-term impact;
-- Convey a project's strategy as a story and explain the onward
strategy after funding runs out.

SAN JOSE 00002071 003 OF 004



BEST PRACTICES AND FUND GOVERNANCE
--------------


9. Organizers of two studies on financial management and
administrative best practices sponsored requested cooperation of the
REDLAC funds in conducting surveys. REDLAC expressed full
cooperation with the study and requested a partnership with the
study sponsors.

-- Daniel Sacaccardi presented a proposal by the Conservation
Finance Alliance, the Wildlife Conservation Society, and Common Fund
to survey environmental fund practices and performances in managing
monies. The Financial Benchmarking study would produce a baseline
for environmental fund financial management and compare general
trends in the sector, allowing for individual funds to grade
themselves and make adjustments accordingly.

-- Barry Spergel and Philippe Taieb are commissioned by the
Conservation Finance Alliance to test the assumptions of a 1999 GEF
Report assumptions on conservation trust funds. The exercise will
identify administrative best practices, develop methodologies for
measuring the biodiversity impact of such funds, and identify
conditions for success.


10. Lampman explored lessons learned during the evaluation process,
encouraging funds to seek out new opportunities that fit their
expertise. These included updating strategic plans; developing
fundraising strategies to offer services for or attract support from
third parties; developing strategies to boost their profiles;
rationalizing administrative costs, especially with regard to
streamlining project awards or operational procedures; making use of
new information technologies; and improving the measurement and
reporting of impacts. He considered the role of the Board,
stressing the need to clarify areas of responsibility and ensure new
board members are trained in Board operations.

ABOUT REDLAC
--------------


11. The Network of Latin American and Caribbean Environmental Funds
(Red de Fondos Ambientales de Latinoamerica y el Caribe - REDLAC)
counts as members of 20 funds in 14 countries in order to share best
practices, seek out financial mechanisms and facilitate civil
society participation. The funds manage US 836 million in sinking
funds, endowments and revolving funds and have financed 10,000
projects. Participating funds included the Environmental Foundation
of Jamaica; the Fondo para la Accion Ambiental y la Ninez (FPAA-
Colombia); Fondo Patrimonio Mundial (Colombia); Fondo de la
Iniciativa para las Americas (FIAES - El Salvadaor); Fundacion
Proteccion y Uso Sostenible del Medio Ambiente (PUMA- Bolivia);
Fundacion para el Desarrollo del Sistema Nacional de Areas
Protegidas de Bolivia (FUNDESNAP-Bolivia); Fondo del as Americas
(Peru); Fondo Nacional para Areas Naturales Protegidas por el Estado
(PROFONANPE - Peru); Protected Areas Conservation Trust
(PACT-Belize); Fundacion Natura (Panama); Fideicomiso para la
Conservacisn en Guatemala; Fundacion Vida (Honduras); Suriname
Conservation Foundation; Fondo Ambiental Nacional (Ecuador); GEF
Small Grants Program; Fondo Brasileno para la Biodiversidad
(FUNBIO); Fondo Nacional del Medio Ambiente (FNMA - Brazil); Fondo
Naconal para la Conservacisn de la Naturaleza (Guatemala); Fondo
Mexicana para la Conservacisn de la Naturaleza (FMCN); and MAR.
U.S.-supported funds from Bangladesh, Botswana, Costa Rica, Paraguay
and the Philippines also participated.

COMMENT: LINKING FUND AND EMBASSY PRIORITIES
--------------


12. El Salvador's EAI/TFCA fund, FIAES, expressed an interest in
leveraging its activities with opportunities available to Embassy
San Salvador. In El Salvador and elsewhere, EAI/TFCA funds can
benefit from tools available to U.S. missions and provide public
outreach opportunities. REO recommends that Post ensure that
EAI/TFCA boards are kept aware of Mission tools, public outreach
opportunities, and project linkages. EAI/TFCA projects are an
excellent public outreach platform that can serve to educate Mission
officials, bolster grassroots contacts, and burnish the U.S. image.
Missions might consider using DVC facilities to encourage discussion
between funds, government officials and/or U.S. experts to address
key issues that Funds encounter as they carry out their work. Funds
may be a source for names of outstanding local leaders for IV and
VOLVIS programs. Other programs providing common ground may
include:

-- Embassy Science Fellow Program: EAI/TFCA Funds may be grappling
with science issues linked to prospecting, climate change
mitigation, application of remote sensing information or geographic

SAN JOSE 00002071 004 OF 004


information systems, etc. Posts may wish to consult with the
EAI/TFCA funds whether the Embassy Science Fellow Program (reftel)
could be a vehicle for making the technical expertise of a
particular U.S. agency available to the Fund or its partners for an
extended period of time.

-- American Fellows Program (www.partners.net): Managed by the NGO
Partners of the Americas, the American Fellows Program offers to
place a mid-level government official (city, provincial or regional)
in a counterpart office for up to six months to work as part of that
office's team - so long as the candidate speaks the language of the
receiving country. EAI/TFCA funds facing particular challenges in
working with government partners may benefit from expertise derived
from exposure to U.S. practices.

-- Project GLOBE (www.globe.gov): For countries with a Global
Learning and Observation to Benefit the Environment (Project GLOBE)
Agreement, it might be possible to bolster Fund activities through a
partnership with GLOBE schools. The program could make available to
the Funds GLOBE tools and techniques to monitor various parameters
relevant to forest conservation.

-- Earth Day(www.earthday.gov): It is never too early to consider
what public outreach activities could be linked to Earth Day,
commemorated by the U.S. on April 22. The EAI/TFCA Funds are a
natural partner for commemorative events like arts, music or essay
contests, field trips for partner schools, good news stories for the
press, or similar activities. Embassy inquiries of fund activities
around April 22 might identify new opportunities to which Earth Day
events can be linked.

-- Site Visits: Funds frequently have close ties with protected
areas managers and community organizations with sustainable tourism
or sustainable production components. Visits to fund-supported
activities could boost the morale of its partners, draw local
attention to the difference U.S. support can make, and provides an
opportunity to check that U.S. funds are being used properly. CLOs
might consider whether Embassy community members might be interested
in supporting partner organizations by visiting protected lands or
taking advantage of recreational activities organized by EAI/TFCA
Fund partners. Commissaries might consider carrying crafts or foods
prepared by Fund partners and beneficiaries. Post recognition
boosts the standing of the Funds and its partners and emphasizes the
grass-roots benefits of U.S. support for host countries. End
comment.

LANGDALE