With Ernst & Young AG for Republic of Azerbaijan

With Ernst & Young AG

for Republic of Azerbaijan 28 January 2022

Proposal title: Gap assessment and action plan for the International Bank of Azerbaijan (IBA) to meet the GCF requirements

Country: The Republic of Azerbaijan

National designated authority:

Ministry of Ecology and Natural Resources His Excellency Mr. Mukhtar Babayev (Minister, 100A Bahram Aghayev Street, Baku, Azerbaijan, +994 12 538 53 81)

Implementing Institution: Ernst & Young AG

Date of first submission: 30 June 2021

Date of current submission / version number

29 November 2021 V.2

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How to complete this document?

This document should be completed by National Designated Authorities (NDA) or focal points with support from their Delivery Partners where relevant. Once completed, this document should be submitted to the GCF by the NDA or focal point via the online submission system, accessible through the Country Portal of the GCF website.

Please be concise. If you need to include any additional information, please attach it to the proposal.

If the Delivery Partner implementing the Readiness support is not a GCF Accredited Entity for project Funding Proposals, please complete the Financial Management Capacity Assessment (FMCA) questionnaire and submit it prior to or with this Readiness proposal. The FMCA is available for download at the Library page of the GCF website.

Where to get support?

If you are not sure how to complete this document, or require support, please send an e-mail to [email protected].

You can also complete as much of this document as you can and then send it to [email protected], copying both the Readiness Delivery Partner and the relevant GCF Regional Desks. Please refer to the Country Profiles page of the GCF website to identify the relevant GCF Country Dialogue Specialist and Regional Advisor.

We will get back to you within five (5) working days to acknowledge receipt of your submission and discuss the way forward.

Note: Environmental and Social Safeguards and Gender

Throughout this document, when answering questions and providing details, please make sure to pay special attention to environmental, social and gender issues, particularly to the situation of vulnerable populations, including women and men. Please be specific about proposed actions to address these issues. Consult Annex IV of the Readiness Guidebook for more information.

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1. SUMMARY

1.1 Country submitting the proposal

Country name: The Republic of Azerbaijan

Name of institution representing NDA or Focal Point:

Ministry of Ecology and Natural Resources

Name of contact person: His Excellency Mr. Mukhtar Babayev

Contact person’s position: Minister

Telephone number: +994 12 538 53 81

Email: [email protected]

Full office address: 100A Bahram Aghayev Street, Baku, Azerbaijan

Additional email addresses that need to be copied on correspondences:

-

1.2 Date of initial submission

30 June 2021

1.3 Last date of resubmission

29 November 2021 Version number V.2

1.4 Which institution will implement the Readiness and Preparatory Support project?

☐ National designated authority ☐ Accredited entity ☒ Delivery partner Please provide contact information if the implementing partner is not the NDA/focal point

Name of institution: Ernst & Young AG

Name of official: Joost Vreeswijk

Position: Partner

Telephone number: +41 58 286 24 09

Email: [email protected]

Full office address: Corso Elvezia 9, Lugano - 6900, Switzerland

Additional email addresses that need to be copied on correspondences:

[email protected] [email protected]

1.5 Title of the Readiness support proposal

Gap assessment and action plan for the International Bank of Azerbaijan (IBA) to meet the GCF requirements

1.6 Type of Readiness support sought

Please select the relevant GCF Readiness objective(s) below (click on the box – please refer to Annex I and II in the Guidebook): ☒ I. Capacity building ☐ II. Strategic frameworks ☐ III. Adaptation planning ☐ IV. Pipeline development ☐ V. Knowledge sharing and learning

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1.7 Brief summary of the request Azerbaijan is highly vulnerable to the negative effects of climate change. The

challenges of sustainable development and protection against climate change are essential in the country. In its first INDC (2017), Azerbaijan committed to reducing its 2030 greenhouse gas emissions by 35% compared to 1990. These commitments require to mobilize large amount of investments to finance mitigation and adaptation projects and programs. To date, Azerbaijan has received very little international financial support: there is therefore an urgent need for accelerating the country’s financial capacity to combat climate-change.

Today, there is no direct access entity that would enable Azerbaijan to more easily engage with the GCF. As the largest bank of the country, the IBA can play a leading role in the implementation of the Azerbaijan’s INDC by channeling international financial support for adaptation and mitigation projects and programs.

However, despite an extensive track record and proven operations, the IBA needs to strengthen its capacities in order to meet the GCF requirements (basic and specialized fiduciary criteria, environmental & social safeguards and gender criteria). Therefore, this Readiness proposal aims to:

- Carry out a gap analysis against the GCF requirements; - Design an action plan to address the identified gaps.

In that perspective, this Readiness will address the following GCF outcome:

- Outcome 1.2: Direct access applicants and accredited entities (DAEs) have established capacity to meet and maintain the GCF’s accreditation standards; and accredited DAE s have the capacity to develop a pipeline of projects and effectively implement GCF-funded activities.

1.8 Total requested amount and currency

USD $ 41,906

1.9 Implementation period 3 months

1.10 Is this request a multiple-year strategic Readiness implementation request?

☐ Yes ☒ No For more information on how a country may be eligible to access Readiness support through this modality, please refer to Annex IV of the Readiness Guidebook.

1.11 Complementarity and coherence of existing readiness support

☒ Yes ☐ No Azerbaijan has received GCF readiness support through three past Readiness projects between 2017 and 2019, named:

- NDA Strengthening and Country Programming support for Azerbaijan through UNDP;

- NDA Strengthening and Country Programming support for Azerbaijan through FAO;

- Adaptation planning support for Azerbaijan through UND.

Those Readiness projects overall helped the country reinforce its NDA’s capacities, to identify ways to attract and work with the private sector to finance climate action in the country, and to prepare the country’s NAP focusing on three adaptation priority sectors (water, agriculture and coastal areas). This Readiness proposal will capitalize on previous Readiness projects by launching IBA’s GCF accreditation process with a technical gap assessment and action plan, to provide Azerbaijan with a technical institution able to manage GCF funds and finance climate actions.

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2. SITUATION ANALYSIS

1) Preamble: This Readiness Proposal was prepared along with the NDA and IBA through an iterative process to ensure the good understanding of the needs and a careful establishment of activities, budget, schedule, risks and their mitigation measures.

2) Country Profile: The Republic of Azerbaijan is a part of the Caucasus region located between Eastern Europe and Western Asia and has a total land area of 86,600 km2. The population of the country was estimated at 10,139,177 people with an annual growth rate of 0.91 % for 20201. Approximately 44% of the population lived in rural areas, while women constituted 50.08% of the total population in 20192. Azerbaijan is considered to be one of the densely populated developing countries3 and ranked 88th on the Human Development Index in 20194. The country had a Gross National Income per capita of $4480 in 20195. The oil and gas sector is the backbone of the country’s economy and accounted for around a third of the total GDP6 in 2020. Forestry, fishing and agricultural production of commodity crops like cotton, cereals, tobacco and pulses accounted for around 5.7% of GDP and provided work for approximately 36% of the total labour force in 2019. Azerbaijan is a relatively low emitter of GHG with 78.35 Mt C02e total emissions in 2018, accounting for approximately 0.17% of the global emissions. Energy sector and agriculture are the largest sources of GHG emissions contributing to approximately 86% and 9% of overall emissions respectively in 20187. Considering geographical characteristics of its location, Azerbaijan is most vulnerable to negative impacts of the climate change mainly due to drought, flooding and heat stress that are expected to increase in the upcoming future8. According to the Ministry of Ecology and Natural Resources’ (MENR) forecasts, the country may face serious risks as a result of climate change, such as (i) low level of precipitation during winter, (ii) reduced water levels in surface and groundwater basins, (iii) higher probability of forest fires, and (iv) flooding increase that can impact forests. Reduced precipitation and lower freshwater levels can cause serious negative impacts on irrigation system and eventually agriculture productivity can be affected. Besides the environmental impacts such as loss of ecosystems, a probability of extreme floods, especially in the mountainous areas of the country, can have social impacts as well (e.g. forcing the local population to relocation and decreasing the agricultural production in the flooded areas). Today, Azerbaijan’s freshwater reserves face a risk of depletion unless proper water resource management practices and water resources conservation efforts are applied at a wider scale. Due to inefficient water infrastructure, increasing urban water consumption, poor water management systems, and wasteful agricultural practices, a quarter of all freshwater is wasted during use. For example, decrease in the water level in Kura River has been observed during the last 5-6 years, and during the early summer in 2020 it shrinked by 108 cm mainly because of high temperatures in summer and low precipitation in winter that year9. Forests cover only 11.8% of territory in Azerbaijan and are vulnerable to the changing climatic conditions and extreme weather events (droughts and heat stress), which can lead to more frequent natural forest fires, caused due to increased soil aridity, lower humidity. These underlying climatic factors can negatively affect the ecosystem recovery (worsening biodiversity) and services provision (ecotourism), as well as have an impact on land use in Azerbaijan. In addition to major water management challenges, Azerbaijan is regularly enduring huge loses of natural capital. It was estimated that only 49% of all arable land is fit for use due to imbalanced

1 https://population.un.org/wpp/Download/Standard/Population/ 2 https://data.worldbank.org/indicator/SP.RUR.TOTL.ZS?locations=AZ 3 https://unfccc.int/sites/default/files/resource/ 4 http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/AZE.pdf 5 http://data.un.org/Data.aspx?q=Azerbaijan 6 Azerbaijan energy profile – Analysis - IEA 7 https://www.climatewatchdata.org/data-explorer/historical-emissions 8 https://eu4climate.eu/wp-content/uploads/countries/EU4Climate-AZERBAIJAN.pdf 9 https://www.ecolifeinfo.az/en/kura-river/#:~:text=The%20water%20reserves%20of%20the,pumping%20stations%20in%20neighboring%20countries.

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salinization, oil spills, erosion and chemical pollution. As a complicating factor, an average of 300km2 of land is flooded every year, making considerable areas of land unfit for agriculture10. As a result, these effects may put almost a third of the country’s population at risk of losing its main source of income and put stress on food supply. Also, failure by the neighboring countries to ratify the Helsinki Water Convention (2020) and the absence of a legal basis for transboundary cooperation and water resources management undermines water safety. Thus, Azerbaijan must take proactive mitigation and adaptation measures to slow down the loss of natural capital and stabilize the water supply in the country. Azerbaijan ratified the United Nations Framework Convention on Climate Change (UNFCCC) in 1995, established the State Commission on Climate Change in 1997; and ratified the Kyoto Protocol in 2000. Many important laws and regulatory acts supporting climate change mitigation and adaptation have been passed based on European legislation. In 2014, the “State Program on the Improvement of Environment and Effective Use of Natural Resources in Azerbaijan 2014–2020” was reviewed wherein Nationally Appropriate Mitigation Actions (NAMAs) and other activities on climate change were also prioritized. Azerbaijan’s most recent adopted framework is UNSDCF (UN Sustainable Development Cooperation Framework) covering the period of 2021-2025. The framework identifies protecting the environment and addressing climate change as one of the four priority areas11.

3) The Intended Nationally Determined Contribution (INDC) of the Azerbaijan: Azerbaijan is fully committed to the implementation of the Paris Agreement on climate change under the UNFCCC. As its contribution to the global climate change mitigation efforts, the government introduced its first INDC in 2017 where a 35% reduction in the level of greenhouse gas emissions compared to the 1990 base year was targeted by 203012.

Source: UNFCCC on the INDC of the Republic of Azerbaijan

Mitigation activities

Azerbaijan has set multiple mitigation targets in its INDC, ranging from an increased use of renewable energy technologies to enhanced protection of its natural capital. Azerbaijan intends to

10 Azerbaijan 2030: A Vision of the Future – Baku Research Institute 11 https://azerbaijan.un.org/en/114165-un-azerbaijan-sign-new-cooperation-framework-2021-2025 12 https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Azerbaijan%20First/INDC%20Azerbaijan.pdf

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use the economic, social and political resources to ensure the effective implementation of projects focusing on energy efficiency, reduction of country’s GHG emissions, efficient consumption of natural resources and increasing adaptation capacity of its communities, ecosystems and major activity sectors. Azerbaijan’s commitment to combatting climate change is also reflected in its recently endorsed development strategy of “National Priorities for Socio-Economic Development: Azerbaijan 2030” which is a follow-up for the previous 2020 Strategy.

To fulfil these commitments, Azerbaijan needs additional resources such as international assistance in the form of financial support and technology transfer. At the same time, international cooperation is an important element for identifying gaps and required institutional improvements as well as facilitating the adoption of innovation.

Following mitigation activities are derived from the country’s INDC:

Sector Planned mitigation activities

Energy

- Development of regulatory frameworks on energy - Implementation of awareness activities on energy efficiency - Implementation of high-efficiency technologies - Reconstruction of the distribution networks and transmission lines - Implementation of isolation works and application of modern lighting systems - EURO-5 standard compliant petrol production - Prevention of gas leakages during oil-gas processing and at distribution

networks - Construction of small hydropower plants (HPPs) - Use of biomass, solar power, wind power, heat pumps and geothermal

energy

Transport

- Use of electric vehicles for public transportation - Electrification of railway lines and the transition to the alternating current

system in traction - Development of underground railway transport (“metro”) and increase of the

number of underground stations

Agriculture - Collection of methane gas from the manure of livestock and poultry - Use of alternative sources of energy and modern technologies

Waste - Develop modern solid waste management system in big cities of the country Land Use, Land-Use Change, and Forestry (LULUCF)

- Plant new forest areas, water and land protecting forest strips (windbreaks) - Increase urban and roadside greenery - Management of pastures and agricultural lands

Vast majority of activities mentioned above are conditional upon financial support and technology transfer, while only a few can be implemented with the country’s own resources, such as measures for LULUCF and implementation of awareness activities on energy efficiency.

Adaptation activities

In 2017, the government of Azerbaijan committed to preparation and implementation of a National Adaptation Plan (NAP) that would consider a set of measures for decreasing or minimizing potential threats at national, local and community scale per sectors. MENR identified key sectors most vulnerable to the effects of climate change, such as agriculture, coastal areas, water resources and public health13.

In December 2019, the Readiness project on Adaptation planning support for Azerbaijan through UNDP was approved by the GCF. This project intends to support the Government of Azerbaijan with the development of a NAP and climate-change adaptation measures for three sectors prioritized by MENR:

- Water

13 Extended INDC with more detailed adaptation measures was prepared by MENR is available upon request.

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- Agriculture - Coastal areas

Azerbaijan has identified concrete activities to implement for each of the three adaptation priority sectors mentioned above in its GCF Country Programme.

4) Policy context: i. National climate change framework Azerbaijan has an extensive history of bringing the issues related to environmental degradation and societal development into the legislative context. Through the years, Azerbaijan was launching multiple action plans and strategic directions, which are designed to combat climate change and its implications. The table below presents key national frameworks to consider:

National Framework Overview Year

Azerbaijan’s Country Programme for Engagement with GCF 2020-2023

The programme sets forth a cooperation framework between the government of Azerbaijan and the Green Climate Fund (GCF) on climate change mitigation and adaptation actions.

2020

Nationally Determined Contribution

Outlines the commitment of Azerbaijan in the global combat against climate change. Outlines a mitigation plan covering all significant sectors of the economy through various environmental initiatives.

2017

National Strategy for the Conservation and Sustainable Use of Biodiversity in the Republic of Azerbaijan for 2017-2020

The main goals of the National Strategy are: sustainable use of genetic resources; conservation of biodiversity and transfer to future generation; poverty alleviation; maintenance of ecological balance; ensuring transition to a “green economy”; promotion of environmental education; restoration of endemic and local fauna species; development of the protected areas network; and reducing the threats to biodiversity.

2017

Establishment of the National Coordinating Council for Sustainable Development (NCCSD) of Azerbaijan, in 2016

Main objective of the National Coordinating Council for Sustainable Development is to work out national priorities in accordance with global targets, which possess importance for Azerbaijan, ensure the compliance of state programs and strategies covering the socio-economic spheres with the UN Sustainable Development Goals.

2016

State Program for the development of the industry in the Republic of Azerbaijan (2015-2020)

The Decree emphasizes strengthening supervision of industrial enterprises harming environment, and promotion of application of environmentally friendly technologies and of efficient energy usage at enterprises

2014

Technology Needs Assessment TNA assessment describes Azerbaijan’s need for adaptation technologies in prioritized economic

2013

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sectors, taking into account main development priorities. The technology needs prioritized under the current adaptation report will be the basis of the environmentally friendly technology transfer to Azerbaijan, leading to sustainable development of the country.

Nationally Appropriate Mitigation Actions (NAMAs) for low-carbon end-use sectors

Objective of the Project is the preparation of energy/GHG emission inventories, identification of baselines and reduction targets, development of mitigation actions for oil & gas end-use sectors, implementation of NAMAs in the oil & gas end-use sectors, and preparation and implementation of Measurement, Reporting and Verification (MRV) system and national registry for mitigation actions in the energy generation and end-use sectors.

2013

Azerbaijan – 2020: The Outlook for the Future

Highlights the possible impacts of climate change on the country’s society and economy and the importance of preparing necessary policy measures. Outlines relevant ecological mitigation plans.

2012* *In 2020, a new

continuous Strategy for 2030 was endorsed

First, Second and Third National Communications to the UNFCCC

Communications to UNFCCC present findings of GHG inventory, studies on national greenhouse gas emissions, vulnerability assessment, mitigation and abatement plans to reduce negative effects of climate change on ecosystems and different sectors of the economy.

2000,2010,2015

ii. Sectoral climate change framework Based on the major national frameworks, Azerbaijan developed relevant action plans to combat climate change through more specific sectoral legislations and programs. With the assistance of these endeavors Azerbaijan targeted specific sectors, which are in need of rehabilitative interventions. The table below will present key frameworks to consider.

Sectoral Framework Overview Year State Program on Socio-Economic Development of Regions (2019-2023)

Outlines the strategies on socioeconomic development of the regions of Azerbaijan. Discusses comprehensive measures to improve the efficiency of the use of labor and of natural/economic resources. Additionally, such issues as reforms in agrarian sector, increasing employment of the population, poverty reduction, infrastructure renewal, creation of a favorable investment climate, modern enterprises and new job places are discussed.

2019

State Program on Reliable Food Supply of the Population in the

Showcases detailed research about the food supply in Azerbaijan and

2019

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Republic of Azerbaijan for 2019-2025

outlines the strategy for increased food production. Additionally, it discusses the strategy for providing population with safe and qualitative food products, risk management of food supply and promotion of entrepreneurship in that field.

Strategic road map on production and processing of agricultural products in the Republic of Azerbaijan

Outlines the strategy to improve the state of agriculture in the country in the long-term (2025) through proposed actions and demonstrates their quantified impacts.

2016

National Program for the Reproduction and Improvement of Forests in the Republic of Azerbaijan

Outlined the strategy for the development of appropriate mechanisms for forest management with a specific aim to promote sustainable development in the country. Outlines the need for improvement of institutional capacities regarding forest management. Azerbaijan’s first NFP.

2013

Strategy of Development of Renewable and Alternative Energy Sources in 2012-2020

Outlines the creation of the legal base for the use of renewable energy in the country, strategy on the development of renewable energy, and other supporting initiatives.

2011

State Program on the Development of Fuel Energy Complex, 2005-2015

Outlines the installation of automatic control and metering systems for oil and gas production, fuel switching (liquid fuel to gas), improvement of hydroelectric systems and many other initiatives in the scope of energy use optimization.

2004

iii. Policy framework assessment14 Despite having multiple targeted action plans for environmental protection, climate change mitigation and adaptation and natural capital preservation, the effectiveness of the implementation of policies and regulation raises questions.

Although Azerbaijan is committed to the fight against climate change, it lacks the financial capacity to implement adaptation and mitigation actions. Incorporation of climate change issues into sectoral activities, providing efficient institutional coordination and implementation methods require considerable investment and high expertise in this field. Therefore, to meet its commitments the country needs the support of GCF an accredited entity to financially support climate change action in the country.

5) Challenge: Although Azerbaijan has embarked on the implementation of its INDC, the country faces a series of challenges which pose a risk of non-implementing it effectively or fully meeting its targets. The main challenges include15:

- Limited data access and sharing by stakeholders in Azerbaijan, accompanied by insufficient institutional and technical capacity and coordination on climate change adaptation;

14 This analysis is provided by the National Climate Change Policy (NCCP, 2016) and the Strategic Programme for Climate Resilience (SPCR, 2017). 15 https://www.adaptation-undp.org/projects/supporting-azerbaijan-advance-their-nap-process

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- An effective, working mechanism of public-private partnership which benefits the establishment of the nation-wide climate related reporting and statistics;

- Higher dependence on fossil fuel prices impacting climate change budget allocation; - Technological shift towards renewable energy, sustainable materials production and clean

technologies, which entails extensive economic and infrastructural implications given the lock-in with the oil and gas economy.

6) Needs and gaps:

Currently, there is no Direct Access Entity (DAE) for the GCF in the Republic of Azerbaijan to foster mutual engagement between the country and the GCF. As mentioned above, to achieve its INDC, Azerbaijan needs a strong national capacity as well as extensive and effective engagement of both private and public entities in climate change adaptation and mitigation.

Established in 1992 and being the largest bank in Azerbaijan and one of the leading banks in the South Caucasus, the IBA is an open joint-stock company. The majority of its shares are owned by the government of Azerbaijan. IBA provides financial services to both local and international entities.

IBA aligns its operations with the commitments of the government of Azerbaijan towards the SDGs and the Paris Climate Agreement. Therefore, the Bank pays increasing attention to responsible finance initiatives, contributing to the socio-economic development of the country by supporting the non-oil sector and service industries in Azerbaijan and providing financial solutions to local projects.

Over the years, IBA has accumulated considerable expertise and experience in the implementation of development projects with the focus on social and economic development:

Agricultural development loans with IFC partnership 2020 – ongoing Launch of IBA Innovation Center and IBA Tech Academy 2020 - ongoing

Contribution to self-employment for vulnerable groups (microbusinesses owned by refugees, internally displaced people, and people with disabilities)

2018- ongoing

In 2018 IBA stared its transformation with the ultimate goal of enhancing the bank’s reputation as a leader in innovation and secure, reliable banking in Azerbaijan. The recent IFC partnership is particularly relevant as the IFC’s CLARA risk assessment methodology is applied in agricultural lending decision-making by the IBA. As a leading bank in terms of assets in the region, IBA has the ability to influence both private and public entities and support Azerbaijan in fulfilling its climate goals. Therefore, IBA’s GCF accreditation can drive other financial institutions to join the fight against climate change and leverage on financial resources. Although no major climate change related projects were initiated neither invested in, IBA plans to expand its investment portfolio by including climate change and infrastructure projects. IBA also recognizes the increasing significance of climate change related financial risk assessments and intends to enhance its internal procedures to ensure ESG criteria are considered in decision making such as lending portfolio decisions. However, in order to analyze the current gaps, eliminate deficiencies and develop proper internal mechanisms, IBA needs advisory assistance, which will direct it through the accreditation process.

7) Objective: The main objective of this Readiness Proposal is to carry out a gap assessment and design an action plan for the IBA to meet the GCF requirements. This objective falls under the GCF’s Objective 1: Capacity building for climate finance coordination and Outcome 1.2: Direct access applicants and accredited entities (DAEs) have established capacity to meet and maintain the GCF’s accreditation standards; and accredited DAEs have the capacity to develop a pipeline of projects and effectively implement GCF-funded activities. The financial

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support from the GCF Readiness proposal will allow IBA to overcome the existing gaps by developing actions plans to address them.

In this capacity, IBA will play the role of a facilitator for future climate change related programs and serve as a mediator between national institutions and the GCF. This will pave the way for structured and active participation of the private sector in the nation’s joint endeavor to achieve national climate goals.

Eventually, the support will further contribute to the achievement of Azerbaijan’s INDC commitment by increasing the institutional capacity and lay the ground for a more effective coordination mechanism between respective stakeholders. It will also enable a targeted and structured implementation of the activities ensuring that INDC targets are achieved in an efficient and timely manner. The specific objectives of this Readiness Proposal include:

• Gap assessment between existing governance system, internal policies, procedures, tools and track record and GCF requirements;

• Action plan to bridge the identified gaps of: o Basic fiduciary criteria for compliance with the GCF standards; o Specialized fiduciary criteria for compliance with the GCF standards; o Environmental & social safeguards and gender criteria for compliance with the

GCF standards.

8) Gender consideration:

At the top regulatory level, Azerbaijan has all the conditions ensuring gender equality in the country. The Constitution of the Republic of Azerbaijan emphasizes the equality between men and women. In addition, the Law on Gender Equality grants equal rights to men and women in the political, economic, social, and cultural spheres.

To advance gender equality, the NDA and the Delivery Partner will assure gender equality and focus on women inclusion in the execution of the Readiness activities. A series of actions will be undertaken such as (blow list non-exhaustive):

- Promoting diversification in terms of gender, including equal opportunity policies and gender-balanced human resource management starting at the project coordination level;

- Ensuring that women are participating and actively involved in the consultations, decision-making and execution stages;

- Enabling inclusive and gender-responsive stakeholder engagement mechanisms.

9) Capitalization on previous Readiness proposals / projects funded by the GCF:

This Readiness proposal is considered as complementary support to on-going country efforts related to fulfilment of the country’s INDC commitment and will contribute to additional involvement of relevant stakeholders (i.e. public and private institutions, NGOs, local communities). While national capacities to manage such programs in compliance with the standards of international donors are at developing stages, the proposal will also set up a positive environment for strengthening national capacity and effective engagement with the GCF.

The proposal will build on the past Readiness proposals prepared by the Government of Azerbaijan, with the aim of capitalizing on previous lessons learned and avoiding duplications. This support will go one step further by accelerating IBA’s GCF accreditation. The following table presents the previous approved Readiness proposals implemented in Azerbaijan:

Project title Date and budget Project overview How will Delivery Partner (DP) capitalize

on this Readiness? 1. Adaptation

planning support 2019; 3,000,000 USD

The government of Azerbaijan embarked on the preparation and

DP will capitalize on the increased availability of climate change related

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for Azerbaijan through UNDP

implementation of a National Adaptation Plan (NAP). This GCF project supports the government to facilitate the development of the NAP and improve climate change adaptation (CCA) actions in Azerbaijan in three priority sectors identified by the Ministry of Ecology and Natural Resources (MENR) through stakeholder consultations: water, agriculture and coastal areas. The NAP Readiness support objective is to increase capacity on climate resilience and adaptation in those three sectors through the implementation of actions and activities that will reduce or eliminate barriers for an effective adaptation process at both the national and local levels.

data and improved institutional capacities, particularly in such segments as agriculture and water. IBA will align its institutional framework to be able to finance projects identified in this Readiness.

2. NDA Strengthening and Country Programming support for Azerbaijan through FAO

2019; 499,654 USD The proposal looks for opportunities to leverage private sector participation into climate investments specifically in the agriculture and LULUCF sectors for the implementation of INDC, following a gender balanced and participatory approach to all the proposed activities. The support for identification of Direct Access Entities also considers private sector institutions from different sectors identified as priorities for the engagement with the GCF according to the Country Work Programme.

The DP will capitalize on the opportunities set up for implementing the climate change investments s in agriculture, forestry as well as food production sectors in collaboration with private sector actors such as IBA.

3. NDA Strengthening and Country Programming support for Azerbaijan through UNDP

2017; 300,000 USD The proposal includes activities that will allow the NDA (Ministry of Ecology and Natural Resources of Azerbaijan) to: i) strengthen national capacities; ii) support stakeholder engagement in consultation and policy development processes; and iii) mobilise private sector in national consultations and financing mechanisms. The proposed project will increase the capacity of the NDA and other national stakeholders to carry out its climate change focused programs in partnership with

This Readiness will capitalize on the strengthened country capacity, improved stakeholder engagement and private sector mobilization and climate change awareness for climate financing. NDA strengthening meaning that it understands GCF processes and procedures and will be able to smoothly drive the accreditation process

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the GCF and pave the way for structured and active participation of the private sector to achieve national climate goals.

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3. LOGICAL FRAMEWORK

Outcomes Baseline16 Targets Outputs Activities (brief description) Deliverables17

Outcome 1.2: Direct access applicants and accredited entities (DAEs) have established capacity to meet and maintain the GCF’s accreditation standards; and accredited DAEs have the capacity to develop a pipeline of projects and effectively implement GCF-funded activities.

IBA is an organization with robust administrative, management & financial capacities and with a good command of project management and financing activities. However, a number of policies, procedures and tools are either not formalized in adequate handbooks or missing.

IBA has an action plan to bridge the existing gaps between its actual situation and the GCF requirements related to basic and specific fiduciary criteria, environmental & social safeguards and gender criteria.

Output 1.2.1: The scope of the GCF accreditation is determined

Activity 1.2.1.1: Organize an initial meeting, present and validate the Initial Meeting Report

Deliverable 1.2.1.1: Initial Meeting Report

Activity 1.2.1.2: Provide technical assistance for the IBA to determine its relevant accreditation scope

Deliverable 1.2.1.2: SWOT analysis on the accreditation scope determined by the IBA

Output 1.2.2: An action plan to bridge the identified gaps of basic fiduciary criteria is developed and validated

Activity 1.2.2.1: Carry out a gap analysis through a detailed review of IBA's documentation and bilateral interviews with directors and collaborators to identify the gaps between its actual situation and the GCF requirements for basic fiduciary criteria

Deliverable 1.2.2.1: Approved gap-analysis between IBA’s actual situation and the GCF requirements for basic fiduciary criteria

Activity 1.2.2.2: Design an action plan to bridge the identified gaps for basic fiduciary criteria

Deliverable 1.2.2.2: Approved action plan to bridge the identified gaps for basic fiduciary criteria

16 Please briefly elaborate on current baselines on which the proposed activities can be built on, processes that are in place that the current Readiness proposal can strengthen, or any gaps that the proposed activities would fill in. If more space is needed, please elaborate this in Section 4. 17 Please include tangible and specific deliverables for each activity proposed, Please note that during implementation all deliverables should be included within the implementation reports for GCF consideration.

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Outcomes Baseline16 Targets Outputs Activities (brief description) Deliverables17

Output 1.2.3: An action plan to bridge the identified gaps of the specialized fiduciary criteria is developed and validated

Activity 1.2.3.1: Carry out a gap analysis through a detailed review of IBA's documentation and bilateral interviews with directors and collaborators to identify the gaps between its actual situation and the GCF requirements for specialized fiduciary criteria

Deliverable 1.2.3.1: Approved gap-analysis between IBA’s actual situation and the GCF requirements for the specialized fiduciary criteria

Activity 1.2.3.2: Design an action plan to bridge the identified gaps for specialized fiduciary criteria

Deliverable 1.2.3.2: Approved action plan to bridge the identified gaps for specialized fiduciary criteria

Output 1.2.4: An action plan to bridge the identified gaps on environmental & social safeguards and gender is developed and validated

Activity 1.2.4.1: Carry out a gap analysis through a detailed review of IBA's documentation and bilateral interviews with directors and collaborators to identify the gaps between its actual situation and the GCF requirements for environmental & social safeguards and gender

Deliverable 1.2.4.1: Approved gap-analysis between IBA’s actual situation and the GCF requirements for the environmental & social safeguards and gender criteria

Activity 1.2.4.2: Design an action plan to bridge the identified gaps for environmental & social safeguards and gender

Deliverable 1.2.4.2: Approved action plan to bridge the identified gaps for environmental & social safeguards and gender criteria

,

Page 17 of 27

4. THEORY OF CHANGE

The development of action plan to address gaps and fulfil the basic fiduciary criteria, the specialized fiduciary criteria, the environmental & social safeguards and gender will enable IBA to benefit from a structured plan of actions to meet the GCF accreditation requirements. Based on the action plans for accreditation, IBA will be able to develop policies, procedures, tools, organizational structures and track record according the GCF requirements. IBA will then establish technical and human capacities to meet the GCF requirements.

The two main barriers to overcome are the lack of maturity of IBA in terms of basic and specialized fiduciary criteria, environmental & social safeguards and gender, as well as, the lack of internal human capacities to efficiently define an action plan to overcome gaps and fulfil GCF’s environmental & social safeguards and gender and basic & specific fiduciary criteria.

This proposal relies on the following main assumptions:

- IBA’s accreditation application has the full support of the NDA; - Awareness of the importance of having a Direct Access Entity to accelerate the access to international

climate finance in Azerbaijan; - Commitment of IBA’s management to strengthen human and technical capacities in order to get

accredited by the GCF; - Successful recruitment of international and local consultants.

The risks associated with the proposal are identified as follows and a risk assessment is presented in sub-section “6.3. Risks and mitigation measures”:

- Non-alignment of this Readiness proposal with the national policies and strategies of Azerbaijan;

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- Non-respect of the technical requirements and the quality expected; - Non-respect of the project timeline and milestones; - Non-respect of the budget of the project; - Low involvement of relevant stakeholders (notably IBA professionals) and / or lack of ownership of the

Readiness activities by IBA professionals; - Non-compliance with the disbursement schedule; - Slow progress in the implementation of activities due to COVID-19.

Page 19 of 27

5. BUDGET, PROCUREMENT, IMPLEMENTATION AND DISBURSEMENT PLAN 5.1 Budget plan

Please complete the Budget Plan in Excel using the template available in the Library page of the GCF website. 5.2 Procurement plan

Please complete the Procurement Plan in Excel using the template available in the Library page of the GCF website. For goods, services, and consultancies to be procured, please list the items, descriptions in relation to the activities in section 2, estimated cost, procurement method, relevant threshold, and the estimated dates. Please include the procurement plan for at least the first tranche of disbursement requested below and provide a full procurement plan for the entire duration of the implementation period if available at this stage. 5.3 Implementation Plan

Please complete the Implementation Plan in Excel using the template available in the Library page of the GCF website.

5.4 Disbursement schedule

Please specify the proposed schedule for requesting disbursements from the GCF. For periodicity, specify whether it’s quarterly, bi-annually or annually only.

☒ Readiness Proposal that requires a Bilateral Grant Agreement to be entered into between GCF and

the Delivery Partner (“Bilateral Grant Agreement”) • Please include an indicative disbursement table showing the expected amounts to be requested and

keep to multiples of USD 5,000.

• The first disbursement amounting to USD 20,000.00 will be transferred upon approval of the Readiness request and effectiveness of the Grant Agreement;

• The last disbursement amounting to USD 20,000.00 will be made upon submission of a completion report and financial report, in form and substance acceptable to the Fund, including an audited expenditure statement.

Page 20 of 27

6. IMPLEMENTATION ARRANGEMENTS AND OTHER INFORMATION 6.1 Implementation arrangements

Please describe how implementation arrangements will be made and how funds will be managed by the NDA and/or the Delivery Partner.

6.1.1. Fund management

The funds will be received and managed by Ernst & Young AG. in its capacity of Delivery Partner of the GCF. Ernst & Young AG. will be responsible for the implementation of all activities envisaged under the proposal, carrying out the overall fiduciary & financial management, procurement of services18, monitoring and reporting activities under this proposal in compliance with Ernst & Young AG.’s policies and procedures and with the Bilateral Grant Agreement.

Ernst & Young AG. meets all legal & regulatory requirements related to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF). To this end, EY has issued its Global AML / CTF Guidance, notably based on the Financial Action Task Force recommendations for combating money laundering and financing of terrorism, which reflect internationally accepted standards. All employees receive regular training to ensure proper implementation of the Global AML / CTF Guidance and related procedures.

Ernst & Young AG.’s commitment to fighting money laundering and terrorism financing concerns its personnel as well as all people acting for the development of the Activities, such as consultants and third-party subcontractors.

Therefore, Ernst & Young AG. will conduct the necessary due diligences and notify the GCF of any suspicious activity that could be linked to money laundering or terrorism financing and that would pose legal, regulatory, reputational and financial risks to the implementation of the Activities.

6.1.2. Implementation map

The implementation map below illustrates the proposed arrangements for implementation:

Two main types of activities are presented in the figure above: (i) The fiduciary activities performed by the DP; (ii) The implementation activities carried out by the implementing entities and coordinated by the Project Management Consultants (PMC) under the overall responsibility of the DP. Following are further details about the role of every stakeholder mentioned in the implementation map:

• The DP implements the Bilateral Grant Agreement signed with the GCF and reports strictly and uniquely to the GCF;

• The DP procures services and ensures the compliance as well as the disbursements to the implementing entities, the PMC and the local10 external independent auditor;

18 No goods to procure under this proposal.

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• The NDA will ensure (with the help of the PMC) that the project is fully aligned with the national policy

framework;

• The PMC is managed by an EY legal entity based in France to limit the execution risks related to the Readiness proposal. It will ensure the technical coordination and the monitoring of the project (activities / budget) as well as the good interaction between the NDA and the implementing entities (see role of the Steering Committee below);

• Implementing entities: EY legal entity in France (“EY France”) and the local19 professional consultancy

firms (“Local consultants”) will implement the activities under the coordination of the PMC and under the overall responsibility of Ernst & Young AG. as DP. Note that Ernst & Young AG. will procure the local consultants that have on one hand all the technical skills to carry out the activities and have on the other hand a strong collaboration experience that will reinforce the value for money of their technical contribution (see table of skills and experience in sub-section 6.2 below). The table below (see sub-section 6.2) presents the split of activities between EY France and the local consultants; The implementing entities will enter into agreements with the DP for the implementation of the activities and will report to the PMC that will ensure that the activities/budget are respected, followed by a financial audit carried out by a local external independent auditor;

• IBA will: - Provide the documentation requested by the implementing entities and the local external independent auditor; - Participate in the meetings, interviews and data collection process; - Review and approve the gap analysis; - Review and validate the action plan developed by the implementing entities.

• The Steering Committee is composed of the DP, the PMC, an IBA’s representative and the NDA. The

Steering Committee will organize a weekly conference call to ensure the progressive and effective implementation of the Readiness activities. This regular update on the progress will allow to take rapid action in case of slow progress or obstacles are observed during implementation.

19 The scope of “local” is delimited to ECOWAS countries (Economic Community of West African States).

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6.2 Implementation and execution roles and responsibilities

Please briefly describe how the activities will be implemented and outputs delivered by project staff and consultants.

The table below presents the split of activities between EY France and the local consultants:

The skills and experience of EY France and the local consultants to deliver the activities above are presented as follows:

EY France’s skills and experience Local consultants’ skills and experience

• Climate-finance track record of 20+ years; • Expertise in providing technical assistance

services related to the basic fiduciary criteria (key administrative & financial capacities and transparency & accountability);

• Expertise in providing technical assistance services related to grant management;

Local consultant #1:

• Expertise in providing technical assistance services related to the basic fiduciary criteria (in particular with regard to procurement, code of ethics and anti-money laundering and anti-terrorist financing policies);

Lead / Support

#People days Responsibilities #People

days Responsibilities

1.2.1.1 1Organize an Initial Meeting and prepare the Initial Meeting Report (consolidate the inputs of local consultants).

1 Organize an Initial Meeting and contribute to the drafting of the Initial Meeting Report .

1.2.1.2 1

Provide technical assistance to determine the relevant scope of GCF accreditation for IBA (SWOT analysis on the accreditation scope determined by the IBA).

0

1.2.2.1 7

Prepare and conduct interviews with IBA's professionals to collect data related to the:- Ways in which IBA and its intended activities will contribute to furthering the objectives of the GCF;- General management and administrative capacities;- Financial management and accounting;- Internal and external audit;- Control frameworks;- Disclosure of confilcts of interest;- Preventing financial mismanagement;- Investigations.

Carry out a gap analysis related to the topics above. Consolidate the inputs from the local consultants in one single document.

3

Prepare and conduct interviews with IBA's professionals to collect data related to the:- Background and contact information of IBA;- Procurement;- Code of ethics;- Anti-money laundering and anti-terrorist financing policies.

Carry out a gap analysis related to the topics above.

1.2.2.2 3Design an action plan related to the topics above. Consolidate the inputs from the local consultants in one single document.

1 Design an action plan related to the topics above.

1.2.3.1 6

Prepare and conduct interviews with IBA's professionals to collect data related to the:- Intended scope of projects/programmes and estimated contribution requested;- Project identification, preparation and appraisal;- Project oversight and control;- Monitoring and evaluation;- Project-at-risk systems and related project risk management capabilities;- Grant award procedures.

Carry out a gap analysis related to the topics above. Consolidate the inputs from the local consultants in one single document.

3

Prepare and conduct interviews with IBA's professionals to collect data related to the:- Public access to information on beneficiaries and results;- Transparent allocation of financial resources;- Good standing for financial requiements with regard to multilateral funding.

Carry out a gap analysis related to the topics above.

1.2.3.2 2Design an action plan related to the topics above. Consolidate the inputs from the local consultants in one single document.

1 Design an action plan related to the topics above.

1.2.4.1 0 - 6

Prepare and conduct interviews with IBA's professionals to collect data related to the:- Environmental and social safeguards;- Gender.

Carry out a gap analysis related to the topics above.

1.2.4.2 0 - 2 Design an action plan related to the topics above.

ActivitiesEY France Local consultants

1.2.4. Approved action plan to

bridge the identified gaps

on environmental &

social safeguards and

gender is developed and

validated

1.2.2. Approved action plan to

bridge the identified gaps

of basic fiduciary criteria

is developed and validated

1.2.3. Approved action plan to

bridge the identified gaps

of the specialized

fiduciary criteria is developed and validated

Outputs

1.2.1. The scope of the

GCF accreditation is

determined

8

4

7

3

1

1

0

0

-

-

Page 23 of 27

• Expertise in providing technical assistance services related to the project management;

• Experience with capacity-building technical assistance services;

• Experience with workshop facilitation skills and experience in delivering dedicated training workshops;

• Experience with project coordination of activities with consultants internationally.

• Expertise in providing technical assistance services related to grant management;

• Expertise in providing technical assistance services related to the project management;

• Experience with public and/or private institutions in Azerbaijan.

Local consultant #2:

• Expertise in environmental & social safeguards and gender at national and subnational levels;

• Experience with workshop facilitation skills and experience in delivering dedicated training workshops;

• Experience with public and/or private institutions in Azerbaijan.

These set of skills and experience are essential to complete the Readiness activities and deliverables mentioned in the table above. Please note that the DP will only procure professional consultancy firms and not individual consultants.

The average daily rates are determined as follows:

• EY France’s daily rate is at 900$:

Level of seniority Time allocated Rate per day

Manager Experience: From 5 to 15 years 13% 1 800 $/day

Senior Experience: From 2 to 5 years 20% 1 000 $/day

Junior Experience: Less than 2 years 67% 700 $/day

Total = 100% Average daily rate = 903 $/day

• Local consultants’ daily rate is at 750$:

Level of seniority Rate per day based on seniority

Senior Experience: From 2 to 5 years 750 $/day

The delivery model and the cost model of professional consultancy firms are based on a pyramid of competences that optimizes the efficiency (cost effectiveness20) of the technical assistance, from junior to manager levels. Each level of the pyramid is essential to the overarching technical assistance:

• Manager: Detailed guidance provided to the senior and junior, direct contribution to the most complex technical aspects, coordination of the delivery team, first level of quality review (deliverables and respect of the methodology, timeline and budget), daily contact point of the operational teams of key stakeholders (e.g. IBA’s professionals);

• Senior: Review and finalize the production of the deliverables and other documents (e.g. meeting minutes), support and supervise the desk researches and data collection, reporting to the manager;

20 For instance, the average daily rate would have been higher without junior staff in the delivery/cost model pyramid.

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• Junior: First level of production of the deliverables, bibliographical searches and various desk researches, minutes of the different meetings, data collection management, reporting to the senior and/or manager.

6.3 Risks and mitigation measures

Please include a set of identified risks and mitigation actions for each. Please utilize the risk table below that identifies the probability of a given risk occurring and the entity that will manage the risk. Please refer to Part III Section 6.3 of the Readiness Guidebook for further information on how to complete this section.

Risk category

Specific risk(s) / Risk(s)

description

Probability of occurrence

(low, medium, high)

Impact level (low,

medium, high)

Mitigation action(s) Entity(ies)

responsible to manage the

risk(s)

Political risk

Non-alignment of this Readiness

proposal with the national policies and strategies of

Azerbaijan

Low High

The NDA has been fully involved in the

Readiness-building process from the

beginning and therefore guarantees the

alignment with the national policies and

strategies.

The NDA will be invited to attend the Readiness

initial meeting during which stakeholders' expectations will be

clarified.

NDA

Technical risks

Non-respect of the technical

requirements and the quality expected

Low High

The Delivery Partner role and the Bilateral Grant

Agreement will be managed by Ernst &

Young AG. who has a comprehensive track record in dealing with

such projects.

The methodology of the Readiness will guarantee

a permanent coordination between

stakeholders, and ad hoc interviews, calls and

workshops will facilitate clarifications and

adjustments.

Delivery partner, international and local consultants

Page 25 of 27

Risk category

Specific risk(s) / Risk(s)

description

Probability of occurrence

(low, medium, high)

Impact level (low,

medium, high)

Mitigation action(s) Entity(ies)

responsible to manage the

risk(s)

Review and validation of deliverables and reports will limit discrepancies.

Non-respect of the project timeline and milestones

Low High

EY France will prepare a Gantt chart with clear

timeline, milestones and deadlines to be approved

during the kick-off meeting.

A weekly progress report and call will identify any potential delay and allow

to take measures to correct it.

Delivery partner, international and local consultants

Operational risk

Low involvement of relevant

stakeholders (notably IBA’s professionals)

Low High

Expectations of relevant stakeholders (notably

IBA’s professionals) will be collected during the

initial meeting.

Delivery partner, international and local consultants

and IBA’s professionals

Financial risk

Non-compliance with the

disbursement schedule

Low High Ernst & Young AG. will

closely monitor and disbursement schedule

Delivery Partner

Non-respect of the budget of the

project Low High

Ernst & Young AG. will closely manage the

budget on a weekly basis with reporting tools to

anticipate possible deviations.

A contingency has been included in the budget to

appropriately manage any potential negative

impact and budget adjustment.

Delivery partner, international,

local consultants

COVID-19 risk

Slow progress in the

implementation of activities due to the increased outburst of the

coronavirus pandemic

Low High

Considering the current sanitary crisis and the

related restrictive measures, the

interactions between IBA’s professionals, the

consultants (international / local) and the NDA were designed from the outset to take

place remotely via powerful videotelephony

platforms (Microsoft teams, Zoom, etc.) that

allow smooth and efficient communication.

Delivery partner, international and local consultants

and IBA’s professionals

Page 26 of 27

Risk category

Specific risk(s) / Risk(s)

description

Probability of occurrence

(low, medium, high)

Impact level (low,

medium, high)

Mitigation action(s) Entity(ies)

responsible to manage the

risk(s)

Contingency of 5% has been included in the

budget.

(NB: The current budget does not include travel expenses due to the legal and corporate

restrictions related to the on-going sanitary crisis).

6.4 Monitoring

The DP jointly with the NDA will establish a Monitoring & Evaluation (M&E) framework and build capacity to monitor the performance of the program activities and the quality of the deliverables and reports, as well as the occurrence of risks and the application of the corresponding mitigation actions. In this sense, the project will establish mechanisms to learn from the process of preparing, developing and implementing the Readiness activities. More specifically, the M&E framework will define Key Performance Indicators (quantitative and qualitative) to assess and monitor the project. M&E activities will include specific, measurable, relevant and time-bound indicators that will be used to monitor and assess the timeliness and appropriateness of the implementation. At the end of the project, the Delivery Partner will make an evaluation of the Readiness activities. M&E activities will focus on fiduciary and technical aspects:

Aspect M&E Periodicity Responsible

Fiduciary Follow-up on the use of funds Weekly Delivery Partner Financial audit End of project External independent auditor

Technical Follow up on activities Weekly Delivery Partner Review of deliverables Every deliverable All project members Monitor risks occurrences Continuously Delivery Partner

6.5 Other Relevant Information

6.5.1. General

Ernst & Young AG. was selected by the NDA as a Delivery Partner according to the following competitive strengths:

- Technical expertise and relevant track record in both climate-finance and capacity building activities; - Strong delivery capacity; - EY local offices in Azerbaijan; - Understanding of the national policies and of Azerbaijan INDC; - Close relationship with the private sector, financial community and public authorities in Azerbaijan.

All these factors will contribute to a high-quality delivery of the Readiness activities, including a strong coordination and project management (budget, schedule and risks).

6.5.2. Exit strategy

At the end of the Readiness activities, the following actions will be taken in order to sustain the project results and further strengthen IBA’s capacities to identify, develop and implement climate change projects:

Page 27 of 27

• Effective implementation by IBA’s professionals of the roadmap associated with the organizational structures and track record, developed and approved during this Readiness project. The roadmap will indicate the actions, their timeline, the nature and extent of the resources required (human, financial, etc.) as well as the stakeholders in charge (the roadmap will be established based on the specifics gaps identified during the Readiness activities). In particular, the approval of this roadmap by IBA, including the resources required to implement it;

• Continued support provided by the NDA during the accreditation process; • Identification, development and implementation by IBA (with a technical assistance, not identified yet)

of a pipeline of climate change projects.

6.5.3. Whistle-blower mechanism

During the implementation of the Readiness activities, the DP will provide every stakeholder with a dedicated email address to send any complaints or allegations reported by third parties. The DP commits to reply and resolve the potential issue within 15 days upon receipt.

6.5.4. UN Security Council restrictive measures

Ernst & Young AG. as a Delivery Partner has performed a control check to confirm if there are currently United Nations Security Council (UNSC) restrictive measures in force against the Azerbaijan. The outcome of the check is that:

• The Azerbaijan has never been part of the 30 sanction regimes that the UNSC has established since 196621;

• No entity/individual related to the Azerbaijan is in the UNSC Consolidated List22.

21 https://www.un.org/securitycouncil/sanctions/information 22 https://www.un.org/securitycouncil/content/un-sc-consolidated-list#individuals

The following considerations are important when completing the budget:

2. You can select the appropriate budget categories from the dropdown list in the budget plan:

4. Additional budget categories may be added by manually typing them on the Budget Category sheet. :

Project Management Cost:

General Principles for PMC costs: 1. The percentage of PMC financed by GCF should not be more than the percentage share of the overall budget financed by GCF 2. PMC budget thresholds: Up to 7.5 per cent of total activity budget. > PMC exceeding 7.5 per cent for the readiness (including NAPs) proposals, and PPF proposals, up to $ 3 million will require detailed documentation and justification supporting the entire PMC budget. > The PMC should be shown as a separate component in the project budget. A detailed breakdown of PMC should be provided by budget category. > Indicative list of eligible project management costs:

> Project staffing and consultants: Project manager, Project Assistant, Procurement personnel, Finance personnel & Support/admin. Personnel> Other direct costs: Office equipment, Mission related travel cost of the PMU, Project management systems and information technology, Office supplies, Audit cost

Contingency :1. Select the appropriate % of Contingency Budget from the dropdown list :

Project management costs (PMC) are the direct administrative costs incurred to execute a project. They should cover only incremental costs incurred due to the GCF contribution. In most cases, these costs are directly related to the support of a dedicated project management unit which manages the day to day execution related activities of the project.

If you are unsure about how to complete the budget template, please send your query to: [email protected]

This file contains three specific planning tools to complete the supplementary information required when submitting a proposal for Readiness Programme support (including for NAP/adaptation planning):

- Budget plan and accompany Budget notes- Procurement plan- Implementation plan

5. The Budget Notes sheet should be used to record explanations, further details or cost breakdowns for individual lines

2. Contingency budget for unforeseen costs arising during the project implementation should not be included in the outcome budget separately.

3. Contingency budget must be used for any unforeseen programme (output level) cost that is unrelated to implementation/service fee.

4. Any use of contingency must be reported to and agreed by the GCF Secretariat in writing in advance provided with justifications that are acceptable to the GCF5. If by the end of the grant implementation period, you have not spent Contingency, you may not increase the scope of the project or make any other expenditures using the Contingency.

1. Before preparing the Readiness and budget, procurement, and implementation plans, please read the full guidance contained in the Readiness Programme Guidebook, specifically Part III Section 5

3. To insert additional rows, right click on the row number below where you wish to insert the new row and choose INSERT.

Readiness Grant Budget Preparation Guidelines

Budget CategoriesAudio Visual & PrintingAudit FeeConsultant - Individual - InternationalConsultant - Individual - LocalProfessional Services – Companies/Firm InternationalProfessional Services – Companies/Firm LocalIT EquipmentOffice SuppliesTravel - InternationalTravel – LocalWorkshop/Training EY legal entity in France

Indicate additional budget categories

5.1 Budget PlanPlease add rows for Outcomes, Outputs and Cost Categories as required. Additional budget categories may be added by manually typing them on the Budget Category sheet.

EY legal entity in France W/Day 2 900.00 1,800.00 A

Professional Services – Companies/Firm Local W/Day 1 750.00 750.00 B

EY legal entity in France W/Day 12 900.00 10,800.00 A

Professional Services – Companies/Firm Local W/Day 4 750.00 3,000.00 B

EY legal entity in France W/Day 10 900.00 9,000.00 A

Professional Services – Companies/Firm Local W/Day 4 750.00 3,000.00 B

Output 1.2.4An action plan to bridge the identified gaps on environmental & social safeguards and gender is developed and validated

Professional Services – Companies/Firm Local W/Day 8 750.00 6,000.00 6,000.00 6,000.00 C

34,350.00 34,350.00 - - - - -

EY legal entity in France W/Day 1 900.00 855.00 AAudit Fee Lumpsum 1 1,700.00 1,700.00 D

- do not change the formula do not change the formula

- 2,555.00 2,576.25

- 7.44% 7.50%

Total (per budget category)

1,700.00

-

-

-

12,750.00 Project Management Cost (PMC) 7.4% requested

- Contingency requested E -

-

-

-

22,455.00

-

-

-

-

36,905.00

0Total Outcome Budget + PMC

Total Outcome Budget

Breakdown (per budget category)

Workshop/Training

EY legal entity in France

0

0

Consultant - Individual - Local

Professional Services – Companies/Firm International

Professional Services – Companies/Firm Local

IT Equipment

Office Supplies

Travel - International

Actual amount and % of PMC requested:

0

Outcomes / OutputsExpenditure Plan

Budget Categorieschoose from the drop-down list

Unit 6m 24m

Maximum PMC that can be requested:

Audit Fee

Travel – Local

Outcome 1.2: Direct access applicants and accredited entities (DAEs) have established capacity to meet and maintain the GCF’s accreditation standards; and accredited DAEs have the capacity to develop a pipeline of projects and effectively implement GCF-funded activities

Project Management Cost (PMC)Up to 7.5% of Total Activity Budget

Total Outcome Budget

Consultant - Individual - International

2,550.00

34,350.00

Output 1.2.1The scope of the GCF accreditation is determined

Output 1.2.2An action plan to bridge the identified gaps of basic fiduciary criteria is developed and validated

12,000.00

2,550.00

13,800.00

Output 1.2.3An action plan to bridge the identified gaps of the specialized fiduciary criteria is developed and validated

0

FOR GREEN CLIMATE FUND SECRETARIAT'S USE ONLY

FOR GREEN CLIMATE FUND SECRETARIAT'S USE ONLY

3,282.91

Sub-Total (Total Outcome Budget + Contingency + PMC)

1,717.50

34,350.00

5%

2,555.00

41,906.00$

Delivery Partner Fee (DP) - Up to 8.5% of the Sub-Total

38,622.50

Total Project Budget (Total Activity Budget + Contingency + PMC + DP)

Budget notes# of Unit 18m

Detailed Budget (in US$)

Total Budget(per sub-outcome)

Unit Cost Total Budget(per budget category)

Total Budget(per outcome) 12m 30m 36m

12,000.00

13,800.00

Budget Notes Detailed Description

A EY France has an expertise in climate-finance, basic and specialized fiduciary criteria => the detailed split of activities between EY France and the local consultants is provided sub-section 6.2. 24,1 people-days at $900/day.

B The Local "Professional Services – Companies/Firm" must have an expertise in basic and specialized fiduciary criteria => the detailed split of activities between EY France and the local consultants is provided sub-section 6.2. 9 people-days at $750/day.

C The Local "Professional Services – Companies/Firm" must have an expertise in environemental & social safeguards and gender criteria. Refer to sub-section 6.2. 8 people-days at $750/day.

D One audit is planned after the end of the activities. The external independent auditor will be procured locally.

E Contingency of 5% / $1717,5 will allow to cover transportation costs for EY France's consultants if the current restrictions related to the on-going sanitary crisis are lifted.

5.2 Procurement Plan

Item Estimated Cost (US$)

N/A $ -

Professional Services – Companies/Firm Local 12,750.00 Direct procurement

External independent auditor - Local 1,700.00 Direct procurement

$ 14,450.00

Projected Contracting Date

17 people-days x $750/day Month 1 Month 1

Sub-Total (US$)

Consultancy Services

Sub-Total (US$)

Audit fee Month 3 Month 3

For goods, services, and consultancies to be procured, please list the items, descriptions in relation to the activities in Section 3, estimated cost, procurement method, relevant threshold, and the estimated dates. Please include the procurement plan for at least the first tranche of disbursement requested below and provide a full procurement plan for the entire duration of the implementation period if available at this stage.

Goods and Non-Consulting Services

Item Description Procurement MethodThresholds

(Min-Max monetary value for which indicated procurement method must be used)

Estimated Start Date

5.3 Implementation Plan

Make sure the identifier number of each activity and deliverable matches with the proposal as this table does not require its name or description. Please refrain from adding descriptions.

For more guidance on how to fill out this tables, please see Part III Section 5 of the Readiness Guidebook

Planned duration Milestone (deliverable) Target completion date

A1.2.1.1 D1.2.1.1

A1.2.1.2 D1.2.1.2

A1.2.2.1 D1.2.2.1

A1.2.2.2 D1.2.2.2

A1.2.3.1 D1.2.3.1

A1.2.3.2 D1.2.3.2

A1.2.4.1 D1.2.4.1

A1.2.4.2 D1.2.4.2

Please list all the deliverables (e.g. D.1.1.1a) per activity (e.g. A1.1.1) with the identifierand mark the planned duration as show in the example. Please also indicate milestones for any deliverables to be completed during the implementation period of the activity in question.

M34 M35M28 M29 M30 M31 M32M6 M7 M36M24M13 M14 M15 M16 M17 M18 M19 M20 M21 M22 M23 M33M25 M26 M27

Reporting

M12Activities & Deliverables

Estimated Timeline

M2 M3 M8M1 M9 M10 M11M4 M5