Based in Seoul, The Global Green Growth Institute (GGGI) is an intergovernmental organization founded to support and promote a model of economic growth known as "green growth", which targets key aspects of economic performance such a poverty reduction, job creation, social inclusion, and environmental sustainability. GGGI works with countries around the world, building their capacity and working collaboratively on green growth policies that can impact the lives of millions. The organization partners with countries, multilateral institutions, government bodies, and private sector to help build economies that grow strongly and are more efficient and sustainable in the use of natural resources, less carbon intensive, and more resilient to climate change.

GGGI has a diverse portfolio of programs in developing countries around the world. These in-country programs, together with global products and services, focus on delivering results through an integrated approach of evidence-based green growth planning and implementation aligned to countries’ development priorities. The organization also focuses on knowledge development and management activities which build a strong theoretical and empirical basis for green growth, while providing concrete options and guidance for policymakers; as well as building the conditions for public and private green infrastructure investments.

Colombia Program Background

GGGI has been working with the Government of Colombia (GoC) to advance green growth policies and green investments, through strategic partnerships such as with the Ministry of Environment and Sustainable Development, the Ministry of Agriculture and Rural Development, Ministry of Finance and Public Credit and the National Planning Department, among others. In a new phase of collaboration with Government agencies at the national and sub-national level, GGGI with the support of the Kingdom of Norway will expand its Colombia Country Program by virtue the transition towards a greener growth pathway that is socially inclusive and contributive to Colombia´s medium term development agenda. Five years of support (2017-2022) will expect to see an impact of an increased capacity to mainstream green growth objectives into development planning and investments within the priority sectors and regions that are critical for Colombia´s future green growth, particularly in those areas that are highly susceptible to increased natural resource degradation and forest cover loss.

The program was divided in two phases: Phase I taking place from 2017 to 2019, and Phase II for 2020-2022. Phase II was designed to increase green growth investments in priority regions and sectors, in addition to supporting the GoC for reducing their current deforestation trends. The program outcomes are aligned with the GoC´s nationally determined contributions (NDC) targets and sustainable development goals (SDGs), GGGI’s Strategic Plan 2015 – 2020 and GGGI Colombia Country Planning Framework (CPF) 2016-2020, as well as the Norway’s International Climate and Forest Initiative (NICFI) strategic objectives.

There are various underlying principles which underpin the fundamentals of Phase II of the program. The main principle being that GGGI will continue to build upon existing efforts to promote green growth, such as the implementation of the Green Growth Policy (with an emphasis on the forest economy) along with other relevant and aligned National Development Plan (NDP) 2018-2022 goals, such as lowering the deforestation rate and increasing areas under sustainable conservation systems. Secondly, there is an increased focus on delivering results at the subnational level, to increase deforestation reduction results in the selected jurisdictions and to augment the number of hectares and investments under a sustainable and restorative production systems approach.

In the current NDP, the government aims to raise the total GDP of the forest economy from its 2018 estimated contribution 0.69% to 1% by 2022. Within this context, GGGI Colombia is supporting the GoC to foster Colombia´s forest economy both, at the national and subnational level. The support will facilitate the incorporation of forestry and forest-related activities into Colombia´s main land uses, as well promoting investment into the sector and increasing forest stands in the country.

The joint work between GGGI and Finagro has found, however, that  that the financing opportunities of commercial forest plantations and sustainable management of natural forests are limited due to the perception of risk towards these activities, owing to not only the long investment return periods, complex logistics, security, but also due to  a gap in the understanding of how the forest sector works. 

Based on the above, a forest finance consultant is needed to support in the review of existing financial instruments of first-tier banks and to bridge the gaps in the understanding of the forestry sector, which will in turn open up financing opportunities to the sector.

Objectives/Purpose of the Assignment

The main objective of this assignment is to support Finagro and GGGI in consolidating and promoting the forest economy. Specifically, consultancy support shall be given through the assessment of the current forest financial products offered by Finagro and first-tier banks, strengthen the understanding of the sector by first-tier banks and provide recommendations to adjust current or develop new financial products.

Scope of Work

The technical assessment and recommendations will be carried out by developing the following components:  

Component 1: An Assessment of Financial Products to the Forest Economy in Colombia

The main output for this component will be an assessment of the current financial products directed at the forest economy by the first-tier banks, how they are offering those products to their clients, and how they are using the funding from second-tier banks to support them. The assessment must include the identification of the main barriers to accessing these financial products as well as the potential ways to overcome them.

Component 2: An Assessment of the Current Collateral Options

This component requires a needs-assessment of the current collateral instruments on offer to the forestry sector complete with an argumentation of why they are needed, as well as recommendations to adjust the current or develop new options. The options given for collateral instruments must be specific to those related to plantations and natural forest.

Component 3: An Analysis of the Funding Options for the Financial Products to the Forest Economy.

An analysis that identifies the current funding options available of financial products to the forest economy as well as recommendations to adjust or develop new methods of funding.

Component 4: Awareness Raising of Pricing Structures of the Forestry Sector and the Minimum Profitable Unit of Forest Economic Activities

The fourth component is to facilitate the awareness of Finagro and first-tier banks to the pricing structures of the forest sector and the minimum profitable unit of the sustainable management of natural forests and commercial forest plantations. This component aims to support the need of changing the perception of investment risk linked to forest economy activities. The pricing structures and the minimum profitable unit of the different forest-related economic activities will be provided by GGGI to the consultant, with the expectation that the consultant provide their review and recommendations to improve upon them.