REMIT TORs: International Experts for NDRMF Fund Architecture  

2.1.          Brief overview

Pakistan is highly vulnerable to climate change and a clear depiction of this was seen in the shape of 2022 floods. The Post Disaster Needs Assessment (PDNA) has identified a minimum requirement of US$ 16.3 bn for the rehabilitation of the flood-affected population and sectors. The destruction has slowed down the GDP growth (impact of about 2.2%) with the national poverty rate increasing by 3.7 - 4.0% pushing 8.4 - 9.1 million people into poverty, as a direct consequence of the floods. The multidimensional poverty is expected to increase by 5.9%, pushing an additional 1.9 million households (~13 million people) into non-monetary poverty.

The rains and floods of 2022 are just one of the manifestations of the Climate Change. Experts have been warning about the changes in the weather patterns and their impact on agriculture, livestock, livelihoods in general, etc. However, the rains and floods were unpredictably widespread and massive and showed how unprepared the government and the people are. These, unfortunately, are not one–off events. Experts predict the rains and floods and other manifestations of climate change to recur with even frequency.  At the September 2010 General Assembly of the UN, Pakistan’s Foreign Minister remarked, “Climate change, with all its severity and unpredictability, has become a reality for 170 million Pakistanis (now over 230 million).” The 2010 floods hastened the process of policy formulation with the first National Climate Change Policy (NCCP) launched in 2012, followed by the launch of the Framework for Implementation of NCCP in 2013.  The NCCP framework outlined the vulnerabilities of various sectors to climate change and identified appropriate adaptation and mitigation actions in case of disaster and suggested certain interventions and investments.

Moreover, floods are not the only consequence of climate change. Pakistan now receives very little rainfall, except for the Northern regions which are prone to monsoons. Inter-annual rainfall values vary significantly, often leading to successive patterns of floods and drought. Temperatures are projected to increase by between 1.4 and 3.7 degrees by 2060, with more rapid warming in the south and coastal zones, which will lead to an increase in rainfall variability and extreme weather events.^[1] This increasing temperature and variability of rain patterns is impacting agriculture productivity and if not addressed will increase the risk to food security. The sectors most susceptible to climate change are water, energy, agriculture and food security, forestry, and biodiversity.

In terms of disaster risk reduction (DRR)^[2], the devastating floods of 2022 highlighted significant gaps in disaster preparedness systems and as per the PDNA brought new light to the importance of climate change and disaster risk management and an increased emphasis on protecting and increasing government’s investment on climate change (mitigation and adaptation) and disaster risk reduction. While climate change and DRR are intrinsically linked, two areas are often managed in institutional silos and lack mechanisms to coordinate investments. In practice, many investments in climate change adaptation and mitigation will in turn impact positively on disaster risk reduction, while reducing needs and costs for relief and recovery (in relation to some, but not all, disasters). Conversely, risk reduction, when targeting climate-related emergencies, involves a lot of adaptation investment. There is also a need to review reconstruction activities, to assess potential negative side effects in terms of mitigation impacts, which could otherwise be overlooked if addressed through a single-issue lens.

Problem statement

Despite the vulnerability of climate induced disasters, Pakistan has not been able to attract international climate finance to address the needs. The existing institutional arrangements do not offer a well-structured architecture to channel the fund. Therefore, a streamlined institutionalised mechanism is needed to attract international climate finance that meets the international funding requirements and can help Pakistan in addressing the rapidly increasing needs to climate induced disasters.

3.1.          Rationale

The Government of Pakistan in collaboration with Asian Development Bank (ADB) and other donors has created the National Disaster Risk Management Fund (NDRMF) to comprehensively address key issues in Disaster Risk Management, Resilience Building and Disaster Risk Financing.

National Disaster Risk Management Fund is a government-owned not-for-profit company incorporated with the Securities and Exchange Commission of Pakistan, under Section 42 of the Companies Act, 2017, in December 2016. It is a non-banking financial intermediary with a corporate structure, having an objective to reduce the socio-economic and fiscal vulnerability of the country and its population to natural hazards and climate change, through financing investments in disaster risk reduction and preparedness that have high economic impacts.

The initial financing of NDRMF was through an Asian Development Bank (ADB) loan to the Government of Pakistan, equivalent to $200.0 million and grants equivalent to $ 5 million from other bilateral funding organizations. The Government made these funds available to NDRMF as a grant, for sub granting to eligible implementing partners both from public and private (non-government) sector entities (I/NGOs).

NDRMF as an organization has been working hard to meet the targets (defined by donors) vis-à-vis hiring competent professionals, developing procedures and policies, carrying out accreditation and project appraisal and approvals, financial management and procurements, while fully ensuring all the safeguards and mainstreaming gender as per requirements of different donors / sponsors.

As a result, NDRMF grant / project portfolio increased from US$ 200 million (ADB and Australian Government) to US$ 420 million (World Bank, ADB, AusAid / DFAT, Norwegian Government, French Government, SDC and etc.). The scope of the Fund also expanded to include health emergencies (pandemics/epidemics), climate change adaptation / mitigation initiatives and food security. Likewise, specialized units were added with increased number of technical professionals to carry out the additional interventions fairly diverse in nature.

3.2.          Objectives of the assignment

Funding Architecture

NDRMF’s fund structure is being revised to strengthen the link between funding and strategic priorities. As a result, the fund structure is being aligned to the new Business Strategy to ensure a major part of the funding from various sources is collectively contributing to the achievement of results identified in the 3-, 5- and 10-years Business Plan. Additionally, some funding will be allocated for certain special themes and activities which are specific to the priority of the funding source or donor. This will be done by consolidating the funding under one Pooled Fund with provision for a standalone Special Window Fund for each special theme and activity depending on donor preference.

The Pooled Fund and Special Window Funds will jointly contribute to achievement of the four pillars and cross-cutting themes in an integrated manner ensuring the realization of the three strategic objectives of the Business Strategy in a coherent manner. It will ensure stronger focus on results and lower transaction costs through consolidated approvals, allocations, expenditures, accounting, reporting, etc.

Every effort will be made to attract funding from various sources to the Pooled Fund. This way donors will be supporting the financing needed to achieve the three strategic objectives according to a coherent and integrated roadmap. Such an approach will ensure effective coordination and consistency of donor support around common priorities and outcomes. The funding in the Pooled Fund would be used for approved activities in the Business Plan and accounting would be done in a consolidated manner. The reporting of the results achieved would also be done in a unified report.

Some donors would like to support special themes or initiatives, which would be possible through the Special Window Fund. This will allow earmarking of funds for specific activities which may or may not be part of the Business Plan but would be contributing to the achievement of the strategic objectives. The accounting and reporting of such funding would be done separately.

3.3.          Scope of work: Areas of support and key results

The overall purpose of supporting NDRMF is to ensure that the fund opens in its design and moves away from the existing narrow approach of specified dispensing of funds and pre-agreed inputs and outputs. NDRMF intends to expand its fund operations and act as a fund of funds with flexible options to create vertical funds to suit the purpose and objective. As per the new Business Strategy of NDRMF, there is a need to expand the scope of the fund, especially in areas relating to climate change mitigation and adaptation and economy-wide interventions to address disaster resilience and disaster rehabilitation. The current structure of the fund is limiting in nature and does not allow NDRMF to operate outside the existing provisions. The following covers the scope of activity to be undertaken:

• The government has/is announcing several funds to tap into climate finance; however, little emphasis is being given to the need, design, and governance of these funds. Thus the task will conduct an assessment of this approach of setting up new funds and help determine the optimal structure based on international experiences.
• Based on the above assessments the task will help design the revised fund architecture of NDRMF to ensure the flexibility and institutional capabilities to execute the fund as a fund of funds or multi-donor trust fund, with clear verticals defined and the process flows developed for mobilizing finance, dispensing mechanisms, reporting structures at intervention level and as portfolio fund for impact.
• The advice should help the NDRMF diversify away from the existing grant operating model to using more innovative approaches under disaster and climate financing allowing flexibility to work with the public sector, private sector, and development partners and financing institutions.
• The activity will be helpful in designing one or two pilot transactions to support operationalizing of the revised fund structure.

REMIT requires the services of international experts to provide technical assistance to design a Funding Architecture for NDRMF to attract international climate finance. The assignment will include providing recommendations for establishment, operationalization and initial implementation of the Funding Architecture, based on the design the Consultant(s) will develop. Working under the direction of the REMIT Team Leader and CEO NDRMF, the Consultant(s) will be expected to undertake the following, but not be limited to:

• Review examples of good global practices in pooled Funds to inform this assignment.
• Study the current funding architecture in NDRMF including inflows and outflows (revenue and expenditure) accounting and reporting. Assess the efficiencies and weaknesses of the existing system with the objective of including them as far as possible in the new pooled Fund architecture.
• Identify the appropriate advantages for establishing the pooled Fund that achieves the NDRMF’s goals at a minimum of transaction and administrative costs.
• Determine how the management of the pooled Fund concept would operate, outlining how such funds would be managed within NDRMF, and the reporting systems that would be available to meet the needs of the various financing sources including the government, development partners, etc.
• Base the design of the pooled Fund to act as hub to improve aid effectiveness, increase alignment among a wide range of actors and reduce transaction costs for donors, country governments and implementing partners.
• Develop the design of the pooled Fund as a mechanism to receive contributions from multiple sources including government, development partners, etc., and allocate such resources towards achievement of the four pillars and ultimately the three strategic priorities in the Business Strategy 2024-2034. The objective should be to provide a flexible mechanism that enables NDRMF and Fund Implementing Partners to handle implementation according to their own operating procedures for procurement and financial management. By avoiding any duplication of operating procedures, the pooled Fund mechanism would minimize implementation delays and transaction costs.
• Ensure in the design that the operational procedures of the pooled Fund ensure efficiency in timely resource allocation, reducing high transaction costs and increasing transparency.
• The design should take into account:
  • Reduce fragmentation and duplication;
  • Strengthen strategic alignment and ownership by using established systems, particularly for fiduciary and safeguards;
  • Manage risks through common risk assessment and risk reduction policy enabling financing sources to take on risk together;
  • Increase financing predictability through multiyear financing plans and strategies;
  • Ensure robust fiduciary management systems and web based monitoring of financial flows;

The Consultant(s) will design the following:

• Financing Strategy: The goal of a financing strategy would be to propose the right mix of financing sources and related priority programmatic investments related to achievement of the strategic priorities and pillars included in the Business Strategy.
• Architecture: The Architecture will be made up of fund codes (charge codes) where all financial transactions are recorded. This will include a “parent fund code” at the pooled Fund level and series of “child fund codes” are created for every specific strategic outcome and/or pillars. This will ensure that projects deliver final outputs and contribute to strategic outcomes. Financial transactions for each project should be linked to a child fund code. Each project would accordingly have a Project code and all activities under a Project would have Budget codes.
• Develop the framework for linking the child fund code with the outcome of each individual projects.

3.4.          Key deliverables and timelines

4.1.          Institutionalisation and sustainability of TA support 

REMIT TA aims to build institutional capabilities within the GoP (including provinces) to attract international climate finance to address the rapidly increasing needs.

       i)          Institutional need and appropriateness of the time of intervention: The TA support will offer innovative solutions on setting up a robust fund architecture that will not help the relevant ministries and provincial departments to pitch their needs but also offer a reliable funding mechanism to international partners to channel international climate finance.

     ii)          REMIT’s approach to delivering the assignment. REMIT will undertake this assignment in collaboration with a team of international and local technical experts with prior experience in the field of designing fund architecture for climate change related interventions.

4.2.          Technical experts/ resources

The expert will be required to have:

• A master's degree in finance or a related field.
• A minimum 15 years of experience of advising public sector in areas of attracting multilateral investments with considerable share in international climate finance.
• Proven track record of designing fund architecture for climate finance in countries of global south.
• Proven ability to work collaboratively with diverse stakeholders.
• Ability to work flexibly and at pace.

4.3.          Reporting

The expert will report to the Output Lead and Team Leader of REMIT Programme.