GEF SECRETARIAT REVIEW FOR FULL/MEDIUM-SIZED PROJECTS* THE GEF/LDCF/SCCF TRUST FUNDS

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1 GEF SECRETARIAT REVIEW FOR FULL/MEDIUM-SIZED PROJECTS* THE GEF/LDCF/SCCF TRUST FUNDS GEF ID: 4492 Country/Region: Nicaragua Project Title: Adaptation of Nicaragua's Water Supplies to Climate Change GEF Agency: World Bank GEF Agency Project ID: Type of Trust Fund: Special Climate Change Fund (SCCF) GEF Focal Area (s): Climate Change GEF-5 Focal Area/ LDCF/SCCF Objective (s): CCA-1; CCA-1; CCA-2; CCA-2; CCA-3; Project Mana; Anticipated Financing PPG: $0 Project Grant: $6,000,000 Co-financing: $31,500,000 Total Project Cost: $37,500,000 PIF Approval: Council Approval/Expected: May 01, 2011 CEO Endorsement/Approval Expected Project Start Date: Program Manager: Lars Christiansen Agency Contact Person: Jocelyn Albert Review Criteria Eligibility Agency s Comparative Advantage Questions Secretariat Comment at PIF (PFD)/Work Program Inclusion 1 1. Is the participating country eligible? Yes. Nicaragua is a non-annex I signatory to the UNFCCC. 2. If there is a non-grant instrument in the project, is the GEF Agency capable of managing it? 3. Has the operational focal point Yes. An OFP endorsement letter dated endorsed the project? March 10, 2011 is attached to the submission. 4. Is the Agency's comparative advantage for this project clearly described and supported? Yes. The WB has a strong comparative advantage to implement the proposed project due to its leadership role in implementing baseline sanitation and water management activities in Nicaragua (in particular through its PRASNICA and PRASMA projects - see below) Secretariat Comment At CEO Endorsement(FSP)/Approval (MSP) *Some questions here are to be answered only at PIF or CEO endorsement. No need to provide response in gray cells. 1 Work Program Inclusion (WPI) applies to FSPs only. Submission of FSP PIFs will simultaneously be considered for WPI. FSP/MSP review template: updated

2 Resource Availability Project Consistency 5. Is the co-financing amount that the Agency is bringing to the project in line with its role? 6. Does the project fit into the Agency s program and staff capacity in the country? 7. Is the proposed GEF/LDCF/SCCF Grant (including the Agency fee) within the resources available from (mark all that apply): the STAR allocation? the focal area allocation? the LDCF under the principle of equitable access? the SCCF (Adaptation or Technology Transfer)? focal area set-aside? 8. Is the project aligned with the focal area/multi-focal area/ LDCF/SCCF results framework? 9. Are the relevant GEF 5 focal area/ LDCF/SCCF objectives identified? 10. Is the project consistent with the recipient country s national strategies and plans or reports and assessments under relevant conventions, including NPFE, NAPA, and NCSA? 11. Does the proposal clearly articulate how the capacities Yes. As mentioned above, the WB has a leading role in supporting Nicaragua's national strategy in the sanitation and water management sectors. The project will be fully mainstreamed into this ongoing process (in particular the PRASNICA and PRASMA projects) and this is reflected through $20 million in WB co-financing. Yes. The water sector is a priority area in the latest CPS for Nicaragua - including the previously mentioned projects (PRASNICA and PRASMA). The WB country office is expected to play a major role in the day-to-day management of the project. Yes. Yes. The project is fully consistent with the LDCF/SCCF results framework. Yes. The project will contribute to all 3 FA objectives, and outcomes 1.1, 1.2, 2.1, 2.3, and 3.2. Yes. The project is consistent with Nicaragua's national climate change and adaptation strategies as well as sectoral plans and policies. Most importantly the project and its activities, are consistent with four out of five strategic areas identified in the 'National Environment and Climate Change Strategy' and the activities identified in the associated ' Action Plan'. Yes. The project includes several specific activities, in particular those under FSP/MSP review template: updated

3 Project Design developed will contribute to the institutional sustainability of project outcomes? 12. Is (are) the baseline project(s) sufficiently described and based on sound data and assumptions? 13. Is (are) the problem(s) that the baseline project(s) seek/s to address sufficiently described and based on sound data and assumptions? 14. Is the project framework sound and sufficiently clear? component 1, aimed at increasing institutional capacity at both national and municipality level and thus contribute to the long term sustainability of the project's outcomes. Yes. The project will build primarily on two WB investments in the water sector of Nicaragua: the 'Rural Water Supply and Sanitation Project in Nicaragua' (PRASNICA) and to a lesser extent the 'Nicaragua Greater Water and Sanitation Project' (PRASMA) both of which started implementation in the Spring of The objectives of these projects are to: (1) Increase rural water supply coverage, (2) Institutional strenghtening of rural water supply management institutions, and (3) Pilot projects to strengthen municipal level water supply and sewage systems and the protection of water sources. Both projects are satisfactorily described, and would appear to provide a solid baseline on which to build the adaptation interventions. Yes. The baseline problems in the water sector are satisfactorily described for the present stage of project development. Yes. The project framework is logically structured around 4 components contributing to the project objective of 'enhancing the current and future resilience to climate change of investments in the water supply and rural sector undertaken by the GoN': 1. Institutional strengthening for integration of climate impacts in water resource management, 2. Protection of water sources and the use of economic instruments to strengthen water supplies' resilience to CC, 3. Demand and supply side measures to protect water sources and improve the efficiency of water use, 4. Coastal wetland protection and reduction of vulnerability to sea level rise to reduce FSP/MSP review template: updated

4 climate induced impacts on drinking water supplies in Corn Islands. This will include a number of specific investments concentrated around the strategic water reservoir in Lake Nicaragua and on Corn Island. 15. Are the incremental (in the case of GEF TF) or additional (in the case of LDCF/SCCF) activities complementary and appropriate to further address the identified problem? 16. Are the applied methodology and assumptions for the description of the global environmental benefits/adaptation benefits sound and appropriate? 17. Has the cost-effectiveness sufficiently been demonstrated, including the cost-effectiveness of the project design approach as compared to alternative approaches to achieve similar benefits? The description of outcomes and outputs are clear, and sufficiently detailed for the current stage of project development. Yes. The proposed activities are clearly additional and complementary to the existing baseline under the PRASNICA and PRASMA projects. It would also appear to be complementary to the IADB and AF projects (see below). If successful, the proposed SCCF project would provide the capacity and on-theground experience necessary to mainstream adaptation into the existing investments in water and sanitation under the PRASNICA and PRASMA projects, and thus help secure a sustainable and climate resilient water supply in Nicaragua. However, complementarity with respect to the recently approved AF project would need to be further clarified by CEO endorsement (please refer to section 23 below). Yes. The applied methodology and assumptions are sound and appropriate. Yes. Cost-effectiveness have been satisfactorily demonstrated for the current stage of project development. Rather than investing in costly engineering solutions, protection of water resources and obtainment of CC-resilient water supply will be achieved through softer measures such as: increasing the natural resilience of micro-watersheds to CC, supporting natural water filtration services of wetlands, implementing various demand and supply side measures in local FSP/MSP review template: updated

5 18. Is there a clear description of the socio-economic benefits to be delivered by the project and of how they will support the achievement of environmental/ adaptation benefits (for SCCF/LDCF)? 19. Is the role of civil society, including indigenous people and gender issues being taken into consideration and addressed appropriately? 20. Does the project take into account potential major risks, including the consequences of climate change and provides sufficient risk mitigation measures? (i.e., climate resilience) 21. Is the provided documentation consistent? 22. Are key stakeholders (government, local authorities, private sector, CSOs, communities) and their respective roles and involvement in the project identified? 23. Is the project consistent and properly coordinated with other related initiatives in the country or in the region? communities and by strengthening institutional capacity and mainstreaming CC adaptation into national water sector planning. Yes. The primary socio-economic benefits of the proposed project would be in terms of its health benefits from improved water quality and greater reliability of drinking water supplies. Yes. The project activities will be implemented in rural communities, many of which consist of indigenous groups. The benefits to women of improved community water supply are also expected to be greater than average, as water collection is disproportionately done by women. Yes. The PIF identifies main risks to the project and intended mitigation measures. Yes. The documentation is consistent. Yes. A brief description of key stakeholders and their respective roles is included and satisfactory for the current stage of project development. The PIF includes an initial account of related projects and a general strategy on coordination (through a leading role in all projects of the Ministry of Natural Resources and Environment). This description can be accepted at the current stage of project development. However, a few of the projects mentioned would appear to have a significant potential for duplication of activities, and approval of this PIF is thus under the condition that complementarity and coordination is comprehensively and satisfactorily FSP/MSP review template: updated

6 clarified by CEO endorsement. 24. Is the project implementation/ execution arrangement adequate? 25. Is the project structure sufficiently close to what was presented at PIF, with clear justifications for changes? 26. If there is a non-grant instrument in the project, is there a reasonable calendar of reflows included? 27. Is the GEF/LDCF/SCCF funding level for project management cost appropriate? In particular, this detailed baseline analysis would have to address the project's complementarity with the recently approved (December 2010) AF project implemented by UNDP. As recognized in the PIF, the AF project will implement a number of measures that are similar to the proposed project (protection of water resources, rainwater harvesting, and water storage), albeit in a different region of the country (Northwest around Villanueva River Basin and Estero Real River) and with a primary focus on the agriculture sector. Both the potential for synergies and the risk of duplication would appear to be great. It is crucial, therefore, that a comprehensive analysis is conducted by CEO endorsement outlining the mandates of each of the two projects, as well as a clear coordination and implementation plan, making it clear that the two projects will be synergetic and not duplicate any activities. Yes. Yes. Proposed management costs are $500,000, and thus below 10% of the proposed SCCF grant (9%). This would appear to be acceptable, but a full account of management expenses would have to be presented by CEO endorsement. FSP/MSP review template: updated

7 Project Financing 28. Is the GEF/LDCF/SCCF funding per objective appropriate to achieve the expected outcomes and outputs according to the incremental/additional cost Project Monitoring and Evaluation Agency Responses Secretariat Recommendation Recommendation at PIF Stage reasoning principle? 29. Comment on indicated cofinancing at PIF. At CEO endorsement, indicate if cofinancing is confirmed. 30. Is the budget (GEF/LDCF/SCCF funding and co-financing) per objective adequate to achieve the expected outcomes and outputs? 31. Has the Tracking Tool been included with information for all relevant indicators, as applicable? 32. Does the proposal include a budgeted M&E Plan that monitors and measures results with indicators and targets? 33. Has the Agency responded adequately to comments from: STAP? Convention Secretariat? Council comments? Other GEF Agencies? 34. Is PIF clearance/approval being recommended? Yes. The SCCF funding per objective would appear to be appropriate to achieve the expected outcomes and outputs. The majority of resources will go towards concrete on-the-ground investments. Indicative co-financing is $31,500,000, through the PRASNICA and PRASMA projects and the IADB/NDF/GoN project. The level and nature of the proposed cofinancing is appropriate and satisfactory. Yes. Not yet. Should be provided by CEO endorsement. None received. None received. Yes. The project is technically strong and builds on a significant baseline of WB investments, which would seem to insure that the project will have a broad impact on the resilience of the Nicaraguan water sector. Recommendation at CEO Endorsement/ 35. Items to consider at CEO endorsement/approval. 36. At endorsement/approval, did Agency include the progress of PPG with clear information of commitment status of the PPG? The project is recommended for CEO clearance and Council approval. Please refer to section 23 above FSP/MSP review template: updated

8 Approval 37. Is CEO endorsement/approval being recommended? First review* March 29, 2011 Review Date (s) Additional review (as necessary) Additional review (as necessary) * This is the first time the Program Manager provides full comments for the project. Subsequent follow-up reviews should be recorded. For specific comments for each section, please insert a date after comments. FSP/MSP review template: updated

9 REQUEST FOR PPG APPROVAL Review Criteria Decision Points Program Manager Comments PPG Budget 1. Are the proposed activities for project preparation appropriate? 2. Is itemized budget justified? Secretariat Recommendation 3. Is PPG approval being recommended? 4. Other comments Review Date (s) First review* March 30, 2011 Additional review (as necessary) * This is the first time the Program Manager provides full comments for the project. Subsequent follow-up reviews should be recorded. For specific comments for each section, please insert a date after comments. FSP/MSP review template: updated