proposals – Addendum

ANNEXES
GREEN CLIMATE FUND FUNDING PROPOSAL | PAGE 98 OF 101
I
Annex XI: Project sustainability: an innovative response by PROFONANPE
A recurring question emerges from almost all projects funded mainly by international sources, no matter if
they deal with conservation, sustainable development, climate change or infrastructure: how sustainable
are post-project activities? In fact, there is little empirical evidence based on appropriate indicators that
objectively demonstrates the degree of sustainability after a project has come to the end of its life span.
Partly because: (a) there are very few ex-post evaluations five years after the closing periods;(bi) in
certain cases there are insufficient provisions to ensure the future sustainability of actions; (c) the design
of certain works are poorly adjusted to the real needs of beneficiaries; (d) very few financial resources are
allocated by governments and/or donors for such assessments; and (e) the continuous changes in
government staff tend to erode the memory of commitments given. Some of these causes by themselves,
or a combination of them, may, in fact, explain the recurring question.
PROFONANPE has almost 23 years of experience in funding projects from bilateral, multilateral,
corporate and international foundation sources; and two decades facing the same question. However, its
institutional design has enabled it to implement a unique arrangement, not yet practised in most
developing countries: the allocation of trust funds. These can be of two types: sinking funds and
endowment funds. The first is fully disbursed during the project life span and the second is a capital
invested in the stock market the annual returns on which are used for project funding. The resulting
capital is granted to PROFONANPE in perpetuity.
Thanks to the trust fund mechanism, PROFONANPE has managed to apply a useful answer to the
uncertainty of sustainability, particularly in the case of beneficiaries for whom the average duration of a
project (five years) is still insufficient within which to consolidate operations achieved during that period.
To date, PROFONANPE has a total of USD 50 million in endowments, the purpose of which is to facilitate
the sustainability of project achievements in the long run.
A formula derived from this mechanism is the generation of an endowment from the annual income
gained by a sinking fund during its lifetime. In spite of the fact that a sinking fund has a determined period,
by means of the proper management of investments it is possible to obtain capital in perpetuity at the end
of the project. PROFONANPE has called this modality "mixed trust fund" and it is the first institution of its
kind that has applied it in Latin America.
The purpose of such a mechanism is not to replace the potential sustainability of certain investments or to
simply subsidize sustainability. Applying a reasonable investment strategy, the idea is to technical assist
some initiatives during a certain period in order to achieve full sustainability, especially those with little
prior experience or facing long periods of maturity.
Examples of PROFONANPE achievements in the past five years are shown in the following table:
Endowment funds set up by PROFONANPE
2010-2015
Source
Project
Implementation
period
Project
amount
(USD millon)
Endowment
amount
(USD millon)
Estimated
endowment
amount
(USD millon)
GEF/WB/KfW PRONANP 2010-2015 23.7 12.6 –
Debt swap SINANPE III 2013-2018 10.0 – 4.0 a