Consultant: Management of Environmental and Social Risks for Financial Institutions

NGO Jobs / UN Jobs Vacancy

Organization: Alliance for Financial Inclusion
Closing date: 24 Dec 2020

1. Background:

The Alliance for Financial Inclusion
The Alliance for Financial Inclusion (AFI) is an innovative member-driven organization that enables policy makers in developing countries to share their knowledge on financial inclusion policies that have delivered positive tangible results. The network currently comprises more than 110 central banks, government ministries and other financial policy-making institutions from about 95 emerging markets and developing countries.

AFI’s members are actively engaged in advancing financial inclusion policy at national, regional and international levels through partnerships and cooperative arrangements with other regulators, as well as with international organizations and private sector leaders. The network uses the depth of unique knowledge and experience to produce regulatory guidance, provide insights on innovative policy developments and highlight proven solutions in the field.

The cooperation model upon which our network is built is a simple one, based on two key priorities:
• Country-led approaches: AFI members focus on ways to support countries in designing and implementing high-impact solutions to meet their unique needs and challenges. This approach has created ownership and a sense of pride as ever more ambitious targets are set and achieved.
• Peer-to-peer engagement: The value of knowledge and experience is not judged by the size or wealth of any one institution. Our cooperation model creates a community of equals where every member, no matter how large or small, is given the opportunity to share as well as to learn.

Inclusive Green Finance
Inclusive green finance is a new and evolving policy area pioneered by AFI member institutions implementing policies, regulations and national strategies to mitigate or build resilience to climate change. In June 2020, AFI published the second edition of a scoping study on inclusive green finance ‘Inclusive Green Finance: A Survey of the Policy Landscape (Second Edition)’. It outlines this emerging policy area and presents the 4P Framework of Inclusive Green Finance: Provision, Promotion, Protection and Prevention. It also reveals new and emerging policy practices that are guiding the transition to more inclusive and resilient low-carbon economies. It also contributes to the global effort to implement the Paris Agreement and achieve climate-related Sustainable Development Goals (SDGs).
The policies fall within four key pillars of inclusive green finance categorization, namely the 4Ps of inclusive green finance:
• Promotion policies and initiatives prepare the private sector to offer financial services for green projects or related climate action activities to qualified beneficiaries, for example, through awareness raising, information sharing, capacity building and data collection.
• Provision policies help to ensure financial resources for green projects or related climate action activities are provided to qualified beneficiaries, whether through lending policies, refinancing or other financing schemes.
• Protection policies reduce financial risk by “socializing” potential losses through insurance, credit guarantees, social payments or other related risk-sharing mechanisms.
• Prevention policies aim to avoid undesirable outcomes by lowering financial, social and environmental risks.

Project Background
Ecuador has a rich biodiversity but is primarily an oil exporting country. Its agricultural sector represents 9% of its Gross Domestic Product in 2018. The country also recognizes that climate change is also affecting its agricultural sector, which originally represented 21% of the country's GDP in 1990. Climate change has increased risks with global warming that will lead to an increase in drylands that are no longer suitable for agricultural production. On the other hand, the agricultural sector is the third largest emitter of carbon in the country, so reducing GHG emissions in the sector through climate-smart agriculture and other means is one of the country's unconditional commitments.

Ecuador's agricultural economy is strongly affected by climate change. To help boost agricultural production, inclusive green finance is one of the key enabling factors identified by monetary policy makers to enable lending to the sector and to MSMEs for small green projects. As key actors in the economic development process, the Savings and Credit Cooperatives or better known locally as COAC have an important role to play in supporting sustainable development. Within the international financial sector, new standards and codes of conduct should be established for the management of environmental and social risks.

In Ecuador, Saving and Credit Cooperatives play an important role in promoting financial inclusion, since they have a strong presence in rural areas serving clients that depend mostly on agriculture. The cooperative sector concentrates more than 60% of the microcredit in the country. To support the country’s climate change mitigation and contribute to its commitment to the Paris Agreement, Superintendence of Popular and Solidarity Economy (SEPS) saw the potential contribution of inclusive green finance to make financial resources available for the agriculture sector and for small green projects especially for the MSMEs. However, this requires an enabling policy support to encourage the allocation of facilities from financial institutions specific for the sector, such as lowering of risks and identifying projects that can be tagged as green. Furthermore, as IGF is a relatively new policy area, there is a huge knowledge gap in the financial sector on inclusive green finance.

2. Goals:

The objective of the consultancy is to contribute to the efforts for adaptation and mitigation of climate change in Ecuador and to the broader objectives of sustainable and low-carbon development of the country through financial inclusion.

It seeks to increase financial inclusion in general, through the introduction of the Environmental and Social Risk Management Guidelines in the regulatory framework of the SEPS to be considered in short, medium and long term credit decisions; and, in coordination with financial and non-financial actors, providing the baseline regulatory framework for loan installments directed, especially to the agricultural sector and MSMEs, in coordination with financial and non-financial actors.

The Environmental and Social Risk Management (ESRM) Guidelines assess and address the social and environmental externalities and risks of a financial institution’s activities. By requiring that attention be paid to the byproducts, secondary effects and unintended consequences of financing, an ESRM policy not only creates an environment for more holistic finance, but also lowers financial, societal and environmental risk.

3. Tasks and Deliverables:

The development of the project objectives will lead to the establishment of the Environmental and Social Risk Management Framework (ESRM) as the standard process for the proactive evaluation and integration of environmental and social issues in the credit risk assessment process of the COAC, which are the financial institutions regulated by the SEPS. The objectives of these standards are to promote corporate responsibility and transparency regarding the impacts of companies on the environment and society, and to promote sustainable development. The role of the ESRM in COACs is to reduce transaction risks that result from social environmental risk factors associated with the business activities of its clients.

The ESRM Guidelines will emerge from a rigorous multi-step consultation process with financial regulators, as well as with different stakeholders, along with building capacity to address the IGF knowledge gap and to deliver the ESRM Guidelines by the end of the draft.
Key Deliverables:

  1. Environmental and Social Risk Management Guide (ESRM)
    For the development of this deliverable, the designated consultant must perform at least the following activities:
    • Preparatory activities: Meetings with key stakeholders to define the objective and scope of the project as well as a workplan proposal.
    • Data collection and analysis: Data collection, document review, stakeholder consultation, and data analysis.
    Development of ESRM Guidelines: Presentation of the draft ESRM guidelines to stakeholders and delivery of the final document of the ESRM Guidelines. The document to be delivered to SEPS will consider at least the following content:
    • Glossary of terms, acronyms and definitions.
    • General considerations: national objectives, national and international standards, international best practices, benefits opportunities and challenges for implementing the guide, policy and cooperative Government considerations, etc.
    • Design and structuring: analysis of credit processes, environmental regulations, identification, evolution and management of environmental risks, etc.
    • Implementation: application, monitoring and follow-up mechanisms, among others.
    The document to be delivered to AFI will consider at least the following content:
    • Assessment report
    • Final report to SEPS and AFI
    • Interview transcripts
    • Meeting minutes
    • Any other technical documents (e.g. loan mechanisms mapping report, inter-agency coordination mapping, etc.)
    • Budget allocation
  2. Develop a common understanding of inclusive green finance between financial regulators and SEPS regulated members.
    The appointed Consultant must:
    • Conduct capacity building workshops for key stakeholders regarding the application of the ESRM Guidelines
    • Hold a final workshop for regulated institutions (COAC) and other key stakeholders to present the ESRM Guidelines and its application. In this last event, an overview of global organisms that provide financing for green projects would be included.

    Suggested content for the workshops proposal (not exclusive):
    • Objective
    • Workshops content
    • Methodology
    • Participants
    • Expected results

4. Qualification:

SEPS and AFI are seeking an expert with the following qualifications:

  • Higher degree expertise in a field related to Finance, Economics, Public Policy, International Development or another related discipline.
  • Knowledge and experience in development of financial regulatory policies, financing policy and, if possible, green finance.
  • Fluency in English (oral and written) is mandatory and a proficiency level of Spanish since SEPS regulatory framework is in Spanish.
  • Writing experience. If possible, send related working papers or research on the topic.

5. Timeline:

The consulting work will last 6 months. The final draft of the study must be completed no later than June, 2021.

6. Reporting:

Throughout the contract period, the Consultant will be reporting to AFI’s Head of Inclusive Green Finance. The contract will be from AFI with the individual consultant (or consulting firm with specific names of the team members) that would be working on the assignment. The consultant is expected to have a technical background on regulatory issues on green finance, climate change, and financial inclusion.

7. Evaluation Criteria:

The proposals submitted will be evaluated based on the following criteria:

  • Experience of vendor working with financial regulation, green finance or financial inclusion policies.
  • Knowledge and experience of the provider or consultant related to the assignment:
  • Expertise and experience of the vendor or consultant related to the financial regulation and/or its links to sustainable development.
  • If the proposed methodology provided is applicable according to the Terms of Reference and if there are an additional and important suggestions, tools, concepts and/or processes proposed by the vendor or consultant.
  • The conceptual framework of the proposal including a demonstration of logical and clear planning to execute tasks and complete deliverables.
  • Risk assessment linked to the consultancy.

How to apply:

Interested applicants are expected to submit a proposal with updated CV and using template given by email to AFI’s Procurement & Contracts Office at by 24th December 2020.

The final decision on selection of a consultant/consulting firm for this project rests with AFI management team and with the Inquiry. Only shortlisted and successful consultants will be contacted.

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