Environment and Social Management Framework (ESMF) Has Been Prepared for the Forests for Prosperity (FFP) Project

Public Disclosure Authorized Government of Nepal Ministry of Forests and Environment Public Disclosure Authorized Nepal Forests for Prosperity Project Public Disclosure Authorized Environmental and Social Management Framework (ESMF) Public Disclosure Authorized March 8, 2020 Executive Summary 1. This Environment and Social Management Framework (ESMF) has been prepared for the Forests for Prosperity (FFP) Project. The Project is implemented by the Ministry of Forest and Environment and funded by the World Bank as part of the Nepal’s Forest Investment Plan under the Forest Investment Program. The purpose of the Environmental and Social Management Framework is to provide guidance and procedures for screening and identification of expected environmental and social risks and impacts, developing management and monitoring plans to address the risks and to formulate institutional arrangements for managing these environmental and social risks under the project. 2. The Project Development Objective (PDO) is to improve sustainable forest management1; increase benefits from forests and contribute to net Greenhouse Gas Emission (GHG) reductions in selected municipalities in provinces 2 and 5 in Nepal. The short-to medium-term outcomes are expected to increase overall forest productivity and the forest sector’s contribution to Nepal’s economic growth and sustainable development including improved incomes and job creation in rural areas and lead to reduced Greenhouse Gas (GHG) emissions and increased climate resilience. This will directly benefit the communities, including women and disadvantaged groups participating in Community Based Forest Management (CBFM) as well and small and medium sized entrepreneurs (and their employees) involved in forest product harvesting, sale, transport and processing. Indirect benefits are improved forest cover, environmental services and carbon capture and storage 3. The FFP Project will increase the forest area under sustainable, community-based and productive forest management and under private smallholder plantations (mainly in the Terai), resulting in increased production of wood and non-wood forest products. The project will also support investment in forest-based enterprises (FBEs) to utilize these products and generate paid employment by removing regulatory constraints and by providing accessible credit for businesses and entrepreneurs. This will be achieved in the context of Nepal’s recent Federal Constitution which requires significant reforms to the functions and capacities of different institutions operating in the forest sector. 4. The PDO indicators are: Forest area under CBFM with productive, sustainable forest management plans (ha) People in targeted forest and adjacent communities with increased monetary or non-monetary benefits from forests (#) Net GHG emissions (tons CO2 eq.) Share of targeted forest-dependent people with rating “Satisfied“ or above on project interventions (livelihoods, forest management, other) 5. The project will be implemented in Provinces 2 and 5 which were selected for their sustainable forest management potential and as suitable locations for forest-based SMEs. Within these two provinces a total of 50 municipalities, in clusters, will be selected for project implementation according to agreed criteria including their potential for community-based sustainable forest management, potential for new plantation establishment, location for forest-based enterprises, currently low levels of rural employment and incomes, and willingness and basic capacity to participate in the project. Municipalities with fully staffed finance and administrative sections that are prepared to hire their 1 SFM is defined by FAO as “managing forests sustainably [for] increasing their benefits, including timber and food, to meet society's needs in a way that conserves and maintains forest ecosystems for the benefit of present and future generations”. i own technical (forestry) staff and that have already made some progress with local policy and planning for the forest sector will be preferred. Forest-based enterprises located anywhere within these two provinces can be supported. 6. Approximately 464,800 people or (111,000 households) will benefit from the project as members of the various CBFM groups and as smallholder families that receive will project support of various kinds. In addition, there will be additional beneficiaries from the support bring provided for forest-based enterprises who will benefit from improved availability of jobs and cash incomes and improved working conditions (numbers of these have not been estimated). Of the total number of project beneficiaries, the project’s target group includes not only indigenous peoples (IPs) but also, Dalits Madhesis, and other poor and vulnerable households and groups. There is the need to consider the needs and interests of women-headed households, which are common to all of these groups. Several of the project interventions are aimed as directly benefiting these stakeholder groups including land allocation (inside community forest); pro-poor leasehold forest management; public land management In the Terai) and as beneficiaries of forest product distribution from CFM groups to distant users in the southern Terai. 7. The project cost is US$24 million of which US$17.9 million will be in the form of soft loan and US$ 6.1 million will be in the form of grant. The project duration is 5 years. 8. The Project has four components: Component 1: Policy & capacity building support for new government structures and processes for sustainable forest management (US$ 2.90 million) Component 2: Community-based sustainable forest management and smallholder forest plantations (US$ 10.76 million) Component 3: Forest Enterprise Improvement and Development (US$ 7.35 million) Component 4: Project Governance, Monitoring and Learning (US$ 2.99 million) 9. Under the Dedicated Grant Mechanism (DGM) of the FIP, a further US$ 4.5 million will be made available directly to IP and local community organizations/ NGOs in the project area after the FFP Project is approved. The DGM is a separate grant for “soft” activities such as capacity building or information exchange that will be managed by these organizations independently, to enable them to participate more fully and effectively in implementation of FFP project activities. The FFPP and DGM are mutually supportive of each other and complementary in projected outcomes. Moreover, this ESMF will be adopted for application in the DGM project also, as none of the sub-projects that would be eligible for support under the DGM are expected to be any riskier or higher impact than what the FFP project. 10. Enviornmental and Social Risks of the FFP Project. The key environmental risks come in relation to unsustainable practices and activities such as over-harvesting of trees and setting too-high harvesting quotas for timber and non-timber forest products. Also, the implementation of activities with adverse E&S impacts such as those located in biodiversity hotspot areas and critical habitats could occur, even though the project will not support any activities that take place in legally designated parks or protected areas. Other impacts on the biodiversity would be from selective felling which may reduce the overall resilience of the forests to pests and pathogens, genetic erosions, loss of biodiversity, loss in natural regeneration of Sal and other major species, over harvesting destroying key habitats such as nesting sites, for birds and other small animals. Other environmental risks stem from the significant use of chemical pesticides and production of waste materials associated with ii forest-based enterprises. The most prominent social risks relate to the possible exclusion of disadvantaged or otherwise vulnerable groups, such as IPs, Dalits or female-headed households, from receiving benefits from the project, although CBFM groups have an overall good track record of embracing pro-poor governance and benefit sharing. All of these risks are ultimately considered possible but not likely, as there are a number of mitigating factors included in the project design itself, including in the capacity building component and through the safeguard instruments that have been prepared during the design phase.The objective of the ESMF is to provide a framework for effective management of the environmental and social issues and the impacts that are likely to emerge during project implementation. The specific objectives of the ESMF include: To review GoN’s existing policies, regulations, operational guidelines and institutional arrangements to address and mitigate environmental and social impacts of national roads. To set out the principles, rules, guidelines and procedures to assess the environmental and social risks and impacts of the project. To assess the compatibility of the core principles of GoN policies with policies of the World Bank, to identify gaps, and to specify measures for addressing the gaps. To provide measures and plans to reduce, mitigate and/or offset any adverse risks and impacts. To estimate and budget the costs of such measures To provide information about the agencies responsible for addressing Project risks and impacts including information about their capacity to manage environmental and social risks and impacts To provide adequate information on the area in which project activities (sub-projects in the case of the DGM project) are expected to be implemented including information about potential

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