River Restoration for Climate Change Adaptation (RIOS)

|

Mexico FMCN

22 October 2019 Project/Programme title: River Restoration for Climate Change Adaptation (RIOS)

Country(ies): Mexico National Designated Ministry of Finance and Public Credit (SHCP) Authority(ies) (NDA): Executing Entities: Fund for the Gulf of Mexico (FGM), Northwest Fund (FONNOR)

Accredited Entity(ies) (AE): Fondo Mexicano para la Conservación de la Naturaleza A.C. Date of first submission/ 10/21/2019 V.1 version number: Date of current submission/ 2/18/2020 V.2 version number A. Project / Programme Information (max. 1 page)

☒ Project ☒ Public sector A.2. Public or A.1. Project or programme A.3 RFP Not applicable private sector ☐ Programme ☐ Private sector

Mitigation: Reduced emissions from: ☐ Energy access and power generation: 0% ☐ Low emission transport: 0% ☐ Buildings, cities and industries and appliances: 0% A.4. Indicate the result ☒ Forestry and land use: 10% areas for the project/programme Adaptation: Increased resilience of: ☒ Most vulnerable people and communities: 20% ☐ Health and well-being, and food and water security: 0% ☐ Infrastructure and built environment: 0% ☒ Ecosystem and ecosystem services: 70%

A.5.1. Estimated mitigation impact 2,568,000 tCO2eq (tCO2eq over project lifespan) A.5.2. Estimated adaptation impact 63,294 direct beneficiaries (number of direct beneficiaries) A.5. Impact potential A.5.3. Estimated adaptation impact 865,634 indirect beneficiaries (number of indirect beneficiaries) A.5.4. Estimated adaptation impact 0.67% of the country’s total population (% of total population)

A.6. Financing information

A.6.1. Indicative GCF funding requested (max Amount: 9,000,000 Currency: USD Financial Instrument: Grants 10M)

A.6.2. Indicative co- Amount: 1,000,000 Currency: USD Financial Instrument: Grants financing Institution: GEF (CONECTA PROJECT)

A.6.3. Indicative total project cost (GCF + co- Amount: 10,000,000 Currency: USD finance) disbursement A.6. Estimated duration of period: 60 A.7.2. Estimated project/ 240 project/ programme: repayment period, if Programme lifespan applicable: 0 A.8. Is funding from the A.9. Is the Environmental and ☐ Yes ☒ Yes Project Preparation Social Safeguards Category C or ☒ No No Facility needed? I-3? ☐ Minimal or no negative environmental and social impact is expected A.10. Provide rationale for since the participation of communities will be voluntary, the natural habitat the ESS categorization will be restored, and gender equity will be ensured. Outreach will be (100 words) culturally appropriate and allow for the participation of stakeholders in training activities aimed at increasing ecosystem-based adaptation capacity. Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 2 OF 17

The project does not include activities on infrastructure, resettlement, use of agrochemicals, or invasive species. A.11. Has the CN been ☒ Yes ☐ Confidential A.12. Confidentiality shared with the NDA? ☐ No ☒ Not confidential Mexico is highly vulnerable to the effects of climate change, such as the increase in extreme events, which are affecting watersheds (droughts, floods, landslides), and the negative ecological, economic, and social A.13. Project/Programme impacts are expected to be exacerbated. The objective of RIOS is to rationale, objectives and increase adaptive capacity in watersheds vulnerable to climate change approach of through river restoration and connectivity by: (i) conducting restoration, programme/project (max conservation and improved productive activities, implemented by local 100 words) organizations in the states of Jalisco and Veracruz, (ii) increasing local monitoring capacities to reduce climate vulnerability, (iii) aligning public and private climate-smart investments; and (iv) promoting climate policy in a National River Restoration Strategy. B. Project / Programme details B.1. Context and Baseline (500 words) Mexico has geographical characteristics that place it as one of the most vulnerable countries to the effects of climate change (SEMARNAT, 2014). These effects will have negative ecological, economic, and social consequences, which are already visible today (Sarukhán et al., 2012). In a scenario business as usual, the cost of climate change in Mexico could reach between $550,000 million-$2.3 billion in 2100 (INECC, 2019).

These impacts reduce ecosystem services in watersheds and riparian ecosystems. A riparian ecosystem is a transition between the aquatic ecosystem and the adjacent terrestrial area (US Forest Service, 2000). Riparian vegetation corridors regulate processes that result in valuable ecosystem services such as uptake, infiltration, and retention of sediments and contaminants from human activities (Iura et al., 2013). However, it is estimated that 45% of riparian corridors in Mexico are degraded (Garrido et al. 2010). This is related to the pressures of land use change caused by the deterioration in territorial suitability for agricultural and livestock activities, caused by climate change; this leads to deterioration of the hydrological cycle and soils. Other barriers are lack of local governance, limited institutional coordination, and deficient alignment of public and private investments. Climate change impacts in this ecosystems are expected to be exacerbated, with negative implications for local communities. Riparian ecological restoration can significantly increase adaptation of these communities to the effects of climate change (Seavy et al., 2009).

Two highly vulnerable watersheds are the Vallarta region in the state of Jalisco and Jamapa basin in Veracruz. Both areas were selected for this project due to their vulnerability to climate change events, climate-change adaptation potential, and local capacities. The regions have different environmental and socio-economic characteristics to maximize the learning potential. Vallarta region in Jalisco. Population: 42,754 (48.5% women).Extension: 22,702ha.Riparian corridors: 6,838ha. Estimated GHG emissions in Jalisco: 25.7 Mt CO2 eq., with 11% from AFOLU (INECC, 2014). Rate of land use change for the basin 1993-2011: 3.23%. Forestry is practiced in the mountainous areas, small scale agriculture on hillsides, extensive cattle ranching within 8,000ha of the basin, and traditional and nature-based tourism is present mostly in coastal areas, with over 4,057,875 tourists per year. Jalisco had USD$389.7 millions of economic losses due to hydrological disasters Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 3 OF 17

during 2000-2015 (data from CENACOM, CENAPRED and FONDEN), 95% weather-related. Climate change scenarios in the near future project an increase of 0.5-4.5°C, and precipitation up to +20mm change. The region presents climate change vulnerability to: human settlements to flooding (vhsf), to landslides (vhsl), extensive livestock farming exposed to flooding (velff) and to water stress (elfws), and forage production exposed to water stress (fpws) (INECC, 2018). Climate change projections show that all these vulnerabilities will increase in the future (2030) (Annex 2 for project areas and Annex 4 climate change vulnerability in the region).

Jamapa watershed in Veracruz. Population: 10,772 (51.2% women).Extension: 36,309ha.Riparian corridors: 7,956.00ha.Rate of land use change in the area is 0.28%. In the upper and middle part of the basin are agricultural activities, such as vegetable production and fruit trees, and near 3,000ha have extensive livestock. Veracruz is one of the top five states with highest economic loss for tropical cyclones, rains, and floods during 2000-2012 (SEMARNAT, 2014). In the watershed, climate change scenarios in the near future project an increase of 1-2°C, and precipitation up to +20mm change. Over 99% of the disasters in the municipalities in the watershed are weather- related. The region presents climate change vulnerability of vhsf, vhsl, velff, elfws (INECC, 2018). Climate change projections show that most of them will increase in the future (2030).

This project is fully aligned with Mexico´s priorities. The project will support to finance the additional costs of implementing adaptation activities prioritized by the government´s climate commitments. The adaptation National Determined Contributions (NDCs) includes three pillars: (i)Social Adaptation, (ii)Ecosystem-Based Adaptation, and (iii)Infrastructure and Productive Systems. The NDC includes in its goals: (i)reforestation in watersheds, with particular focus on riparian ecosystems; (ii)conservation and restoration of ecosystems; (iii)integral watershed management, and (iv)integration of climate change criteria into agricultural and livestock programs. Mexico is currently developing the National Adaptation Strategy, this is intended to:¨reduce vulnerability to the effects of climate change (…) and to facilitate the integration of adaptation to climate change in policies, activities and programs(…)”. B.2. Project / Programme description (1000 words) Component 1: Increase functional connectivity in two watersheds. This Component will strengthen capacities in producers along the Jamapa and Vallarta watersheds to conduct activities on their land that promote ecosystem-based adaptation through functional connectivity. Functional connectivity are biological corridors that improve ecosystem services, which are directly linked to increased resilience to the effects of climate change. INECC -the National government agency that coordinates climate change research and policy- has identified the required actions to reduce climate change vulnerability through Integrated Watershed Action Plans (IWAPs) built with key local stakeholders, during the Global Environmental Facility GEF-Financed C6 Project coordinated by FMCN in 2013-2018 (Annex 3).

It will be implemented through sub-projects (grants) to selected community, civil and private organizations working with producers on the ground to increase capacities in: (i)rehabilitation and restoration of forests along rivers and springs (increase coverage with native species, soil restoration); (ii)protection and conservation of forests (through voluntary areas for conservation, environmental compensation, and other local schemes); and (iii)implementation of productive activities that promote connectivity (as agroforestry and silvopastoral systems, partially co-financed by the CONECTA project, financed by the GEF (Annex 6)). Table 1 and Annex 1 illustrate the Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 4 OF 17

proposed activities. Selected practices are proved to be effective to increase adaptation, and will be appropriate for the regions. FMCN will launch a demand-based request for proposals (RFP)through its regional funds (see ¨Institutional Arrangements¨ and Annex 5 for RFP). The RFP will promote the inclusion of women and indigenous peoples, through the dissemination in appropriate spaces, and gender-sensitive activities. Selection criteria include: (i)financial planning and viability, (ii)impact, (iii)social participation, (iv)institutional capacity, (v)complementarity with additional initiatives, and (vi) continuity.

This Component will also support institutional strengthening of local actors to enhance coordination and connectivity in the basins. It will create a “learning community” that will meet annually to exchange experiences between beneficiaries, collaborate regional and national actors to coordinate activities and achieve connectivity in the watersheds. This learning will be scaled-up nationally under Component 4. Activities will include workshops, publications, and dissemination events. Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 5 OF 17

Component 2: Increase local monitoring capacities to assess and reduce climate change vulnerability. This Component will adapt existing methodologies to evaluate the vulnerability of the project basins continuously and to monitor the provision of ecosystem services (biodiversity and water quality). It will provide sub-projects under Component 1 with technologies and assistance to learn about vulnerability and monitor project benefits and co-benefits. The results will serve to communities to improve their adaptive capacity, and as input for the vulnerability assessment to be conducted by INECC at the onset, mid-term, and end of project. The protocol developed will support the National River Restoration Strategy (NRRS), designed under Component 4.

This Component will also implement a Natural Capital Accounting system through an economic valuation of selected ecosystem services to quantify, valuate, and attribute the contribution of river restoration to the reduction of climate vulnerability. This will serve as a basis to increase private and public investments focused on river restoration for climate vulnerability reduction that will be leveraged under Component 3, for example, with the tourist industry in Jalisco.

Component 3: Align and catalyze public and private climate-smart investments to scale up river restoration for climate change adaptation. This Component will implement coordination activities to align public and private investments, including credits, to scale-up the best practices supported under Component 1. It includes three strategies: (i)alignment of local and national public programs related to connectivity (including CONAFOR Payment for Ecosystem Services, Sillvopastoral Program in Jalisco, and others); (ii)improve enabling environment and capacities for producers benefited by Component 1 to access to dedicated credit lines for sustainable, climate- resilient productive practices in sustainable ranching and agroforestry. The credit lines will be developed through parallel funding from the CONECTA project (financed by the GEF, and with parallel funding from French Development Agency - AFD-, Annex 6); and (iii)mobilized investment of private funds in watershed connectivity in target and additional basins, for example, coming from the tourism industry and water service providers. Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 6 OF 17

Component 4: Support the National River Restoration Strategy with a climate focus. Under the leadership of INECC, this Component will support the design of the NRRS to strengthen the country's adaptation to climate change. It will: (i)identify relevant stakeholders for the design; (ii)establish a Design Committee and its institutional arrangements; (iii)incorporate lessons learned from intermediate results from Components 1 and 2; (iv)develop workshops to define objectives, scope, and guidelines of the NRRS. It will also support the work with public officials and legislators to:(i)define the legal framework of the strategy; (ii)identify relevant key decision-makers and legislators that require strengthening in their knowledge on climate change adaptation, and (iii)develop and launch a communication strategy.

The accredited entity is the Mexican Fund for the Conservation of Nature (FMCN). FMCN has a strong structure and capacities for the implementation of multilateral-financed projects. For example, FMCN recently concluded the implementation of the “Coastal watersheds conservation in the context of climate change” (C6), GEF-financed for USD$39.5 million. All project goals were met, and it has been recognized as a best practice by GEF for its inter-institutional collaboration (see Annex 3). FMCN has wide experience implementing projects in partnership with INECC, the National Forestry Commission (CONAFOR), National Commission for Natural Protected Areas (CONANP), among others, as well as coordinating funding for local organizations, communities, and producers.

Potential for transformation and scaling-up. This project focuses on activities in connectivity derived from the experience of C6 project and develops its potential to scale-up (see Annex 3). This project is organically designed to scale-up outcomes sequentially, from the implementation of local sub projects and local development of capacities (Components 1and 2), coordination at the regional level (Component 3)to the design of a National Strategy (Component 4).

The costs and benefits of the activities supported under this project have been widely analyzed. According to a recent economic analysis of a World Bank project in Mexico that supported similar activities, investments in both forest conservation and productive activities generate sufficient benefits to justify their costs; this was also determined during the C6 project (see section “Effectiveness”). Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 7 OF 17

The project´s implementation arrangements will replicate the structure designed in C6. - FMCN: the project will have a Project Coordinating Unit (PCU)under FMCN. FMCN will be the AE. It will also be the EE for Component 4 and hire consultants to support INECC.

- Two Regional Funds: the project will have two Regional Coordinating Units (RCU)under two regional funds created by FMCN that will act as EE in Components 1,2 and 3. These funds have been proved to reduce operation costs by working closer to the producers and local organizations. In Veracruz, the FMCN will transfer funds to Fondo Golfo de México (FGM), and in Jalisco to Fondo Noroeste (FONNOR). The World Bank has supervised both regional funds for six years and highlight them as key for local engagement, supervision, and capacity building. They have the governance mechanism of non-profits and follow the standards established by FMCN and derived from the Practice Standards for Conservation Trust Funds developed by the Conservation Finance Alliance.

- Organizations, communities, and producers: FGM and FONNNOR will disburse funds for Component 1 trough a RfP that will finance civil, community or private organizations that work directly with local communities and producers.

- INECC: will provide technical inputs and sub-project technical supervision. INECC will lead the assessment of vulnerability in Component 2 and the design of the NRRS to ensure country appropriation. Consultants under INECC supervision and financed with project funds will strengthen these capacities in the country. FMCN will hire the consultants required for INECC´s contribution.

- Other institutions: representatives from CONANP, CONAFOR, INECC, and FMCN integrate a Technical Project Committee (TPC), which has held 28 meetings in the last five years. The TPC Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 8 OF 17

agreed in its 28th meeting to integrate a Commission on RIOS that will invite representatives of the National Water Commission (CONAGUA)and the Institute for Water Technology (IMTA), who are already participating in the design of RIOS.

The main project risks are: (i)the number of potential beneficiaries who voluntarily apply under Component 1 may not present enough proposals that increase connectivity; (ii)the private sector does not have willingness to pay for the provision of ecosystem services and/or to donate, and (iii)the NRRS may not be implemented by the government. Mitigation measures are described in Annex 7.

Monitoring and evaluation. FMCN will be responsible for project monitoring and will provide oversight of regional funds involved in developing capacities in local organizations for Component 1 and 2 and will coordinate with INECC for technical supervision. Progress will be measured against the Results Framework. The Monitoring and Evaluation (M&E)plan will include midterm and final independent evaluations. The final review will assess the achievement of indicators, sustainability of results, and identify lessons learned. A key part of the project is the participatory nature of the M&E, to serve as a tool to empower beneficiaries to improve the management of their own resources, and to ensure long-term sustainability (supported under Component 2).

B.3. Expected project results aligned with the GCF investment criteria (500 words) Impact potential. The Project has an integrated vision to promote connectivity between sub-basins Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 9 OF 17

and the people who live in them. Connection is geographically determined by the limits of the sub- watersheds where the project interventions will take place -where the direct beneficiaries are found- and the whole watershed, considering the population downstream as the indirect beneficiaries of increased resilience and reduced vulnerability (e.g. floods and landslides). The project will benefit 63,294 people directly (51% women) and 865,634 indirectly (52% women) (see Annex 2) by increasing their climate adaptation capacity and by maintaining the benefits that they receive from riparian ecosystems. The indirect beneficiaries are 5.42% of the total population in the states of Jalisco and Veracruz. Although this is an adaptation project, it also has a significant mitigation potential of 2.17 Mton CO2eq (see Annex 8). Interventions and data generated at the sub-basin level will feed regional inititiatives to align investments and the development of a NRRS, potentially scaling up country-wide the examples supported at the local level.

Paradigm shift. The current paradigm based on loss of ecosystem services in watersheds due to limited capacity for adaptation will shift to connected watersheds with communities with capacities in adaptation, aligned investments in the territory and a national strategy to scale this adaptive capacity. The paradigm shift will be created by: (i) restoring riparian areas to reduce vulnerability in sub-basins and complementing those strategies with sustainable livestock and agriculture; (ii) developing local capacities to assess and act on climate vulnerability; (iii) involving users of ecosystem services in the middle and lower parts of the basin to finance their provision, including the tourism industry through matching donations using the regional funds as financial mechanisms; (iv) the design that will scale-up the impacts, by transforming local lessons learned into a NRRS. Data quantifying natural capital will quantify, value and attribute the contribution of river restoration to vulnerability reduction, raise stakeholder awareness and incentivize private investments through donations matching public investments on payments for ecosystem services. RIOS will create a cascade effect of investments, by using the proofed leverage ability of FMCN to align private, public and social investments to maximize effects.

Sustainable development. Concerning environmental co-benefits, some ecosystem services provided by riparian ecosystems that will be impacted are: (i) increase water availability both in quality (reduced suspended solids and coliform bacteria already recorded in the C6 project) and in quantity (availability in dry period); (ii) soil retention, and (iii) natural barrier (e.g. flow regulation) to extreme hydrometeorological phenomena exacerbated by climate change. The socio-economic co-benefits include the improvement of local livelihoods of landholders participating in sub-projects, such as an increase in productivity and improved jobs. Women will be particularly benefited with activities and criteria that encourage their participation according to a Gender Action Plan.

Needs of the recipient. The C6 project identified local needs in the watersheds selected for their vulnerability related to climate vulnerability. Activities that will be supported have been identified as the most strategic for the most vulnerable populations. Experience shows that technical assistance is a key initial investment that is required for productive activities, especially for those with little access to capacity building. The experience of FMCN in linking a variety of actors, the technical expertise of INECC, and the economic resources of this project are essential to increase the adaptive capacity of watersheds. Moreover, the beneficiaries of sub-projects require the grants and technical assistance to ensure a transition and continuation of sustainable practices that improve climate adaptation in basins. The sub-project activities have been tested and accepted by local populations.

Country ownership. This project directly responds to a request by INECC to scale up the lessons Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 10 OF 17

learned from C6. FMCN and the regional funds have a unique capacity to ensure that a variety of local and national actors, from private, public, and social sectors, coordinate their actions to align field investments. This coordination is required to improve forests and river connectivity in basins vulnerable to climate change. This is demonstrated by FMCN in implementing other projects from bilateral and multilateral organizations. A Technical Project Committee that has functioned effectively since 2013 and which has already approved a Commission to focus on RIOS, ensures complete ownership of the project. The TPC includes representatives from INECC, FMCN, National Forestry Commission, National Commission for Protected Areas, while the Commission adds representatives from National Water Commission and National Institute of Water Technology. INECC will lead the design of NRRS to ensure country appropriation.

Efficiency and effectiveness. The costs and benefits of the proposed activities have been widely analyzed in similar projects. A recent analysis by the World Bank (2018) in Mexico concluded that transition from unmanaged forests to sustainable forest management is profitable for participating communities, with Net Present Value of over US$1,100/ha in tropical forests and over US$1,000/ha in temperate forests. The transition of forest with conservation potential to conserved forest with payments for conservation generates positive net benefits, about US$230/ha in tropical forests and US$180/ha in temperate forests (at Social Value of Carbon of US$38/tCO2e). The wide interest generated among producers in C6, who determined that sub-projects increased profit while restoring the landscape, is an indication of cost-effectiveness, especially compared to the costs of similar interventions by federal programs. In addition to financial benefits, participating communities benefit through improvement in governance and capacities. The project will not only leverage US$1 million in co-financing but will mobilize private and public alignment of investments at the watershed level in the order of US$2.23 million (see Annex 9 for project costs), which is expected to be replicated once the NRR is operational. The GCF investment represents US$3.04 per ton of CO2 and US$9.02 per person (indirect beneficiaries) in Component 1 and 2, with the potential to escalate at the regional and national level due to Component 3 and 4. C. Indicative financing / Cost information (max. 2 pages) C.1. Financing by components Please provide an estimate of the total cost per component and disaggregate by source of financing. Indicative cost GCF financing Co-financing (USD) Component Output Amount Financial Type Amount Financial Name of (USD) Instrument (USD) Instrument Institutions 1 1.1 6,071,951 5,071,951 Grant Public 1,000,000 Grant GEF 1 1.2 715,925 715,925 Grant Public 0 Other - 1,736,95 2 2.1 1,736,958 Grant Public 0 Other - 8 2 2.2 279,030 279,030 Grant Public 0 Other - 3 3.1 315,767 315,767 Grant Public 0 Other - 3 3.2 167,254 167,254 Grant Public 0 Other - 4 4.1 532,187 532,187 Grant Public 0 Other - 4 4.2 180,928 180,928 Grant Public 0 Other -

Indicative total cost (USD) 10,000,000 9,000,000 1,000,000

For private sector proposal, provide an overview (diagram) of the proposed financing structure. C.2. Justification of GCF Funding Request (300 words) Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 11 OF 17

GCF funding is crucial due to the limited national budget channeled to increase adaptive capacity in basins vulnerable to climate change. The project objectives are directly linked to Mexico´s NDCs and National Development Plan (see section B.1); however, the required investment for climate adaptation needs cannot be met with the national budget alone. The national Budget reductions in the environmental sector in 2019 were 32% compared to the allocation of 2018. According to the Think Tank FUNDAR this budget reduction “risks the capacity to meet Mexico´s goals of the Paris Agreement on Climate Change” (FUNDAR, 2019). The low costs compared to the expected benefits of the RIOS project will be an essential element to incentivize public investment in the future. GCF funding will allow showcasing efficient local and sustainable examples, that can be linked to the regional alignment of private and public funding, as well as national strategies.

Additionally, the limited investments in the basins need to be aligned to respond to climate adaptation needs. The GCF investment will allow for coordination of multiple agents in the watersheds to increase climate adaptation through river restoration. This coordination is required to improve forests and river connectivity to increase the adaptive capacity in basins vulnerable to climate change (see “Country Ownership”). C.3. Exit Strategy and Sustainability (300 words) Sustainability of the project is ensured because: (i) productive activities implemented through sub-projects ensure cost-effective practices that contribute to climate adaptation, and will continue providing economic and environmental benefits after project ends; (ii) the participatory monitoring system ensures that local beneficiaries will continue monitoring and generating corrective actions even after project concludes; (iii) the project enables the involvement of public and private-sector resources for financing the implementation of the sub-projects (trough PES and other schemes), which increase financial sustainability in the long term; (iv) the project strengthens institutions such as the regional funds and INECC which will continue after project ends; (iv) the project is coordinated with parallel funding that will improve the access to credit lines for productive activities that contribute to climate adaptation, which further facilitates the project exit strategy; and (iv) the project contributes to policy design and alignment, as well to a national-level strategy that will aim at scaling up successful interventions after project ends.

The exit strategy is already embedded in the project design: (i) in Component 1, the resources will serve to train and prove the economic feasibility of the activities, and therefore the activity will continue after project ends; (ii) in Component 2, the training of local communities on M&E will provide valuable information that will allow them to continue monitoring and adjusting their activities after project ends; (iii) in Component 3, the investment of private sector will ensure that the subprojects will continue and have financial sustainability; and (iv) in Component 4, the involvement of INECC in the design of the NRRS and the activities training legislators and key stakeholders, will increase the appropriation of the NRRS and will facilitate its implementation. C.4 Stakeholders engagement in the project or programme (300 words) This project responds to a request made by the Mexican Government, through INECC, to replicate the success of stakeholder engagement during the C6 project. INECC is the national government agency that coordinates research to feed policy on climate change in Mexico. INECC request recognizes the successful role that FMCN and regional funds had in engaging a variety of actors in the basins of the C6 project. This project will continue to apply the lessons learned on how to coordinate local actors such as communities, local organizations and governments, private sector and academia Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 12 OF 17

in the watershed through Regional Coordinating Units (see Institutional Arrangements).

To date, FMCN and INECC have already coordinated a series of meetings with the Technical Project Committee. This Committee was created to ensure complete ownership of the project. The Committee includes representatives from key public agencies and has created a Commission for the project with the two main water agencies. The latter two institutions are already participating in the project design. There will be further engagement with local stakeholders during project design in regional multistakeholder platforms created under C6 and other local participation spaces. The full proposal will be socialized and strengthened through these platforms. D. Annexes

☒ ESS screening check list (Annex 1) ☒ Map indicating the location of the project/programme (as applicable) ☒ Evaluation Report of previous project (as applicable) Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 13 OF 17

Annex 1: Environmental and Social Screening Checklist

Part A: Risk Factors

Please indicate your answers to the questions below and provide an explanation on the response selected. In cases when the TBD response has been selected please explain briefly why you are not able to determine now and when in the project cycle the question will be addressed.

If the criteria is not applicable to the project you may write N/A in the justification box.

Exclusion criteria YES NO Will the activities involve associated facilities and require further ☐ ☒ due diligence of such associated facilities? The profile of the beneficiaries and criteria is already designed and scales-up previous successful experiences. Will the activities involve trans-boundary impacts including those that would require further due diligence and notification to affected ☐ ☒ states? N/A Will the activities adversely affect working conditions and health and safety of workers or potentially employ vulnerable categories of ☐ ☒ workers including women and children? N/A Will the activities potentially generate hazardous waste and pollutants including pesticides and contaminate lands that would require further studies on management, minimization and control ☐ ☒ and compliance to the country and applicable international environmental quality standards? The sub-projects will apply the highest environmental standards, and only sustainable practices will be supported, no pollutants or hazardous waste will be allowed in the sub-projects. Will the activities involve the construction, maintenance, and rehabilitation of critical infrastructure (like dams, water ☐ ☒ impoundments, coastal and river bank infrastructure) that would require further technical assessment and safety studies? N/A Will the activities potentially involve resettlement and dispossession, land acquisition, and economic displacement of ☐ ☒ persons and communities? All activities will be voluntary and demand-based; therefore they will not involve displacement. Will the activities be located in or in the vicinity of protected areas and areas of ecological significance including critical habitats, key ☒ ☐ biodiversity areas and internationally recognized conservation sites? The activities that will be performed in areas of ecological significance will focus on conservation, restoration, and sustainable management, and will improve the ecosystem quality as well as the services they provide (see Section B2). Will the activities affect indigenous peoples that would require further due diligence, free, prior and informed consent (FPIC) and ☐ ☒ documentation of development plans? It is expected that project will benefit indigenous groups. Further due diligence is not necessary Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 14 OF 17

because all activities will be voluntary and demand-based. Moreover, the participation of indigenous peoples will be encouraged through the dissemination in appropriate spaces, translated materials into indigenous languages, and selection criteria that will privilege their participation. Will the activities be located in areas that are considered to have archaeological (prehistoric), paleontological, historical, cultural, ☐ ☒ artistic, and religious values or contains features considered as critical cultural heritage? N/A

Part B: Specific environmental and social risks and impacts

Assessment and Management of Environmental YES NO TBD and Social Risks and Impacts Has the E&S risk category of the project been ☒ ☐ provided in the concept note? Has the rationale for the categorization of the project been provided in the relevant sections of the concept ☒ ☐ note? Are there any additional environmental, health and safety requirements under the national laws and ☐ ☒ ☐ regulations and relevant international treaties and agreements? N/A Are the identification of risks and impacts based on ☒ ☐ ☐ recent or up-to-date information? It is based on the observed risks, impacts and environmental and social safeguards of other projects executed by FMCN and currently financed by GEF, the Interamerican Development Bank, and other donors. Labour and Working Conditions YES NO TBD Will the activities potentially have impacts on the working conditions, particularly the terms of employment, worker’s organization, non- ☐ ☒ ☐ discrimination, equal opportunity, child labour, and forced labour of direct, contracted and third-party workers? A positive impact is expected in employment through the implementation of activities under Component 1. Local organizations hiring personnel will follow the Mexican labor law and the guidelines determined in FMCN Operational Manual, which monitors compliance of social norms. The Mexican Federal Labor Law is recognized internationally for its high standards. Will the activities pose occupational health and safety ☐ ☒ ☐ risks to workers including supply chain workers? N/A Resource Efficiency and Pollution Prevention YES NO TBD Will the activities generate (1) emissions to air; (2) discharges to water; (3) activity-related greenhouse ☐ ☒ ☐ gas (GHG) emissions, (4) noise and vibration; and (5) wastes? N/A Will the activities utilize significant amount of natural ☐ ☒ ☐ resources including water and energy? Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 15 OF 17

N/A Will there be a need to develop detailed measures to reduce pollution and promote sustainable use of ☐ ☒ ☐ resources? The project will apply the highest environmental standards to the supported activities, and will finance exclusively sustainable practices. Community Health, Safety, and Security YES NO TBD Will the activities potentially generate risks and impacts to the health and safety of the affected ☐ ☒ ☐ communities? N/A Will there be a need for an emergency preparedness and response plan that also outlines how the affected ☐ ☒ ☐ communities will be assisted in times of emergency? N/A Will there be risks posed by the security arrangements and potential conflicts at the project ☐ ☒ ☐ site to the workers and affected community? N/A Land Acquisition and Involuntary Resettlement YES NO TBD Will the activities likely involve land acquisition and/or ☐ ☒ ☐ physical or economic displacement? All activities will be voluntary and demand-based; therefore they will involve neither physical displacement nor restrictions in land use. Biodiversity Conservation and Sustainable YES NO TBD Management of Living Natural Resources Will the activities potentially introduce invasive alien species of flora and fauna affecting the biodiversity of ☐ ☒ ☐ the area? In the case of reforestation or afforestation activities, only native, non-invasive species will be used. Will the activities have potential impacts on or be dependent on ecosystem services including ☒ ☐ ☐ production of living natural resources (eg.agriculture, animal husbandry, fisheries, forestry)? All activities are designed to improve riparian ecosystems and the services they provide. Indigenous Peoples YES NO TBD Will the activities potentially have any indirect impacts on indigenous peoples, ethnic minorities, or ☒ ☐ ☐ vulnerable and marginalized groups? It is expected that project will benefit indigenous groups; all activities will be voluntary and demand- based. Moreover, the participation of indigenous peoples will be encouraged through the dissemination in appropriate spaces, translated materials into indigenous languages, and selection criteria that will privilege their participation. Cultural Heritage YES NO TBD Will the activities restrict access to the cultural ☐ ☒ ☐ heritage sites and properties? Access will not be affected. Will there be a need to prepare a chance-find ☐ ☒ ☐ procedure in case of the discovery of cultural heritage Simplified Approval Process CONCEPT NOTE Template V.1.1

GREEN CLIMATE FUND | PAGE 16 OF 17

assets? In case of a discovery by chance, the national regulation will be followed , which mainly consists of notifying the National Institute of Anthropology and History. Stakeholder engagement and grievance redress Yes NO TBD Will the activities include a continuing stakeholder engagement procress and a grievance redress ☒ ☐ ☐ mechanism and integrated into the management/implementation plans? FMCN already has a grievance redress mechanism in place, which will be available for this project.

Part C: Sign Off

Sign-off: Specify the name and designation of the person responsible for the environmental and social screening and any other approvals as may be required in the accredited entity’s own management system.

Graciela Reyes Retana, Fundraising Director.