FP154: Mongolia: Aimags and Soums Green Regional Development Investment Program (ASDIP) | | Mongolia Asian Development Bank (ADB) Decision B.28/04 6 April 2021 GREEN CLIMATE FUND FUNDING PROPOSAL V.2.1 | PAGE b OF 126 Contents Section A PROJECT / PROGRAMME SUMMARY Section B PROJECT / PROGRAMME INFORMATION Section C FINANCING INFORMATION Section D EXPECTED PERFORMANCE AGAINST INVESTMENT CRITERIA Section E LOGICAL FRAMEWORK Section F RISK ASSESSMENT AND MANAGEMENT Section G GCF POLICIES AND STANDARDS Section H ANNEXES Note to Accredited Entities on the use of the funding proposal template • Accredited Entities should provide summary information in the proposal with cross- reference to annexes such as feasibility studies, gender action plan, term sheet, etc. • Accredited Entities should ensure that annexes provided are consistent with the details provided in the funding proposal. Updates to the funding proposal and/or annexes must be reflected in all relevant documents. • The total number of pages for the funding proposal (excluding annexes) should not exceed 60. Proposals exceeding the prescribed length will not be assessed within the usual service standard time. • The recommended font is Arial, size 11. • Under the GCF Information Disclosure Policy, project and programme funding proposals will be disclosed on the GCF website, simultaneous with the submission to the Board, subject to the redaction of any information that may not be disclosed pursuant to the IDP. Accredited Entities are asked to fill out information on disclosure in section G.4. Please submit the completed proposal to: [email protected] Please use the following name convention for the file name: “FP-[Accredited Entity Short Name]-[Country/Region]-[YYYY/MM/DD]” GREEN CLIMATE FUND FUNDING PROPOSAL V.2.1 | PAGE 3 OF 126 A PROJECT/PROGRAMME SUMMARY A.1. Project or A.2. Public or private Programme Public programme sector A.3. Request for Not applicable Proposals (RFP) Check the applicable GCF result area(s) that the overall proposed project/programme targets. For each checked result area(s), indicate the estimated percentage of GCF budget devoted to it. The total of the percentages when summed should be 100%. Mitigation: Reduced emissions from: GCF contribution: 0% ☐ Energy access and power generation: 0% ☐ Low-emission transport: ☒ Buildings, cities, industries and appliances: 5% A.4. Result area(s) ☒ Forestry and land use: 45% Adaptation: Increased resilience of: ☒ Most vulnerable people, communities and regions: 10% ☒ Health and well-being, and food and water security: 10% ☐ Infrastructure and built environment: 0% 30% ☒ Ecosystem and ecosystem services: Direct beneficiaries: 552,300 A.5. Expected mitigation 1 A.6. Expected adaptation Indirect beneficiaries 3.2 112.40 million tCO2e impact impact million Direct: 17.1%; indirect 100% A.7. Total financing (GCF 735 million USD + co-finance) Large (Over USD 250 A.9. Project size million) A.8. Total GCF funding 175 million USD requested Mark all that apply and provide total amounts. The sum of all total amounts should be consistent with A.8. A.10. Financial ☒ instrument(s) requested Grant 45 million USD ☐ Equity 0 USD for the GCF funding ☒ Loan 130 million USD ☐ Results-based ☐ Guarantee 0 USD payment 0 USD A.11. Implementation 10 years A.12. Total lifespan 40 years period A.13. Expected date of 5/28/2021 A.14. ESS category B AE internal approval A.15. Has this FP been A.16. Has Readiness or ☒ ☒ submitted as a CN Yes No ☐ PPF support been used Yes ☐ No before? to prepare this FP? 1 This represents the net emission reductions, taking into accounts all sources of emission reductions and additional emissions. The latter represents emissions from the use use of infrastructure created by ASDIP, such as improved roads. GREEN CLIMATE FUND FUNDING PROPOSAL V.2.1 | PAGE 4 OF 126 A Yes No ☐ ☒ Yes No A.17. Is this FP included Part of ADB's Country A.18. Is this FP included ☒ ☐ Aspects of it are included in the entity work Partnership Strategy and in the country in the GCF country programme? the Country Operations programme? programme and Business Plan. Yes ☐ No ☒ However, ASDIP is expected to be used to launch the Partnership for Low- A.19. Complementarity Carbon and Climate-Resilient Rangeland Management in Asia, which will and coherence provide financing for low-carbon and climate-resilient rangeland management in Mongolia and Asia based on the mitigation results achieved. See Section B.6 and, in particular, Box 10. The Executing Entities of ASDIP is Government of Mongolia, represented by the Ministry of Finance, Ministry of Construction and Urban Development (MCUD), the Development Bank of Mongolia (DBM), and the Asset Management Company of Development Bank of Mongolia (AMC-DBM) acting on behalf of the A.20. Executing Entity Green Inclusive Regional Agribusiness Fund (GIRAF). More details are in B.4 information The main implementing entities are MCUD, Ministry of Food, Agriculture and Light Industry (MOFALI), and Asset Management Company of Development Bank of Mongolia (AMC-DBM). A.21. Executive summary (max. 750 words, approximately 1.5 pages) Rangelands are one of the world's predominant ecosystems, representing about 70% of the earth's land surface, excluding Antarctica. They offer a large mitigation potential through better rangeland management, estimated at 1.1 billion tCO2/year globally. However, rangelands are vulnerable to climate change and unsustainable human activities, such as unsustainable animal husbandry or poor water management, especially in arid regions where rangelands can turn into a desert if not well-managed. Despite the large surface areas involved and the significant adaptation concerns and mitigation potentials, little climate finance support has so far been provided to better rangeland management. In Mongolia, rangelands are the most common land type, covering 82% of the country. Meanwhile, the livestock sector is vital to the Mongolian economy in terms of employment (representing about 25% of total employment) and its contribution of not less than 10% of GDP. Both are under severe threat of climate change, unsustainable rangeland and livestock management, and weak urban-rural linkages. As stated in the NDC of Mongolia, the annual mean air temperature over Mongolia has increased by 2.07°C from 1940 to 2014. The ten warmest years in the last 70 years have occurred after 1997. Impacts on precipitation are more uneven, with an overall trend towards a reduction in annual precipitation, especially in summer. However, evaporation has clearly increased and outpaces precipitation, causing water shortages and increased occurrences of drought. Climate projections show an intensification of these changes in the first half of the 21st century. Some of the key impacts and vulnerabilities are: • Approximately 70% of pastoral land has degraded, while changing plant composition. • The winter dzud (heavy snow, cold waves, storms etc.) risk is likely to increase leading to more livestock losses which in return push herders to increase their herds size as resilience mechanism to compensate their losses. • The intensification of dry climatic conditions causes an increase of the frequency of forest and steppe fires. • The frequency of extreme weather phenomena has doubled in the last two decades. This is expected to increase by 23-60% by the middle of the century as compared to present conditions. Number based on the GWPs of the second assessment report of the IPCC, which are the numbers Mongolia has used in its latest national communications. Based on the GWPs in the fifth assessment report of the IPCC, the emission reductions are 3.3 million tCO2e higher. Throughout the remainder of the FP, the GWPs from the second assessment report have been used. Furthermore, we have used this net number for the calculation of key ratios in Section E of the funding proposal. GREEN CLIMATE FUND FUNDING PROPOSAL V.2.1 | PAGE 5 OF 126 A Climate change has reduced the productivity of rangelands, affected glacier-fed water regimes, and has increased exposure of herders and the animal husbandry sector to climate-related natural disasters. These issues have severely impacted herders as well as livestock productivity and quality, which were already significantly weakened by the collapse, since the 1990s, of the local livestock value chains and the urban productive and service functions delivered to the rural economy. Herders have increased their herds' size to unsustainable levels (70.97 million in 2019, compared to 25.86 million in 1990),2 leading to overgrazing averages of 22.6% above the rangeland carrying capacity (27.4% in the three western aimags). Overgrazing severely degrades the rangelands, which aggravates herders' vulnerability, who then further increase the size of their herds as safety net.3 As a result, 70% of pastoral land has been degraded.4 This means both above- and below-ground biomass has been considerably reduced, and soil carbon is significantly below its capacity. Reversing the degradation and restoring the health of Mongolia's vast rangeland area offers a very large mitigation potential, estimated at over 440 million tCO2 countrywide over a 20 years period.5 The Government of Mongolia is fully aware of the severity of the situation. It has set policies and objectives to reverse the current overgrazing trends and implement sustainable, climate-resilient rangeland management. Several important stand-alone initiatives from donors have also been implemented. However, those attempts have so far failed to reverse