Amendment 1 J.1 Statement of Objectives (SOO) (Final).pdf

Attachment J.1 STATEMENT OF OBJECTIVES (SOO)

TITLE OF ACTIVITY

The title of the activity is the USAID/Sri Lanka and Maldives Climate Change Adaptation activity.

PURPOSE

The purpose of the activity is to enhance the adaptive capacities of the public and private sectors and local communities in the Maldives and Sri Lanka to climate change impacts in ways that contribute to sustained, inclusive market-based growth.

PERIOD OF PERFORMANCE

The period of performance for this activity will be five years from the date of the award.

BACKGROUND

The impacts of climate change are already slowing the Maldives’ and Sri Lanka’s economic growth by degrading natural assets and resources that are critical to the competitiveness of key sectors and livelihoods. These negative impacts are expected to increase for identified sectors and further affect other sectors and wider communities in the future, given current trends. While responding to the ongoing COVID-19 pandemic remains the paramount priority, investing in adaptation measures that build capacity to respond to climate change impact will be critical to build long term and broader resilience to future health, environmental, and economic crises in both countries.

Both Maldives and Sri Lanka are highly vulnerable to the impacts of climate change.1 Sea level rise, coastal storm surges, and associated flooding pose a significant threat to the Maldives, where more than 80% of the land area is less than 1 meter above sea level.2 Many inhabited islands in the archipelago have experienced increasing intensity of extreme weather events in recent years, including storm surges, strong winds, rough seas, and flooding.2 These events continue to inflict damage to coastal infrastructure, cause significant beach erosion, and increase the logistical challenges of transporting essential goods and providing services across the 200 plus locally inhabited and 150 plus resort islands of Maldives.3 Expanding human and economic development activities exacerbate pressure on the country's fragile coral reef ecosystems and coastal zones leading to reduced fish populations, beach erosion, and

1 Kafle, S.K., 2017. Disaster risk management systems in South Asia: Natural hazards, vulnerability, disaster risk and legislative and institutional frameworks. Journal of geography and natural disasters, 7(3), pp.1-10.

2 World Bank Climate Change Knowledge Portal (2020) 3 Stojanov, R., Duží, B., Kelman, I., Němec, D. and Procházka, D., 2017. Local perceptions of climate change impacts and migration patterns in Malé, Maldives. The geographical journal, 183(4), pp.370-385.

saltwater intrusion into freshwater tables.4 The public sector responses to these events divert the Maldives’ public resources from funding other development needs.5 The driving forces of the Maldives economy, tourism and fisheries, are particularly sensitive to the impacts of climate change: much of these industries’ assets and infrastructure are primarily located within 100m of the coastline.2 Considering that these two sectors alone account for combined 40 percent of

GDP and 27 percent of employment in the Maldives,6 climate change poses a significant threat to the capacity of the Maldives’ economy to drive self-reliance.

As an island nation highly vulnerable to the effects of climate change and dependent on maintaining the richness of its natural resources and a sustainable energy system to drive economic growth and provide for the welfare of all of its people, improving the resilience of Sri

Lanka’s resource base to shocks and stresses is critical to advancing inclusive self-reliance.

Low-end estimates predict that, even with mitigation measures, Sri Lanka will experience a 1.2 percent loss of annual GDP by 2050 due to climate change.7 Health, human settlements, and many sectors of the economy, including power, transportation, infrastructure, industry, tourism, water resources, agriculture, food security and aquaculture, are directly impacted by rainfall variation, temperature changes, and marine and coastal degradation induced by climate change.8 Floods and droughts are increasing, as is the severity of landslides, especially in the highland regions.2 Sea level rise and storm surges driven by climate change threaten the heavily-populated west, southwest, and southern coastal belt areas, where much economic activity takes place.2 These impacts directly threaten the capacity of Sri Lanka’s private sector to contribute to generate sustained, inclusive economic growth.8 The need for the Government of

Sri Lanka to respond to these events, both acute and gradual, depletes the resources that it has available to invest in other development needs. Furthermore, ecosystem services not only support local communities, but also act as a long-term buffer against increasing change and mitigation and sequestration of carbon. Efforts to protect these habitats or reduce other non-climate stressors can help to maintain the resilience of ecosystems and the services they provide.

Both countries have policy frameworks in place that identify climate change risks and resultant adaptation needs, and prioritize adaptation strategies that incorporate input from community, government, and the private sector. The Maldives’ National Adaptation Program (NAP) identifies extensive erosion, impacts on critical infrastructure, tourism, fisheries, human health, water resources, agriculture and food security as the immediate sectors with significant climate

4 Cowburn, B., Moritz, C., Birrell, C., Grimsditch, G. and Abdulla, A., 2018. Can luxury and environmental sustainability co-exist? Assessing the environmental impact of resort tourism on coral reefs in the Maldives. Ocean & coastal management, 158, pp.120-127.

5 Sovacool, B.K., 2012. Perceptions of climate change risks and resilient island planning in the Maldives.

Mitigation and Adaptation Strategies for Global Change, 17(7), pp.731-752.

6 National Bureau of Statistics Maldives (2018). Note: 20% tourism and 7% fisheries.

7 World Bank Systematic Country Diagnostic for Sri Lanka (2016) 8 Uddin, M.G.S., Bidisha, S.H. and Ozturk, I., 2016. Carbon emissions, energy consumption, and economic growth relationship in Sri Lanka. Energy Sources, Part B: Economics, Planning, and Policy, 11(3), pp.282-287.

http://statisticsmaldives.gov.mv/nbs/wp-content/uploads/2018/10/HIES-Report-2016-Employment-Update-6112018-1.pdf change impact.9 The Maldives Climate Change Policy Framework (2015)10 identifies five policy goals to guide the implementation of the NAP - sustainable financing, low emission development and ensuring energy security, adaptation actions or opportunities and building a climate resilient infrastructure and communities, building local capacity and taking up an advocacy role at international level, and fostering sustainable development. Sri Lanka’s NAP identifies food production and food security, conservation of water resources and biodiversity, coastal resources management, and infrastructure design and development as priorities.11 The

National Climate Change Policy of Sri Lanka12 provides guidance to address the adverse impacts of climate change through broad policy statements under Vulnerability, Adaptation, Mitigation, Sustainable Consumption and Production, Knowledge Management and General

Statements. Both the Maldives’ and Sri Lanka NAP’s also define intended Nationally

Determined Contributions (NDCs) to adapt to the impacts of climate change by addressing these priorities; however, both countries lack the resources and expertise to comprehensively implement these NDCs and coordinate activities across multiple ministries and agencies. The need for both governments to redirect resources to respond to the health and economic impacts of COVID-19, which has severely impacted tourism in both countries, has further exacerbated the challenges faced in implementing the NDCs.

Both governments face challenges in developing and effectively implementing other policies, rules, and regulations related to climate change and the protection of environmentally sensitive areas. On paper, Sri Lanka has national policies on the environment, wetlands, and biosafety, but enforcement is lax.13 Sri Lanka’s below average Environmental Policy commitment score reflects the government’s implementation and coordination challenges applying its numerous existing environmental laws, policies, and regulations. USAID’s Tropical Forest and Biodiversity

Analysis supports this, noting that inconsistent or, in some cases, inadequate or even absent application of environmental laws, policies, strategies, regulations, and procedures drives a set of threats to Sri Lanka’s resource base. Similarly, the Government of Maldives has developed a relatively comprehensive set of rules and regulations regarding environmental protection and climate change adaptation but lacks capacity for implementation, especially at the local governance level. This weak enforcement contributes to a significant trust deficit between government and firms. Both Maldives and Sri Lanka lack comprehensive frameworks for investments in climate change adaptation approaches and lack strong private sector engagement and incentives to support these investments.

The Maldives’ and Sri Lanka’s private sectors struggle to identify and implement investments needed to reduce vulnerability to climate change. In some cases, firms and private sectors associations lack awareness of the numerous risks that climate change poses to their short- and long-term financial viability and business sustainability. In other cases, firms tend to view climate change adaptation through a corporate-social responsibility lens. Those firms that do

9 https://unfccc.int/resource/docs/napa/mdv01.pdf 10 http://extwprlegs1.fao.org/docs/pdf/mdv172920.pdf 11The Sri Lanka National Adaptation Plan 2016-2015.

12 http://www.climatechange.lk/CCS%20Policy/Climate_Change_Policy_English.pdf 13 Bertelsmann Stiftung Transformation Index (BTI) (2020).

https://unfccc.int/resource/docs/napa/mdv01.pdf http://extwprlegs1.fao.org/docs/pdf/mdv172920.pdf http://www.climatechange.lk/CCS%20Policy/Climate_Change_Policy_English.pdf acknowledge climate risks to their core business interests struggle to identify partnerships and solutions that would build their capacity to adapt to climate change and invest in these solutions.

The impact of COVID-19 has exacerbated this situation by forcing firms to divert/focus their attention on sustaining essential operations.

There are a small group of active non-governmental organizations (NGOs) in both Maldives and

Sri Lanka raising awareness on climate change impact and/or implementing climate change adaptation initiatives. These NGOs have limited resources and capacity to advocate for and/or implement such adaptation initiatives. Small grant mechanisms implemented through the US

State Department, the UN and regional USAID environmental initiatives continue to provide critical short-medium term funding to support work by such NGO’s. However, long term support builds their capacity to network and advocate for public/private sector financing to sustain and expand their efforts on climate advocacy and adaptation. Similarly, local communities in the

Maldives and Sri Lanka whose livelihoods are threatened by climate change-related stressors lack the capacity and resources to implement initiatives that would make them less vulnerable19.

The above-mentioned challenges are exacerbated by a lack of access to high-quality data, analysis and sharing of this information with relevant stakeholders to raise awareness and reduce vulnerability to climate change. In Maldives, while high quality climate vulnerability data is available to some extent,14 there is a need to better utilize this information for decision making centrally and locally. Sri Lanka, government institutions lack detailed sector-specific and area-specific climate risk data and information to inform decision making. Both the Maldives and Sri

Lanka struggle to coordinate data collection and sharing between government agencies, the private sector, NGOs, community organizations, and research institutions. These issues limit the ability of these stakeholders to make informed decisions and investments to adapt to climate change.

RESULTS

Theory of change

The impacts of climate change are already slowing Maldives’ and Sri Lanka’s economic growth by degrading natural assets and resources that are critical to its economic competitiveness, and this negative impact is likely to increase in the future, given current trends. By supporting innovative solutions to climate-related risks, strengthening inclusive governance of climate sensitive areas and sectors, and improving the quality of and access to climate information, this activity will enhance adaptive capacities of the Maldives’ and Sri Lanka’s private and public sectors and local communities to climate change impact in ways that contribute to sustained, inclusive market-based growth.

Journey to Self-Reliance

14 2020 Multihazard Risk Atlas of Maldives.

By reducing vulnerabilities of key climate-sensitive areas and sectors of the economy to climate change-related events, both sudden and gradual, the activity will reduce the need for allocation of public funds to address emergency responses to such events, which will preserve and sustain domestic resources for other critical development needs. At the same time, the activity will increase the resilience of local community livelihoods and the economy despite increasing frequency and severity of climatic change-related events, and ultimately increase overall income and tax revenues that can be combined with other public sector resources available for development.

Objectives

This activity will achieve its purpose through three objectives: (1) identifying and scaling up innovative solutions to climate-related risks through market-driven private sector and community engagement, (2) strengthening central and/or local governance to address climate-related risks, and (3) improving the quality of and access to information for decision-making to reduce vulnerability to climate change. Wherever possible and as relevant, linkages between objectives and opportunities for cross-learning and shared solutions between both countries are encouraged.

1. Identify and scale up innovative solutions to adaptively manage climate-related risks through market-driven private sector and community engagement

All asset owners, public or private, are exposed to climate-related risks in traditional industry risk categories such as credit risk, operational risk, market risk, and regulatory risk. Understanding climate risk is critical to asset owners on several levels. Identifying, prioritizing, and managing climate risk will allow asset owners, including MSMEs, larger firms, and local communities, to enhance risk management and better understand the strategic impact of climate change on creating and protecting long term value for its beneficiaries and create a framework for constructive dialogue between all elements of the investment chain.15 Although many asset owners have started work to identify, prioritize, and manage climate risk, this is a learning curve and there is no one fits all solution due to the nature of climate risk. It is therefore recommended to develop an “adaptive management” approach: making decisions and adjustments in response to new information and changes in context.16 Adaptive management is not about changing goals during implementation, but about changing the path to achieving the goals in response to changes. As part of an adaptive management approach, asset owners can look to investing in climate adaptation as part of a risk management strategy, and as an opportunity to build value.

This activity will identify innovative solutions to adaptively manage climate-related risk through market-driven private sector and community engagement and scale up successful initiatives. It

15 Della Rocca, M., McManus, T. and Toomey, C., 2019. Climate resilience: Asset owners need to get involved now. McKinsey & Company: https://www.mckinsey.com/industries/capital-projects-and-infrastructure/our-insights/climate-resilience-assetowners-need-to-get-involved-now.

16 https://www.wwf.nl/globalassets/pdf/2020-wwf-climate-adaptation-guide-for-asset-owners-11-lr.pdf https://www.wwf.nl/globalassets/pdf/2020-wwf-climate-adaptation-guide-for-asset-owners-11-lr.pdf will: (1) improve the capacity of private sector associations to identify and build awareness of shared risks in key economic sectors and establish dialog with the governments of Maldives and

Sri Lanka about the risks and benefits of investing in solutions; (2) incentivize and strengthen the capacity of private sector partners to adapt to and mitigate climate-related risks in their business models and investment chains, overcome business model barriers to climate change adaptation product or service adoption, integrate climate change adaptation into core business interests, adopt new and/or improved technologies to adapt to climate change, and actively engage the financial sector to develop and identify financing opportunities to fund and scale up climate change adaptation pilots; and (3) build the capacity of local communities in geographically-vulnerable areas to identify climate-related risks, devise solutions to adaptively manage these risks, strengthen engagement and partnerships with public and private sector to support adaptation, and access financing opportunities to implement these solutions. This activity will propose appropriate interventions to scale up climate adaptation investments in

Maldives and Sri Lanka that support an enabling environment for investment, strengthen information and capacity development, and improve financial markets and mechanisms.17

2. Strengthen central and/or local governance to address climate-related risks

This activity will strengthen governance capacity of central and/or local governments in Maldives and Sri Lanka to address climate-related risks. Efforts will be made to support the government to incentivize and engage the private sector in climate change adaptation governance initiatives wherever possible. It will: (1) identify and address gaps in regulatory and policy frameworks for investments in climate change adaptation approaches and incentives for these investments; (2) build government capacity, at the central and/or local level, to assess climate vulnerability, prioritize and monitor climate change adaptation investments, develop and implement rules, regulations, and policy commitments (e.g., NDCs) related to soft and hard adaptation measures and the management of environmentally sensitive and/or protected areas that are vulnerable to the impacts of climate change; and (3) strengthen central and/or local government capacity to coordinate and integrate climate change adaptation governance measures across relevant ministries and agencies, as well as engage the private sector in climate change adaptation-related policy development and implementation.

3. Improve availability and access to high quality information for decision-making to reduce vulnerability to climate change

This activity will: (1) improve availability and access to high quality information that the private sector, government, non-government organizations, educational organizations, and communities need to make informed decisions to reduce vulnerability to climate change; (2) improve coordination between government and non-government agencies, the private sector, and research institutions in the collection, analysis, and sharing of climate change-related information; (3) support the development and dissemination of tools that facilitate the incorporation of information into decision-making regarding investments in climate change

17 See https://www.climatelinks.org/resources/climate-finance-assessment-opportunities-scaling-financing-clean-energy-sustainable for potential activities that support adaptation investments.

https://www.climatelinks.org/resources/climate-finance-assessment-opportunities-scaling-financing-clean-energy-sustainable https://www.climatelinks.org/resources/climate-finance-assessment-opportunities-scaling-financing-clean-energy-sustainable adaptation activities; and (4) promote initiatives that increase public awareness of climate change-related risks and adaptation opportunities. This activity will seek to reach geographic areas within each country that are particularly at-risk and require increased access to information for decision-making. To the extent possible, climate information generated and disseminated through this activity should be open-source and non-proprietary to maximize the impact of this information.

Results

The activity is expected to achieve the following illustrative results:

1. Innovative and improved climate change adaptation approaches developed that increase private sector and community resilience to climate-related risks

2. Increased number of public and private enterprises implementing climate change adaptation approaches

3. Increased decision-making using climate-risk information by public and private sectors

4. Increased number of laws, policies, regulations, or standards addressing climate change adaptation formally proposed, adopted, or implemented

5. Improved government capacity to coordinate and integrate climate change adaptation across the public sector portfolio

6. Increased public awareness of climate change risks and adaptation opportunities

7. Increased capacity of non-governmental organizations to support or advocate for adaptation initiatives

8. Private and public resources mobilized for climate change adaptation

GRANTS UNDER CONTRACT

The SOO must include a Grants under Contract Fund of $2,300,000 for Maldives and

$1,750,000 for Sri Lanka. The purpose of the Grants Under Contract Fund is to provide USAID and the Contractor a flexible means to support innovative approaches, technologies, and financial instruments to mobilize investment to advance this activity’s objectives. It is strongly encouraged that funds utilized for grants under contract leverage resources from grant recipients, including in-kind contributions, where possible.

IMPLEMENTATION REQUIREMENTS/ACTIVITY PARAMETERS

Private Sector Engagement. The Contractor must actively seek out private sector expertise and innovation when designing and implementing initiatives to build capacities to adapt to climate change vulnerabilities. The Contractor must work with the private sector to encourage adaptive management of climate risks, align core business interests with climate change adaptation, and mobilize private sector resources to either fully finance or co-finance these initiatives. The Contractor must support innovative pilots that increase capacities to adapt to climate change vulnerabilities and address constraints to the uptake of these pilots more broadly through information campaigns to promote awareness and bring these practices to scale, which will unlock additional private investment in these initiatives.

Gender, Youth, and Inclusiveness. The Contractor must ensure broad inclusion of stakeholders and to promote the empowerment of women, youth, and persons with disabilities through this activity. Worldwide experience has demonstrated that climate change has the severest impact upon those who are least able to adapt, often because of poverty, lack of education or access to information, disabilities, gender power dynamics, or any other factor that may impact their ability to access the resources that would provide capacities to adapt to climatic conditions or natural disasters. Through this activity, the contractor must place an emphasis on strengthening dialogue between key stakeholders and improving the adaptive capacities of vulnerable communities and enterprises, through enhanced access to relevant climate data, design and implementation of better policy, and education about and piloting of appropriate adaptation options.

Coordination with host country government, other USG activities, and other donors. The

Contractor must coordinate and complement activities closely with the Governments of Maldives and Sri Lanka, other USG-funded activities, and other donor-led initiatives designed to strengthen climate change adaptation in ways that leverage their investments to ensure burden sharing and build upon their achievements and lessons learned from past climate change adaptation initiatives. This mapping of existing and completed projects should also ensure that activities are not duplicative of previously unsuccessful efforts or currently ongoing efforts through other funding sources. These include, but are not limited to, USAID/Sri Lanka and

Maldives’ REGENERATE, Public Financial Management Maldives, Private Sector Development, PARTNER, and Clean Cities/Blue Ocean activities, US State Department activities, and activities funded by the World Bank, the Asia Development Bank, multiple UN-funded and/or implemented activities, the Japan International Cooperation Agency, and Canadian International

Development Agency.

Sustainability of activity interventions. The Contractor must design and implement interventions in ways that make activity interventions and results achieved through these interventions sustainable beyond the life of the program. Moreover, the Contractor must ensure that these interventions are environmentally friendly, energy-efficient, non-polluting, and promote a greener Maldives and Sri Lanka. The Contractor must examine the incentives and motivations of key actors for sustaining interventions and incorporate these findings into intervention design. Where possible, the Contractor must reorient practices or activities that could undermine sustainability, preferably in ways that create new opportunities. The Contractor must also promote engagement and partnerships with financial institutions and other private and public sector actors that have interests in seeing program interventions and results sustained into the future and ensure that each grantee has a sustainability plan after the end of the activity.

Flexibility in implementation. The Contractor and its interventions must be flexible and responsive to changing market conditions. In particular, the Contractor must be prepared to actively manage the impact of acute events on implementation and take into account the potentially sustained impact of COVID-19 on Maldives and Sri Lanka in designing interventions.

In case of rapidly changing conditions and new opportunities, the Contractor may need to shift emphasis between and within objectives and may do so in consultation with and with approval from the COR.

Public information and outreach. The Contractor must communicate opportunities, efforts, and successes under the USAID/Sri Lanka and Maldives Climate Change Adaptation activity to the public. Outreach efforts must be coordinated with, and should leverage, USAID public outreach programs through the COR in collaboration with the Mission Development Outreach

Communication Specialist(s).