BAA-MEX-PCM-2020.pdf

USAID Call for Expressions of Interest in Support of Blended Finance Approaches to Promote Sustainable Landscapes and Reduce Deforestation in Mexico

Process and Deadlines Through this Call for Expressions of Interest (EOI), USAID/Mexico seeks partners to research, develop, test and evaluate innovative approaches to increase access to finance and catalyze investments to reduce deforestation and forest degradation in Mexico by improving land management practices and reducing the drivers of land-use change.

I. Submission of Questions: Questions must be submitted no later than 18h00 (6:00 p.m.)

on March 6, 2020 via email to SAM@USAID.gov.

II. Submission of EOIs: EOIs must be submitted no later than 18h00 (6:00 p.m.) on March 27, 2020 via email to SAM@USAID.gov. The subject line of the email should be your organization name, followed by “Submission under BAA-MEX-PCM-2020” Please limit file submissions to 10 megabytes or less.

Introduction Blended finance is the strategic use of development funds, such as those from government aid and philanthropic sources, to mobilize private capital for social and environment results, such as improving infrastructure, education, agriculture, healthcare, and more. Blended finance strategies are designed to encourage members of the private sector, such as companies and investors, to invest in activities and projects that can achieve both financial returns and positive social and environmental outcomes. Through this Addendum to the Broad Agency Announcement (BAA- MEX-PCM-2020), USAID/Mexico seeks partners to research, develop, test and evaluate innovative approaches to increase access to finance and catalyze investments to reduce deforestation and forest degradation in Mexico by improving land management practices and reducing the drivers of land-use change, especially in the States of Campeche, Chiapas, Jalisco, Oaxaca, and Quintana Roo. While multiple factors help to improve land use and management practices, this initiative will focus on employing blended finance approaches that enable small producers (both men and women), ejidos, and communities to apply socio-economically sustainable land use practices, resulting in reduced deforestation and forest degradation.

Through its sustainable landscapes (SL) programs, USAID partners with countries to achieve their sustainable natural resources management goals, which typically include protecting forests, mangroves, and peatlands, improving management of forests and grazing lands, and restoring ecosystems. In addition, these programs aim to help governments, civil society, and the private sector become more self-reliant by increasing land productivity while avoiding expansion into lands that provide valuable ecosystem services; strengthening resilience to natural hazards;

creating new economic opportunities; protecting water and land resources; among other benefits.

Through its SL programming and this Expression of Interest (EOI), USAID/Mexico aims to co-create innovative research and development-based solutions that employ a blended finance approach to positively influence the socio-economic development and well-being of rural communities, while simultaneously protecting productive forests and soils rich in organic matter.

In particular, USAID seeks to promote new forms of collaboration with the investment and business community to catalyze investment in high-impact areas important to USAID such as mailto:SAM@USAID.gov mailto:SAM@USAID.gov mailto:SAM@USAID.gov sustainable agriculture1, forestry and other land uses, and the environment. Among other possible solutions, this could include innovative ways to strengthen value chains that protect rather than degrade natural resources or involve poor labor practices; improve market linkages for deforestation-free products; influence consumer preferences for sustainably produced goods;

increase processing capabilities to add value; or promote access to finance.

Background Mexico’s natural landscapes are increasingly coming under pressure. In the past three years, the country has lost an average of over 250,000 hectares of forest cover annually, driven in part by conversion to commercial agriculture and extensive livestock production. The environmental consequences of this loss may harm the country’s short- and long-term social, cultural and economic well-being.

Financing for smallholder farmers, small and medium enterprises (SMEs), and community and forestry enterprises (CFEs)—herein referred to as “small producers”—is critical to reversing this trend. Small producers manage the majority of Mexico’s natural resources and therefore play a critical role in sustainable land management. These activities include the management and protection of forests, reforestation and afforestation, and sustainable agricultural and livestock practices. However, scaling these activities requires (1) financing for agricultural inputs, productive assets, labor, initial opportunity costs to change production practices, (2) technical assistance, and (3) increasing market demand for “sustainably-produced” products.

Preliminary findings from an analysis2 commissioned by USAID/Mexico identified four key barriers to financing sustainable landscapes in Mexico: (1) lack of capacity and experience of small producers to access investments; (2) weak market conditions in the agriculture, forestry and other land use (AFOLU) sector; (3) lack of financing options suitable to small producers;

and (4) insufficient support to drive change. Specific barriers identified that impact small producers include:

Demand-side

• Limited economic incentives to invest in sustainable land activities (such as livestock production that integrates forests and pastoral lands) because the market does not pay higher prices for related products.

• Limited demand for credit to support sustainable land management activities given government support to the AFOLU sector, previous negative experiences with the financial sector, high interest rates, and general aversion to credit risks.

• A lack of technical, financial, management and organizational capacities to attract financing.

Supply-side

• Producers are not currently incentivized to seek other financing options.

1 For the purpose of this BAA, “sustainable agriculture” is defined as an integrated system of plant and animal production practices that will over the long term: (i) enhance environmental quality and the natural resource base, for example by building soil organic matter, supporting diverse pollinator communities, strictly limiting use of synthetic pesticides and herbicides, and reducing losses of nitrogen and phosphorous to surface water and groundwater; (ii) make the most efficient use of on-farm resources and integrate natural biological cycles and controls; and (iii) sustain the economic viability of farm operations.

2 The full analysis will be completed in March 2020.

• Many financial institutions and investors do not finance sustainable production given small transaction size and risk.

• Financial products that exist have low penetration in rural areas and/or are not adapted to the needs of producers implementing sustainable land activities (e.g., longer time horizon to see profits in forestry, different growing seasons).

Enabling environment

• Limited support services to help mobilize and deploy financing to sustainable land use management activities, including a lack of professional talent (financial advisors, accountants, lawyers) to support small producers.

• Limited (or non-existent) long-term technical assistance to simultaneously help producers change their production practices while strengthening their financial and business management skills, or “incubation” programs tailored to the unique needs of rural producers who want to understand and employ more sustainable business activities.

• Weak monitoring and certification systems that recognize and value sustainable production, especially for beef.

• Need for additional policies and incentives to promote sustainable production and/or prevent overproduction writ large.

• Limited demand for sustainably-produced products.

While some barriers are cross-cutting, many manifest differently across value chains, regions, and genders. Women face greater barriers than men in accessing finance to transition to sustainable practices; in many cases, women are less likely to be ejiditarias, and therefore have less ability to make decisions about land use or financing. However, some ejidos do have more equal participation of women in terms of land ownership, participation in programs, and decision-making responsibilities, and represent an opportunity for learning and replication.

Over the past decade, the Government of Mexico, bilateral donors, development finance institutions, and other actors have supported a range of programming for sustainable landscapes, primarily through grants and subsidies, with some loans and credit. Some programs have achieved important results in terms of coordination and demonstration of viable smallholder financing models. Nevertheless, there is a need to increase the sustainability and scale of promising programs. Many programs have limited scale and lack market-based models or “exit” strategies to mobilize follow-on investment from the private sector. Some public programs are ending and the budgets of key government agencies have decreased. Achieving transformative and systemic change requires a multi-stakeholder approach that links financing, technical assistance, market access and public policy; builds trust with actors across productive value chains; increases demand for sustainable products; and incentivizes investment in sustainable land use.

Solutions Sought Through this Call for Expressions of Interest (EOIs) and subsequent co-creation process, USAID/Mexico seeks to identify partners who can successfully research, develop, test and evaluate innovative approaches to increase access to finance and catalyze investments to reduce deforestation and forest degradation in Mexico by improving land management practices and reducing the drivers of land-use change. The innovative solutions USAID seeks should focus on how to catalyze investment in smallholder farmers, small and medium enterprises (SME), community and forestry enterprises (CFE), ejidos, and communities.

In employing a blended finance approach, USAID hopes to achieve the following objectives:

1. Mobilize private capital to finance activities that reduce deforestation and improve land management practices.

2. Enable smallholder farmers, small and medium enterprises (SME), community and forestry enterprises (CFE), ejidos, and communities to adopt economically-viable and sustainable land use practices.

3. Develop systemic approaches that can have a transformational impact on deforestation and sustainable land use in Mexico.

This co-creation process should build on the momentum of “green financing”3 as a platform for impact investors and the broader public and private financial sectors’ participation in blended finance approaches. USAID seeks creative approaches and new partners, and looks to organizations submitting EOIs to bring new thinking and genuine interest in collectively designing solutions that will leverage USAID resources to advance the key development objectives above.

Who May Apply EOIs may come from organizations in the natural resources management and financial sectors, including technical assistance providers, civil society and non-governmental organizations, investors, asset managers, intermediaries, businesses buying and selling sustainably-sourced products, community forest and smallholder producer organizations, academia, thought leaders, and other entities that have experience and capabilities in line with the objectives of this solicitation. Applicants should be willing to meaningfully discuss challenges and to collectively construct potential market-based solutions to reduce deforestation and promote sustainable landscapes, taking into account challenges and opportunities that include access to finance, market failures or distortions, capacity to implement sustainable agriculture, livestock and forestry practices, policy and regulatory barriers, and consumer demand, among others.

EOI applicants selected to advance in the co-creation process should be available to participate in a co-creation workshop to take place in Mexico City, on or about April 28-29, 2020.

Expressions of Interest Submission Guidelines

3 Green finance increases the levels of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities. A key part of this is to better manage environmental and social risks, take up opportunities that bring both a decent rate of return and environmental benefit and deliver greater accountability. https://www.unenvironment.org/regions/asia-and-pacific/regional-initiatives/supporting-resource-efficiency/green-financing https://www.unenvironment.org/regions/asia-and-pacific/regional-initiatives/supporting-resource-efficiency/green-financing https://www.unenvironment.org/regions/asia-and-pacific/regional-initiatives/supporting-resource-efficiency/green-financing

EOIs should illustrate the submitting organization’s (and/or consortium’s) interest, capabilities, and experience in sustainable land management, green finance, blended finance, community forestry, enhancing economic opportunities and capacity building with smallholder farmers, land use policy, and/or other areas relevant to the objectives and challenges outlined in this solicitation. Previous experience with USAID is not required.

EOIs must be submitted no later than 18h00 (6:00 p.m.) Central Standard Time on March 27, 2020. Submissions should:

• Be in English or Spanish;

• Be no more than three (3) pages in length, with text no smaller than 12 point font with 1-inch margins.

• Be submitted electronically to the following e-mail address: SAM@USAID.gov

• Include a cover page (not counted against page limit) with the following information: Respondent Name/Group; Contact Information; and Response Title.

• Include two submission attachments in email, one in .doc and one in .pdf format.

In your EOI, please describe your ideas of how to support sustainable landscapes and reduced deforestation in Mexico, with a focus on innovative approaches to increasing access to finance and catalyzing investments to smallholders, communities and/or ejidos in, including:

• Background of your organization (and/or consortium members).

• Experience relevant to the objectives, context, and challenges outlined in this solicitation.

• If applicable, results achieved through implementing creative or innovative approaches to novel problems through other activities/initiatives carried out by your organization. Examples relevant to the general topical area of this call for EOIs would be particular informative for USAID, including, but not limited, to activities related to mobilization or leveraging of capital from diverse sources;

work with smallholder farmers or similarly situated groups, and work related to preservation or reforestation efforts.

• Your organization’s (or consortium’s) principal target population and/or stakeholders.

• Preliminary ideas on how private sector investment can be mobilized to work with small producers, communities and/or ejidos in support of sustainable landscapes and reduced deforestation in Mexico.

• Resources you and/or your consortium could bring to a USAID partnership (capital, products or services, existing programs, etc.)

EOI Selection Criteria The following criteria will be applied to all Expressions of Interest. Submissions are not evaluated against other submissions, but solely against the evaluation criteria outlined below:

1. Idea(s) for partnering with USAID: Creative, informed, and realistic thinking based on experience with green finance, blended finance, and market-driven solutions that engage the financial sector, government, private enterprise, small holders, ejidos and community forest enterprises to increase access to finance and catalyze investment for sustainable landscapes.

2. Impact: Potentially transformative ideas that have a high potential to significantly increase private capital for sustainable land use that results in reduced deforestation and more sustainable landscapes in Mexico in a way that also benefits small holders, ejidos and communities, among others.

3. Qualifications and Experience: Strengths of your organization (or consortium) as a USAID partner, including the ability to make a unique contribution to achieving the goals of this activity; willingness to collaborate with other stakeholders; and contribution to strategic solutions.

4. Diversity of Perspectives and Capabilities: Brings together a diverse set of participants from the natural resources and investment sectors, as well as resources that can contribute to reaching the objectives.

EOI Selection and Co-Creation Process USAID will review and select Expressions of Interest in accordance with the criteria set forth in this solicitation. USAID reserves the right not to review any EOIs that do not meet the criteria or submission guidelines. Please note that due to the expected number of EOIs, USAID is unable to provide feedback on those EOIs that are not selected to move forward.

Organizations selected to move forward will continue on to the following stages of the co-creation process:

Stage 1: Selected groups will be invited to join a co-creation workshop in Mexico City, on or about April 28-29, 2020. USAID and participants will gather to collaboratively build on initial ideas and collectively begin to develop concept papers that will achieve the objectives of this solicitation. Up to two experienced technical experts from submitting organizations must be available to participate in the workshop.

Please note that costs associated with participating in the co-creation workshop, including travel and labor, will not be paid for by USAID.

Stage 2: Organizations invited to participate in the co-creation workshop are eligible to take the lead in developing a concept paper after the workshop. Organizations are also free to join the coalitions of other invitees as partners. Third parties, i.e., those not invited to co-creation, may also be invited to join coalitions as partners. The concept paper should outline a programmatic plan, management plan, focus areas, goals, timeline, the different roles of consortium members, and draft budget, as applicable.

Concept papers will be due in late May 2020 and will be reviewed by USAID for final selection. Concept papers may be further refined and/or co-designed with USAID before final selection and award. More information on this stage, including concept paper submission guidelines, will be provided at the end of the co-creation workshop only to those organizations whose concepts are selected.

Stage 3: A Peer and Scientific Review Board will review concept papers and identify those that are in line with the objectives and criteria laid out in the BAA Addendum. Those concept papers that are successful following the review process will be recommended for a research and development-based award that will further test and develop the concepts defined during the co-creation phase. This may involve additional in-person or virtual co-creation with selected parties.

USAID is not obligated to issue a financial instrument or award as a result of this Addendum.

The reputation of an organization (or consortium), its past performance, the managerial and technical ability of the proposed team are always significant considerations in assessing the potential and risks associated with each award. USAID reserves the right to check the past performance, references, and other pertinent offeror information in making award decisions.

Additionally, the organization selected for funding will need to confirm eligibility based on USAID rules and regulations, including the submission and acceptance of a Non-U.S.

Organization Pre-Award Survey (NUPAS). Should the selected proposal not qualify for award, USAID may consider other technically feasible proposals.

Protection of Information USAID’s goal is to facilitate research and development that will lead to innovative, and potentially commercially viable solutions. Understanding the sensitive nature of submitters’ information, USAID will work with organizations to protect intellectual property.

Expressions of Interest should be free of any intellectual property that applicants wish to protect, as EOIs may be shared with USAID partners as part of the selection process. However, once applicants have been invited to engage in further co-creation discussions, USAID will work with each to identify proprietary information that requires protection.

By submitting an EOI to this request, applicants agree to grant to USAID a royalty-free, non-exclusive, and irrevocable right to use, disclose, reproduce, and prepare derivative works, and to have or permit others to do so to any information contained in the EOI. If USAID engages with an organization regarding its submission, the parties can negotiate further intellectual property protection.

Organizations are responsible for ensuring that any submission under this solicitation is free of any third party proprietary data rights that would impact the license granted to USAID herein.

USAID is not obligated to issue a financial instrument or award as a result of this solicitation.

Approved EOIs and subsequent proposals may potentially lead to an award or other instrument, as appropriate, to be determined by USAID.