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INTEGRATED SAFEGUARDS DATA SHEETAPPRAISAL STAGE

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Report No.:ISDSA21201Date ISDSPrepared/Updated: 12-May-2017Date ISDS Approved/Disclosed 12-May-2017

I. BASIC INFORMATION1. Basic Project DataCountry: Mexico Project ID: P151604

Project Name: Mexico Dedicated Grant Mechanism for IP and LC (P151604)

Task Team Leader(s): Carlos Tomas Perez-Brito

Estimated AppraisalDate:

29-May-2017 Estimated Board Date:

Managing Unit: GEN04 Financing Instrument:

Investment Project Financing

Is this project processed under OP 8.50 (Emergency Recovery) or OP 8.00(Rapid Response to Crises and Emergencies)?

No

Financing (In USD Million)

Total Project Cost: 6.00 Total Bank Financing: 0.00

Financing Gap: 0.00

Financing Source Amount

Borrower 0.00

Strategic Climate Fund Grant 6.00

Total 6.00

Environmental Category: B - Partial Assessment

Is this a Repeater project? No

2. Project Development Objective(s)The Proposed Development Objective of the project is to strengthen capacity of forest-dependent people from targeted regions to participate in local, national and international REDD+ related processes.

3. Project Description1. In the spirit of the DGM’s collaborative approach to design and implementation, the DGM Project objective is consistent with the interests and aspirations of the IPLCs expressed in the DGM Design Proposal and the DGM Framework Operational Guidelines (OG). Likewise, the proposed PDO has an overarching approach which leaves enough room to allow the selection of activities based on the principle of demand-driven interventions and identified through an extensive participatory and representative process which is the nature and essence of the DGM at the national and regional level.

Project Description

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2. The main beneficiaries of the Project are IPLC from Mexico s FIP and REDD+ Early Action Areas targeted states include: Jalisco, Oaxaca, and the Yucatán Peninsula (Campeche, Yucatan and Quintana Roo). For the purpose of this Project, IPLC is defined as any of the following indigenous peoples and/or local communities located in the Member Country’s territory, including: ejido, agrarian community (comunidad) (including individuals living in an ejido or agrarian community, including avecindados), associations or organizations of producers, and legally established community enterprises.. In addition to having a geographical targeting, the Project will also include a set of eligible activities under an integrated forest landscape management approach and integration between communities and associations of producers, and markets.

Groups of Beneficiaries.

1.- “Ejidos” and “comunidades”. In Mexico, “Comunidades” (or ―agrarian communities) are long-standing rural population centers that have been given formal ownership of their traditional or customary lands. Theoretically ―agrarian communities are entirely composed of indigenous peoples. “Ejido” refers to a portion of land that has been titled to a rural population nucleus that was formed more recently or relocated from another area. Most of them are non-indigenous “campesinos”. Both types of community property are governed by a similar structure, with an “Asamblea” of all “ejidatarios” or “comuneros”, a “Comisariado Ejidal” or “Comisariado de Bienes Comunales” and a “Consejo de Vigilancia”. It is estimated that 9,000 communities and “ejidos” have a forest area equal to or greater than 300 hectares, of which about 3,000 are engaged in forestry as their main activity.2.- “Avecindados”. Persons who live in the territory without being “ejidatarios” or “comunero".3.- Associations or Organizations of Producers. Two or more ejitarios/comuneros or ejidos/comunidades” that are dedicated to the same productive activity, and choose to combine efforts under a cooperative contribution scheme.4.- Community Enterprises Legally established and recognized organization of an “ejido” or “comunidad”, that is dedicated to a productive activity and follows a formally established business structure and purposes.

Project Components3. Component 1: Financing Mechanisms for Community Forestry Management (US $ 3.7 million). This component will support IPLC sub-projects for conservation and integration of sustainable productive activities in forest landscape management activities related to (a) avoided deforestation and forest degradation through SFM, (b) protection of environmental services; (c) enhancement of carbon stocks in forest landscape, (d) agroforestry and sustainable use of timber and non-timber products, (e) low carbon production systems in agriculture, and (f) strengthening of community forest and non-forest enterprises.

4. Sub-Component 1.1. Demand-Driven Community Projects. (US$ 3.10 million). This sub-component will finance the provision of sub-grants and matching grants to IPLC from eligible targeted states, and thematic areas and activities. All sub-grants and matching grants proposals will be assessed by the National Steering Committee (NSC) and the National Executing Agency (NEA) using the following criteria: i) improving local population livelihoods, ii) strengthen participation of indigenous and local communities in the overall forest landscape management, iii) target low carbon emission and sustainable forest landscape products and value chains; iv) addressing climate change mitigation and adaptation, and the ability to offer additional environmental co-benefits such as biodiversity and hydrological services; v) socio-economic feasibility; vi) number of potential beneficiaries; and vii) evidence of broad community support.

5. Taking into consideration the current scenarios faced by IPLCs, from the different target states, proposals will be eligible for funding under two sub-grant windows: (i) Social Inclusion Sub-Projects Window. Small and innovative sub-grants proposals that can be fully funded coming from but not limited to social priority and vulnerable groups including indigenous women, youth and “Avecindados”; and (ii) Market-oriented and Financial Inclusion Sub-projects Window. These will be from producer organizations, and Community (Forest

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and Non Forest) Enterprises that will be funded with the goal of leveraging resources and to strengthen regional organization between communities, organizations and enterprises (horizontal integration), as well as access to markets (vertical integration), and usage and quality of financial services. A minimum share of 50 percent of the funds allocated for this component will be targeted to the Social Inclusion Window and a maximum share of 50 percent to Market Oriented Window.

6. Sub-Component 1.2. Training and Sustainability Assistance. (US$ 600,000) This sub-component will finance technical assistance and operational cost of conducting critical project management activities for pre-selected and selected sub-grants. This activity will focus on enhancing the organizational, technical and managerial capacities of beneficiary organizations from pre-selected and selected proposals under a financial inclusion scheme in order to ensure sustainability and extend access to markets and financial services existing in Mexico. This activity will also support workshops by region to help develop pre-selected innovative ideas into full proposal eligible for funding for any of the windows. These activities will be executed by the NEA before launching the first official call for proposals and directly after an initial assessment of all selected proposals in order to identify technical gaps that need to address for long-term sustainability and to define tailor made workshops and specific technical assistance package.

7. Component 2: Capacity Building, Communication and Advocacy (about US$ 1.4 million). This component will support technical assistance and financing of operational cost for (i) training to Local Community Promoters “Promotores Comunitarios Locales”; (ii) conduct knowledge-sharing and know-how workshop and exchanges among IPLC, associations of producers and community enterprises through Community Schools (“Ejidos-Escuela”); (iii) develop and adapt training modules on financial inclusion to complement and fill the gaps in already existing training materials; and (iv) developing a culturally appropriate communication and advocacy strategy for the all DGM activities and REDD+ processes.

8. Sub-component 2.1. Capacity Building. (US$ 1, 100,000) This sub-component will support technical assistance and financing of operational cost for capacity building and knowledge-sharing and exchanges activities through two delivery mechanisms: (i) Selection and training of a roster of 20 qualified young professionals to become Local Community Promoters (“Promotores Comunitarios Locales”). The 20 local community promoters will be trained on financial inclusion topics and REDD+ processes using training modules and materials developed or adapted under numeral iii. The local community promoters be identified and proposed by “Ejidos” and communities from each of the targeted regions that will also help in the promotion for the selection of sub-projects, support IPLC from their own regions in financial inclusion and Participatory Monitoring and Evaluation (PM&E) issues. For the selection of these local community promoters, a special consideration will be given to attract youth-female community leaders that are fully supported by their own communities to participate in this program; and (ii) Conduct 50 knowledge-sharing and know-how workshop and exchanges through Ejidos-Schools ( “Comunidades Instructoras”) This capacity building activity will be carried out following an “Ejido-to-Ejido” and Community-to-Community approach to improve the capacity of incipient “Ejidos” and communities to conduct integration of sustainable productive activities in forest landscapes, successful access to markets and financial services, key lessons learned, cultural appropriate approaches and build synergies among communities, associations of producers, financial intermediaries, and government institutions for sustainable production in forest landscapes. These workshops will be given by already successful “Ejidos” and community forest enterprises pre-identified for this purpose from within targeted regions or beyond, if needed, to conduct the exchanges. Subsequently, 50 exchanges will be carried out through the lifetime of the Project which will allow to strengthen knowledge among IPLCs. In addition to the two previous capacity building activities, the Project wil l (iii) develop and adapt training modules on financial inclusion to complement and fill the gaps in already existing training materials. One of the main barriers faced by IPLC in terms of accessing funding for their activities is the lack of knowledge and information on key requirements to access different financial resources available in the country and also technical expertise to prepare proposals. The goal of this activity is to tackle those issues by developing training modules on key

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financial inclusion topics to complement some already available and also adapt some others to conduct tailor made training for the local community promoters and to be used as part of the overall knowledge-sharing and exchanges in the “Ejidos”-Schools.

9. Sub-component 2.2. Communication and Advocacy. (US$ 300,000) This sub-component will support technical assistance and financing of operational cost to conduct communication and advocacy activities by: (i) developing a culturally appropriate communication and advocacy strategy for the DGM activities. Particularly, this strategy will facilitate the successful implementation of Project’ activities, including the design and administration of the DGM Mexico Internet website, support effective and culturally appropriate calls for proposals for sub-projects, identify and disseminate lessons learned, good practices and show case successful sub-projects to both internal and external audiences and interested parties such as “CONAFOR, CDI, SAGARPA, FIRA, Financiera Nacional”, etc and the international community. With this activity, the NEA will ensure that targeted beneficiaries, organizations and communities in the selected areas within the geographical intervention of the DGM know about the Project, the funding windows, call for proposals for sub-projects, and overall activities; and (ii) support the participation of DGM beneficiaries, the NSC and regional sub-committee’s members in key DGM and REDD+ processes and events at the local, national and international level.

10. Component 3: Management, monitoring and evaluation (about USD$ 900,000). This component will support two main areas. First, it will support activities that increase the capacity of IPLC to oversee and assess their forest resources and to monitor and evaluate project activities using a participatory approach. Second, it will cover the incremental management costs of the NEA to implement the sub-projects and facilitate capacity building. That said, the component and its cost are an integrated approach to cover project management, monitoring under a participatory approach, and supervision.

11. Sub-component 3.1. Participatory Monitoring and Evaluation (PM&E). (US$100,000) This sub-component will support technical assistance and financing of operating cost to (i) design and implement a pilot PM&E system to test the concept within the context of the project and areas of intervention; (ii) implementation of the PM&E system in all sub-project areas, with the key feature to focus on participation, not only to oversee the results of the project, but also serve as a tool to empower forest-dependent communities´ to improve the management of their own resources and to promote collaborative learning; (iii) implementation of a sub-project-level survey to compare with national existing metrics provided by CONAFOR’s annual National Beneficiaries Survey (“Encuesta Nacional de Beneficiarios”) and (iv) dissemination and exchange of lessons learned of the use of the PME system (under the DGM Global Component). Monitoring and Evaluation will include reporting of outputs and outcomes based on the indicators specified in the Results Framework (RF) in PAD-Annex 1, and will be collected mostly using a participatory approach.

12. Sub-component 3.2. Management. (US$ 800,000) This sub-component will finance the incremental operational and managerial costs of the NEA to carry out its task and responsibilities. The maximum total operational cost of the NEA is 12% of the total donated amount, equivalent to US$720,000.00, and it does not include the cost of the audits. These responsibilities include: (i) Serving as secretariat to the NSC, including technical and financial support for the organization of annual NSC and Regional Sub-Committees’ meetings and the provision of technical assistance to support the NSC’s approval process; (ii) Project’s technical coordination, monitoring and evaluation; (iii) reporting to The World Bank, NSC, and the Global Steering Committee (GSC); (iv) Project’s financial management, procurement, and social and environmental safeguard (v) design and implementation of Project’s Grievance Redress Mechanism (GRM); (vi) supervising the implementation of community initiatives and results assessments; and (vii) developing a robust OM for the Project. Additional US$ 80,000 will cover the cost of contracting the annual Project audits for the life of the project.

4. Project location and Salient physical characteristics relevant to the safeguard analysis (if known)

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13. The target area of the project includes the State of Oaxaca, the coastal watersheds in the State of Jalisco and the Yucatán Peninsula. In this priority project target area, forestry remains a relevant economic sector and about 7.3 million people live under the poverty line. Together, these states are responsible for 12.9 percent of the country’s timber production (5.9 million cubic meters) and 11.7 percent of its fuelwood and charcoal production (0.7 million cubic meters).

5. Environmental and Social Safeguards Specialists on the TeamArelia Jacive Lopez Castaneda( GSU04 )

Dora Patricia Andrade( GEN04 )

6. Safeguard Policies That Might ApplySafeguard Policies Triggered? Explanation (Optional)

Environmental Assessment OP/BP 4.01 Yes This Project is rated as Category B. The Project is designed to generate positive environmental impacts through increased incentives to protect the forests and stronger capacity at the local level for forest and natural resource management. Potential negative impacts will be of limited scope and not be significant or irreversible. A programmatic stand alone ESMF (Environment and Social Management Framework) was prepared by the NSC in close collaboration with the WB team. Based on that the NEA (Rain Forest Alliance) prepared a Specific ESMF for the Mexico DGM that was disclosed on RA’s national web site on March 10, 2017. (http://www.rainforest-alliance.org/lang/sites/default/files/uploads/4/proyecto-mde-mexico-mgas.pdf).The ESMF will enhance local capacity to address the direct and underlying drivers of deforestation and forest degradation in the selected areas, based on a community driven forest landscape management approach, which will particularly focus on a stronger inclusion of vulnerable groups, such as indigenous people, women and young. Subprojects to be selected will necessarily need to demonstrate, i) improving local population livelihoods, ii) strengthen participation of indigenous and local communities in the overall forest landscape management, iii) target low carbon emission and sustainable forest landscape products and value chains, and iv) addressing climate change mitigation and adaptation, and the ability to offer additional environmental co-benefits such as biodiversity and hydrological services. Eligible subprojects/activities might consist of activities related to: Sustainable Forest Management (SFM) (Including among other Community Forest Management, and forestpasture); Eco-agriculture in

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Forest landscapes (restoration and stabilization of the agriculture and livestock frontier, sustainable rural production systems (grazing rotation, conservation tillage, agro-ecology, afforestation, reforestation, restoration and forest certification, low impact sustainable plantations (café de sombra, milpa and acuahual), low intensive cattle ranching, control of forest fires by changing the patterns of land use); Ecotourism (Support Nature-based forms of tourism -observation and appreciation of nature- educational and interpretation features by community driven); and Enhancing local governance, inclusion and advocacy (collaborative, community-driven processes for dialogue, planning, negotiating, implementation and monitoring, financial and basic business administration and entrepreneurial skills). All of these activities are expected to have a net positive impact on the environment contributing to the benefits of forests, natural habitats and landscapes. It will also improve the living conditions of vulnerable IPLC, which rely on forest resources for their livelihoods.The most significant risk for the conservation of forests and biodiversity is represented by those activities that are not carried out under principles of sustainability and within a sustainable rural development approach.The ESMF outlines the sustainability criteria and process to be included in the Environmental Management Plans. EMP’s will be prepared for those activities that require such a Plan, especially those that could be in the proximity of environmentally sensitive areas, and provides specific guidelines to avoid or minimize risks and manage potential environmental impacts.Any subproject or activity considered to be Category A will not be eligible for funding by the Project. During preparation, efforts were made to ensure consistency with other relevant national processes such as the Forest Carbon Partnership Facility/REDD+ (P12041 7 and P162749), and the Forest and Climate Change Project (P123760), that also includes the main portion of the Mexico FIP Investment plan.The ESMF is considered a living document, and as such it will be updated as needed. The updated versions will always be available on the NEA’s website and the Bank website.

Natural Habitats OP/BP 4.04 Yes The Natural Habitats (OP/BP 4.04) policy is triggered as some of the community based

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agroforestry subprojects may have impacts on natural habitats. The ESMF promotes sound practices in forest management, which may include innovative approaches to protect environmentally sensitive habitats, includes a description of the mechanisms to engage stakeholders during the implementation to avoid any land use conversion or degradation that may result associated with project activities. A list of ineligible activities is also included in the ESMF.

Forests OP/BP 4.36 Yes The Forests (OP/BP 4.36) policy is triggered as the proposed project will be implemented in natural forest areas and supports non-timber, agroforestry, and timber subprojects.

Pest Management OP 4.09 Yes The Pest Management (OP 4.09) policy is triggered as the project will finance agroforestry and non-timber forest products (NTFP) subprojects. The project will not directly finance the use of pesticides but will promote integrated management of pest programs and eventually the use of certain non-restricted pesticides to minimize risks to human health and the environment. The ESMF contains a specific Pest Management Plan (Annex 1) to ensure a responsible management. The Plan is in line with sound environmental and human health protection objectives. This Plan was consulted as part of the ESMF with interested parties. The PMP is integrated as annex in the ESMF.

Physical Cultural Resources OP/BP 4.11 Yes The Physical Cultural Resources (OP/BP 4.11) policy is triggered as project related activities may have an impact on the use of and access to areas with potential cultural significance such as sacred sites. The principles of this Policy are fully integrated into the screening and mitigation planning processes described in the ESMF procedures.

Indigenous Peoples OP/BP 4.10 Yes The World Bank’s Operational Policy 4.10 Indigenous Peoples is triggered for this project. As indigenous peoples are the project’s direct and main beneficiaries, this project is considered to be an Indigenous Peoples Project. For this reason, an Indigenous Peoples Plan (IPP) will not be prepared and the elements of an IPP will be included in the overall project design.The project is not expected to have direct negative impacts on IP. However some issues were identified in the review of existing social assessments and the overall preparation process for the programmatic ESMF: i) the need for social

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inclusion of indigenous peoples and communities, ii) the need for culturally and socially appropriate means of communication, iii) capacity building activities for the most vulnerable groups within ejidos and communities and for IPLC in general, and iv) consideration of IPLC traditional knowledge and traditions during the project preparation and implementation. The ESMF focuses on mainstreaming and optimizing the project benefits for indigenous people, and includes a strategy for culturally adequate communication, a gender inclusion strategy and monitoring and evaluation mechanisms. Overall, the DGM will provide financing through grants and matching grants to specific demand-driven sub-projects from IPLC.The Project was prepared jointly with the NSC and in full consultation under a participatory process with indigenous leaders from the project areas. A robust consultation process was conducted with members of the NSC, and key governmental institutions such as CONAFOR and CDI in order to review the proposed project design. In particular, the IPLC representative demanded for more appropriate communication. The DGM preparation and implementation attended this demand through several key features: i) Participatory and regional governance structure that allows to respond to cultural and socio economics needs, ii) component 1 integrates a social window that not only recognizes cultural needs but attends specifically vulnerable groups, and iii) component 2 will specifically aim at fostering cultural appropriate communication through community driven learning and knowledge and exchange among communities.The ESMF was jointly reviewed, inputs incorporated and continuously consulted and reviewed with the NSC. As a result, no adverse impacts are expected. Potential positive impacts of the ESMF include the strategy of culturally adequate communication, gender inclusion strategy and monitoring and evaluation mechanisms.Rainforest Alliance (NEA) will assume full responsibility for the administration of grant proceeds, compliance with the Bank’s fiduciary and safeguard policies and procedures, and all project-related monitoring and reporting, as well as the design, and implementation of the Grievance Redress Mechanism.

Involuntary Resettlement OP/BP 4.12 Yes From a safeguard point of view, no involuntary

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resettlement of population will result from any activities financed by the project. In addition, the beneficiaries of the DGM are ejidatarios, comuneros, avencidados, producer organizations and forest enterprises that must provide either proof of land possession or title, or any arrangement and approval by the community or land owner.A Process Framework (PF) was prepared by the project as a precautionary measure to ensure compliance with the OP4.12, in the unlikely event of any possible restriction of access to natural resources originated by project activities within and outside of protected areas. The PF must be adequate and culturally appropriate consulted with indigenous peoples and local communities within the potential intervention sides.In addition, the PF establishes actions to ensure the provision of benefits to the most vulnerable such as women and young (non-land tenure holders), and those without land. The PF includes guidelines for authorization from community/ejido (ejidos) assemblies for such activities. The PF aims at promoting the inclusion of the most vulnerable to the IPLC governance structures.The PF has been disseminated and consulted with a wide range of stakeholders during several subcommittee meetings. It was presented to the NSC during its general assemblies in Chetumal and Oaxaca in October and November 2016 respectively. PF has been revised and finalized during the NSC’s meeting in Oaxaca, Mexico in April of 2017. The DGM PF was designed in compliance with the national and international legal framework relevant in Mexico and applicable to the project. For this reason, no relevant technical observations were made during the consultation process.

Safety of Dams OP/BP 4.37 No This policy is not triggered given that the project will not support the construction or rehabilitation of dams nor will support other investments which rely on the services of existing dams.

Projects on International Waterways OP/BP 7.50

No This policy should not be triggered because the proposed project will not affect International waterways.

Projects in Disputed Areas OP/BP 7.60 No This policy should not be triggered because the proposed project will not affect disputed areas as defined under the policy.

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II. Key Safeguard Policy Issues and Their Management

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A. Summary of Key Safeguard Issues1. Describe any safeguard issues and impacts associated with the proposed project. Identify and describe any potential large scale, significant and/or irreversible impacts:A comprehensive analysis of different social and environmental assessments and ESMF’s of several projects in Mexico’s forestry and natural resource management sector with significant indigenous population components was carried out (Forest and Climate Changeprogram financed by the IBRD, the Forest Investment Program, the REDD+ Readiness and Emission Reduction Program under the FCPF) . The analysis included an extensive desk review, field visits to several of the potential beneficiary regions in the targeted states, interviews and meetings with a wide range of stakeholders and a presentation of the initial results to the NSC during its general assembly in Chetumal in October 2016 and aimed at designing the project’s programmatic ESMF by the NEA with the advice of the WB team. As a result of this, no potential indirect and/or long term impacts have been identified due to activities in the project area. The following risks have been identified as part of the project preparation, for all of which mitigation measures are presented in section 4 (Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described).Social: The priority issues identified in the review of the existing social assessments and the overall preparation process for the programmatic ESMF are: i) the need for social inclusion of indigenous peoples and communities, ii) the need for culturally and socially appropriate means of communication, iii) capacity building activities for the most vulnerable groups within ejidos and communities and for IPLC in general, and iv) consideration of IPLC traditional knowledge and traditions during the project preparation and implementation. The Project is not expected to result in any instances of land acquisition and/or displacement of people, regardless of indigenous or non-indigenous populations.Environmental: Overall, project implementation is expected to have a net positive impact on the environment contributing to the benefits of forests, natural habitats and landscapes. It will also improve the living conditions of vulnerable IPLC, which rely on forest resources for their livelihoods.The most significant risk for the conservation of forests and biodiversity is represented by those activities that are not carried out under principles of sustainability and within a sustainable rural development approach. Specific activities include, but are not limited to: commercial agriculture, extensive cattle raising, illegal logging, and forest fires. All of these activities are generally driven by economic, market, technical, or social issues such as lack of incentives, poor community organization, lack of alignment in the implementation of public policies, lack of competitiveness of sustainable forestry activities, deficiencies in technical assistance, lack of financing schemes for the most vulnerable populations, government subsidies that favor productive activities without long-term vision or environmental considerations with a landscape approach, positive environmental externalities not included in the prices of forest resources, lack of employment opportunities, etc. Those become important barriers for the implementation of activities that benefit forest dependent communities.In order to foster sustainable activities for a low carbon sustainable rural development, the proposed project and programmatic ESMF have included an integrated forest landscape management approach to promote sustainable community-based activities. Specific examples include, but are not limited to land planning activities (PPredial), sustainable forest management, protection of ecosystem services, increased carbon stocks, agroforestry and sustainable use of non-timber products. Under the call for proposals a specific environmental screening will be included.

2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area:The basic design of the DGM poses serious challenges in the Mexican context in terms of governance, representation and gender parity. In terms of governance, due to the close and often overlapping relationship between the members of the NSC and the potential project beneficiaries, maintaining a neutral separation between the governance function of the NSC members and their personal and/or political relationships with the potential beneficiaries at the community level and ensuring that there is no bias and a conflict of interest in the selection of the subprojects could prove challenging. Implementation of some subprojects will be in remote

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locations and involve numerous and relatively small transactions which makes management and implementation more challenging.

3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts.In terms of governance, representation and gender parity the risk will be mitigated by a tailor made Conflict of Interest Guidelines and Policy that was approved by the NSC and defines specific situations under which there is an obligation for abstaining from a decision, clear eligibility criteria for the selection of the subprojects and beneficiaries. The NSC has also invited representatives of CONAFOR and CDI two key government institutions to become members of the DGM’s NSC. The Conflict of Interest Policy will be included in the project’s OM. The integration and constant support to Regional sSub-committees will ensure constant representation of IPLC organization from targeted states. In terms of gender mainstreaming issues and inclusion of vulnerable populations, the NSC and regional sub-committees have committed themselves to gradually include more women to their members. Likewise, the Project design includes specific targeted beneficiaries including women, and non-land tenure holders that lice within the ejido / community.To contribute to overcome or, at least, minimize the implementation risk: the DGM proposes (i) broadly participatory and empowering approach that ensures representation and participation of key stakeholders in the different stages of project preparation and implementation; (ii) the design of an appropriate, clear, transparent and broadly representative governance mechanism – the NSC – open to dialogue with other participatory bodies; and (iii) selection of a National Executing Agency through a competitive process, which shall (a) assure World Bank standards and procedures for project implementation (fiduciary, procurement, and safeguards), (b) assure the capacity to provide technical assistance and training in all areas needed by the key stakeholder, and (c) have experience in working with indigenous communities and “Ejidos”.

4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described.Social measures: One of the most important risks found in the review of the social assessments is the need for social inclusion of indigenous peoples and communities in the project. This necessity is included in the Mexico DMG objective, because the beneficiariesare the Indigenous People and Local Communities. In addition, the assessment identified the need for culturally and socially appropriate means of communication, with cultural appropriate training and materials, as well as the importance of taking into account their traditional knowledge and traditions during the design and implementation of the project activities. To that regard, the ESMF includes a strategy for culturally adequate communication, a gender inclusion strategy and monitoring and evaluation mechanisms. The DGM will provide financing through grants and matching grants to specific demand-driven sub-projects from IPLC.Environmental: The DGM ESMF aims at fostering best practices for integrated forest landscape management. To achieve this objective mitigation measures will be incorporated to the list of eligible activities, and will be reflected in the ESMP’s and Operational Manual to be developed by the NEA.Implementation Capacity of the NEA: Part of the NEA’s selection criteria was its experience and capacity to implement safeguards requirements. Rainforest Alliance (RA) was able to provide sufficient proof on its long-standing experience working in the forestry sector and well known results. RA proposed a full time technical staff dedicated to safeguards implementation, and train the “Promotores comunitarios” in different issues associated with sustainable forest management, health and safety training, fire suppression, community organization etc.RA is a member of “La Alianza México para la Reducción de Emisiones de carbono por Deforestación y Degradación (REDD+)” which aims at strengthening low carbon rural and forest development and social and environmental best practices to underlie such development approach. The Alliance promotes and supports knowledge and capacity building, mainly in rural and indigenous communities and organizations in the country, as well as in government entities at regional, state and national levels. RA works with the communities and owners of the forests, with local, state and federal governments, especially with the Ministry of the Environment and Natural Resources (SEMARNAT) and with the National Forestry Commission (CONAFOR).

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5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people.No large, significant irreversible social or environmental impacts have been identified in the Social Assessment. The main beneficiaries of the Project are indigenous peoples and local communities (IPLC) from Mexico s FIP and REDD+ Early Action Areas targeted states: the coastal watersheds of Jalisco, Oaxaca, and the Yucatán Peninsula (Campeche, Yucatan and Quintana Roo).For the purpose of this Project, IPLC is defined as any of the following indigenous peoples and/or local communities located in the Member Country’s territory, including: ejido, agrarian community (comunidad) (including individuals living in an ejido or agrarian community, including avecindados), associations or organizations of producers, and legally established community enterprises. In addition to having a geographical targeting, the project will also include a set of eligible activities under an integrated forest landscape management approach and integration between communities and associations of producers and markets.The architectural design of the DGM is based on a participatory process including relevant stakeholders in forestry landscapes, including community leaders and representatives of ejidos and communities in the area of influence of the DGM. The process of free, prior and informed consultation started in 2014 and a total of 16 consultation workshops have been held with key stakeholders, including two regional meetings with indigenous representatives in the Yucatán Peninsula, Oaxaca and Jalisco. In addition, 6 consultation meetings (2014- 2015) were conducted with each one of the regional sub-committees and general assemblies of the NSC in Guadalajara, (Jalisco), Chetumal, (Quintana Roo) and Oaxaca. In addition, the Mexico DGM is conceived as a pilot project and its design has been led by IPLC. The project aims at contributing to the implementation of the national REDD+ program – including the FIP and the FCPF as well as the Forest and Climate Change project – and particularly adds to the ongoing efforts to implement its operational pillars, the ENAREDD+ and the emission reduction program under the FCPF. To that regard, Mexico’s overall REDD+ program provides an open, participatory, inclusive, cultural appropriate and analytical consultation process. Particularly, under the FCPF readiness grant a full national consultancy on the ENAREDD+ (2014 to 2015) was carried out that included 4 modalities – indigenous people, sectorial workshops, working groups for vulnerable groups and on-line – and more than 5,000 consulates..

B. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 10-Mar-2017 Date of submission to InfoShop 07-Apr-2017 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors

"In country" Disclosure Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 10-Mar-2017 Date of submission to InfoShop 07-Apr-2017 "In country" Disclosure Indigenous Peoples Development Plan/Framework Date of receipt by the Bank 10-Feb-2017 Date of submission to InfoShop 07-Apr-2017 "In country" Disclosure Pest Management Plan Was the document disclosed prior to appraisal? Y Date of receipt by the Bank 14-Apr-2017 Date of submission to InfoShop 07-Apr-2017 "In country" Disclosure If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective

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issues are to be addressed and disclosed as part of the Environmental Assessment/Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why::

C. Compliance Monitoring Indicators at the Corporate LevelPHCompliance

OP/BP/GP 4.01 - Environment AssessmentDoes the project require a stand-alone EA (including EMP) report?

Yes [] No [X] NA []

If yes, then did the Regional Environment Unit or Practice Manager (PM) review and approve the EA report?

Yes [] No [X] NA []

Are the cost and the accountabilities for the EMP incorporated in the credit/loan?

Yes [] No [X] NA []PHCompliance

OP/BP 4.04 - Natural HabitatsWould the project result in any significant conversion or degradation of critical natural habitats?

Yes [] No [X] NA []

If the project would result in significant conversion or degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank?

Yes [] No [X] NA []

PHCompliance

OP 4.09 - Pest ManagementDoes the EA adequately address the pest management issues?

Yes [X] No [] NA []

Is a separate PMP required? Yes [] No [X] NA []If yes, has the PMP been reviewed and approved by a safeguards specialist or PM? Are PMP requirements included in project design?If yes, does the project team include a Pest Management Specialist?

Yes [] No [] NA [X]

PHCompliance

OP/BP 4.11 - Physical Cultural ResourcesDoes the EA include adequate measures related to cultural property?

Yes [X] No [] NA []

Does the credit/loan incorporate mechanisms to mitigate the potential adverse impacts on cultural property?

Yes [X] No [] NA []PHCompliance

OP/BP 4.10 - Indigenous PeoplesHas a separate Indigenous Peoples Plan/Planning Framework (as appropriate) been prepared in consultation with affected Indigenous Peoples?

Yes [] No [X] NA []

If yes, then did the Regional unit responsible for safeguards or Practice Manager review the plan?

Yes [] No [] NA []

If the whole project is designed to benefit IP, has the design been reviewed and approved by the Regional Social Development Unit or Practice Manager?

Yes [] No [] NA []

PHCompliance

OP/BP 4.12 - Involuntary ResettlementHas a resettlement plan/abbreviated plan/policy framework/process framework (as appropriate) been prepared?

Yes [X] No [] NA []

If yes, then did the Regional unit responsible for safeguards or Practice Manager review the plan?

Yes [X] No [] NA []

Is physical displacement/relocation expected? Yes [] No [X] TBD []Is economic displacement expected? (loss of assets or access Yes [] No [X] TBD []

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to assets that leads to loss of income sources or other means of livelihoods)

PHCompliance

OP/BP 4.36 - ForestsHas the sector-wide analysis of policy and institutional issues and constraints been carried out?

Yes [X] No [] NA []

Does the project design include satisfactory measures to overcome these constraints?

Yes [X] No [] NA []

Does the project finance commercial harvesting, and if so, does it include provisions for certification system?

Yes [] No [X] NA []PHCompliance

The World Bank Policy on Disclosure of InformationHave relevant safeguard policies documents been sent to the World Bank's Infoshop?

Yes [X] No [] NA []

Have relevant documents been disclosed in-country in a public place in a form and language that are understandable and accessible to project-affected groups and local NGOs?

Yes [X] No [] NA []

PHCompliance

All Safeguard PoliciesHave satisfactory calendar, budget and clear institutional responsibilities been prepared for the implementation of measures related to safeguard policies?

Yes [X] No [] NA []

Have costs related to safeguard policy measures been included in the project cost?

Yes [X] No [] NA []

Does the Monitoring and Evaluation system of the project include the monitoring of safeguard impacts and measures related to safeguard policies?

Yes [X] No [] NA []

Have satisfactory implementation arrangements been agreed with the borrower and the same been adequately reflected in the project legal documents?

Yes [X] No [] NA []

III. ApprovalTask Team Leader(s): Name:Carlos Tomas Perez-BritoApproved By:Safeguards Advisor: Name: Noreen Beg (SA) Date: 12-May-2017Practice Manager/Manager: Name: Paul Jonathan Martin

(PMGR)Date: 12-May-2017