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Annual Review - Summary Sheet

Title: Proyecto Ganadería Colombiana Sostenible – Sustainable Cattle Ranching Project, Colombia

Programme Value: £15m Review Date: 4 August 2016

Start Date: June 2015 End Date: June 2016

Summary of Programme Performance

Year 2013-14 2014-15 2015-16

Programme Score B A B

Risk Rating High Medium High

Summary of progress and lessons learnt since last review Overall the project has been scored B – outputs moderately did not meet expectation. The project is designed to gather evidence on whether introducing silvopastoral systems (SPS) can help reduce the deforestation caused by cattle ranching and alleviate poverty through the increase of milk and beef production, and the provision of alternative income through forestry products and payments for environmental services. The DECC1 project manager joined the World Bank’s Mid-Term Review mission in June 2016 to verify and gather evidence on progress so far; triangulate evidence; take the views of other stakeholders, including the Colombian Government which manages the other major donor funding from the Global Environment Facility; to assess lessons learned; and to agree an action plan for the remainder of the project life to January 2018. While the project is delivering some good and interesting results on the ground and the project’s concept remains highly relevant to the future development of Colombia’s agricultural sector and plans for forest protection, the project is at a critical moment in its life. A number of factors, within and without the project’s control, have contributed to slower than expected progress in implementation including:

fragmented, complex administrative and decision-making processes between the institutions involved;

the lack of an adequate information management system;

slow recruitment of the project team and subsequent high turnover of staff;

El Niño effects in 2014 which delayed planting of trees in some areas;

the low investment capacity of small scale farmers, hampering the chances of achieving wide-scale adoption, especially in intensive silvopastoral systems (iSPS); and

the wide geographical spread of properties leading to inefficiencies in the provision of technical assistance and project management.

While progress has been made since the last annual review, particularly the revision of the PES2 (payment for environmental services) scheme into a working incentive, it appears the strength of the project’s foundation measures may have been overestimated at the last review and some significant risks to overall delivery remain. The capacity of the project team remains understrength and unless working arrangements between the project partners improve markedly, then the project is unlikely to catch up, or even make adequate progress here on in, in contracting farmers, converting land to SPS and making payments. If the verification of land change uses, contracting and processing payments are not made more efficient then this will continue to undermine the reputation of the project and threaten the replicability of the project’s interventions. BEIS will continue closely monitoring progress. This has resulted in a downward trend in the World Bank’s evaluations of the project from a “Satisfactory” assessment in March 2015, to “Moderately Satisfactory” in December 2015, and to a rating of “Moderately Unsatisfactory”, in the recent June 2016 Mid-Term Review mission.

1 In July 2016, the Department of Energy and Climate Change (DECC) was merged with elements of the

Department for Business, Innovation and Skills to form the new Department for Business, Energy and Industrial Strategy (BEIS). In this report, references to actions before the change will refer to DECC, future recommendations will refer to BEIS.

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The project administrators Federación Colombiana de Ganaderos (FEDEGAN) (the Colombian cattle ranchers federation) and the other institutions involved, need to accelerate delivery in order to achieve the project’s proposed development objectives. The World Bank has drawn up detailed action and milestone plans in agreement with the project team in order to quickly address the issues identified in the latest review mission. This includes revised contracting and payment processes to reduce minimum processing times from six to two months in each case and the urgent recruitment of contractors to develop an all-encompassing information management system for the project, beginning with a payments module. The mission also made several agreements with, and recommendations to, the project team including that:

the project team be strengthened;

the role of field technician be divided into different specialist roles;

farmers be compensated for previous late payments;

field staff be given access to information on the progress of payments to farmers in their area;

field staff be better remunerated;

resources currently allocated to Global Environment Facility (GEF) funded contracts (whose amount was overstated) be freed up to spend on other priorities;

the project team raise its targets for recruiting technicians trained in silvopastoral systems (SPS) and that it work with the national technical training agency, Servicio Nacional de Aprendizaje (SENA), to ensure a supply of qualified professionals in this field ;

twenty further demonstration farms are set up; and

the project team quickly recruit new farmers to replace those lost to the project. These interventions should give the project team the capacity to significantly accelerate the conversion of land to SPS. A fully effective project team delivering the project’s interventions at scale, combined with a fully functioning monitoring and evaluation framework, which must now be urgently finalised, will allow BEIS to build on lessons learned so far and take a more considered view of the value for money and effectiveness of the project’s interventions and their potential for transformative change in climate-friendly agriculture. A further assessment of value for money and strategic merit will be undertaken following the World Bank’s next mission in November, to consider a one year extension to the project to allow time for more results to be delivered. However, should the changes agreed in the milestones and action plans not be carried through, then an extension should not be countenanced. Summary of recommendations for the next year

1. BEIS should continue to engage closely with the World Bank team over the coming months to monitor the project’s progress against the agreed milestones and action plans and in particular, to check progress on streamlining the contracting and payment processes and reducing the current backlog. This will be crucial for putting the project back on track.

2. The World Bank must ensure that the remaining elements of the monitoring and evaluation framework are in place as soon as possible and that are no gaps in the 2017 results collection.

3. An early assessment should be made by the project team of the effect of the reduced expectations around land conversion to iSPS as part of the assessment of the project’s overall contribution to reduced GHG emissions and avoided hectares of deforestation.

4. Should the project meet the requirements of the agreed milestones and action plans over the next six months, BEIS should review the case for a one year extension to the project and possible additional supervisory funding (this decision will be taken within the context or other portfolio priorities and will be based on ongoing performance).

5. The project implementation team should ensure that lessons learned on the effectiveness of the various interventions made are disseminated as part of the project’s communications strategy.

6. BEIS and British Embassy Bogota should continue to monitor and encourage Colombian Government engagement with the project to ensure lessons from the project are informing wider policy development, particularly in any future bids for financial support through forest funds, the NAMA facility or Green Climate Fund.

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A. Introduction and Context

Link to Business Case:

https://edrms.decc.gsi.gov.uk/isr/ieu/PNK/_layouts/15/WopiFrame.aspx?sourcedoc=/isr/ieu/PNK/Documents/SPS%20Colombia/Project%20Development/Business%20Case/Colombia%20SPS%20Business%20case.docx&action=default

Link to Log frame:

https://edrms.decc.gsi.gov.uk/isr/ieu/PNK/_layouts/15/WopiFrame.aspx?sourcedoc=/isr/ieu/PNK/Documents/SPS%20Colombia/M%20and%20E/Plan%20and%20Logframe/SPS%20Colombia%20Project%20Results%20Framework.docx&action=default

Outline of the programme Delivered through the World Bank, the project is designed to promote the adoption of SPS in Colombia. The aim is to increase the environmental and economic sustainability of cattle ranching in Colombia. SPS can both increase the efficiency of cattle production, providing better incomes for the rural poor, and deliver environmental benefits, including reduced greenhouse gas (GHG) emissions, decreased soil erosion and water pollution, and enhanced biodiversity. The project will seek to convert 48,000 hectares of often degraded extensive (i.e. open, treeless) pastures into a richer and more productive environment, where trees and shrubs are planted interspersed among fodder crops such as grasses and leguminous herbs. The project is gathering evidence on whether introducing SPS can help reduce the deforestation caused by cattle ranching and alleviate poverty through the increase of milk and beef production, and the provision of alternative income through forestry products and payments for environmental services. The Colombia Mainstreaming Sustainable Cattle Ranching Project (CMSCR) was initially funded by the Global Environment Facility (GEF) with US$7 million, using FEDEGAN as lead executing agency and involving a range of NGO partner agencies (Fundación Centro para la Investigación en Sistemas Sostenibles de Producción Agropecuaria, the Nature Conservancy and Fondo Acción). BEIS funding is being used to expand the reach and scope of the project including by piloting a new carbon sequestration scheme; by extending the project to two new deforestation hotpots beyond the original five regions the project covered; supporting the greater provision of technical assistance to farmers; and by assisting with the production of planting material.

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B: PERFORMANCE AND CONCLUSIONS

Annual outcome assessment As explained in the last Annual Review, the programme timeline was extended in 2014 to 2018 (from its original 2016 end point) with the expectation that it might need to be extended further to reach the end targets. This has been assessed in the World Bank’s Mid-Term Review. The Theory of Change for the project lists the following expected outcomes and impacts: Outcomes:

1. Reduced GHG emissions from cattle farming as a result of SPS adoption (SPS act as net carbon sink).

2. Increased productivity of cattle farming and increased incomes for farmers. 3. Wide range of environmental benefits including to biodiversity, water and soil, and increased

climate resilience. 4. Wider adoption of SPS in Colombia and further afield as a result of the project demonstrating

benefits. 5. Better informed Government and REDD+ policy and legal support mechanisms for SPS.

Impacts:

1. Reduced impact of cattle farming on climate change and the environment. 2. Reduced poverty among small-scale livestock farmers in seven regions of Colombia.

Despite delays to implementation, if the recommendations arising from the Mid-Term Review are carried out, then the programme can still achieve these outcomes and the transformational impacts sought, to a good degree of the extent originally envisaged. Even if the target numbers of hectares transformed to SPS/iSPS are not reached the project may still achieve transformational change to ranching in Colombia, given the positive feedback from the farmers involved regarding land use changes to SPS/iSPS and good support from the Colombian Government. The number of farms recruited is very close to target; nurseries to provide vegetal material have been established; the regional technical teams are in place; and systems have been established for contracting, baselining, verifying progress and making payments to farmers. That stated, there have been very significant delays to those systems. The project team will now need to make profound changes to its own composition, the working arrangements between the different delivery bodies, the role of field staff and particularly the speed at which administrative processes are carried through. This requires a lot of work in the next few months to recruit new staff, set up the management system and to revise the contracting, baselining and payment processes. If progress remains at current rates, then the project could fall very short on some of the most significant indicators, particularly on the number of hectares converted to iSPS; and consequently while the outcomes and impacts set out above will be achieved, it will be on a much smaller scale than originally envisaged. The World Bank will monitor progress against milestone and action plans agreed at the Mid-Term Review and will formally review progress at the next mission in November. Overall output score and description Overall the project has been scored B – Outputs moderately did not meet expectation. The progress of the project-wide indicators against the 2016 targets is given in the table below. Component specific indicators are included under the relevant component in the outputs that follow. These are all taken from the results framework.

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Key actions 2015 Annual Review recommendations 1. “Consider reviewing the assumptions about project costs and project milestones to ensure targets

are still realistic – The World Bank will be undertaking a review next year to carry this out.”

The project milestones have been reviewed and the World Bank’s proposed changes are outlined below. A revised disbursement plan to February 2017 has been produced. The World Bank is currently reviewing the project team’s projections to understand what this means for BEIS disbursements through to the end of the project.

2. “Ensure everything is in place to report a full set of results in March 2016 – The World Bank M&E [monitoring and evaluation] lead will be responsible for this.”

There were some significant gaps in the March 2016 results reporting. The Key Performance Indicator (KPI)15 methodology is in place, but has not yet been reported on. The contract for KPI 6 and KPI 8, for monitoring and evaluation of effects on carbon emissions or hectares of deforestation avoided, is not yet in place. BEIS has inputted into the design of the methodology and the World Bank expects to sign the contract shortly (see recommendation 4).

3. “DECC needs to engage with the World Bank’s in-depth review scheduled for next year to ensure we get the outputs we are interested in, including the cost-implications of reforming delivery versus the status quo”

The DECC project lead joined the World Bank’s Mid-Term Review mission in June 2016 and was joined for some meetings by the British Embassy Bogota.

Indicator(s) Dec 2016 Milestone Progress at June 2016

Area under environment-friendly cattle ranching production systems implemented in project areas

43,500ha 42,367ha

Land area where sustainable land management practices have been adopted as a result of the project

28,500ha 9,129ha

Increase in the production of beef and/or milk per intervened hectare in participating farms

3% 7%

Improved presence of globally important biodiversity in project areas, as measured by an increase in the Environmental Services Index (ESI) resulting from the adoption of environment-friendly SPS in participating farms in project areas, over baseline

300,000 236,695

Reduced soil erosion (tonnes/ha) induced by the adoption of SPS and measured in at least two pilot areas, over baseline

End of project target 0.15t/ha

Measurements of soil erosion have started on a few runoff plots on a handful of selected farms.

Reduction in GHG emissions from avoided deforestation and forest degradation and increase in carbon sequestration at the farm-level through adoption of environment-friendly SPS in participating farms

No intermediate milestone. End of project target 2mtCO2

The monitoring of this indicator will be carried out by The Nature Conservancy (TNC). The contract for this activity has been delayed but is expected to be signed shortly.

Number of cattle ranching farms benefitting from project instruments (technical assistance, PES, or support for establishment of on-farm nurseries)

2,637 2,700

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4. “The March 2015 results collection included the following points which need to be followed up before the next results collection in March 2016. ‘a’ and ‘b’ are joint DECC/World Bank actions, ‘c’ is a World Bank action:

a. Monitoring activities under KPI-6 and KPI-8 have not yet been initiated and will formally start with the signing of a contract with TNC. We need to determine when we will be able to report on these.”

This contract has still not been signed due to delays in agreeing the methodology. The World Bank expect contract signature to happen in July and for TNC’s work to begin in early August.

b. “Attribution factors will be discussed during the next supervision planned in May 2015.” There was not time to cover this during the mission so we will need to pick this up in the next few months. The attribution may not be the same for all KPIs. For example, much of the public finance was brought in under GEF’s funding and so attributes to them, but the CO2 savings are more evenly split.

Attribution factors have not been agreed. The World Bank is of the view that activities need to be seen as a single project, as, with the exception of the PES-2 scheme, it is difficult to separate outcomes by funding source. As the monitoring and evaluation framework is finalised over the next couple of months, we will revisit this discussion. The default assumption is that results are attributed proportionally to the funding amounts.

c. We are still lacking milestones for the KPI as these will be developed following the base lining study currently being completed.

Milestones have not been put in place for the KPIs. Given the remaining short duration of the project there is little value in setting interim milestones at this point as there are clear indicators of interim progress elsewhere e.g. Annual Review or Mid-Term Review recommendations.

Has the logframe been updated since the last review? The results framework (logframe equivalent) has not previously been updated. The World Bank mission team reviewed the results framework during the recent Mid-Term review. As a result, they have proposed some adjustments to the project and component specific indicators in terms of formulation, methodologies and/or goals:

• PDO 2: Areas which have adopted SPS: Decrease target to 35,000ha (reduction of 13,000 ha).

It was expected that about 6,000 hectares would be converted to iSPS, as a result of a combination of technical assistance support and access to financial resources to support expansion, via credit through FINAGRO2. The project has been providing technical assistance, but access to credit has been limited. As the resultant land use changes have been much smaller than expected, the target will be decreased to an achievable yet still ambitious figure.

• PDO 3: Increased production of meat and/or milk in participating farms: Adjust description to match separate methodology which only covers milk production.

The initial methodology proposed to report values based on research on just 3% of project farms. As separate monitoring is also being carried out on over 50% of participating farms on milk production alone, it was decided to use the methodology from that monitoring to report progress, given the simplicity and greater representation offered. The monitoring of meat and milk production on a sample of 3% of project farms will still be carried out.

• CI 1.1: Areas of iSPS in participating farms: Reduce the final goal from 10,000ha to 4,400ha.

As for PDO2, with the lack of access to credit, the changes to iSPS from the provision of technical assistance alone have been much smaller than expected, so the target will be decreased to an achievable yet still ambitious figure.

2 El Fondo para el Financiamiento del Sector Agropecuario. FINAGRO is a fund which seeks to increase the

production and marketing activities of the agricultural and livestock sector.

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• CI 1.2: Increased stocking (cows/ha) in the Project areas: Adjust the title to match the new methodology used.

The methodology will measure the increase in livestock units per hectare rather than cows per hectare.

• CI 3.2: System Monitoring & Evaluation: Reformulate the definition of the indicator to ensure that the project develops an information management system including a separate public information component.

This change reflects the review team’s recommendation that a combined information management system is set up to better integrate the work of the various project deliverers.

• CI 3.4: SPS farms outside the project: change the description of the indicator and corresponding goals and methodology in order to measure the expansion of SPS in the country.

At the moment there is confusion over what this indicator is intended to measure. The mission team concluded that the objective is to consolidate information on the expansion of SPS in Colombia whether there is a causal link with the project or not. This is to be clarified in the indicator description and methodology.

The mission team also proposes that further research is carried out on the soil erosion and carbon measurement indicators (which have yet to be reported on) before any decision on their final formulation is taken. The most significant changes are for the target conversions of land to SPS/iSPS. The poor performance against the initial milestones set, reflects the slow set up of the project and recruitment of farms; the challenging climactic conditions in 2014 and 2015; the ineffective design of the first PES2 scheme; the challenge for small-scale farmers to invest the resources in converting land to iSPS given the challenges of accessing credit from FINAGRO, and the resultant lower than expected effect of the provision of technical assistance alone. Given that current progress stands at 9,129ha for SPS and 243ha for iSPS the revised targets still represent a considerable delivery challenge. Reducing the targets now to a more realistically achievable level should provide a better incentive for the project team and allow them to produce a realistic delivery plan to work to. It will also enable a more accurate assessment of the likely results of the project once the final monitoring and evaluation framework is in place. These deliverables and recordable targets are only indicators for wider transformational change – they should continue to be monitored but will provide one part of the wider picture of progress. BEIS should continue to monitor these indicators alongside more quantitative evidence.

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C: DETAILED OUTPUT SCORING

Output Title Component 1. Improving productivity in participating cattle ranching farms in project areas, through SPS would pursue the institutional capacity building on SPS at the national and local levels to provide technical assistance to farmers on SPS and cover the selection process for the additional 300 beneficiaries in the two “deforestation hotspot” areas.

Output number per LF n/a Output Score B

Risk rating (H, M or L): High Impact weighting (%): 35%

Risk revised since last AR? Yes Impact weighting % revised since last AR? No

Key Points This component has been awarded a B – outputs moderately did not meet expectation. Conversion of land to iSPS (the most important sub-component) remains very significantly below target, however the other aspects of the component are on or above target. The project has successfully delivered its technical assistance strategy. This technical assistance is highly appreciated by farmers according to the results of focus groups conducted in five regions (involving more than 100 farmers). Simplifying the methodology for verifying changes in land use has been key to overcoming delays in establishing baselines and verification processes for land use, as discussed below, revision of the PES2 scheme has turned this into an effective incentive mechanism. However, progress in converting land to iSPS is still slower than expected due to the upfront investment in time and money required. Activities related to the development of a long-term payment for environmental services have not advanced over the last year. Summary of responses to issues raised in previous annual reviews

“Recruiting farmers in the two [additional deforestation] hotspots has been challenging because the two selected areas have fewer farmers and land rights issues have limited the selection pool further than anticipated. At the end of this process which had to be revised due to the insufficient number of potential participating farms, the Project team expects to add nearly 600 new farmers, of which 300 will be in hotspots areas, hence reaching the targets.”

169 farms have been recruited in hotspot areas (82 in Guajira and 87 in Meta), achieving 53.3% of the original expectation of 300. The project team has highlighted that in some areas, where the project currently operates, such as lower Magdalena and Piedemonte Orinocense, which are also defined as hotspots by the Instituto de Hidrología, Meteorología y Estudios Ambientales de Colombia, there are a number of farms that could also be considered as in targeted hotspots, bringing the total number of farms in hotspot areas over the 300 expected.

“It is important to keep monitoring the hectares implemented under the first indicator: iSPS conversion. Progress in achieving this has been slow to date for the reasons set out above. This is not in itself a

Indicator(s) 2016 Milestone

Progress at June 2016

Area converted to iSPS in participating farms 4,000ha 243ha

Increase in average stocking rate (cows/ha) in project areas 3% 11%.

Number of cattle ranching farmers sensitized on SPS and informed about availability of credit sources

3,000 4,770

Number of professionals and technicians trained on SPS establishment and management

100 190

Number of market-based / consumer initiatives designed, (including large-scale payment for environmental services mechanisms), that could support the broader adoption of SPS by the end of the project

No 2016 milestone. End target = 2

0

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concern, but the project should be in a good place to implement the conversion of land to iSPS soon and we would expect to see significant progress made by the time of the next annual review.” Progress has remained slow, particularly as the project team has found that the provision of technical assistance alone has been insufficient to incentivise the adoption of iSPS. The focus on small-scale farmers has also limited the potential for large-scale adoption, particularly given the upfront investment required and the challenges in accessing credit from FINAGRO. The project team will look to recruit a greater number of medium-sized farms over the next few months, but these will only have a limited time in the project. The target for the indicator will be reduced accordingly from 10,000ha to 4,400ha. This still represents a considerable delivery challenge as progress currently stands at 243ha. DECC will need to assess what this means in terms of the overall targets for GHG reductions and hectares of avoided deforestation once the final monitoring and evaluation framework is in place. It is important that lessons are drawn from this in the design of future incentive mechanisms for conversion to iSPS. Recommendations An early assessment should be made by the project team of the effect of the reduced expectations around land conversion to iSPS as part of the assessment of the project’s overall contribution to reduced GHG emissions and avoided hectares of deforestation. Should the project meet the requirements of the agreed milestones and action plans over the next six months, BEIS should review the case for a one year extension to the project and possible additional supervisory funding. The project implementation team should ensure that lessons learned on the effectiveness of the various interventions made are disseminated as part of the project’s communications strategy.

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Output Title Component 2: Increasing connectivity and reducing land degradation through differentiated PES schemes would provide support under the PES-1 scheme to 700 additional farmers, would support the production of high-quality planting material and would pilot a new scheme to promote the adoption of iSPS in about 1,250 farms.

Output number per LF n/a Output Score B

Risk: Medium Impact weighting (%): 35

Risk revised since last AR? No Impact weighting % revised since last AR?

No

Indicator(s) 2016 Milestone Progress at June 2016

Area under PES schemes in project areas (PES-1 and PES-2)

22,280ha (PES-1) 1,600ha (PES-2)

30,710ha (PES-1) 119ha (PES-2)

Number of cattle ranching farms benefitting from a PES scheme (biodiversity or carbon)

1,500 (PES-1) 500 (PES-2)

1,681 (PES-1) 734 (PES-2)

Number of focal plant species used/conserved in cattle ranching farms (25 of which are globally important species)

20 27

Key Points This component has been scored B – outputs moderately did not meet expectation. While progress against the majority of the component indicators is ahead of schedule this masks some serious delays in implementation which have resulted in a much smaller number of hectares being covered by the PES2 scheme than expected, and in making the payments to farms which have been signed up for the PES1 scheme. Work on the PES2 scheme is yet to begin in earnest. However, the most important inefficiencies are in the process of verification and payments for PES1 scheme. On field trips, it was found that these payments may take between 12-18 months after the baseline or incremental changes verification is performed in the field. Similarly, land-use checks have not been carried out on an annual basis as envisaged, so many of the farmers who have been with the project the longest (three years or more), have received just one payment. This has caused dissatisfaction amongst farmers and lack of confidence in the project. In general "payment" instead of being the project’s key incentive, has become a disincentive. Summary of responses to issues raised in previous annual reviews “The first indicator under this component is being used to monitor how many hectares have been signed up to each PES scheme rather than how many hectares have been changed as a result of receiving a PES. We will need to continue to monitor implementation of payments to realise the benefits from this indicator.” Currently, the project benefits 1,634 properties, corresponding to a total of 1,093 active contracts (a total of 1,402 signed); baseline payments were made to a total of 808 contracts, representing 74% of active contracts and 58% of all contracts. On the other hand, incremental payments (year 1 onward) have only been made to 540 contracts, i.e. only 49 % of active contracts. In the case of PES2, there have been significant delays in the establishment of iSPS, though the situation has been improving following adjustments to the incentive scheme. Recommendations BEIS should continue to engage closely with the World Bank team over the coming months to monitor the project’s progress against the agreed milestones and action plans and in particular, to check progress on streamlining the contracting and payment processes and reducing the current backlog. This will be crucial for putting the project back on track.

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Output Title Component 3: Strengthening Sub-sector Institutions, Dissemination and Monitoring & Evaluation would provide policy-makers with evidence-based results on the benefits (social, environmental and economic) of SPS to support the transformation of the cattle ranching sector in Colombia.

Output number per LF n/a Output Score B

Risk: Medium Impact weighting (%): 20

Risk revised since last AR? Yes

Impact weighting % revised since last AR?

No

Key Points This component has been awarded a B – moderately does not meet expectations. While progress against some indicators is ahead of target, the rating reflects that the M&E system has not yet been fully established and integrated, making reporting on the indicators and International Climate Fund (ICF) KPIs incomplete and that the communication strategy needs improvement. The project needs to close the gaps in the coming months and provide full reporting through the remaining project lifetime. While the project is generating valuable information on a number of indicators, the project would benefit from greater coordination between the partner institutions including by developing a shared information management system. This could generate significant efficiencies systematizing management and monitoring processes, which are currently fragmented and basic, and are largely responsible for the current inefficiencies in the project administration. Similarly, while there is a communication strategy in place, this needs strengthening in several areas. In particular better communication with farmers is required to explain the project incentives and investment benefits. To improve communication with other stakeholders, a series of regional workshops with local authorities and the private sector will be delivered in coordination with the Ministry of Agriculture. Finally, as the project’s research findings become available dissemination strategies need to be put in place. The final project indicator, methodology and goals will be revised to reflect the mission team’s conclusion that this indicator should track the adoption of SPS across Colombia. Summary of responses to issues raised in previous annual reviews “Continued engagement with the Government of Colombia should be prioritised to assist its development of a national programme to promote sustainable cattle ranching and to ensure lessons learnt during the design and implementation of this pilot are carried forward.” During the Mid-Term Review mission in June, the mission team, the DECC project lead and members of the project implementation team were able to meet with the Deputy Minister for Agricultural Affairs of the Ministry of Agriculture and Rural Development (MARD), Mr. Juan Pablo Pineda, to explain the progress of the project and to hear how it fits with the country’s long-term plans. Representatives of MARD, the Ministry of Environment and Sustainable Development (MADS), and the National Planning Department are seated on the Public Policy Committee (PPC) which oversees the

Indicator(s) 2016 Milestone

Progress at June 2016

Number of strategic alliances established with key public and private, national and regional entities for the promotion of SPS in Colombia

3 5

M&E system established and providing timely and relevant information on project’s activities and results.

Yes Incomplete

Communication Strategy implemented for different target audiences (mainly policy makers and farmers)

Yes Incomplete

Number of farms not directly participating in project adopting SPS 150 200

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project. The PPC met during the June mission to hear the World Bank’s initial findings and to hear DECC’s priorities as project sponsor. The Committee confirmed the great interest in the experience generated by the project and how it could be applied under the post-conflict scenario in Colombia, particularly in informing the design of interventions in the implementation of the Comprehensive Rural Reform programme derived from the peace talks, as well as the climate change commitments contained in Colombia’s Intended Nationally-Determined Contribution. On the latter, during the mission, it was agreed that the project will support and coordinate with the MARD and MADS, the development of a Nationally Appropriate Mitigation Action (NAMA) on livestock, with an investment of US$ 250,000-300,000. The project will continue to seek opportunities to support these government agendas. Recommendations The World Bank must ensure that the remaining elements of the monitoring and evaluation framework are in place as soon as possible and that there are no gaps in the 2017 results collection. BEIS and British Embassy Bogota should continue to monitor and encourage Colombian Government engagement with the project to ensure lessons from the project are informing wider policy development.

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Output Title Component 4. Project management would support the overall Project coordination. The UK funding would provide additional resources to this component to ensure a satisfactory technical, financial, legal and administrative execution of the project.

Output number per LF n/a Output Score C

Risk: High Impact weighting (%): 10

Risk revised since last AR? Yes Impact weighting % revised since last AR?

No

Key Points This component has been awarded a C – Outputs substantially did not meet expectation. While formal project management arrangements appear satisfactory, as detailed above, fundamental issues with delays brought about through the contracting and payments processes should have been dealt with sooner, and the monitoring and evaluation systems have taken too long to establish. Agreement at the Mid-term Review of action and milestones plans to address these and other issues is a very positive step forward, but the future success of the project depends on these plans being successfully seen through. The project implementation team provides 6-monthly reports to the World Bank. The latest one, for the period July-December 2015, was received in February. The next one is expected in August for the period January-June 2016. The team also prepared a report covering the whole project lifetime in advance of the Mid-Term Review mission. The World Bank team has conducted three supervision missions in Financial Year 2016 – in November 2015, February 2016 and June 2016. This last mission was also attended by the project lead in DECC. Further visits are planned in August and November. Summary of responses to issues raised in previous annual reviews “DECC should keep up the more active engagement with this project and seek opportunities to promote the project when appropriate.” While recent staff changes within DECC, now BEIS, have made consistent oversight challenging over the last year, the new project lead (supported at times by the new energy and climate attaché at British Embassy Bogota) was able to attend the June 2016 Mid-Term Review and should be in a position to provide continuity of oversight from now on. Recommendations BEIS should continue to engage closely with the World Bank team over the coming months to monitor the project’s progress against the milestones and action plans which are aimed at putting the project back on target.

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D: VALUE FOR MONEY & FINANCIAL PERFORMANCE

Key cost drivers and performance To date, the World Bank has disbursed to the designated project account 37% of BEIS and 67% of GEF funds. The disbursement rate for the entire project reached 44.5%. There have been no disbursements from the account assigned to the GEF grant in fiscal year 2016. According to information presented to the mission team, the project has executed 21% of BEIS funds (a 2% increase since the last information provided in February 2016) and 54% of GEF funds (a 1% increase from February). The significant depreciation of the Colombian peso against the dollar (ca. 60%) has contributed in part to the slow implementation of the funds, by making available more financial resources than originally budgeted. Accelerating disbursements is critical. It is essential that in December 2016, the project reaches a budget execution greater than 45% for BEIS funds and minimum 75% in the case of the GEF. Even so, delays to the project mean that unless the project is extended, significant underspend can be expected. The project team and World Bank are currently revising the financial projections for the project. No new cost drivers have been identified. Value for Money (vfm) performance compared to the original vfm proposition in the business case Economy: With the fall in the Colombian peso against the dollar input costs have generally fallen since the start of the project, although at the Mid-term Review it was agreed to raise remuneration for the project’s field staff to attract and retain talent. Administration fees have remained constant. The effect of currency fluctuations may have an impact on the amount of funding provided to the project. This will be assessed at the point of the final disbursement from BEIS later this year. Efficiency: As described above, there have been inefficiencies and delays caused by inadequate project management, which have had a negative impact on value for money. Cost Effectiveness: The business case identified four key measures to assess the cost-effectiveness of the intervention: 1. Leverage ratio of ICF resources to private / public investment.

Using the expected private and public investment totals from the 2016 results collection, the expected leverage ratio of ICF resources to private / public investment would be down significantly from the business case expectation of 1.81 to 0.22. However, the 2016 results only included a conservative estimate of private finance leveraged and the separate attribution of leveraged finance to GEF and BEIS funding has yet to be calculated. This is currently based on the 65/35 respective split assumed in the business case.

The expected public leverage has dropped significantly since March 2015. This is because there has been a problem with ICR (Incentive for Rural Capitalization) funding. Previously it was estimated that $22m would be provided as direct payments to farmers through a loan granted by FINAGRO. It is now expected that only a miniscule number of farmers will access this funding, because of:

- the limited borrowing capacity of farmers (with low/ no guarantees of indebtedness); - high transaction costs to access the credit; and - the perceived risks associated with adopting innovations with little understanding of the short,

mid and long term benefits.

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2. Abatement costs in terms of £ per tonne of CO2e abated - this is calculated from data on project costs and outcomes.

The project is not yet measuring the amount of CO2e abated, so it is too early to take a judgement on vfm here, though given that the log frame has been adjusted downwards for “Land area where sustainable land management practices have been adopted as a result of the project”, cost effectiveness is likely to fall.

3. Cost per hectare converted to silvopastoral systems.

The project is not currently measuring separate GEF and BEIS funding attributions of hectares converted. Using the latest reported financial disbursement and hectare conversion figures the project is achieving a cost per hectare of £662, against an original business case estimate of £540.

4. Increase of income for small-scale farmers

The original business case set out four expected outcomes related to farmers’ income:

20% increase in productive assets-based patrimony of small-scale livestock farmers through the establishment of iSPS in Project’s participating farms, at project closing date.

10% increase in the production of beef and or milk per intervened hectare in participating farms, at project closing date, improving GHG balance.

The conversion from degraded pastures to SPS (i.e. restored pasture, pasture with trees, live fences etc.) is expected to increase income per hectare by at least 50% since stocking rates are likely to double3 after seven years of the establishment of the SPS.

Total farm income will rise according to the amount of land converted to each improved land use.

The only one of these currently being measured is the average increase in milk and/or meat production per hectare on participating farms. This currently stands at 7%.

Assessment of whether the programme continues to represent vfm Significant delays have reduced the project’s efficiency, but despite this, the programme could still deliver the majority of results set out in the revised results framework within the set budget. However, achieving the expected leverage ratio for public and private finance, and the cost per hectare for conversion to SPS looks much more challenging. As yet we have no information on CO2 abatement, but given downwards revision sustainable land management indicators in the log frame, it is likely that this will reduce the project’s overall vfm. What information we do have on increases to small-scale farm income looks promising. In addition, some of the transformational impacts we hoped to see are already being realised, for example the strategic alliances being formed and the Colombian Government investigating options for a mass roll-out of sustainable cattle ranching. In summary, the project is not currently meeting its original value for money projections and the next six months will be key to addressing this and deciding the future of the project. Quality of financial management

Date of last narrative financial report H22015 received Feb 2016

Date of last audited annual statement FY2014 received May 2016

3 World Bank 2008. ICR, RSPS project

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E: RISK

Overall risk rating High. Overview of programme risk As progress continues to lag behind expectations and the time remaining for the project is fast running out, the risk of failure to deliver the expected scale of the project has grown significantly. Some project targets are being revised, though the monitoring and evaluation plan is not yet finalised. Colombian Government interest and engagement remains high, but the communications plan to ensure results dissemination is not yet fully developed. Should the project implementation team be able to meet the challenging timescales agreed in the new action and milestones plan, then the project could still meet the majority of its aims and targeted scale. No further actions are required to manage risk at this time. Outstanding actions from risk assessment None.

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F: COMMERCIAL CONSIDERATIONS

Delivery against planned timeframe As discussed in previous annual reviews the project was slow to get moving with delays in setting up the project team and the monitoring and evaluation framework, with further delays to planting caused by unforeseen climactic conditions. Many indicators are now on track or at least showing good progress, but some of the significant targets such as hectares converted continue to lag behind and the World Bank has consequently proposed changes to some targets. The potential for a one year extension has already been under informal discussion between the project team and the World Bank. The World Bank will consider the practicalities of this request before forwarding any proposal to BEIS. Any such proposal is likely to depend on a significant improvement in delivery over the coming months. The separate GEF funding cannot extend beyond the current close date for the project.

Performance of partnership(s) BEIS’s primary relationship is with the World Bank. This relationship is working well and the World Bank has been responsive and helpful throughout the year. In the Mid-Term Review mission the World Bank team proved very effective at establishing and agreeing a plan of action with the various delivery bodies to address the current delays and process issues with the project. Putting in place a system easily accessed by all of the institutions involved in project delivery and which reports in a timely way on the verifications being performed, contracts signed, executed payments, etc., will help significantly to improve working between these institutions. Asset monitoring and control The World Bank has visited the project three times in the last year. DECC joined for the June mission and was able to visit recipient farms and a project nursery and was able to directly engage with the central project implementation team, regional staff, local stakeholders, farmers and the Colombian Government.

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G: MONITORING & EVALUATION

Evidence and evaluation As stated above, the monitoring and evaluation system has not yet been fully established and integrated, leaving reporting on the indicators and ICF KPIs incomplete. The project is now reporting actual results against most of the project specific indicators allowing a quantitative assessment as well as a qualitative one to be made. The project needs to close the gaps in the coming months and provide full reporting through the remaining project lifetime. While the project is generating valuable information on a number of indicators, the project would benefit from greater coordination between the partner institutions including by developing a shared information management system. This could generate significant efficiencies systematizing management and monitoring processes, which are currently fragmented and basic, and are largely responsible for the current inefficiencies in the project administration.

Actual reporting against KPI 11 and KPI 12 has been carried out for the 2016 results collection, though information on expected private co-finance has not been reported as this remains incomplete. It is still too early to report against KPI 15, however a methodology has been developed and reporting is expected to begin next year. The contract for monitoring KPI 6 and KPI 8 has yet to be signed with TNC. The World Bank expect contract signature in July and for TNC’s work to begin in early August. Plans are advancing to carry out an impact evaluation of the project with the objective of assessing the effectiveness under different conditions of the instruments that the project is using to induce adoption of environmentally-friendly land uses - namely payments for environmental services and technical assistance. The participating farms from the third call will be used as the treatment group for the evaluation plan. A matched group of farms will form a potential control group. At the time of this report’s drafting, these farms are being visited to verify their willingness to participate. Baseline and socio-economic surveys for these farms will be completed in September by a new team of 30 technical staff However, with the very limited time that remains in the project, any land use changes may not be easily observable, therefore, limiting the possibilities of a robust impact evaluation. It was decided during the Mid Term Review mission that the implementing agencies will go ahead with the application of the socio-economic survey on the selected sample, as well as on the control group, and the final survey will be undertaken only if an extension is granted. If an extension is not granted, the team in conjunction with the World Bank will have to re-assess the scope of the project evaluation.

Monitoring progress throughout the review period DECC joined the June 2016 Mid-Term Review mission with the World Bank and was accompanied to some of the meetings by the UK Embassy in Bogota. The mission included a field visit to several project farms and a project nursery. We were able to follow up on the 2015 mission and previous meetings with Ministers, discuss the Government’s plans to implement a nation-wide sustainable cattle ranching programme and review the progress of the project. The World Bank’s Aide Memoire from the review has been used to inform this report.

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H: TRANSFORMATIONAL CHANGE

Rating In the March 2016 Results Collection, the project was again given a score of 1 (No evidence yet available - too soon to revise assessment in business case) for transformational change. Evidence and evaluation The score reflects the fact that reporting has not begun for the majority of indicators, so causal links are hard to establish. The project has made a concerted effort to engage the wider ranching community and there is anecdotal evidence from regional project staff that other farmers are showing strong interest in being involved in the project, and the nurseries established with DECC funding are making good sales beyond project farms. We have also received positive feedback from Colombian Ministers and the President of FEDEGAN. However, whether the implementation of SPS in some farms will lead to a widespread take up beyond the farms enrolled in the project remains to be seen. The project is registering where it understands other farms have established SPS, but they are not registering when or why this occurred, so no causal link can be confirmed. This will be addressed in the revision to the relevant project indicator and its methodology. Monitoring progress throughout the review period A methodology for KPI 15, the Transformational Change KPI, has been established and reporting against KPI 15 will be carried out in next year’s results collection.