Finance instruments are used to mobilize, collect, manage and disburse funding and can be configured as components of a finance solution. They can be strictly financial instruments like bonds or equities, or fiscal and regulatory tools designed to change incentives, prices and motivation. The term “finance instrument” in this workbook is used flexibly and interchangeably with finance tools, mechanisms, economic incentives, etc. Some features of finance instruments are:
The listing of existing instruments and mechanisms should be as thorough as possible and include all types of instruments such as regulatory, market, fiscal, grant, debt/equity, and riskrelated. This list can be based on a variety of national reports, through direct interaction in workshops and with experts’ interviews. The inventory should include all current financial instruments regardless of their status or effectiveness. They should be named and described with sufficient details, e.g. this is not about listing “Payment for Ecosystem Services (PES)” but to detail what kind of PES are implemented (e.g. water PES), where and when. If there is only a legislative provision on PES, but not actual implementation, or only a single pilot was carried out, this should be clearly stated.
The BIOFIN Catalogue of Finance Solutions is a good place to start getting ideas for types of instruments and mechanisms. Additional information on finance solutions can be accessed via the online platform “ Financing Solutions for Sustainable Development”. These knowledge platforms can be similarly used for awareness-raising and advocacy, but their information cannot be used directly to include in the actual listing of a country’s existing instruments, as this needs to be a description of the country-specific mechanism. When developing such a database for the country, consider the columns in Table 3.1.
Table 3.1: Additional Data that can be Added when Relevant
|Result||Select: generate revenues, realign expenditures, avoid future expenditures, and better delivery|
|Finance source category||Select: government (level), private firm, project developer, national/local/international NGO, national/ international financial institution, institutional investor, private foundation, bilateral/multilateral other donor, household. Add a category, if necessary|
|Source name||Actual name of the source(s). Example: UK National Lottery|
|Recipients||Organization(s), group(s), company(s) to whom the resources are transferred and/or which benefit from increased income|
|Notes||References and information not captured elsewhere|