Land-use & Forests Risks & Capacities Guideline

Gold Standard for the Global Goals

Risks & Capacities Guideline for Land Use & Forest projects
 

Version 1 – July 2017

 

Template Documents
Risks & Capacities Template

SECTION A. INTRODUCTION

The ‘Risk & Capacities’ guideline is used to assess performance risks related to the project’s non-delivery or reversal of  greenhouse  gas  benefits and other SDG Impacts.  It  does  not  consider  other  risks  (e.g.,  social  impacts  or  environmental  risks), which remain covered in the Gold Standard for the Global Goals Safeguarding Principles & Requirements Assessment instead.

HOW TO READ THE DOCUMENT

  • Italics are used to improve the readability and understanding.
  • Shall indicates requirements that must be followed in order to conform.

APPLICABILITY

The  guideline  shall  be  applied  by  all  Gold  Standard  ‘Land  Use  &  Forests’  projects,  including  smallholder  and microscope projects, in conjunction with the Gold Standard LU&F Activity Requirements.

PURPOSE

The Risks & Capacities Guideline is included to ensure Project Developers (particularly those with less experience of Gold Standard or of implementing Land Use & Forests projects) fully consider the projects risks and to articulate these in a clear and transparent manner.  It also encourages thought on proposed mitigation and timing thereof.

It  is  further  intended  to  identify  high  risk  activities where  little  or  no  risk mitigation  has  been  proposed  and/or implemented.   This will  inform  the Gold  Standard  secretariat and  the Technical Advisory Committee  (TAC) when deciding upon Gold Standard certification.

ASSURANCE

The role of the GS-VVB involves:

(a) Checking that the guideline has been completed to a reasonable level of detail and that the weightings

applied are also reasonable, AND

(b) Cross-checking  any major  risks  perceived  by  the  auditor  either  in  desk  review  or  field  visit  against  the guideline, AND

(c) Checking  that  any mitigation measures  proposed  by  the  project  owner  for  a  given  time  period  are  in place.

These may lead to Corrective Action Requests (CARs) (absence of completion of form or any perceived risk being missed) or Forward Action Request (FARs) (for example mitigation proposed not in place where impacts are low).

The guideline applies a risk scoring system that assesses pre-defined risk categories and determines whether the risks  of  a  project  are  acceptable[1] to  Gold  Standard  or whether  mitigation measures  shall  be  adopted.  The  risk scoring system  provides  the  structure  for  a  broad  and  objective  risk  analysis  and  thus  allows  comparable assessment of risks among all land-use project types.

The  scoring  system  is based on  a  transparent quantitative approach  that  assigns  scores  for  ‘high’, ‘medium’ and ‘low’ risk, based on defined thresholds for a range of risk categories. A ‘high’ rating indicates that the respective risks are not acceptable to Gold Standard without mitigation measures.

The guideline defines five major risk categories that influence the long term implementation of projects:

  1. Natural Disturbance risks
  2. Political risks
  3. Project Management risks
  4. Financial risks
  5. Market risks

Each category is further subDdivided into several risk sub-categories.

The risks scoring system combines three factors that determine the overall risk per sub-category:

  1. The probability of a damaging event to occur: refers to the question “how likely is a certain event to occur over the project crediting period“.
  2. The impact of a damaging event on carbon pools (e.g., crops, trees, soil) and related greenhouse gas emissions: indicates the power of an event of a specific risk subDcategory to destroy or to harm carbon pools.
  3. The spatial scale of a damaging event: relates to whether the event affects the entire project area or only parts thereof.

For every sub-category, the risk factor probability is rated high (Score 3), medium (Score 2), low (Score 1), or not  applicable (Score 0) and justification for the rating shall be provided by the project owner.  

For every sub-category, the risk factors impact and scale is rated high (Score 3), medium (Score 2) or low (Score 1)  and justification for the rating shall be provided by the project owner.  

The scores shall be selected based on the long-term implementation risk of the project.

These factors are multiplied to reflect the actual risk for the subDcategory to the overall performance of the project. In other words, if e.g., fire probability is medium (score of 2) and its impact on the trees is destructive/high (score of 3), the combined risk would require a mitigation measure. However, the scale of this event is decisive here, e.g. the medium fire probability and its high impact would not reach a ‘high’ overall risk rating if the event effects only a small part (special scale) of project area (score of 1) and thus does not lead to significant reversals of sequestered carbon overall (total score of 6).

The multiplication of probability, impact and scale leads to a score between 0 and 27.

  • Score 0 – 6 designates risks for which mitigation measures are not mandatory under Gold Standard (though

still recommended).

  • Score 7 – 27 indicates that risks are not acceptable and mitigation measures are required in order to pass the

Gold Standard risk assessment.

Note that risks are initially assessed without taking into account mitigation measures (present or planned). After adequate mitigation measures are defined, a corrected score (taking into account the mitigation measures) shall lead to risk score of 6 or lower.

The project owner may use any type of creditable information to support his statements, including but not limited to scientific report, studies, historic data, pictures, maps, credible websites, aerial imagery, CVs, legal documents, etc. 

SECTION B.  SCORING SYSTEM

Risk Category Unless otherwise stated below, the risk classification and scoring described in this table applies to all sub;categories.
Probability of the risk High (Score 3): Event is expected to occur once or more in 10 years

Medium (Score 2): Event is expected to occur once in 11-20 years

Low (Score 1):  Event is expected to occur less than once every 20 years

Not applicable (Score 0): Event is expected to not occur during the crediting period of the project

Impact of the risk High (Score 3): Event is expected to fully destroy the products / greenhouse gas benefits, AND

Products / greenhouse gas benefits are not expected to recover without intervention.

Medium (Score 2): Event is expected to harm the products / greenhouse gas benefits, but do not lead to full destruction, AND

Products / greenhouse gas benefits are expected to recover without intervention in more than 5 years from the current levels.

Low (Score 1):  Event is expected to harm the products / greenhouse gas benefits, but do not lead to full destruction, AND

Products / greenhouse gas benefits are expected to recover without intervention in less than 5 years based on the current levels.

Scale of the risk High (Score 3): Event is expected to affect more than 50 % of the project area

Medium (Score 2): Event is expected to affect between 5 % and 50 % of the project area

Low (Score 1):  Event is expected to affect less than 5 % of project area

Total score if the risk Multiplication of probability, impact,and scale leads to a score of the project.

Min. score: 0        Max. score: 27

This score determines the need for risk mitigation,measure:

Score 7 or higher: Risk not acceptable, mitigation,measures,obligatory

Score 6 or lower: mitigation,measures not required, but recommended

Mitigation measures Depending on the total risk score, mitigation measures shall be described.

This shall include a description of which risks / risk factor are addressed and a justification on how the risks are reduced to a total score of 6 or lower.

C.   RISK AND CAPACITIES CATEGORIES AND SCORING

Present Score: The present score consideres the project situation without any risk mitigation measures

Corrected Score: The corrected score takes into account mitigation measures

ID: 1 Natural Disturbance
Risk Category 1.1 Fire Damage Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 1 Natural Disturbance
Risk Category 1.2 Wind damage (e.g. hurricanes, typhoon) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 1 Natural Disturbance
Risk Category 1.e Animals (e.g. domestic or wild animals encroachment) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 1 Natural Disturbance
Risk Category 1.4 Pest and disease outbreaks (e.g. insects, bacteria, viruses, fungi) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 1 Natural Disturbance
Risk Category 1.5 Temperature extremes (e.g. extreame heat, frost) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 1 Natural Disturbance
Risk Category 1.6 Water extremes (e.g. droughts, heavy rains, floods, mudslides, avalanches, ice-storms) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 1 Natural Disturbance
Risk Category 1.7 Changing climate( e.g. long draught period, seasonlavariability of rainfall pattern, water availability) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 1 Natural Disturbance
Risk Category 1.8 Earthquake and induced landslides Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 1 Natural Disturbance
Risk Category 1.9 Geological risk (e.g. volcanic eruption, desert progression) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 2 Political risks
Risk Category 2.1. Political interventions (e.g. wars, riots, civil strife, terrorism, corruption, land occupation, community resistance) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures No mitigation measure need to be provided – as this is beyond the influence of the project developer
Total score of the risk

 

ID: 2 Political risks
Risk Category 2.2. Confiscation of property (e.g. expropriation, infrastructure development) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 2 Political risks
Risk Category 2.3. Irregular resettlement Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 2 Political risks
Risk Category 2.4. Explotation of natural resources (e.g. mining, water, oil) Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 3 Project management risks
Risk Category 3.1  Project  failure  due  to: 

• insufficient   internal   technical   capacity   (e.g.   due   to   high   fluctuation   of   season   workers   or   permanent   staff,   not  sufficient  training),  OR 

• dependency  on  continuous  external  technical  support 

Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 3 Project management risks
Risk Category 3.2  Project  failure  due  to dependency  on  key  technical  individuals  in  the  organization  that  are  difficult  to  replace    Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk  

 

ID: 3 Project management risks
Risk Category 3.3  Project  failure  due  to: 

• to  the  lack  of  technical  equipment  (e.g.  machinery),  OR 

• planting  material  (e.g.  import  barriers  such  as  taxes,  bureaucracy) 

Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

 

ID: 3 Project management risks
Risk Category 3.4  Project  failure  due  to: 

• insufficient  internal  financial  accounting  and  management  capacity,  OR 

• dependency  on  continuous  external  financial  accounting  and  management  support 

Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 3 Project management risks
Risk Category 3.5  Project  failure  due  to  dependence  on  key  financial  accounting  and  management  expertise  of  individuals  in  the  organization  that  are  difficult  to  replace Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 3 Project management risks
Risk Category 3.6  Project  failure  due  to: 

• insufficient  internal  legal  management  capacity,  OR 

• dependency  on  continuous  external  legal  management  support 

Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 3 Project management risks
Risk Category 3.7  Project  failure  due  to  dependence  on  key  legal  management  individuals  in  the  organization  that  are  difficult  to replace  Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 3 Project management risks
Risk Category 3.8  Project  failure  due  to: 

• insufficient  internal  capacity  to  support  to  maintain  third;party  certification,  OR 

• dependency  on  continuous  external  support  to  support  to  maintain  third;party  certification 

Present Score Corrected

Score

Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 3 Project management risks
Risk Category 3.9  Project   failure   due   to   dependence   on   key   individuals   to   support   to  maintain   third;party   certification   in   the  organization  that  are  difficult  to  replace  Present Score Corrected

Score

Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 4 Financial risks
Risk Category 4.1. Late achievement of the project cumulative cashflow break-even point[2] Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk  

*  Adapted  scoring 

High  (Score  3):  Break-even  after  more  than  10  years  /  or  never[3]  (not-for-profit)  from  the  date  of  the  current  Gold  Standard  certification

Medium  (Score  2):    Break-even  within  5  9  10  years  from  the  date  of  the  current  Gold  Standard  certification 

Low  (Score  1):    Break-even  within  less  than  5  years  from  the  date  of  the  current  Gold  Standard  certification

ID: 4 Financial risks
Risk Category 4.2. Lack of secured continued financial resources for project implementation until the project’s cumulative break-even cash flow (for profit projects) / total cost until end of crediting (non-profit projects Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk  

*  Adapted  scoring 

High  (Score  3):  Secured  funding  is  less  than  70  %  of  funding  volume   

Medium  (Score  2):    Secured  funding  is  30  9  70  %  of  funding  volume   

Low  (Score  1):    Secured  funding  is  more  than  70  %  of  funding  volume 

ID: 5 Market risks
Risk Category 5.1. Lack  of  liquidity/financial  resources  due  to  price  variations  (e.g.  crop/timber  produced,  CO29certificates,  fertilizer, machines)  Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 5 Market risks
Risk Category 5.2. Project failure due to competing commodities (e.g. palm oil, soya)  Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

  

ID: 5 Market risks
Risk Category 5.3. Project failure due to competing infrastructure (e.g.settlements, roads)  Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

 

ID: 6 Other risks
Risk Category 6.1. Any   other   specific   project   risk   that   endangers   the   viability   of   the   project   (e.g.   project   failure   due   to   crop robbery/illegal  timber  logging,  due  to  disputes  with  the  cooperative)  Present Score Corrected Score
Probability of the risk >> provide description here
Impact of the risk >> provide description here
Scale of the risk >> provide description here
Mitigation measures >> provide description here
Total score of the risk

[1] As Gold Standard does not have a scalable risk buffer contribution on a project level, the standard needs to set minimum requirements (maximum acceptable risk) to ensure that potential losses are covered by the buffer.

[2] The  break-even  point  in  the  cumulative  cashflow,  relates  to  the  cumulative  project  revenues  (including  product  sales  and  carbon  credit  sales)  from  the  perspective  of  the  project  owner  minus  the  cumulative  costs of  project  implementation  over  time.

[3] If  a  break-even  cumulative  cashflow  is  never  achieved,  the  project  is  not9for-profit  and  fully  depends  on  external  funding/donor  support.