This discussion paper from the United Nations Development Programme examines the experiences of Asia-Pacific countries in establishing and managing extra-budgetary national climate funds (NCFs). The purpose is to provide an overview of the key issues decision-makers face in designing, implementing and managing climate funds in the region; and to offer practical examples of countries' experiences.The paper begins by contextualising NCFs within the overall national climate finance environment and by explaining the methodology of the research (including literature review, e-discussions, case study analysis and a regional clinic). The report itself covers three main phases of establishing NCFs:

Decision-making – This includes information on defining strategic goals, evaluating options and capacity, identifying beneficiaries and sources of funds, and time/cost considerations. A range of questions, recommendations and notes of caution for decision-makers are presented in order to aid with the development of a feasibility analysis prior to establishing an NCF.
Designing NCFs – The report explains the intricacies of the various fund types available, and their legal and governance requirements. Design features should be selected according to pre-defined strategic goals and take into account the political commitment and resources available, as well as the target time for when the fund should be operational. An option that should be considered as an immediate and temporary solution is external (of government) sinking funds. As the simplest fund type, they do not require parliamentary approval and can be administered by multilateral agencies. If the aim of the fund is to provide sustainable income from investments whilst channelling it to intended beneficiaries, then an endowment fund is the suggested choice.
Managing NCFs – The paper outlines aspects of the fiduciary standards required and explains the importance of performance based monitoring (both technical and financial), working alongside beneficiaries at the local level, and adapting or initiating new programmes should monitoring indicate a drift from intended goals.

The report concludes with a note on the importance of integrating a strong capacity development strategy into NCF design.