The 2016 Global Landscapes Forum: Climate Action for Sustainable Development event “Unlocking Private Finance in Forests, Sustainable Land Use and Restoration,” held during COP22 in Marrakech on Nov. 16, brought landscape and finance experts together to discuss ways to advance private investment in sustainable use of land and forests.
The international community is experiencing challenges with limiting the rise of global average temperatures to well below 2 degrees Celsius above pre-industrial levels.
To address this issue, organizations will need to mitigate emissions globally. They can do that through energy efficiency, transportation redesign, and industrial management. They can also invest in landscape restoration and deforestation reduction initiatives.
To do that and effectively achieve the United Nations Sustainable Development Goals (SDGs), decision makers need to transition to an integrated development model, find ways to de-risk land-conservation finance, and create metrics and standards for green investments.
The conference explored insights on how to advance this transformation.
Integrating Landscape Management
The traditional development model is based on a sectoral approach in which energy use, natural resources, agricultural production, water sustainability, and other issues are treated separately, with little to no coordination between different sectors.
This approach is not capable of achieving the SDGs.
According to Kuntoro Mangkusubroto, chair of the steering committee of the Tropical Landscape Finance Facility (TLFF), “We are in the era of the landscape.” Improving agricultural productivity, alleviating poverty, and reducing pressure on forests will only happen if we adopt a holistic approach such as integrated landscape management.
The TLFF, launched in Jakarta on Oct. 26, is an example of an integrated approach to bringing long-term finance to the region, stimulating green growth, and improving rural livelihoods at the same time.
De-Risking Landscape Investments
To advance private financing of sustainable land use and forest management, blended finance can de-risk investments.
Joost Oorthuizen, CEO of the IDH Sustainable Trade Initiative, said a powerful solution to promote sustainability is blended finance, which uses public funds to mobilize private finance and de-risk landscape investments.
IDH Sustainable Trade Initiative is working on blended finance strategies to bridge the gap between finance and conservation. The initiative is engaging with financial institutions to de-risk investments in commercial activities and bring public-good elements into these investments.
“We need a lot of the blended finance construct,” Oorthuizen said. “Otherwise, we are going to fail.”
An example of how this works is a partnership between IDH, the International Finance Corporation (IFC), and Barry Callebaut. The partners jointly invested in a credit facility that allows smallholder cocoa farmers to access credit to invest in production and formalize their operations. IDH initially provided grant money as a junior deposition, which led the IFC and Barry Callebaut to share the risk in the $9-million credit facility.
Evaluating Green Bonds
Another important innovative approach to scale up these initiatives is the evaluation of green bonds. Green bonds have been issued on energy-efficiency and renewable-energy projects, but so far it has not focused on financing sustainable land use.
In this context, Mike Wilkins, managing director of S&P Global, presented the Green Bonds Evaluation Tool as a possible way of moving forward.
The tool provides a scoring mechanism to measure how green a green bond actually is. It analyzes four categories: transparency, governance, mitigation and adaptation. The idea is that having this framework in place will provide the necessary information to incentivize behavior, add value, and advance private investment.
To understand the risks and opportunities in commodity supply chains, it is vital to have monitoring and tracking systems in place. The availability of this information will help to de-risk landscape investments by allowing investors to quantify and measure outcomes.
Yet in some cases it can be challenging to have tracking systems in place. New technologies are being developed that can help in this process. An example is Trase.earth, a tracking tool developed to de-risk commodity supply chains.
Changing Investment Banking
Ideas about having a sense of purpose have emerged in the investment banking industry after the economic crisis in 2007. According to Amine Bel Hadj Soulami, global head of sustainable investments for global markets at BNP Paribas, there has been an evolution in how the world of private finance operates.
These ideas are now at the heart of the investment banking industry and are advancing through financial innovation. Even though there is increasing interest from the investment community in mission-related investments, there still need to be concrete actions to achieve on-the-ground results.
Leveraging Government Support
Finally, it’s important not to forget the key role of governments. As Ibrahim Thiaw, deputy executive director and assistant secretary-general of the of the United Nations Environment Programme, said, “Governments need to provide facilities and remove barriers for the private sector to shift from old to new traditions.” In this way, it will be possible to achieve the SDGs and create sustainable landscapes.