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As essential reading we'd recommend starting with the 1) Little Book of Sustainable Landscapes, 2) Landscape Elements resource and Ecoagriculture Partners' 3) Business for Sustainable Landscapes report

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Takeways | Fireside chat on Finance opportunities for Forest and Landscape Restoration

Posted by Deesha Chandra (Admin) 1 month ago Posted in Past webinars

We hosted a discussion on Finance opportunities for Forest and Landscape Restoration with two great speakers, Esther Mutuma, Komaza and Edit Kiss, Mirova Natural Capital. We share some key takeaways to kick off further discussions. 

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Take away summary | How investment can support finance on the ground for forest landscape restoration

  • Investment for due diligence is key:  Projects, certainly at the local level, need money, and quite a significant amount as it can take 18 - 24 months to get the early concept stage started. It involves a lot of systems building and development, proving that the concept is actually viable, which costs money.   E.g. $200K budget is a starting point to develop an early stage concept with a loan size of $5 - 10M. Some support for this comes in the form of asset facilities, accelerators and incubators such as The Restoration Factory, Landscape Finance Lab, Birdlife’s FLR Accelerator, Matanataki, IUCN’s Nature+ accelerator, Envisage Incubators to name a few. 
  • Hurdle of governance structures: Especially within some of the projects. This is a key area of investment needed to grow local ownership and build trust.  Governments  can also support this with policy related tax incentives that encourage companies and multinationals operating in a region, to kick start more projects. E.g. This would mean more uptake in companies investing in locally led initiatives to buy carbon offsets. 
  • A holistic, impact driven approach is needed:  Landscape scale impact can take time and structuring a programme with multiple revenue streams can be complicated. This might be a cause for increased interest in nature based solutions and voluntary carbon markets. There has been a flurry of capital into large, plantation type activities, which can be quite delicate around biodiversity, you want to make sure it's fully balanced and it's not just a carbon play.  While there is a big focus on bankable projects, in order to attract capital, you need finance to support and develop the proof of concept to make it bankable.  There is also an opportunity for further development in the insurance sector as projects face impacts of climate change and not enough development has happened in this sector. 
  • A call for patient investors:  Investors need to be ready to work on a programme regardless of whether returns are short or long term.  Good examples exist through development of more adaptive and flexible funds. E.g. The L’oreal fund for Nature Regeneration has been able to go in at an early stage to help structure projects by adjusting their lower ticket size to $1m instead of five. This means they can come in during the feasibility/ due diligence phase. Another example is the Kenya government’s investment in creating a tea industry over 10 years through concessions, and working with international investors. 
  • The convergence of climate and biodiversity agendas encourage blended finance:  This creates a more holistic approach. Greater engagement and support can be gained from the private sector to scale up public programmes. Public sector support is an important tool to enable the private sector to take on more risk. This is complex in itself and needs some thought to develop and can be quite burdensome at a project level. Scaling these up is perhaps a more important element to include.
  • A clear project proponent is essential for investment: Many great projects, ideas or initiatives, have an organisation create an interesting solution for a certain sector but are unable to take out the financing when it comes to that stage.  Typically, NGOs can’t deal with equity, even sometimes loans, as it feels like a risk on their balance sheet. For a carbon project it is more straightforward, as most of the structuring issues will be around land tenure. Landscape level investments, where you have multiple revenue streams the main question will be “who am I financing?”, “who is the benefit sharing with?” For this reason local entrepreneurs and parties are encouraged to think about this from the start. One of the most important key success factors is that you have local ownership. Grant driven programmes, designed by external consultants who come up with a nice business plan don't always have strong local ownership. If there's not a local entrepreneur or local NGO or somebody who's implementing it's at high risk, it's just not feasible for an investor. So this is a key starting point.

If you joined the session or watched the video - share your comments, questions, discussion starters below....

This post was edited on Jul 29, 2021 by Deesha Chandra

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