Financial Strategies for Integrated Landscape Investment

Seth Shames, EcoAgriculture PartnersMargot Hill Clarvis, Earth Security Initiative

Gabrielle Kissinger, Lexeme ConsultingLaunch – April 30, 2014 – Washington, D.C.

Financing Needs for ILM: Asset Investment

• Agriculture practices that contribute to multiple landscape objectives• Farm conservation or production• Restoration or protection of natural

assets• Environmentally and socially

responsible enterprises• Large-scale green infrastructure

Financing Needs for ILM: Enabling Investment

• Stakeholder engagement and cooperation• Appropriate legal and regulatory

framework• Knowledge and capacity to plan and

manage on a landscape scale• Incentive mechanisms

Landscape analysis: Research questions

1. What is the current state of practice for landscape initiatives in accessing finance and achieving outcomes?

2. How does the integrated management that is characteristic of landscape initiatives relate to how these initiatives are financed? How are integrated outcomes achieved with disparate sources of funds? How is this integration coordinated?

3. Landscape initiative themselves are not static practices, but rather are dynamic, continually responding to community, market, policy and risk factors. What does the future of landscape initiative portend for how finance institutions and mechanisms can best respond to those needs?

4. How can the experiences of these landscape initiatives help and guide other initiatives in their approach?

Global scoping assessment: 29 initiatives● Full range of entry points (biodiversity/conservation,

production, livelihoods), range of institutional and agroecological contexts, stakeholder engagement

● Institutional planning/coordination key● ILI leadership and governance critical, finance siloed

Three in-depth case studies● Criteria: meets ILI definition, maturity, range of entry

points (production, REDD+, livelihoods, etc.), adequate information to assess

Synthesis report summarizing results

Landscape analysis: Methodology

ILI leadership and governance strongly correlated with finance sources and patterns

Landscape analysis:Case studies

Atlantic Forest, Brazil

Biome scale: Atlantic Forest Restoration PACT• Restore 15 million hectares by

2050

• Sectors: forestry, agriculture, urban water

• 250 registered signatories (members) – stakeholder platform, civil society-led

• 170 restoration initiatives

• Federal, state, multi-lateral and private investment authorized through legislation and coordinated across actors

• Cadastre Ambiente Rural/Rural Environmental Registry (CAR)

• Link between access to rural credit and improved land management

State scale: Espírito Santo• Applying PACT principles at state

scale

• Government-led, Reflorestar programme

Landscape analysis:Case studies

Atlantic Forest, Brazil

Espírito Santo

Atlantic Forest biome

Atlantic forest: finance innovation

Succulent Karoo Ecosystem Programme, Namaqualand, South Africa

Landscape analysis:Case studies• NGO-led stakeholder

platform, now housed within a parastatal biome scale and in Namaqualand

• Sectors: Biodiversity, agricultural production (livestock), mining

• Critical Ecosystem Partnership Fund

• Global Environmental Facility (GEF)

• SKEPPIES small-grants facility

• Investment in building scientific basis of information on risks and management options

• Challenge of moving mining sector investment from CSR to operations (and legal compliance)

SKEP: Namaqualand: finance innovation

Imarisha Naivasha, Kenya

Landscape analysis:Case studies

• Government-led stakeholder platform and public-private partnership, with very strong private sector leadership

• Sectors: Floriculture, municipal water, small-holder agriculture, forestry, wildlife, pastoralism, fisheries, tourism, geothermal energy

• IFC performance standards triggered over landscape-level water risks

Imarisha Naivasha: finance innovation

Imarisha Naivasha: finance sources

• Though an ILM approach, most investment is water-focused

• This sector-based focus has limited the ability for integrated management solutions– need finance to enable that

• Investment favors response to risk– how to have continuity for long-term solutions? Investor motivations and ‘skin in the game’

• Payments for Ecosystem Services:• Industry views as a tax

• Fairness concerns

• How to scale from >1000 smallholders to 250,000?

• Strategic coordination of all sources of finance to serve integrated outcomes is needed—e.g. PES, REDD+, access to credit and low-interest loans, strategic infrastructure investments, improving value-addition of agricultural products, and improved market access

Imarisha Naivasha: Finance challenges

• Cross-cutting needs (climate change, livelihoods, etc) can be emphasized as priorities to attract finance that supports integrated solutions

• A per-stem charge on flowers passing through the Dutch wholesale flower market

• Motivation for actors in the landscape to focus their investments in compatible management practices (PES)

Imarisha Naivasha: finance opportunities

Integrated landscape investment pathway

Tracking innovation in ILM Finance

Tracking Innovation● Identify types of

mechanisms and institutions.● Enabling Investment● Asset Investment

● Map public and private innovation.● Case Studies ● Case Examples

Scaling Opportunities● Understand barriers to and

opportunities for financing ILM.● Why, how?

● Roadmap for public finance institutions to work with private investors.● Aggregation & Coordination● Risk Profile of ILM● ILM Business Case

Framing ILM Finance

Institutional investors

Impact investors

Development finance institutions

Governments Non-Profit Organisations, Charitable Foundations

Social / Environmental Return Financial Return

ScopingILM Finance

200 Institutions

> 250 Mechanisms

Range of interfaces with ILM components

Scoping ILM Finance

ILM Case Studies and Examples- Global Environment Facility - World Bank BioCarbon Fund- NICFI / NORAD- EcoEnterprises Fund- Moringa- Althelia - Bunge Environmental Markets- Agricultural Lending & Investment

- SAB Miller- Global Mechanism UNCCD- Verified Carbon Standard’s Jurisdictional and Nested REDD+ (JNR)- ForestRE- CGIAR Landscape Fund- Grasslands, LLC

Why is ILM being financed?

• Sustainable & certified commodities.• Investment value of arable & fertile land.• Potential new PES markets.

Market Opportunities

• Environmental & social risk awareness, monitoring, management.

• Strengthened business model, diversified revenue streams.

Holistic & Diversified Risk Management

• Shifting global & national legal and market conditions.

• Green growth, green credit lines.

Regulatory Conditions

How is ILM finance structured?

InvestmentsEnabling Environment / Landscape (Stakeholder

coordination; institutional alignment; technical & skills,

infrastructure).

Portfolio of Companies (SMEs in conservation areas

with ESG impact)

Portfolio of Projects with landscape effects

(purchase agreements, intermediaries)

ReturnsEmission reductions

PES payments

Reduction of costs & land regeneration

Capital value appreciation of companies at exit

Long term capital gain from resilient and replicable agro-

forestry projects

Short & medium term cash flows from projects

Diversified revenue streams (biomass, certified crops)

Conclusions

●Tendency for small scale funds; un-coordinated funds; large scale single entry point funds; limited mix of funding for coordination.

●What would more comprehensive and coordinated landscape finance look like?

●How to overcome challenges for constructing a potential ‘Landscape Fund’?

Asset Investment challenges

• Time horizon

• Investment size

• Risk/return ratio

Enabling Investment Challenges

• Public sector silos

• Underfunded ILI coordination

• Incentives for asset investment

Recommendations: Strengthening enabling investments

• Clarify, quantify and communicate• Mobilize public and civil society• Coordinate investments at the

landscape scale • Foster new partnerships

Recommendations: Attract asset investors

• Use public finance to reduce risk• Use REDD+ to catalyze asset

investments• Bridge asset investments across

landscapes• Employ investment standards and

guidelines

THANKS!Questions or comments?