June 30, 2017

Rethinking Landscape Finance

Sara ScherrEcoAgriculture Partners

The pieces are in place, but it will take dramatically higher ambition to transform landscape investment from single deals to financing the SDGs.

Numerous integrated landscape partnerships have developed Landscape Action Plans that reflect the partners’ collaborative assessment of landscape challenges and opportunities, agreed objectives for a sustainable landscape, and commitments to help advance those objectives. Meanwhile, a growing number of individual projects and business deals for farm and forest enterprises that cleverly generate multiple landscape benefits are being financed around the world.

But few landscape partnerships have developed comprehensive and coordinated financing strategies or concrete landscape finance plans to turn their action plans into reality and achieve impacts at landscape scale. Much more funding is needed for landscape-friendly asset investments (like agricultural and other production/value chain activities, industry and processing, green infrastructure/greening built infrastructure and natural resource restoration), and enabling investments (like multi-stakeholder dialogue-and-action platforms, strategic planning and coordination, setting up new policy and finance mechanisms; and landscape assessment and monitoring). Case studies suggest that a large landscape initiative may require $2-4 billion of new or reoriented investment to meet their goals. We need to rethink landscape finance. Our current strategies aren’t working, and the innovative new funds emerging are far too small.

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We must fill the deal pipelines from the landscape level

What exactly makes something a ‘landscape investment’? In my view, it has five key attributes:

  • Contributes to multiple elements of landscape sustainability (production, ecosystems, biodiversity, livelihoods, equity), as well as financial returns, and regularly monitors and reports on these;
  • Takes into account socio-ecological processes, spatial interactions and off-site impacts in the landscape  in financial decisions and investment design;
  • Conforms with public land use and resource sustainability laws and rules;
  • Aligns with other investments in the landscape to realize ecosystem-wide benefits; and
  • Aligns with a landscape action plan, developed through multi-stakeholder dialogue and negotiation processes (where this exists).

It takes numerous such investments, coordinated across the landscape, to achieve landscape-scale production, conservation and livelihood goals. We need financing strategies at the landscape level. Organized landscape platforms can work through their partners to make this happen. With the right tools, they can scrutinize existing sources of finance and financial flows and develop a financing plan to complement their landscape action plan that identifies priority investments and practical roles for different types of investors. We’ve teamed up with IUCN Netherlands to develop a tool and framework to guide the process with landscape platforms, called the Landscape Finance Opportunity Assessment Tool (PDF). We’ll be testing it with platforms in Ghana, Tanzania and Honduras this year.

Once opportunities for finance are clear, landscape platforms can foster new partnerships between financial institutions and landscape stakeholders. They can design enabling investments to leverage, shape and complement private investment. They can assist stakeholders to develop compelling and investable business plans that contribute to landscape goals. They can develop mechanisms to aggregate funding from multiple sources, and disburse available large-scale funds to diverse land managers. They can, in short, fill investor pipelines with the types of potential landscape investments that are needed to achieve the sustainable development goals.

One green investment in a landscape of unsustainable “traditional” investments is not sustainable. Our ambition must be larger than simply matching donors and impact investors with “green” businesses.

But investors need to build more and better pipelines

We also need change at the investor level. We need a new generation of financial mechanisms and institutions explicitly designed to ‘fit’ the needs of integrated landscape investments. The Business for Sustainable Landscapes Action Agenda proposes specific steps to make this shift. These include more innovative blending of public, private and civic sources of finance, and ensuring finance reaches the farmers and resource managers. Business incubators that understand what is meant by landscape investment would help landscape-friendly operations to grow and proliferate. Financial institutions should create their own ‘communities of practice’ to accelerate learning and innovation.

The Action Agenda, which we co-produced with IUCN, SAI Platform, and Sustainable Food Lab, as part of the Landscapes for People, Food and Nature Initiative, was formally launched in May in Kigali, Rwanda at the Forest and Landscape Investment Forum, organized by FAO and the Rwandan Government. The Forum’s dynamic group of entrepreneurs, financiers, incubators, public agencies and analysts generated rich ideas for a proposed Landscape Investment Platform for Africa. This platform is a good example of the type of innovation needed to close the deal gap for sustainable landscapes. But it is only a drop in the bucket of what is needed. Our ambition must be larger than simply matching donor and impact investment funds with sustainable businesses.

Because all investments must make a positive impact

We have to consider ways to shift the billions in “traditional” capital, both public and private, that currently flows into unsustainable agriculture, forestry, energy, and infrastructure projects toward sustainable landscape investments instead. With an estimated price tag of more than $5 trillion per year to achieve the SDGs, according to an UNCTAD report (PDF), most investments must generate positive social, economic and environmental returns.

The international development, agriculture, finance and conservation communities need to join together to develop the financial infrastructure required for long-term investment in sustainable landscapes, whether the initial ‘entry point’ is watershed protection, biodiversity conservation, land restoration, climate-smart agriculture, or deforestation-free supply chains. These new institutions must link directly with local landscape partnerships (rather than channeling funds through the short-term projects of externally-based intermediaries) to help finance key elements in their landscape action plans. They can broker innovative financial deals that take advantage of multi-sector and cross-landscape spatial synergies to reduce investment risks, co-finance costs, and increase returns. They can advise financial institutions interested in landscape investment opportunities.

For example, how about establishing Landscape Banks that are locally-grounded, but internationally-networked, staffed by experts in shaping landscape investments? These could potentially mobilize short, medium and long-term funds from diverse private, public and civic sources. EcoAgriculture, WWF’s Landscape Finance Lab and partners from the finance sector are exploring this option and others that directly meet the needs of integrated landscape initiatives. We are actively recruiting other financial innovators to join this effort. Join us.

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  • Louis Wertz
    June 30, 2017 at 12:47pm

    I’ll add another ambitious idea, floated by Matthew Weatherly-White, Managing Director at Caprock: Make Environmental, Social and Governance analysis the opt-out proposition for all investments. As he says, “Imagine asking someone, for example, if they would like to invest along a special set of investment criteria that treated with utter disregard the environmental and social consequences of their capital.” Game changer. See here: https://medium.com/@i3impact/opting-out-a-modest-proposal-7b0bc73ef804

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