Unlocking Forest Finance

Unlocking Forest Finance

Cattle beside a road with the Amazonian canopy on the horizon

The Unlocking Forest Finance (UFF) project aims to channel finance towards the transition to sustainable landscapes. This transition can increase agricultural production while protecting forests and providing many other benefits for local people. As part of this work, GCP has produced Financing Sustainable Landscapes, a detailed guide to creating and financing such projects.

The project aims to do this by catalysing the creation of new financial mechanisms, operating at the scale of subnational regions, to stop the conversion of tropical forest to produce commodities, and to transition towards sustainable modes of development.

The project is made up of three ‘sustainable landscape initiatives’ in forward-looking Amazonian regions: Mato Grosso and Acre, both in Brazil, and San Martin, in Peru. These initiatives take a landscape-wide perspective, optimising land use to balance the needs of agriculture, conservation and sustainable livelihoods.

At the core of the project are innovative financial mechanisms which use public funds to leverage private capital. These mechanisms will ultimately support a range of activities including interventions that increase agricultural productivity. Coupled with strong environmental and social safeguards, increasing per-hectare yields can alleviate the pressure to deforest, restore degraded land, promote more sustainable management systems, conserve forests and improve rural livelihoods. These efforts go hand-in-hand with interventions to strengthen protected areas and support the livelihoods of indigenous and traditional peoples living in the forest.

In San Martín, Peru, UFF consulted local, regional and national institutions and representatives, held discussions with international investors and developed an investment portfolio and business proposal. 

The portfolio of investments was selected according to the regional government’s political priority, and narrowed down according to environmental, social and economic criteria. This portfolio includes analysis of costs, revenues and investments required for the transition in the region as well as the potential return.

These investments will help more than 21,000 farming families sustainably increase productivity in seven productive supply chains (six agricultural and one aquaculture), support conservation in four protected areas and contribute to a sustainable livelihood plan for local communities. The investment proposal identifies key activities to implement the transition, the target population and expected benefits. 

It is expected that an initial pilot phase will start in San Martín in 2017, distributing loans to around 700 families working in coffee, cocoa and oil palm. Lessons of this pilot will be used to scale up the intervention.

In Mato Grosso and Acre, the Unlocking Forest Finance team has created a similar portfolio of interventions in agriculture, conservation and livelihoods. However, these projects are not as advanced as in San Martin. 

UFF takes a four-step approach to formulating a financial mechanism:

  1. Work with governments and local partners to increase awareness of the issues and agree objectives and outcomes for a case study region.
  2. Gather environmental, social and economic information to underpin the project, including an estimate of the costs and potential returns of the transition.
  3. Model investments to show the scale and distribution of potential returns, and produce an ecosystem services assessment to demonstrate potential environmental benefitss.
  4. Combine all analyses to produce feasibility studies of the transition and to create approaches for raising the necessary capital.

About UFF partners

Unlocking Forest Finance (UFF) brings together NGOs, environmental and social sector safeguarding institutes, financial sector experts and strategic advisors including Credit Suisse, European Investment Bank and Althelia Ecosphere. UFF is managed by the Global Canopy Programme, a UK nonprofit with a strong track record of implementing international projects to address tropical deforestation.

The project relied on a number of local partners: Environmental Services Development Company (CDSA) in Acre, Brazil, the Amazon Environmental Research Institute (IPAM), in Mato Grosso,  Brazil, and the Centre for Development and Research in Upper Amazonia (CEDISA) in San Martin, Peru.

Other implementing partners and subcontractors are: The National Agricultural University of La Molina (UNALM) in San Martín, World Wide Fund for Nature (WWF-UK, and other WWF offices), Climate Bonds Initiative (CBI), Vivid Economics, Helmholtz Centre for Environmental Research (UFZ), the International Institute for Sustainability (IIS), the International Institute for Applied Systems Analysis (IIASA), the National Institute for Space Research – Centre for Earth Systems Science (INPE-CCST).

 

Read more about the Unlocking Forest Finance pilot projects, methodologies and analysis at http://financingsustainablelandscapes.org/

This project is part of the International Climate Initiative (IKI). The Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) supports this initiative on the basis of a decision adopted by the German Bundestag.