Investing to halt climate change

Thuận Sarzynski
Jul 29, 2019 · 5 min read
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Photo by Jp Valery on Unsplash

A recent study published in Science have estimated that 0.9 billion of hectares of forest must be restored to store carbon and reduce climate change negative effects. This is an area equivalent to the US which must be set apart for global forest land restoration. This solution which is the most efficient way to mitigate climate change will need large investment both for the planting phase and monitoring phase.

The obvious question is how are we going to find the necessary money to plant all these trees?

Finding investors to invest in landscape restoration or tree planting is not easy. During a webinar on inclusive finance last month, Marco Boscolo from the Food and Agriculture Organization (FAO) shared that investments in nature “are perceived as high risk and unattractive because of the poor communication about it as well as the lack of finance knowledge and skills of the implementing actors”. Nonetheless, it will be important to attract investors not only to combat climate change but also to reduce rural poverty.

The work of Marco Boscolo and his colleagues at FAO is to improve national policies and train marginalized actors to facilitate investments in tropical countries where landscape restoration has the potential to both mitigate climate and improve farmers lives.

The actors who can benefit from such investments are usually cooperatives of producers or conservation organization protecting natural ecosystems and promoting sustainable agricultural systems like agroforestry. Juan Carlos Gonzalez Aybar from Athelia Funds, a worldwide fund and asset manager investing in sustainable land use in all continents shared with us that large investors like development banks, insurance and institutional investors are interested in inclusive finance because they can recover interests from the restoration activity and at the same time have a positive impact on the environment and people’ lives. As he stressed, the will of private investors to invest in Earth brings optimism because in the past land restoration has mainly been funded by the public sector or international donors. Now that investments in land restoration are moving to the private market, everything will go faster.

The last speaker at the webinar was Pauline Nantongo Kalunda from Ecotrust. Her NGO from Uganda works closely with rural poor communities to connect them to the market and package their sustainable agricultural activities or conservation actions into bankable opportunities to access finance. Their main success was to blend private, public and interannual revenue together to finance smallholder farmers sustainable practices.

Even though, investors seem to be more wiling to bet their money on sustainable land management, there are still many challenges to overcome to fundraise enough money to plant one billion hectares of trees. The first challenge mentioned by the three speakers is the perceived risk of such investments. “Perceived” is the key word because according to our speakers, investors exaggerate the risk because they lack a reliable information about the sector of land management and conservation. Another challenge of inclusive finance is to make sure marginalized communities increase their productive capital and receive benefits from their work.

The three key areas of progress to overcome these challenges were detailed by M. Boscolo. First, farmers should have official tenure rights over their land and resources, meaning that they can access and exploit natural resources like forests. In certain countries, communities do not have land titles and end up living on their ancestral land where they do not officially have the right to stay. This can create conflicts between communities, governments and companies, and thereby threaten investments. Second, small producers must organize themselves in organization to increase their impacts on the land. Lastly, the financial and business knowledge as well as land management skills of the farmers communities must be improved. Then farmers can run their family business like a real business and increase profit to be more attractive to investors. They can gather data and information about the progress of their business and then pitch investors to scale up and have a greater positive impact on the land. Once farmers are able to talk the same language as investors, the perceived risks decrease and investing in land restoration look more attractive.

This is where non profit organization like Ecotrust have a key role to play. Ms. Kalunda highlighted that her organization was providing the necessary training and the seed investment to enable farmers to access other sources of investments. “We work with smallholder farmers and transform them into profitable venture with a business plan.” Ecotrust access international donor funding to build capacity and pay for the preparatory activities. “Once we have a business plan and sound indicators, we can access private finance through ecosystem services like the carbon market.” Ecotrust develops a monitoring system with farmers to quantify environmental services and sell them on the market. Once a group of farmers is organized in a cooperative and become a productive asset, investors become interested to finance their growth and therefore the conservation of the land.

Of course, policymakers have an important role in designing the suitable environment for inclusive finance to flourish. Policies can act on all the point mentioned above like training, networking, and giving long-term land leases. But policies can also provide warrantees to investors to make their investments safer. Policy can push national investors to invest inside the country and not abroad, incentivizing them to invest the money on the restoration of the national land.

There is still a lot of work to be done to find the money to plant 1 billion trees. There is still a lot of investors to convince that investing in the land is a profitable endeavour and the right thing to do. Non-profit organizations working with farmers to improve their business skills and finance literacy also need financial support to set the first step toward changing marginalized smallholders into a profitable cooperative.

In March 2019, the United Nations declared the UN Decade on Ecosystem Restoration, a ten year program which aims to restore natural ecosystems and thereby halt climate change. Let’s hope this international program will provide seed investments for smallholders’ organization to train themselves and attract private funds. The private sector is the only way we can quickly gather funds to urgently plant the 1 billion trees which will capture the atmospheric carbon we need to stay under the 1.5 deg.C.

We have 8 years. We don’t have time.

Link to the original webinar

Environmental Ideas

Environmental Ideas gives you reliable and entertaining…

Thuận Sarzynski

Written by

SDG Warrior, World Citizen, Capitalist Hippie, Scientist, Polyglot, Storyteller, Writer, Earthling, Tree Hugger, Food Lover, Adoptee & Otaku

Environmental Ideas

Environmental Ideas gives you reliable and entertaining information about human’s relationship with Nature.

Thuận Sarzynski

Written by

SDG Warrior, World Citizen, Capitalist Hippie, Scientist, Polyglot, Storyteller, Writer, Earthling, Tree Hugger, Food Lover, Adoptee & Otaku

Environmental Ideas

Environmental Ideas gives you reliable and entertaining information about human’s relationship with Nature.

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