Financing sustainable landscapes: a billion dollar opportunity

The production of a handful of agricultural commodities like soy, beef and timber drives two thirds of tropical deforestation worldwide. If targets like the Sustainable Development Goals and the Paris Climate Agreement are to be met, then companies and governments involved in the supply chains of these commodities must ensure that this production becomes sustainable, and that deforestation for agriculture is ended.

The transition to sustainable agricultural landscapes can be achieved. According to the World Economic Forum and the Tropical Forest Alliance, the scale of finance required to ‘green’ major supply chains would be US$200 billion per year to 2020; this is a small amount given that financing for the 250 most influential companies trading these commodities is at least US$2.8 trillion. Sustainable production through agricultural intensification will improve productivity, generate attractive returns and deliver a host of co-benefits, from climate mitigation to the conservation of irreplaceable biodiversity. What is needed now is targeted investment plans to deliver these benefits.

In Peru, nearly two million hectares of forest was lost between 2001 and 2014, of which 21% was in the province of San Martin. Global Canopy Programme’s Unlocking Forest Finance (UFF) project, a consortium of international and national organisations as part of the German government’s International Climate Initiative, has developed a $100m investment plan for San Martin. This portfolio is across seven supply chains, almost 105,000 hectares of land and will involve 21,311 smallholder families, providing finance and technical assistance to improve productivity and reduce pressure on the forest. This will deliver a carbon emission reduction of 1.3 megatonnes of Co2 equivalent.

Sustainable land use is scalable, and a robust investment, as long as banks are willing to invest in the long term, as payback periods are often longer than four years; donors are willing to use climate finance to increase the scale of investment; the finance adapts to requirements on the ground, as ‘bundling’ supply chains together brings its own challenges; and essential technical assistance can be paid for. You can read about these necessary conditions in more detail here.

The timing of finance, the risk profile and the expected return are key questions that any supply chain investment must be able to answer. Private investors may expect shorter timescales and higher interest rates, and climate finance works over longer timescales and may function as a concession or grant. Not everything that is required for long-term sustainability can be covered by either separately. Policy makers must broker a marriage of the different interests at the table.

For more information on the UFF project and how public and private investment can be blended to meet climate and sustainable development targets whilst generating a return on investment, visit www.financingsustainablelandscapes.org or read a recent briefing note on financial instruments here. For more information on the transition to a deforestation-free global economy, visit www.globalcanopy.org.

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