The Forest and Landscape Restoration Mechanism

Local financing for Forest and Landscape Restoration (FLR)

Year published: 18/03/2019

The Forest and Landscape Restoration Mechanism (FLRM) has developed an Online Community of Practice to share ideas and knowledge with communities and built a Community of Practice on Finance for FLR. Through webinars and online discussions, it aims to exchange experiences to build capacity and share knowledge and tools, enhance collaboration within and between practitioners in different regions, and share information on FLR costs and benefits.

The first finance webinar was held in November 2018, under the title: “Local finance for Forest and Landscape Restoration”. It was co-organized by FAO’s FLRM and the Worldwide Fund for Nature’s (WWF) Landscape Finance Lab. The lab acts as an incubator, to facilitate and support the growth and success of sustainable landscape regeneration and restoration projects. The webinar built on FLRM’s recent work with EcoAgriculture, reviewing local finance mechanisms to support FLR. It provided an overview of potential sources of financing, investment mechanisms and strategies that can be targeted to directly support and benefit local stakeholders engaged in FLR, illustrating their implementation through case studies.   

With over two billion hectares of land identified for restoration through the Bonn Challenge, the New York Declaration on Forests (NYDF), Sustainable Development Goal (SDG) Target 15.3, Land Degradation Neutrality, etc., significant investment is required to meet these objectives. It also presents new investment opportunities from the benefits of FLR and financial value generated from restored landscapes. Diverse causes of degradation and deforestation, together with diverse stakeholder needs, require different forms of financial support to implement restoration activities.

Several mechanisms exist to finance FLR at local level through asset and enabling investments.

  • Asset investments are direct investments in the landscape or activities contributing to FLR, e.g. soil restoration, improved forest management, green infrastructure, reforestation, etc.

  • Enabling investments lay the institutional foundations for asset investments through stakeholder engagement, legal and regulatory frameworks, etc.

Both are needed to support profit via loans, equity investments, insurance guarantees, etc. in addition to not-for-profit financing (public programmes, fiscal policies, grants, etc.), market (payments for ecosystem services, NTFP products, ecotourism, standards and certification, etc.) and individual-financed (personal time and labour, savings, social mobilization, etc.) mechanisms on the ground. Different tools will be appropriate depending on the nature of investment, landscape and stakeholder needs, expected rate of returns (if any) and risk factors.

Coordination of these investments from public and/or private sources into packages of blended finance can provide funding to enable the scaling up of FLR activities throughout the FLR process. Each investor may have different objectives, rates of return or risk tolerance. When combined, however, a wider variety of FLR activities and stakeholders can be supported with diverse incentives, spreading the burden of investment risk.

Three case studies were described in detail to share examples and key lessons learned from accessing blended funding sources to provide incentives to local stakeholders to scale up FLR.

The case in Tigray, Ethiopia, illustrated how evolving financial needs for restoration in the landscape over time were supported through coordinated investments. These included initial participatory planning for early restoration activities, including soil conservation measures financed by an enabling investment from the World Food Programme (WFP) and the Ethiopian Government. Together with community labour, such financing regenerated and stabilised heavily degraded upper watersheds. Once restored, more water was available and erosion was reduced. Watershed agencies then financed projects to capture the increased water flow. Sustainable financing through NGO funding and public agricultural programmes supported improved production through farm inputs and marketing. Consequently, 400 000 ha of degraded land has been rehabilitated in 451 sub-watersheds since 2002.

Multi-stakeholder financing within a landscape can address diverse social, economic and environmental needs, including FLR. In the Lake Naivasha Basin, Kenya, soil erosion and unsustainable farming practices have caused irregular water qualities and quantities in the lake, impacting water users downstream and horticulture agri-business. To address this, a community-driven initiative, Imarisha Naivasha, was established to enable downstream water users and upstream communities to work together to coordinate diverse incentives to support farmers to implement sustainable practices upstream. Incentives include training in soil and conservation methods, access to improved seed varieties and materials to adopt improved production methods and practices to protect sensitive habitats. These incentives result in sustainable practices and conservation.

Integration of asset and enabling investments through a single financial mechanism were highlighted in the Upper Tana-Nairobi Water Fund, The Nature Conservancy (TNC), Kenya case. A central Water Fund, established and facilitated by TNC, in collaboration with the government and other partners, it coordinates public, private and civil society investment sources to finance restoration and sustainable production activities in the upper watershed. Financial and non-financial incentives have facilitated the implementation of soil conservation measures, reforestation, and training in improved production practices, etc. This has resulted in the restoration of over 80km of riparian vegetation, the plantation of one million trees within the watershed and a 15 percent decrease in sedimentation rates, thereby improving the water quality and quantity in the capital Nairobi. It has also enhanced livelihoods through increased yields and a certification from Rainforest Alliance for the conservation of coffee.

These examples highlight the context-dependent nature of FLR implementation, and therefore the high variability of investment needs and applicability of financing strategies. When identifying finance options and mechanisms for FLR, projects may benefit from developing a landscape financing strategy that takes into consideration restoration requirements, stakeholders involved and their incentive needs, spatial and temporal elements of the landscape and restoration plan, governmental support and local engagement, etc. Alignment with existing investments in the landscape supporting FLR at local level is also important to realize ecosystem-wide benefits, as well as taking into account spatial interactions and off-site impacts in the landscapes through financial decisions and investment design. The sustainability of financial strategies should also be considered, including the identification of markets and sustainable value chains through business model development.

The next webinar in the finance series will explore case studies that use incentives to support FLR and the provision of ecosystem services.

To join the Online Community of Practice for FLR:

To watch the recording webinar click here.

For more information contact: [email protected] and click here.


Lucy Garrett (FAO)