Sustainable financing for forest and landscape restoration

Year published: 29/04/2016

More than USD 300 billion per year are needed to restore the world’s degraded land and achieve Sustainable Development Goal (SDG) 15.3 to combat desertification, restore degraded land and soil – including land affected by desertification, drought and floods – and strive to achieve a land-degradation neutral world by 2030.

However, with governments facing more and more funding shortages and development cooperation having limited growth margins, long-term financing solutions may increasingly rely on the private sector and on instruments enabling self-sustained financing such as environmental funds. Indeed many sources do exist for raising the necessary funds for forest and landscape restoration (FLR). They include development cooperation resources, climate finance, non-governmental organizations (NGOs), state budgets, environmental funds, crowdfunding and private sector investments.

In order to provide an overview of financing opportunities and barriers to FLR implementation, the Food and Agriculture Organization (FAO) and the Global Mechanism of the United Nations Convention to Combat Desertification (GM) launched in December last year a discussion paper on “Sustainable financing for forest and landscape restoration: opportunities, challenges, and the way forward”. The publication (launched at the occasion of the Global Landscapes Forum, 6-7 December 2015, Paris, France) highlights the need to create an enabling environment for private sector investments in FLR, in particular with regard to supporting ongoing investment innovations through impact funds and to bridging the gaps between project developers and investors in the design of bankable projects.

In fact, enabling FLR financing requires a number of key issues to be addressed. The development of marketplaces for FLR is critical to promote interactions and discussions on mutual opportunities for FLR implementation; all stakeholders involved are called to support their creation and management. Successful experiences of partnerships and alliances for FLR at different levels (global, regional, national and local) should be taken as a reference for further implementation of FLR; to this aim, information on good examples and lessons learned should be made available and widely disseminated. Developing a common language between project promoters and investors is key in bridging the existing gaps; to this aim, efforts should be made to harmonize concepts, definitions and terminology used by different groups of stakeholders and to develop a common vocabulary. Capacity building measures and common learning processes would be critical to achieve this goal.

Public policy makers from developed and developing countries can play a key role in enabling the environment for FLR, and take leadership as FLR financing champions. Even without controlling private capital, they can support resource mobilization by:

Integrating FLR in state budgets and public investment funds, and proofing these financing instruments against negative impacts on landscapes;
Mobilizing Official Development Assistance (ODA) funds for FLR (whether as donor or beneficiary) and adapting the wide range of ODA instruments to FLR;
Promoting FLR as a solution for joint climate change mitigation and adaptation, targeting climate finance, and advocating for an FLR window in climate change instruments such as the Adaptation Fund and the Green Climate Fund;
Developing monitoring systems for FLR expenditures and mechanisms for collecting data on the costs and benefits of FLR investments;
Designing, adapting and implementing national and local financing mechanisms for FLR such as national and local forest funds;
Using these financing instruments to implement public incentive schemes (e.g. payment for ecosystem services mechanisms) and coupling these schemes to investments in sustainable value chains to ensure a long-term self-sustaining financing strategy;
Increasing engagement with the private sector, especially with pioneer private impact funds and other innovative initiatives such as layered funds that can benefit from the support of governments and public institutions;
Building a legal and regulatory framework that makes landscapes “ready for investment” and attracts investors to FLR;
Establishing risk mitigation mechanisms to engage FLR investors at scale;
Promoting partnerships and alliances at local, national, (sub)regional and international levels, and contributing towards international FLR initiatives.

FAO’s Forest and Landscape Restoration Mechanism is called to play a facilitating role in supporting governments to make significant progress towards FLR implementation. To this aim, practical actions and concrete projects including on financing for FLR are currently being designed and implemented in a number of countries worldwide.