Deforestation Kenya 2018

IRIN/Angela Dewan Photo: IRIN/Angela Dewan

This article is brought to you thanks to the strategic cooperation of The European Sting with the World Economic Forum.

Author:  Ivo Mulder, Finance and Private Sector Coordinator, Freshwater, Land and Climate Branch, UN Environment

Forests and agriculture hold more than 30% of the climate change solution in terms of providing the most cost-effective forms of mitigation potential. However, they currently receive less than 3% of public climate finance. Neither the Paris Climate Agreement targets nor the Sustainable Development Goals will be reached unless there is a systematic and fundamental transition to different land use models that better balances the need to scale up food production for an estimated 9 billion people by 2050, whilst also reducing deforestation and biodiversity loss, and enhancing climate mitigation and adaptation.

We need business unusual to better balance the need to stimulate economic growth and scale up food production while focusing on achieving the climate, biodiversity and ecosystem restoration targets, However, public funding and government regulation alone will not be enough to change the ‘deforestation trajectory’ in developing countries, where most of the deforestation associated with the production of commodities including palm oil, soy, beef, timber, cocoa and rubber takes place.

The solution will therefore have to include more efficient use of existing agricultural land as well as prioritizing the use of degraded land (instead of converting primary forests). By partnering with private sector entities in the agricultural, finance and other sectors, UN Environment aims to support member states to proactively transition to sustainable land use management at scale by providing (bottom-up) economic and financial incentives to smallholder farmers, supply chain companies, traders and finance institutions to systematically include climate and zero-deforestation targets.

The “zero net deforestation” commitments that a growing number of agribusinesses (e.g. Unilever, Mars, Nestle, Carrefour) and a few finance institutions (e.g. BNP Paribas) are making, is opening the door for a different way of agricultural production. However, to move from commitments to implementation, it is imperative to initially stimulate pioneers to make progress by using public funding to “de-risk” private finance towards “zero net deforestation” agricultural production. De-risking in this context means taking away some of the perceived and real credit risk, as well as costs for smallholder farmers, supply chain companies and finance institutions related to switching to sustainable agricultural commodity production that is decoupled from deforestation, climate and biodiversity loss impacts.

To pioneer the transformation to sustainable land use, UN Environment – in collaboration with key partners – is setting up or supporting several facilities aimed at removing the regulatory, economic and financial barriers that currently prevent this. These facilities aim to use public funding to leverage and unlock private capital at scale for sustainable agricultural commodity production as well as forest and landscape restoration.

The Tropical Landscapes Finance Facility (TLFF) with BNP Paribas, the World Agroforestry Centre and ADM Capital, and a USD 1 billion partnership with Rabobank to scale up private finance for sustainable, deforestation-free, commodity production (tentatively called “Forest Protection and Sustainable Agriculture Fund” – FPSA), are examples of the way in which the UN aims to proactively create a systemic shift in the way banks and investors allocate for agricultural production and other economic activities that have profound impacts on the environment and society.

Second, UN Environment aims to play a proactive role in scaling up public finance to de-risk private capital for example through the &Green Fund. Third, the number of so-called ‘bankable projects’ needs to rise in order for public and private investors to become more active. UN Environment aims to set up an initiative to scale up early stage funding for pipeline and project development (Seed Capital Assistance Facility for Forest and Landscape Restoration – SCAF-FLR), building on an existing SCAF Renewable Energy facility. Lastly, this project will also focus on creating the right enabling framework (e.g. reform of fiscal and trade policies) to stimulate demand.

In doing so, UN Environment aims to play a constructive and proactive role in better aligning the demands and actions of public and private stakeholders. Best practice examples (“blueprints” of novel land use finance models) will be communicated to the finance and agricultural value chain with the aim of greater uptake and ultimately mainstreaming across relevant sectors. If you feel, this message aligns with your organisation or company’s vision and ambition, please do get in touch with us as we’re seeking to broaden the partnership base.