Our financial system is fragmented. As in other facets of our lives, distinctions between each desired outcome also characterize how we think about and manage money. Financing for agriculture is largely disconnected from financing for the environment; investments in commodities disregard the places that produce them; and development finance that is targeted to urban areas largely ignores connected rural regions.
The attractiveness of these differentiations is obvious: they help make complex decisions simpler. However, scientific data and experience consistently tell us that social, economic, and ecological systems are interconnected. The numerous interconnections between the 17 Sustainable Development Goals are a prime example.
The United Nations Food and Agriculture Organization projects an additional $83 billion per year is needed in developing countries to meet future agricultural production needs. However, agriculture is a significant contributor to greenhouse gas emissions, biodiversity loss, soil erosion and it unavoidably impacts the communities in which it is practiced. If this funding flows through our current system that emphasizes sectoral divisions, we risk spending money on food production while harming the underlying ecosystem services on which it depends. While they may make for a tidy ledger, segmented financing structures don’t work.
Financing for an integrated world
Recommendations for scaling finance for sustainable landscapes:
1. Design standards and monitoring systems for integrated landscape investments
2. Establish landscape investment incubators
3. Establish brokering services for integrated landscape deals
4. Incorporate integrated landscape principles into public finance
5. Create frameworks for financing ILM within national SDG and green growth strategies
Fortunately, the financial and investment world is beginning to see the need to change this model. Water funds in Quito, Ecuador; New York, and Bogotá, Colombia, as well as companies such as SABMiller, are increasingly demonstrating how investments can be designed to deliver ecological, social, and financial returns.
Sustainable commodity agreements, such as the Consumer Goods Forum’s commitment to zero net deforestation or the Roundtable on Sustainable Palm Oil, are also demonstrating high-level commitments to multi-objective financing. On-the-ground actions developed through multistakeholder, landscape-based processes will now be required to fulfill these promises.
Yet, shifts from segmented to integrated, place-based investment structures face significant barriers. Mechanisms to link financial flows within landscapes, approaches for incorporating multi-objective landscape criteria into investment choices, and systems for monitoring multiple outcomes need to be developed.
Furthermore, investors and financiers need to find effective methods for engaging meaningfully in partnerships with other actors within a landscape and need to identify other mechanisms to mitigate risks. While these are not insurmountable barriers, they do require intellectual leadership and strong commitment.
New models for sustainable finance
Some financiers are already making this commitment. Althelia Ecosphere is an impact investment fund pursuing ecologically supportive investments. Investments by Althelia in the Peruvian Amazon provide a model for how a financial investor, in partnership with local institutions, can coordinate investments for the multiple objectives within a landscape. In this case, a local nongovernmental organization is leading efforts to identify key drivers of deforestation and address them with the support of Althelia’s investments in cocoa agroforestry within the forest buffer zone. Althelia chose to invest in the site in part because there was a strong stakeholder process and a landscape investment facilitator.
Leadership is also coming from the ground up. Imarisha Naivasha, a multi-stakeholder management entity within the Lake Naivasha basin in Kenya, brings together diverse stakeholders in the basin to collaboratively manage natural resources. Through a public-private-civic partnership, groups including private businesses, agriculturalists, pastoralists, fishermen, civic organizations, conservation groups, and government representatives created a sustainable development action plan. The action plan guides development objectives and helps investors coordinate investments. The action plan also calls for the establishment of a sustainable financing mechanism. EcoAgriculture Partners and Imarisha Naivahsa are currently exploring innovative models for coordinating and catalyzing investments throughout the basin.
As the 21st Conference of the Parties of the U.N. Framework Convention on Climate Change gets underway and leaders gather for the Global Landscapes Forum in Paris, we are offered a unique opportunity for scaling local landscape finance experiments into global change.
Capitalizing on this opportunity will require action from a wide range of actors. From institutional investors and multinational companies, to community banks and local landscape managers, there is a role for everybody to play in transforming our current financial system.
Development projects should, for example, focus on building multisectoral, multistakeholder platforms with strong financial literacy. This is indeed the only way these projects will stand on their own when donor funding moves on. Locally customized finance coordination solutions will continue to attract and invest the private capital needed to drive environmentally and economically sustainable development that creates triple bottom line returns for companies, financiers and communities.
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