http://www.fao.org/ecosystem-services-biodiversity/incentives/en/ Presentation of why and how the private sector should be integrated into Incentives for Ecosystem Services. © FAO: http://www.fao.org

1. 1
Private Sector Engagement
Incentives for Ecosystem Services
Incentives for Ecosystem Services in Agriculture (IES)
Lucy Garrett
October 2015Incentives for Ecosystem Services (IES)

2. Incentives for Ecosystem Services in Agriculture (IES)Private Sector Engagement
2
To create new funding opportunities
To create markets for environmental goods
and services
To deliver returns of investment:
- Conservation (ecosystem services)
- Social
- Financial (direct or indirect)
- Impact (a mixture of the above)
To enable more efficient and economic
channeling of finance
To build on shifts in public focus towards
environmental issues
To increase the involvement of research
departments
To provide an opportunity for developing an
environmental leadership position and
reputation
To reduce the probability of investment
duplication
Why engage
with the
private
sector?
Incentives for Ecosystem Services (IES)
Garrett, L. (2015)

3. Incentives for Ecosystem Services in Agriculture (IES)
3
What opportunities are there for private sector engagement?
Private sector engagement can
be sought throughout the stages
of the IES process:
Upfront/
Readiness
Implementation Self-sustaining
investments
Voluntary action with a
direct returns of
investment expectation.
Through:
• Insetting – to secure and
improve efficiency,
sustainability and cost-
effectiveness of value chain
• Impact marketing
Requiring private actors to
fulfil government regulations
Voluntary action, but lacking
a direct link to daily business
operations.
Pre-compliance to save costs
or position private actors on
a new emerging market
Mandatory
Regulations
Flexible Regulations
Voluntary
Investments:
Linked to input
Voluntary
Investments:
De-linked to input
Opportunities to engage the private sector
Incentives for Ecosystem Services (IES)
Garrett, L. (2015)

4. Incentives for Ecosystem Services in Agriculture (IES)
4
What opportunities are there for private sector engagement?
Compliance to fulfil government
regulation
Opportunity to gain an additional/ new
market share
PrivatesectorIESPackages
Larger scale of investment
Financial stability
Investment is independent of
consumer behaviour
To save (later) implementation and
compliance costs
Investment is independent of
consumer behaviour
Investment is independent of
political cycles
Link to input factor increase the
livelihood of ecosystem services
delivery
To position itself on a new emerging
market
To save (later) implementation and
compliance costs
Green and/ or social investments to
improve their corporate reputation
Investment is independent of
political cycles
Opportunity to incorporate social
co-benefits
Mandatory Regulations Voluntary Investments:
Linked to input factors
Voluntary Investments:
De-linked to input factors
Flexible Regulations
(early compliance)
To position itself on a new emerging
market
To create greater freedom in the
explicit design of their investment
To build up a relationship with the
government
To target specific ecosystem services
in their value chain
To build up a relationship with the
government
To create greater freedom in the
explicit design of their investment
Incentives for Ecosystem Services (IES)
Garrett, L. (2015)
Developed from: Vogt, L. and Sonnevelt, M. (2015) Analysis of private sector involvement in
Incentives for Ecosystem Services. Food and Agriculture Organization of the United Nations, Rome.

5. Incentives for Ecosystem Services in Agriculture (IES)
5
What risks are there for private sector engagement?
Lack of direct link to business means
initial investments may pose a high
financial risk
High compliance costs may stifle
innovation
Investments may be dependent on
political cycles, economic markets and/
or consumer behaviour
PrivatesectorIESPackages
Tendency to link the provision of an
incentive to the output
Free-riding: Exploitation of public
programs by the PS to profit from
public financial investment
Investments may be dependent on
political cycles
Investment may be dependent on
political cycles, economic markets and/
or consumer behaviour which may
discourage PS participation
Investment may be dependent on
political cycles, economic markets and/
or consumer behaviour which may
discourage PS participation
Lack of financial sustainability –
investment may be dependent on
consumer behaviour or market
changes
Specificity of PS investment may not
be reflective of IES needs or priorities
Lack of regulation of PS investment
to ensure a level playing field
Can create high dependency between
sellers and buyers
Slow and uncertain returns on
investment
Investment may be dependent on
consumer behaviour
Investment may be dependent on
consumer behaviour
Greenwashing
As the PS is not directly affected by
outcomes, initial commitments may
be low and the possibility to quit
participation may be high
Specificity of PS investment may not
be reflective of IES needs or priorities
Lack of regulation of PS investment to
ensure a level playing field
Slow and uncertain returns on
investment
Lack of financial sustainability:
Investment may be dependent on
consumer behaviour or market
changes
Mandatory Regulations Voluntary Investments:
Linked to input factors
Voluntary Investments:
De-linked to input factors
Flexible Regulations
(early compliance)
Incentives for Ecosystem Services (IES)
Garrett, L. (2015)
Developed from: Vogt, L. and Sonnevelt, M. (2015) Analysis of private sector involvement in
Incentives for Ecosystem Services. Food and Agriculture Organization of the United Nations, Rome.

6. Incentives for Ecosystem Services in Agriculture (IES)
6
What opportunities are there for private sector engagement?How can IES integrate private sector investment?
Private sector finance is, however, often dependent on the expected returns of investment and the amount
of risk they are willing to accept.
IES can provide an enabling environment to allow greater private sector engagement and develop a long-
term perspective of their investment.
Disperse the burden of financial risk and impact of political, environmental and social changes across
multiple private and public investors and programs throughout stages of the IES process (upfront/
readiness, during implementation, or self-sustaining investments.
Provide a supportive institutional framework under which investments can be coordinated and co-
benefits encouraged for multiple stakeholders.
Encourage co-benefits through the use of different forms of incentives that address multiple issues for
diverse stakeholders. While each stakeholder invests for their own objectives, each investment works
towards a mutual goal.
The integrated approach of IES can:
Incentives for Ecosystem Services (IES)
Garrett, L. (2015)

7. Incentives for Ecosystem Services in Agriculture (IES)
7
What opportunities are there for private sector engagement?
Incentives for Ecosystem Services (IES)
Lucy Garrett Food and Agriculture Organization of the United Nations
Citation: Garrett, L. (2015) Private sector engagement for Incentives for Ecosystem
Services. Food and Agriculture Organization of the United Nations, Rome
[PowerPoint slides] Retrieved from: http://www.fao.org/ecosystem-services-
biodiversity/incentives/supportive-ies-policies/private-sector-engagement/en/
Private Sector Engagement - Author
Garrett, L. (2015)