Financing Strategies for Integrated Landscape Management
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This presentation by Dr. Margot Hill Clavis, Earth Security Initiative, shows the goals of ILM Financing Innovations, which scope they have, how to map them and much more.
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Financing Strategies for Integrated Landscape Management
- 1. Financing Strategies for Integrated Landscape Management Blending Public-Private Capital & Capacity Dr Margot Hill Clarvis Associate, Earth Security Initiative Landscape Forum – 16.11.2013 – Warsaw, Poland
- 2. Goals: ILM Financing Innovations 1. CURRENT LANDSCAPE 2. SCALING UP STRATEGY • Identify types of mechanisms • Scope levels of finance available • Map public/private innovation • Challenges and opportunities • Roadmap for public finance institutions to work with private investors.
- 3. Scoping Finance Institutions and Financing Mechanisms for ILM > 200 Institutions; > 250 Mechanisms; Range of interfaces with ILM components
- 4. Mapping ILM Finance REVENUE STREAM Public Donors Sovereign Wealth Funds Government Donors (ODA) Public Funds (IOs , UN) Charities (NGOs) Multilateral Development Banks and Aid Orgs Private Donors HNWI / Family Offices / Endowments/ Foundations Enabling Investments PPP Warrants/Certificates Direct Investments Land Owners / Small Holders Agribusiness Asset Investments Bilateral Development Banks / Aid Orgs Grants Concessional Loans Public Sector Banks National Development Banks Subsidies / Loans Tax Credits/Relief Guarentees PES Agribusiness Smallholders Policy Public Institution Capacity Communities Portfolio Investors Carbon/ Forest Funds Fund Managers Asset Managers Offset Brokers Often by FIs with no expectation of financial reward. Tax Revenues Carbon; General National Budget National Funds Capital Markets Offset Markets Carbon Market Biodiversity Offsets Watersheds Offset Specific Company Investments Fees / Services PES (water, carbon, biod) User Fees Concession al Fees Taxes Protected Area Entrance Fees Recreation License Fees Special Access Payments Carbon /Biodiversity offset flows Funding the generation of the incentive to invest. Other Asset Owners Pension Funds Insurance Companies Institutions Research Policy Shaping /Initiatives National / Regional public institutions Commercial Banks Impact Investors Conservation Funds REDD+ Funds Blended / Whole Earth Funds NGOs Offset Brokers Market Rate Loans Micro-finance Investment Capital/ Equity (PE, VC) Securitisation Debt for Nature Swaps Certification Marketing Labels Offset PPP Community PPP Finance for an activity that creates tangible value. Adaptation/ Mitigation Smallholders Policy Public Institution Capacity Communities Offset Intermediaries Products Sales of goods: Agricultural Commodities Products Sales of goods: Wood Products Non Wood Forest Products Mostly through loans and equity investments. Utilities (Water / Energy) WSS Utilities Communities Land Owners Local Authorities Biodiversity Forest/Park/Land Managers Conservation Orgs Communities Offset Internediaries Enabling Asset Social Returns Gender Equity Economic Stability and Security, Living Standards Social Resilience Improved Health Environmental Returns Environmental Resilience Hazard Reduction Reduced Inputs Biodiversity
- 5. Mapping ILM Finance Blended Public Livelihoods UNFCCC Adaptation Funds (NAPAs) Environmental Development Funds PPP Carbon Funds Clean Energy cofinancing Impact Funds Climate Change Funds Environmental & Development Funds Carbon Mitigation Funds Feed-in Tariffs Technology Transfer Pilot Projects / Seed Capital PPP Funds for Investment and Technical Advisory of Public and Private Sector Technology Transfer Concessional finance & loans REDD Readiness Grants Debt for Nature Swaps PES Capacity Building Conservation Banks Global Mechanism UNCCD Adaptation PPP Concessional finance and loans Impact Funds Carbon: Energy Carbon: REDD Sustainable AG BioCarbon Fund Watershed Impact Funds Biodiversity Water Funds PES, PPP PES Enabling Asset Forest Funds Offsets & Certification Impact Investment (supply chain) Offsets & Certification Carbon Funds Project Finance – Renewables Equity – Alternative Investments Insurance Climate Change Micro-finance Lending Direct Investments Value chain / RIsk CSR Portfolio Investors Blended Funds Offsetting PPP Impact Investors Private PES / Offsetting
- 6. Plotting Innovation for Integration Public ILM Entry Points Norad’s NICFI USD 480 Carbon Credit Focussed Global Environmental Facility-5 CC : USD 324 BioD: USD 968 Land Deg: USD 324 REDD / Forest Carbon Focussed AG/Farmland Focussed Global Mechanism UNCCD World Bank BioCarbon Fund USD 65 US AID WB BioCF Plus USD 6 Enabling Savoury Institute Livelihood's Fund USD 35 Mixed Macquarie Bank/FFI BioCarbon USD 25 Asset AgroEcological (USD 200) Inari Althelia USD 90 (200) Rabo Development & Foundation Moringa USD 68 (180) Bunge Environmental Markets Nestlé Rabobank AG Lending PPPs Finance available USD million (USD in brackets is target size) Private EcoEnterprises Fund USD 35 /6.3 TIAA CREF USD 2, 500
- 7. ILM Innovation Challenges and opportunities to financing ILM at scale Case Study Private Sector e.g. Althelia Ecosphere Moringa Fund EcoEnterprises Fund Public Sector e.g. World Bank BioCarbon Fund Global Environmental Facility Key Challenge Opportunities - Market uncertainty & complexity - Access to finance - Up-front financing & risk capital - Track record & unfamiliar business case - Lack of investable deals - Exits/Illiquidity - Finance for technical assistance - Diversification of risk through blending multiple revenue streams; Commitments & Guarantees - Partnerships; leverage PPP networks; field presence & aggregating partners; VC/SC - Mezzanine instruments, long-term risk capital to accelerate. - Grant funding for technical assistance - Siloed conventions - Predictability of financing acrossconventions - Uncertainties in demand and market for land-based carbon and forest finance - Complex methodologies and fragmented accounting - Leveraging private sector finance - Predictability and simplicity of financing for countries to plan in a more integrated way - Simplified yet robust carbon accounting at the landscape level - Innovative financing approach (e.g. bond financing, guarantees, price support); linking to other financing mechanisms (e.g. climate finance) - Funds to target private enterprise to leverage private investment
- 8. Barriers to Scaling up Integration/Coordination Shifting barriers into risk opportunities DEMONSTRATING THE BUSINESS CASE Complexity, Deal Flow, Risk. • Unfamiliar business case & lack of track record • Complex metrics and accounting • Limited pipelines - lack of commercial opportunities & investment ready enterprises Portfolio Approaches Risk Diversification ENABLING ENVIRONMENT SUPPLY OF FINANCE Lack of coordination and integration across sectors and ecosystems. • Governance gaps, siloes & lack of clear policy signals • Siloed convention objectives • Fragmented financing • Lack of guarantees • Lack of co-ordination & aggregation Risk Capital, Capacity & Aggregating Force Lack of patient and risk capital; Lack of investable deals. • • • • • Transaction costs Exit options Investment horizons & scale Risk/Reward profile Risk insurance / guarantees Risk Minimisation & Portfolio Diversification
- 9. ILM Innovation: Key Value Drivers Opportunities to provide value • • • • • • • Increasing value of arable & fertile land Growing demand for sustainable & certified commodities Potential new markets for PES beyond just carbon finance Reducing transaction costs of fragmented projects New business models creating efficiencies Better response to context specific risks Diversified revenue streams – risk management – Value chain development / integration – Supply chain security • Shifting global and national legal & market conditions • Growing interest in & regulatory requirements for green growth
- 10. Larg e Blending public-private approaches to scale-up Sovereign Wealth Funds Risk Capital Commitments Start-up Capital Acceleration Institutional Investors Deal Size Development Finance Institutes (ML & BL) Portfolio approach Composite Assets Private Equitye.g. Bonds, PE Venture Capital Funds Commercial / National Banks Low Microfinance / Impact Investors Direct Investments by small-holders or agribusiness Low ShorterTerm Risk Tolerance Foundations High Longer-Term Time Horizon
- 11. Integrated approaches to address interdependent land and resource security Deforestation, governance gaps, climate exposure and land risks security ⎯ Combined & inter-dependent market risks/barriers ⎯ Governance gaps ⎯ Drive & undermine REDD+, ILM, climate investments. ⎯ Blending PP capital and capacities ⎯ Directing public capital as risk capital & acceleration ⎯ Support unfamiliar & unproven business models for diversification & integration Earth Security Index
- 12. Diverse combinations of market risks REDD+: market risks and opportunity Indonesia - Position integrated and diversified approaches as key to addressing market risks. - Public and private interests, capital and capacities converge to invest in resilience within diverse country contexts.
Editor's Notes
- Mapping the flows of finance and the different foci of different streams of finance. USD millions will be added.
- Mapping the relative amounts of financing available for different ILM components and different types of investment – i.e. enabling or asset, from public/private sources of capital. USD millions to be added.
- Introduce the case studies and the range of ILM entry points across private and public sector. Larger capital available – more siloed the finance becomes.ILM entry points tend to be positioned as either REDD, AG etc, but these land based investments have explicit revenue streams, risk mitigation and requirements that span a multitude of environmental and social challenges and benefits. For example: Althelia or Moringa – agro-forestry at the landscape level. Nestle/Bunge/Rabo take a supply chain approach to manage risks, improve security of supply, improve productivity and resilience; BioCF focus on carbon credits at the landscape level.
- What the case studies tell us about the challenges faced in taking a more blended approach and how they have tried to overcome these. Using selections of case studies, not the full suite. Lack of co-ordination and integration across resource sectors and ecosystem components. Lack of Patient Capital for integrated and coordinated investments for blended earth returns. Challenge of metrics and language for demonstrating the business case. Lack of risk mitigation instruments.
- What the broad scoping and case studies tell us about the key barriers to financing ILM at scale. Developed from: http://www.syngentafoundation.org/index.cfm?pageID=466 - Framework to analyse smallholders' challenges in the market place: The value chain and its supporting environment
- What do the case studies tell us about the key value drivers for ILM focussed ventures. Shifting risks to opportunities.
- http://dalberg.com/documents/Impact_Investing_Senegal_Eng.pdfDevelopment Finance InstitutionMicrofinance Institutions
- Demonstrates interdependent dimensions for land & resource security risks. 24 dimensions for land & resource security risksPublic and private interests to invest resilienceBenchmark progress against critical governance barriers Opportunity to provide stable investment returns in fluctuating markets.
- Identifying integrated approaches as the solution to market and environmental risks – use the diversity of emerging risks, which most investors don’t fully understand, to make a more compelling case for integrated approaches.