WASHINGTON (Landscape News) — Would you sink hundreds of millions of dollars into an investment on contested land?
This is a key question investors and companies engaged in land-based sectors must ask whenever they consider a new project.
Insights into the way the private sector deal with risks to their investments stemming from unclear or weak land tenure and property rights is the focus of a new report released on Wednesday by the U.S. Agency for International Development (USAID) at the Global Landscapes Forum (GLF) Investment Case Symposium.
The Investor Survey on Land Rights conducted jointly with Indufor North America and the European Investment Bank shows that land tenure risks led to the rejection of at least 66 percent of projects with a combined value of about $1.6 billion.
During a panel discussion on land tenure and investing at the GLF event in Washington, participants agreed uncertainty over land rights is considered a top risk when planning investments.
“For us, land tenure is risk number one,” said Sylvia Wisniwski, managing director of Finance in Motion, an advisory investment firm, during a session on land tenure risk mitigation. “When it is under question, we are not investing.”
From her perspective, de-risking tools are critical: “If forest investments go belly-up, it’s large losses we are talking about.” Especially large-scale investments such as forestry plantations.
One way the sustainable real assets investment manager New Forests is trying to minimize the risk is through community participatory mapping.
“It empowers them because it graphically defines their zone of influence,” agreed Mark Constantin, in charge of social and environmental risk management at the International Finance Corporation (IFC). “It creates a de facto recognition of rights that may not be legally recognized.”
For Mary Kate Bullen, associate director of Sustainability and Communications, not only is it useful to investors, but it is also empowering for local communities.
Although participatory mapping and information-gathering among local stakeholders may help assess the risk, Bullen noted it rarely disappears. “Addressing land tenure is an ongoing issue, not just part of an investment-ready process,” she said.
Jeffrey Hatcher, managing director of Indufor North America, offered insights into the survey during the panel.
“We thought we’d see a lot more record-keeping in companies around the financial risks [associated with unclear land tenure],” he noted.
For Hatcher, agribusinesses must implement land tenure verification protocols to ensure outgrowers have proof to their land rights and, if they do not, see how this challenge can be addressed, he said.
Ultimately, land tenure security is a foundation of sound business outcomes, as much as social and environmental ones.
Constantin’s words: “We believe in inclusive development models and land tenure security is a corner stone.”
In addition to concerns over mounting land risks, other key concerns of investors included rights of local communities to access resources and disputes over land.
For more information, including on the implications of these findings, visit www.land-links.org/investor-survey.
Read a guest blog post on Viewpoint about the survey here