Struggling to follow the flow of REDD+ finance

A REDD+ safeguards and benefit-sharing site in Jambi, Indonesia. Icaro Cooke Vieira, CIFOR
29 November 2018

A recent study looking at the financial flows of REDD+, the UN program on reducing emissions from deforestation and forest degradation, found that countries with the highest potential to reduce greenhouse gas emissions aren’t necessarily receiving the most funds.

The study, which is the most comprehensive REDD+ financing study conducted to date, compares 41 countries receiving public, institutional and private flows of direct and indirect funding. Carried out by scientists at the Center for International Forestry Research (CIFOR), the Öko-Institut and international consulting group COWI, it determined which countries have the greatest capacity for success of REDD+ efforts and tracked funding flows from different sources.

Neither the research process nor the results were as clear-cut as anticipated.

“The REDD+ potential for countries is highly uncertain and volatile because definitions of ‘potential’ are different,” says Hannes Böttcher, a senior researcher at the Öko-Institut and a co-author of the study.

Also complicating the study, Böttcher adds, was the difficulty in getting estimates of how much of the potential can be realized, because the 41 countries are in very different starting conditions.

Nevertheless, Böttcher took on the complex task of comparing what information was transparent and available and used a number of comparable factors including general forest characteristics, drivers and risks, monitoring capacities, policy and engagement, and governance to determine the countries with the highest potential. Those countries, the report found, include Malaysia, Ghana, Brazil, Indonesia and Ecuador.

“You see high levels of subjectivity, and the indicators need to be interpreted cautiously,” says Böttcher. “There will always be uncertainties and different views or angles [on data] by looking at it in different ways.”

PRIVATE MATTERS

In tracing private REDD+ funding, the report discovered a number of issues. Co-author Asger Strange Olesen, COWI global topic lead on land use and the bioeconomy, said that on the surface, private REDD+ finance is difficult to track. The number of financial sources is much larger than that of official development assistance (ODA). And the forms of finance – including equity, loans and credit – are numerous, making the number of transactions almost impossible to count. Fund managers and intermediaries often make transactions on behalf of clients, adding to the unclarity.

The unavailability of data quickly became evident. “Most of these investments and their sources are not disclosed, and even if they could be identified and mapped from annual accounts and balance sheets, there are still massive flows inside companies and supply chains that are not disclosed,” Olesen said.

What the study did find, with the help of the UN Environment Finance Initiative (UNEP FI), was that there were large flows of private money going into ‘soft’ – grown – commodities, such as coffee and cocoa, and their value chains.

Olesen added that the geographical focus of donors and international financial institutes often overlapped, which indicates there is a high level of both deliberate and coincidental coordination happening in how the program is being carried out around the world. Gaps in data revealed that more funding is needed for to help countries implement the program’s MRV framework – in which countries measure, report and verify their emissions – as well as for African countries as general.

THE F-FACTOR

An insightful part of the reporting process was CIFOR researchers determining something called the ‘F-factor’ – the amount of funding that countries can access.

Looking at a variety of databases, CIFOR researcher Stibniati Atmadja categorized funding as either direct (earmarked specifically for REDD+) or indirect (part of larger conservation or mitigation programs where REDD+ could apply). Atmadja found that USD 19 billion went to REDD+ between 2008 and 2015. Of the direct donors, Atmadja said the majority of the money – some 80 or 90 percent – came from less than 10 donors and that “almost everything was a grant.”

Combing through the databases was challenging for Atmadja. Since funds were not tagged as being for REDD+, researchers had to do a keyword search for terms, such as ‘agroforestry’ and ‘mitigation’ instead. When looking at different funding databases, they also had to be careful to avoid double counting, errors in reporting or data entry, incomplete datasets, and inconsistencies. The data sets also only deal with international funding, as individual countries and the private sector aren’t required to report to the databases consulted for the report.

“Overall the funds are not enough,” says Atmadja.

The usefulness of determining the F-factor is to show the readiness of REDD+ countries to move from the ‘readiness’ phase of the program, in which they develop a national strategy for reducing emissions, to the ‘implementation’ phase where they carry out their plans.

Atmadja says donors are expecting recipient countries to be ready to begin the implementation phase by 2020, the deadline given by the program, but most countries are still in the readiness phase, and funding is in part responsible for the holdback.

“After 2020, for countries not there yet, what happens to them?”