Finance the strongest – but lagging – soldier against climate change

East Kalimantan, Indonesia. Nanang Sujana, CIFOR
3 December 2018

The 2018 report on Progress on the New York Declaration on Forests – a commitment that aims to end natural forest loss by 2030 – found that 40 times more subsidies and investments are made in driving deforestation than protecting the world’s precious and rapidly deteriorating forest landscapes. According to Global Forest Watch, one football field’s worth of forest was lost every second in 2017.

This was one of many examples presented over the two days of the Global Landscapes Forum in Bonn, Germany, held on 1–2 December, of the pitfalls of finance when it comes to sustainable investment, development and fighting climate change. While the first day of the Forum focused largely on how and why individuals, communities and leaders must take action to secure a more sustainable future, the second day revolved around perhaps the largest enabler of such positive change: money, planted in the right places in the right ways.

  • The need to streamline and consolidate guidelines for restoration was repeated throughout discussion forums. The numerous methodologies promoted by different institutions can be confusing and, in turn, unattractive to private investors new to restoration processes, said speakers.
  • By some estimates, up to USD 450 billion is needed annually until 2029 to help developing countries adapt to climate change and develop climate resiliency. Nearing this amount will never be possible without help from the private sector. Conversations revolved largely around how to use public finance to make restoration and ‘green’ economy projects risk-free and investment-ready to mobilize private funders.
  • Four institutions working in sustainable finance, including the first private, listed company focused on holistic restoration, discussed a shift toward impact finance rather than investment in single- and multi-commodity production. The Sustainable Development Goals can serve as the common vocabulary when bringing the private sector into this financial sphere.
  • But how do you measure impact? Jyotsna Puri, who heads the Independent Evaluation Unit of the Green Climate Fund, said in her keynote speech that it must be measured quantifiably, in terms of size and cost. Measurements should take into account the ‘three B’s’: bias in how evidence is produced; benefits; and using human behavior to design and deliver policies that work in the ‘last mile.’
  • An all-women Finance Plenary of four leaders in ‘green’ finance focused on de-risking investments for the private sector and giving measurable market value to social and environmental impact. Mechanisms like ‘structured funds,’ which comprise layers of funding that Sylvia Wisniwski from Finance in Motion compared to black forest cake, is one way to do so.
  • In the same plenary, Ada Osakwe, Nigerian founder of Agrolay Ventures, stressed the need for early-stage capital in small-ticket–sized deals, while Jane Feehan from the European Investment Bank lamented the high transaction costs for funding numerous small projects.
  • The private sector cannot be treated as “untouchables,” said UN Environment assistant secretary-general Satya S. Tripathi.
  • Feehan said that successful sustainable financial mechanisms should not be deemed “innovative,” but instead “a good idea and the right thing to do.”