THE STATE OF THE WORLD’S FORESTS 2022
BOX 19 EXAMPLES OF BLENDED-FINANCE EFFORTS TO RAISE MONEY FOR SUSTAINABLE FORESTRY New Forests’ Tropical Asia Forest Fund 2 . A group of institutional investors, development finance institutions, endowments and corporate investors are attempting to raise USD 300 million with a view to investing in sustainable, Forest Stewardship Council-certified plantation forestry in Southeast Asia (Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia and Viet Nam) to meet rising timber demand in domestic and export markets. Blended finance would comprise 10–15 percent of impact/“concessional” equity for funding activities such as environmental habitat restoration, peatland rewetting and community outgrower schemes in the fund’s plantation companies. Investors in the fund are also interested in long-term carbon credit offtake from fund activities.366
small farmers in commercially viable operations. Komaza was built up initially with grant money from social enterprises, enabling it to obtain development and commercial money through convertible loans and equity investments from various entities. Financiers also invested in Komaza, helping it build assets in trees and a range of small to medium-sized processing facilities. After 14 years, the company now has thousands of partners, a value of more than USD 20 million and expertise across the whole value chain. In 2020, Komaza reached an equity finance agreement worth USD 28 million with the Dutch Development Bank. Farmers provide land and labour and the company provides technical assistance and the required inputs for tree-farming. This helps keep costs down (in conventional plantations, labour may comprise more than half the total cost), while farmers can invest in their plantations without getting into debt and convert their labour into assets (trees). When trees have reached an appropriate size, the company harvests, transports and sells them, sharing sales revenues with the farmers. Subsistence farmers sometimes find it difficult to obtain documentation to support their claims of ownership of land and other assets, which they need to obtain commercial loans. To become a partner of Komaza, however, a farmer’s ownership can be recognized by neighbours, chiefs and community leaders. To date, nearly 6 000 farmers have planted 2 million trees in about 4 000 ha under the scheme.368
The Green Climate Fund’s new Amazon Bioeconomy Fund. The USD 600 million programme will include an investment of USD 279 million from the Green Climate Fund, and it will be implemented with the Inter-American Development Bank. It will encourage private investment in six key areas of the bioeconomy: (1) sustainable agroforestry; (2) native palm cultivation; (3) non-timber natural forest products; (4) growing native-species timber; (5) aquaculture; and (6) community-led nature tourism.367
Komaza Smallholder Forestry Vehicle. The aim of Komaza, a smallholder company in Kenya, is to address increasing wood demand in Africa and include
Several forest companies are engaged in structuring blended-finance vehicles to invest in sustainable forest management, with conservation and restoration co-benefits.
different returns and maturity expectations. Such models can enable the mobilization of public, private and international sources of financing by investment funds. They are increasingly being explored by international public funding mechanisms such as the Global Environment Facility in support of global environmental goals. In such approaches, public finance helps unlock private capital, thus increasing the finance available for investments that traditional investors consider too risky. Box 19 presents three recent examples of blended-finance approaches with the potential to support the three pathways.
Green bonds are emerging, but only 3 percent are oriented towards nature-based solutions Green bonds are debt securities issued on the financial markets with the specificity of financing (or refinancing) projects with environmental benefits; they are an important part of the sustainable finance market, which has grown | 67 |
