Bonn Challenge: New solutions urged for financing landscape restoration

FOZ DE IGUACU, Brazil (Landscape News) — Governments are increasingly committed to restoring deforested and degraded landscapes, but creative financing solutions are needed, including a larger role for private investors, said top officials who met earlier this month in Foz de Iguaçu, Brazil, over the Bonn Challenge, an initiative launched in 2011 to bring 150 million hectares of land into restoration by 2020 and 350 million by 2030.

Financing those efforts remains a challenge, especially for small countries, said Elsa Nickel, director general of Germany’s Ministry of the Environment (BMUB), which co-hosted the meeting with the Brazilian government.

Some countries are going ahead on their own, either setting up trust funds, as Bangladesh has done, or earmarking a percentage of their annual budget for restoration, as Guatemala has done.

“There was a very strong message (at the Brazil meeting) about self-sufficiency and about countries being willing to allocate their own resources to restoration, because they want to be self-sufficient and/or to send a signal to the international community that they’re serious about restoration,” said Carole Saint Laurent, deputy director for knowledge, policy and environmental governance at the International Union for the Conservation of Nature.

Studies indicate the cost of ecosystem services lost due to degradation, such as soil erosion and salinization and the draining of peatlands and wetlands, is $6.3 trillion a year. However, only a small fraction of the funds earmarked for addressing climate change go to landscape restoration, resulting in a restoration funding shortfall of some $300 billion a year, experts say.

It will be hard to make up that difference without private investment. Nevertheless, the long time frame and slow returns of landscape restoration make it less attractive to investors, even though studies show that every dollar invested in restoration can generate economic benefits of between $7 and $30.

“The biggest barriers are the systemic ones that distort the system,” said Sofia Faruqi, who manages the new restoration economy area at the World Resources Institute (WRI) in Washington, D.C.

Financial models tend to omit environmental factors such as carbon, biodiversity or damage resulting from deforestation, as well as the social benefits of a healthy ecosystem, or the harm to communities resulting from environmental damage, she said.

“Often we don’t ascribe much value to environmental benefits,” Faruqi said. “In financial calculations, they are often just factored in as zero. Ultimately, it’s because it’s not something that can be easily monetized, at least to date.”

Including environmental and social factors in financial assessments would be an important step toward changing the way policy makers and investors view the economics of landscape restoration, she said.

Governments could take another step by eliminating policies that contribute to deforestation, such as agricultural subsidies that encourage deforestation for industrial-scale farms or ranches.

Because landscape restoration requires long-term investment, problems that could make the investments more uncertain must be resolved. To attract investors, land tenure and forest rights must be clear. Some countries where possibilities for landscape restoration are greatest also suffer high levels of corruption that keep investors away, experts said.

A combination of short- and long-term returns on investment is also needed. That could be done by mixing fast-growing crops or timber species with others that grow more slowly, which which have a higher value and will provide a greater return over the long term.

Linking landscape restoration to ecosystem services is another way to create market value, said Manuel Guariguata, principal scientist on tropical forest ecology and forest management at the Center for International Forestry Research (CIFOR).

Carbon storage may be the most obvious ecosystem service, but focusing only on carbon could lead to a decision to plant only fast-growing tree species, he says. Other services, such as regulating the quantity and quality of water flow, could yield returns over the long term, although those markets tend to be small, Guariguata said.

Mechanisms for mitigating risk, such as insurance or tax credits, could encourage investors to “dip their toes in the water” and take a closer look at investment in forest landscape restoration, Faruqi said.

Meanwhile, new forms of financing are appearing. In late February, the Tropical Landscapes Finance Facility, which includes the U.N. Environment Program, several private financial firms and the World Agroforestry Center (ICRAF), announced a $95 million “sustainability bond” for a natural rubber plantation to be installed on degraded land in Indonesia.

The area will also serve as a buffer zone for Bukit Tiga Puluh National Park, which is home to orangutans, tigers and elephants.

Leaders of some developing countries have noted that wealthier nations have been slow to fulfill their pledges to the Green Climate Fund, which was established at the 2010 U.N. Climate Change Conference in Cancún, Mexico, to help lower-income countries respond to climate change.

Restoration projects financed by the fund in lower-income countries would benefit wealthier countries, as well, said Tim Christophersen, senior program officer for forests and climate change at the U.N. Environment Program.

Healthy landscapes provide not just ecosystem services, but also job opportunities, which make it possible for people to remain in rural areas rather than migrating to cities in their own or other countries.

Protecting and restoring ecosystem services, especially the amount and quality of available water, have a positive impact on agriculture, health and livelihoods, and reduce the likelihood of future conflicts over water, Christophersen says. Restoration also creates jobs in rural areas, which could reduce migration to cities, making urbanization more manageable.

“Countries that can afford it need to invest in sustainable development in areas in their (regions), not only in their own countries,” he said.

Despite the obstacles to increased investment in forest landscape restoration, projects and programs being implemented around the world are signs of progress, Faruqi said.

“There is reason to be optimistic,” she said. “Change can happen fast when the right conditions are in place.”