Investment In Locally Controlled Forestry: Implementation of the Guide
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The document outlines the necessity and strategies for mobilizing investments in locally controlled forestry, highlighting the significance of carbon and impact investments. It emphasizes the importance of developing partnerships, investment frameworks, and opportunities for various stakeholders, including governments and private investors, to foster sustainable local economies and enhance forest management. Key ingredients for success include clarity of tenure, good governance, and the establishment of effective organizational structures.
Investment In Locally Controlled Forestry: Implementation of the Guide
- 1. Investment in Locally Controlled Forestry: Implementation of the guide Chris Buss UNFF Ad Hoc Expert Group on Forest Financing Vienna, Austria 16th January 2013 INTERNATIONAL UNION FOR CONSERVATION OF NATURE
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- 3. Why now? • The need to mobilise the growing amount of funds available for investment in forests – carbon & impact investment as examples • Development of a process for improving the quality and quantity of investments in locally controlled forests • Identification of viable options for investment through international and national economic assessments of carbon stocks • Interest with investment funds, philanthropic foundations 3
- 4. Moving forward – implementation of the guide • Identify priorities and opportunities to enhance the mobilisation of private sector investments in LCF activities, • Develop partnerships and a framework of engagement that can provide ideas, innovative financing mechanisms and support for investments in LCF activities. 4
- 5. Investment opportunities • Rights holders – to build resilient and viable economies, reinforce tenure & rights • Governments – SME’s and forest investment driving growth, multiple social benefits (health, education), improved landscape management • Donors & NGO’s – a model for local development • Climate change – low carbon development & enhance carbon stocks through improved improved forest management • Investors – real returns and a move beyond CSR 5
- 6. Types of investment Enabling Investment • Made by governments, donors, NGOs, philanthropists, rights-holders • To create the conditions for productive investments in assets. • SME forestry business models, associations, market linkages and new technology. Asset Investment • Not expected to lose the nominal value of the underlying capital, even if the anticipated level of financial return may vary according to the needs • The capital invested is an asset, which either has immediate tangible value or gives the right to receive future cash flow.. • Profit-oriented investors are looking for places to invest their money and earn a return on their assets. They include banks, government sovereign wealth funds, private equity funds and pension funds. • Product-oriented investors are involved in some kind of manufacturing or sales business and are either seeking raw materials, or products they can sell. They include processing mills, specialist manufacturers and wholesalers. 6
- 7. Investment Framework Type Enabling Investment Asset Investment Investor Government Donors Rights-holders Private sector Philanthropists Banks Private investors Philanthropists Product investors companies SWFs* and equity funds Philanthropists Rights-holders Vehicle Projects NGOs SMEs Product purchase Capital investment Financial services Capital investment Research institutions Intermediaries Goal Private sector development Fill the ‘Pioneer Gap’, Sustainable supply Return on capital plus Payment of interest Risk-adjusted return chain, quality social / environ-mental and return of principal on capital product impact Means Public expenditure, Grants, e.g. Enterprise Product Impact investment via Loans secured Value e.g.: Infra-structure Organizational Philanthropy: Grants investment via equity, loans against company or investment via: Fiscal reform development, Institutional and seed funding, e.g. Purchase order, personal assets (e.g. equity, loans Regulatory reform reform demonstrating validity of pre-payments land) Subsidies business model Output Public goods Private assets 7
- 8. What does enabling investment achieve? 8
- 9. Ingredients for success • Clarity of tenure and rights • Good enough governance • Organisation to define roles and generate economies of scale • Forming partnerships • Business Development Services • Intermediaries and brokers • Transparency and accountability • Agreed goals and expectations • Checks and balances • Respect different values and embrace change 9
- 10. Cycle of investments 2. Enterprise support Commercial 1. Rights-based advocacy forest rights Fair and balanced Business asset capacity investment 4. Brokering deals Enterprise- oriented 3. Organization-building organisation INTERNATIONAL UNION FOR CONSERVATION OF NATURE
- 11. Roadmap to Success ILCF Guide & Process – Proposition Aim to build a sustainable business – Establishment Institutional development & partnerships – Validation Situational analysis & feasibility – Preparation Business plan, funding model & offer to investors – Negotiation Due diligence, terms and shared vision – Performance Impact monitoring and conflict resolution 11
- 13. Enabling Investment – the next step • Forest and Farm Facility aims to develop institutions at local level. • Further understanding of opportunities for asset investment – understanding the value chain and policy frameworks at national level. • Develop partnerships (international, regional, national & local) with private sector and enabling investors to mobilise enabling investment in order to develop investment propositions. 13
- 14. Thank you! 14