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(This post originally appeared on the Peru COP20 website)

By: Carla Ramírez Zea / Main Forest Advisor, FAO Peru

“The new policies on climate change demand greater quantity, quality and efficiency of forest information. A truly comprehensive monitoring of forest management involves biophysical – environmental, socioeconomic and governance information needed to guide and evaluate actions to mitigate and adapt to climate change.”

The welfare of citizens worldwide is threatened by increased emissions of greenhouse gases (GHG), mainly from industrialized countries. For this reason, the United Nations Framework Convention on Climate Change emerges as a space for discussion to define global agreements to reduce emissions of party countries. During the discussion, the most developed countries have been called to meet their targets for reducing emissions, but also support for the least developed countries has been boosted to plan mitigation and adaptation, through institutional and technical capacity building, as well as through the definition of funding sources.

Forests in public policies

The role of forests in maintaining human wellbeing is being increasingly recognized. Forests are carbon sinks, carbon being the most abundant element in greenhouse gases. They are also a source of food, medicine, and income from lumberable and non-lumberable products; retain and filter water; are cultural and spiritual sanctuaries; and are gene banks of flora and fauna. It has been shown that the loss of forests causes up to 17% of GHG emissions, so reducing deforestation and forest degradation is one of the strongest mechanisms for mitigating GHG emissions. For these reasons, forests are increasingly important in national and international public policy, to be applied within a vision of comprehensive and responsible land use, avoiding deforestation and forest degradation.

In this context, States are increasingly involved in updating and evaluating their forest and climate change policies. To achieve this, comprehensive monitoring of forest management is essential. This involves the generation of information on biophysical aspects of forests and other productive land use, socio-economic benefits of forests to the population and governance for equitable distribution of those benefits. This information as a whole is necessary not only to a solid construction of new policies but for the payment of benefits based on results, as the mechanism for Reducing Deforestation and Forest Degradation (REDD+).

Quantity, quality and efficiency of forest information

In the case of Peru, a country with 57% of forested area , the government is running serious initiatives to improve information on a broad range of needs for forest management, such as the national forest inventory (with its two components: biophysical and socio-economic), satellite monitoring of forest and land use, inventories for evaluation and assessment of the natural heritage,the permanent production forests inventory, the measurement, reporting and verification system for REDD+, the national greenhouse gas inventorysystem, the forest cadaster, the control module of wild wood production, the national forest and wild fauna information system, and information for the national accounts and for the forestry and ecosystem service satellite accounts.

Other initiatives to develop are the national information system of safeguards for REDD+ and the national monitoring of forest governance. All these initiatives jointly managed would truly support comprehensive monitoring of forest management, since they involve biophysical-environmental, socioeconomic and governance information needed to guide and evaluate actions to mitigate and adapt to climate change. However, to face this challenge, you must meet certain principles demanded by users. For example, the scientific community — represented by the Intergovernmental Panel on Climate Change (IPCC) — requests relevant, reliable, complete, consistent and transparent information. On the other hand, the increasing number of actors involved demands more participation to present their goals and needs, and also request that the information is accessible.

Another important principle is the sustainability of monitoring systems, in such a way that States must work hard on financial strategies and institutional coordination to avoid duplication of efforts and ensure system efficiency. Finally, due to the complexity of this challenge, scientific and practical knowledge should be shared among international organizations, as well as national, subnational and local government institutions, scientific communities and civil society organizations.

photo: ILRI-Mann

Guest Author: Stella Gama, Ministry of Natural Resources, Energy and Mining, Malawi

In my view an effective REDD+ approach is linked to the engagement of all relevant stakeholders, regardless of gender, and to the promotion of equality and equity in terms of participation in decision-making and access to benefits. Specific attention to women’s needs and contributions is key to efficient REDD+ strategies and activities, and the UN-REDD Programme is helping to guide countries conceptually and methodologically in addressing the gender considerations of REDD+.

The UNFCCC ‘Cancun Agreements’ call for the integration of gender considerations within REDD+ national strategies, and this is reflected in the UN-REDD Programme Strategy 2011-2015, which makes numerous references to gender equality and equity. Moreover, integrating gender sensitive activities in REDD+ efforts can help improve the efficiency, efficacy and the long-term sustainability of forest management.

Malawi joined the UN-REDD Programme in 2013 – we wanted to be part of the global REDD+ network to benefit from the capacity development, and technical and financial support provided by the UN-REDD Programme to implement REDD+ activities. Thirty per cent of Malawi’s land area was once covered in forest. Since 1992, there has been a high deforestation rate, according to statistics 2.8 per cent annually, so we hope to increase forest cover through engaging with REDD+ activities and to enhance sustainable forest management strategies.

There are other advantages – working with the UN-REDD Programme also means having a wider platform. The Programme has created a platform for sharing lessons and best practices particularly for countries who have advanced, so we don’t have to reinvent the wheel, only to learn from other countries and from the mistakes which have already been made and giving us a pool of knowledge to draw on. Other advantages include support for REDD+ preparedness activities. Malawi has developed a REDD+ Roadmap through support from the US, and now through collaboration with the UN-REDD Programme we will get immediate support in order to implement some of the activities in the roadmap, and address governance and monitoring, reporting and verification. Ultimately we hope we are going to benefit from a national programme.

One of our challenges is that in the past we have had disjointed sector coordination. REDD+ is not just about the forestry sector. We can ensure that we embrace other sectors, and draw a wider range of stakeholders into REDD+, we are looking at the Green Economy approach and livelihoods, sustainable forest management agriculture, biodiversity conservation and other multiple core-benefits.

The opportunities presented by REDD+ can potentially create a fairer gender balance in forestry decision-making. In Malawi we have both matrilineal societies and patrilineal societies. REDD+ represents an opportunity to involve women and offer a greater participation in society, and also to enhance the benefits that women get from REDD+. With regard to benefits it is about the access and control of benefits, e.g. secure forest land tenure from REDD+ due to the need to consider women’s contributions in REDD+ implementation.

During discussions for developing the National REDD+ Strategies – Africa, gender mainstreaming was on the table. This will also help to enable even better gender balance. Specifically with the inclusion of gender-sensitive safeguards in the development of national REDD+ programmes in order to develop a gender-transformative strategy so that the new paradigm specifically contributes to the advancement of gender equality while safeguarding women’s rights, thereby contributing to climate change solutions. In addition, use of the affirmative action to ensure gender balance in REDD+ Academy. The tools designed for training delivery should integrate gender. We also need gender balance indicators for participation as well as impact of REDD+ activities — for both women and men.

 

Stella GamaBio: Stella Gama is the REDD+ focal point for Malawi at the Ministry of Natural Resources, Energy and Mining. Ms. Gama discussed gender mainstreaming while participating in the UN-REDD Programme Workshop “Regional South-South Exchange – Africa: Developing National REDD+ Strategies” Workshop, being convened in Nairobi at UNEP, 14-17 October 2014.  View workshop agenda.

Guest author: Stuart Clenaghan

In my view there is a critical missing link in REDD+ thinking, and that relates to the high cost of finance for small and medium-sized enterprises (SME) in developing countries. SMEs are widely acknowledged to be the real engines of economic growth, and account for between 80 per cent and 90 per cent of forest enterprises. Yet SMEs face strong headwinds when it comes to accessing funding. For many SMEs, the unsustainable exploitation of natural resources – or “natural capital” – is a substitute for financial capital.

This perspective draws upon insights gained as a co-founder of a private sector sustainable forestry company, striving to deliver strong financial, social and environmental results in Peru (a UN-REDD Programme partner country), as well as my experience of capital markets as a former investment banker.

The link between the high cost of capital for the private sector in developing economies and the unsustainable exploitation of the natural capital of forests has received little attention in the global debate on REDD+.
Yet the behaviour of the private sector is fundamentally influenced by the availability of finance – both equity investment and loans – and by how much it costs. This is as true for a farmer working a two-hectare plot as it is for a forestry company working two hundred thousand hectares. Where capital is expensive, or difficult to obtain, the only option for many is to turn to the exploitation of natural capital. Conversely, where cheap finance targets forest-friendly enterprise, business follows.

For REDD+ to succeed we must overcome the shortcomings of financial markets in countries where forests are at risk. And because the drivers of deforestation are rooted in the wider economy (think charcoal supply chains, or urban markets for agricultural produce), investment is needed not just in forests, but in other areas too. Anyone with experience in building businesses in developing economies will attest to the difficulties in raising money. Equity investment is often tightly controlled by wealthy elites, and there are few other sources of venture capital or private equity. Bank loans are expensive, frequently at rates of 15-20% or more, available only to those offering guarantees and collateral. Additionally, businesses in poorer countries face costs that peers in developed markets do not have. True, labour bills are generally lower, but poor infrastructure and lack of service providers force companies to invest in vertically integrating their operations. One company, a 5,000 hectare rice farm in east Africa, has had to build its own hydro and biomass power plants, construct rice drying polishing facilities, invest in packaging and marketing, and on top of that maintain a 100 kilometre stretch of road. This expenditure would be unnecessary had it been a potato farm in eastern England, where outsourced services are readily available.

It is hardly surprising, then, that some turn to the exploitation of natural capital. We can see examples across the globe, from East Africa’s charcoal trade (estimated to be worth US$ 350 million a year in Dar es Salaam alone and employing hundreds of thousands of people), to the destruction of mangroves in India for shrimp farming, and agricultural frontiers where forest is cleared for ranching or crops.

Historically, the transformation of natural capital to financial capital has underpinned the growth of some of today’s biggest economies. Waves of deforestation in England fed agricultural expansion, maritime trade and the early industrial revolution. The great Hanseatic port cities of Germany and the Baltic expanded on the back of trade of timber pulled from northern hinterlands. Indeed, the very foundations of monetary systems were built upon natural capital – the world’s first coins were forged in Lydia (in today’s western Turkey) from bronze and silver smelted with charcoal from deforested uplands.

To achieve lasting REDD+ results, access to financial capital must replace the exploitation of natural capital. We need more than investment in forests: we need to effect deep-rooted socio-economic changes across whole economies. If we ask forest nations to do a job in protecting forests and sinking carbon, then we must provide financial capital for sustainable growth.
By linking financial capital, economic development, and the goals of REDD+ we can gain insight into the type of mechanism required:

  • First, countries that deliver reduced emissions – or even carbon sinks – need to be paid for results at agreed prices, and on a bilateral basis. Market-priced payments introduce too much uncertainty and income volatility. And, as we have seen with the much-criticised Clean Development Mechanism, project-based accreditation brings high transaction costs, uncertain financing and drains scarce management resources.
  • Second, forest nations need national development banks that supply low-cost finance – equity and loans – to spur REDD+-friendly private sector enterprise from micro-scale to national-sized corporations. As a model, take a look at Brazil’s BNDES, or even Germany’s KfW (set up to support post-war reconstruction).
  • Third, result-based payments must be ring-fenced for REDD+. The more successfully a country reduces emissions the more it earns, and the more capital it has to invest. REDD+ benefits will show up throughout the economy and that should be incentive for countries to adopt a holistic strategy. In fact, many governments have already started to identify where investment is needed in REDD+ Readiness plans produced with the UN-REDD Programme and Forest Carbon Partnership Facility.

 

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Two interesting outcomes might result from such arrangements:

  • The first is that REDD+ development banks could operate at a profit – REDD+ investment can make money.
  • The second is that ring-fenced REDD+ payments could enable countries to enhance their creditworthiness and issue bonds. In other words, a lot more private investment capital could be leveraged into REDD+.

Deforestation is driven by economic factors. For sure we need better land rights, governance, enforcement and conservation. But at the heart of the matter is the challenge of achieving non-extractive sustainable growth in forest nations. That can only happen if REDD+ bridges the deficiencies of financial markets.

 

stuart clenaghanBio: Stuart Clenaghan is an investor in environmental and sustainable forestry businesses. In 2008, he co-founded Green Gold Forestry, an FSC-certified sustainable forestry company operating in Peru, producing sawn hardwoods. Alongside its 154,000ha of forest concessions, GGF also sources logs through its programme of community forestry partnerships.  His consultancy, Eco System Services Limited, specialises in developing financing models for large-scale land-use projects. He is also a senior fellow of the Climate Bonds Initiative and a trustee of Botanic Gardens Conservation International, and a former investment banker with Lehman Brothers and UBS.

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TOURISTS VIEWING BIRDS IN KIBALE NATIONAL FOREST, UGANDA. BY MAKING FORESTS MORE VALUABLE STANDING THAN FELLED, REDD+ PROVIDES FOREST COMMUNITIES AND DEVELOPING COUNTRIES WITH A NEW, SUSTAINABLE, LOW-CARBON PATHWAY TO ECONOMIC GROWTH (PHOTO CREDIT: UNDP/MATHIAS MUGISHA).

(This blog post originally appeared on the UNDP blog).

The process to establish a UN REDD+ programme in Uganda is underway, with calls from the civil society for government to step up enforcement of environment laws and regulations to address the underlying drivers of deforestation and forest degradation in order to develop a more sustainable forest sector.

This recommendation was one of several that were made during a three-day review of the project document for the UN-REDD+ programme support for Uganda.

The aim of the workshop was to provide an update and progress of the National REDD+ Programme implementation, present a draft UN-REDD National Programme Document; and to seek input from Non-Government Actors including the civil society.

Uganda is preparing to implement REDD+, and is currently in the readiness phase, a crucial stage that involves developing the necessary policy and institutional framework before REDD+ can be implemented.  Allowing for input from multiple stakeholders in to the country’s Readiness Preparation Proposal (R-PP) is a key principal of achieving REDD+ readiness to ensure it is inclusive and participatory so as to lead to effective, efficient and equitable outcomes.

In 2011, government under the Ministry of Water and Environment set up the Environment Protection Police Unit to enforce environmental laws and prevent the degradation of protected areas. The cops were also tasked to sensitize members of the public on the environmental laws such as the National Environment Forestry and Tree Planting Act 2003. However, a combination of lack of capacity, poor facilitation, and increased encroachment by communities for economic livelihood, have made it difficult for this specialized police unit to enforce compliance.

REDD+ — reducing emissions from deforestation and forest degradation in developing countries — is a climate change mitigation mechanism launched in 2008 to help reduce greenhouse gas emissions by funding conservation and sustainable management of tropical forests, including paying developing countries to stop cutting down their forests. It builds on the convening role and technical expertise of the Food and Agriculture Organization of the United Nations (FAO), the United Nations Development Programme (UNDP) and the United Nations Environment Programme (UNEP).

Tropical deforestation currently accounts for 12-17 percent of greenhouse gas emissions from human activities, a share larger than all the world’s cars, trucks, ships, planes, and trains combined. The National Forestry Authority estimates that 80,000 hectares of private and protected forests are being cleared annually in Uganda for the unsustainable production of charcoal and timber.

Ms Ahunna Onochie-Eziakonwa, the UN Resident Coordinator, and United Nations Development Programme (UNDP) Resident Representative, described REDD+ as timely as it will build on the on-going implementation of the National Climate Change Policy, and also feed in to the on-going preparation processes for the second National Development Plan, and the United Nations Development Assistance Framework (UNDAF).

“The impacts of deforestation and forest degradation are significant contributors to climate change. As REDD+ development takes shape in Uganda and internationally, it is essential to ensure that it is effectively implemented, putting into consideration the potential challenges and risks,” Miss Onochie-Eziakonwa said, in a speech that was delivered on her behalf by Mr Daniel Omodo McMondo, Programme Analyst, Energy and Environment at UNDP.

” I therefore would like to reiterate the support of the United Nations Country Team to ensure successful implementation of the UN REDD Programme in Uganda and to appeal to all of you to actively engage and ensure successful preparation and implementation of the UN REDD+ National Programme as well as other related interventions in Uganda” she added.

The Assistant Commissioner, Margaret Mwebesa of the REDD+ National Focal Point in the Ministry of Water and Environment said the draft national programme document for UN-REDD still needs to undergo additional review and committed to consult more stakeholders to refine it further.

“We are going to have other consultative meeting with other stakeholders between this and next month before this document is endorsed, validated and sent the UN-Redd Secretariat for international peer review,” she explained.

Mr. Nicholas Soikan, a Social Development Specialist in the Anglophone region for the World Bank, said the consultative meeting was important because stakeholder engagement is very critical for the World Bank and REDD+ partnership.

“Without involvement of CSOs, without involvement of indigenous people and local communities REDD+ might not meet its objectives and that is basically why we are here; to communicate well. We are here to get their position, on how to address Redd+ issues in general and how they can participate more effectively in this process that is now in a high gear,” Mr. Soikan explained.

He said the World Bank is supporting several climate change initiatives in Uganda, and revealed US$3.6m has so far been provided by its Forest Carbon Partnership Facility to government to get the country ready for REDD+,  and formulate a strategy that will outline some of the strategic options for addressing drivers of deforestation.

Participants commended government for coordinating the REDD+ preparation process and ensuring it is multi-stakeholder driven, participatory, gender sensitive, transparent and accountable.

The UN-REDD+ Programme supports nationally-led REDD+ processes and promotes the informed and meaningful involvement of all stakeholders, including Indigenous Peoples and other forest-dependent communities, in national and international REDD+ implementation. The Programme supports national REDD+ readiness efforts in 55 partner countries, spanning Africa, Asia-Pacific and Latin America, in two ways; direct support to the design and implementation of UN-REDD National Programmes and complementary support to national REDD+ action through common approaches, analyses, methodologies, tools, data and best practices developed through the UN-REDD Global Programme. By June 2014, funding to support countries totalled US$195.7 million.

For more Information contact:

Daniel Omodo McMondo, Programme Analyst, Energy and Environment Unit, UNDP Uganda. Tel: +256 414 112100 Ext. 140. Email:daniel.omodo@undp.org

(This post originally appeared on the UNFCCC blog).

At the New York Climate Summit on 23 September, the United Nations is expecting clear commitments in the area of forest climate action.

Countries that are home to tropical forests have the opportunity to present priority actions on deforestation and forest restoration in their summit statements, including actions that are conditional on international support.

Developed countries can in turn outline their financial contributions to sustainably manage forests.

A new declaration – the New York Declaration of Forests – is expected to catalyze action from public and private sector as well as civil society organizations to combat deforestation and to ensure that new forests are planted.

The Declaration is likely to be accompanied by the announcement of a number of significant, concrete and tangible commitments to take action on forests by multilateral institutions, subnational jurisdictions, companies, financial institutions, and civil society organizations.

Why action on forests is important for the overall fight against climate change

According to the Intergovernmental Panel on Climate Change (IPCC), action in the area of forests is essential to stay below the two-degree warming limit.

More than a million hectares of forests are still lost globally every year. The release of carbon dioxide through the burning and cutting of trees and other biomass is responsible for around 20% of global greenhouse gas emissions.

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In New York, key commitments are expected to be made specifically to REDD+, which is Reducing Emissions from Deforestation and Forest Degradation, conservation of forest carbon stocks, sustainable management of forests and enhancement of forest carbon stocks in developing countries.

What commitments at the UN Summit mean for the UN climate process

Long-term commitments made in New York towards action taken after 2020, when a new universal climate change agreement is to take effect, can have a positive influence on raising immediate climate ambition.

Last year, governments completed the methodological guidance for REDD+, paving the way for its implementation.

Raising immediate climate ambition has been one key focus of work under the UN Framework Convention on Climate Change this year through so-called Technical Expert Meetings held in 2014, also through action on forests.

For example, at a meeting in Bonn in June, China and Brazil presented what they are doing in this field.

China said it had committed to increase its forest cover by 2020, and had already achieved more than half of this. China also plans to integrate forest carbon into its national pilot emissions trading scheme.

Brazil, home to the largest part of the Amazon rainforest, said it had achieved a decrease in deforestation during recent years, and would be able to do more with international support.

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Read about highlights of the UNFCCC Technical Expert Meeting on land use

Extensive information on REDD can be found on the UNFCCC REDD Web Platform

Read more about the action area of forests on the UN Climate Summit website

UN Photo/ Eva Fendiaspara

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The 20-member Policy Board of the UN-REDD Programme approved US$ 35,481,763 in REDD+ readiness funds at their 12th policy board meeting, held in Lima, 8-9 July, which was attended by more than 100 participants from 25 countries.

The meeting was marked by a collaborative and forward-looking atmosphere that included much knowledge sharing both on current and planned REDD+ initiatives. A full day was dedicated to “information sharing” on 7 July in advance of the official policy board meeting. H.E. Pak Heru Prasetyo, Head of the Indonesia National REDD+ Agency and H. E. Manuel Pulgar-Vidal Peru Environment Minister both attended the information day and highlighted the importance of REDD+ to climate change mitigation and the importance of the support delivered through the UN-REDD Programme to advance national REDD+ efforts. The ministers also emphasized the role of forests at the upcoming climate summit and UNFCCC COP20 in Lima.

Another highlight of the meeting was the launch of three new national programmes — Argentina, Cote d’Ivoire and Mongolia. Mongolia’s is the first boreal forest National Programme to be funded by the UN-REDD Programme.

The meeting was also an opportunity for UN-REDD Programme partner countries to discuss the future of the Programme post-2015. The policy board members approved a roadmap to develop the Programme’s 2016-2020 strategy by May 2015, which will include a strong participatory process.

Several REDD+ knowledge tools were also launched at the meeting including the REDD+ Academy, with the first regional sessions announced to take place in Indonesia, Nigeria and Argentina; and the REDD+ Radar, a new tool for tracking progress of National Programmes that can be used by country partners, donors and others.

The next UN-REDD Policy Board will take place in November 2014 in Tanzania.

 

For more information about the UN-REDD Programme’s Policy Board, or to access documents from the meeting, visit here

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Guest Author: Dr. Fiona McKenzie

Imagine you were throwing a rock. Where the rock ends up will pretty much depend on you – your strength, aim and coordination. You could easily predict where the rock will go and the trajectory could be accurately modelled. Now imagine throwing a live bird (this isn’t encouraged in practice). Even though the bird is subject to the same laws of physics as the rock, there is no way for you to know for sure where it will end up. Its trajectory is not something that can be easily predicted. You could try weighting the bird down to control its path, but this destroys the capability of the bird.

Why does the difference between birds and rocks matter? It matters because the way one would think about and work with a rock is different from the way one would (hopefully) interact with a bird. Too often we apply the wrong approach to the right idea. REDD+ is like the bird. While there were many expectations, fears and predictions when it was officially incorporated into the Bali Action Plan in 2007, it has since behaved in ways we didn’t expect.

This is because REDD+ has the properties of a complex adaptive system. A simple system is relatively stable and has straightforward cause-and-effect relationships (a bit like a rock). In simple systems, it is possible to analyse the parts of the whole at their most reduced or basic level in order to learn about the sum. A complex adaptive system is more like the bird. It exists within other interdependent systems and is driven by interactions between system components and governed by feedback. Its complexity comes from these patterns of interactions. It is constantly adapting. Results can be counterintuitive. You can make the changes you want, but you might not end up in the place you would expect. The whole truly is more than the sum of its parts.

Such complexity doesn’t have to be a liability. It can be an advantage, so long as we realise that we need to think and work differently in such contexts. What does this mean? It means that we need to be more aware of the patterns of interactions that characterise the whole and how these patterns create points of leverage or influence, often in unexpected places. We need leaders who can draw upon the emergent and self-organising nature of complex adaptive systems through facilitation, empowerment, evaluation and continuous re-calibration.

We need organizations (not just leaders) that can keep up with the dynamic nature of complex adaptive systems by being able to learn from and adapt to feedback. Learning requires experimentation, evaluation and reflection. Learning also requires taking risks and acknowledging failures. We need organizations (and individuals) that are willing to do both. This might require admitting uncertainty and taking on a portfolio of experiments. It may mean strategy becomes about setting a common vision or destination, but still creating room for a diversity of approaches in how to best get there. It definitely means creating organizations that can learn for themselves, based on real time feedback, continuously. In nature, if you don’t adapt you eventually become extinct.

There is no doubt that it will take time and commitment to develop the organizational skills and cultures needed. The good news is that there is a strong appetite for new ways of thinking and working. This was clearly evident at a retreat on collaborative cross-sectoral action (Smithsonian-Mason School of Conservation, Front Royal, USA), sponsored by UNEP and the UN-REDD Programme in December 2013. This is a start. The challenge is to ensure that this translates into action through ongoing high-level support for adaptive approaches that don’t fit the usual templates for planning and administration. Surely if anything were worth the effort, if would be REDD+.

This post is derived from a policy brief, Complex Adaptive Systems: Implications for Leaders, Organisations, Government, and Citizens.

Dr. Fiona McKenzie is an advisor and researcher with a background in agricultural and environmental policy and a PhD on farmer-driven innovation. She is an Honorary Associate in the Faculty of Humanities and Social Sciences, La Trobe University, Australia and a Strategy Advisor for the Australian Futures Project. She recently led a project with EcoAgriculture Partners and the United Nations Environment Programme (UNEP), funded by the UN-REDD Programme, on enabling cross-sectoral collaboration in the global food system. Previously, Fiona was part of the team that established the Terrestrial Carbon Group. Contact: fiona@fionamckenzie.com.au

Guest author: Zoë Cullen, Senior Programme Manager at Fauna & Flora International

Every good solution starts with a problem.

At the Forests Asia Summit last week, a wealth of intellectual capital came together to discuss the pressing global problem of tropical deforestation and the need to develop holistic solutions to reduce forest loss while enabling equitable and sustainable economic growth. In essence, how to transition to a Green Economy, or “Enterprise Earth” as aptly described by H.E. Heru Prasetyo, Head of the Indonesia National REDD+ Agency.

My personal experience of this challenge stems from working with Fauna & Flora International’s team in western Jambi Province, Indonesia. Here many adat (customary) communities have a strong desire to sustainably manage these carbon and biodiversity-rich forests as “village forest”. But support is needed to do this and to increase the productivity, value and sustainability of their agriculture-based economy to help ensure that rural economic development is not tied to forest loss.

This theme is replicated across Indonesia and globally. Beyond smallholder agriculture, such evolutions of practice are needed by agricultural producers at all scales and across sectors. How do we stimulate and finance this transition? What are the sources of finance and in what smart ways can they be deployed to drive results?

Donor funding alone will not suffice. The gap in funds available to pay for REDD+ and other conservation efforts is well documented. Private sector finance needs to be part of the solution.

The UNEP Finance Initiative and the UNDP Green Commodities Programme convened a workshop in Jakarta, with the support of UNORCID, on behalf of the UN-REDD Programme to discuss the use of results-based finance for REDD+. Essentially this is finance that rewards achievement of certain desired impacts, such as forest conservation, and there are many potential variations of results-based payments.

Participants of the UN-facilitiated results-based REDD+ workshop at the Forests Asia Summit, in May 2014.

Participants of the UN-facilitiated results-based REDD+ workshop at the Forests Asia Summit, in May 2014.

There has been much talk of green bonds that generate capital to invest in commercially viable green investments. They offer enormous potential to drive sustainable investments in commodity supply chains, for example. Recent work by ForestTrends highlights the potential for jurisdictional REDD+ bonds to support forest conservation and development of sustainable agricultural supply chains across an administrative landscape, such as a state or province.

Thinking back to my community forest example, I’m particularly inspired by the potential of the “development impact bond” model that repays bond investors using long-term donor commitments. Applied to forests, a “rainforest impact bond” could be used to make significant funding available up-front to support diverse REDD+ activities such as clarification of forest tenure, investment in more sustainable and productive agriculture practices, and forest protection.

Up-front certainty of multi-year funding would enable implementing agencies to offer results-based contracts at the field level that could be much longer than traditional grant cycles permit. This, in turn, would provide greater certainty to the beneficiaries of those contracts and sufficient time to support development of green economic activities designed to deliver sustained benefits to communities beyond the lifetime of the bond.

While this approach to results-based finance is still dependent on donor funds, it introduces the private sector as key part of the story.

For every potential advantage of these approaches, I recognise the challenges and as yet unanswered questions: the distribution and management of risk, defining the size, form and timing of results-based payments, ensuring equity and trust, and measuring impact, to mention but a few.

Yet, as Nelson Mandela once said, “It always seems impossible until it’s done”. Similar methods have already been used to great effect by the International Finance Facility for Immunisations (IFFIm) to scale up vaccine delivery in the world’s poorest countries.

Last week’s workshop advanced an important discussion about the role and use of results-based finance mechanisms in the context of REDD+. There is much work to do to turn these approaches into real and appropriate solutions, at a scale in keeping with the size of the problem. Like other elements of REDD+ it will require true cross-sector collaboration and design of mechanisms that are carefully tailored to the local context where results-based finance will be deployed. But if there was one over-riding message I took from the group it was – when it comes to designing these mechanisms…keep it simple stupid!

The rewards of success will be great, as we strive towards what Pavan Sukhdev (UNEP Goodwill Ambassador) described as the “Holy Grail of REDD+”, a green economy in which sustainable management of forest, crop and grazing lands sustains all the major ecosystem services on which we all depend.

 

zoe cullen flora and faunaBio: Zoë Cullen is a Senior Programme Manager at Fauna & Flora International. She oversees the Innovative Conservation Finance programme within the Environmental Markets team, which seeks to identify and develop sustainable finance mechanisms for biodiversity conservation. Much of her recent work has focused on REDD+, particularly in Indonesia.

 

 

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Author: Will McFarland, in Jakarta

The headline news in the Jakarta Globe earlier this week was that Indonesia’s economy has risen to 10th in the ranking of global economies. BUT, the analysis and commentary went on to say, the country’s growth is unequal, doesn’t benefit the poorest and is vulnerable. The next president faces the task of improving the quality of growth.

On Tuesday the same paper was filled with headlines from the Forests Asia Summit, which was one of the reasons I was in Jakarta for the week. In his keynote speech, Indonesian President Susilo Bambang Yudhoyono (SBY) made a plea for his successor to continue his commitments to reduce deforestation in the country and ensure that Indonesia finds a way to reduce its rapid deforestation rates.

So, what’s the link?

Indonesia’s economy and forests are inseparable. As the world’s biggest producer of palm oil, a US$ 40 billion industry globally, much of Indonesia’s economic activity centres on clearing forest. Palm oil is Indonesia’s second-largest export and generates huge tax revenue for the government. The domestic palm oil industry is a large part of the recent economic growth and it effectively contributes to ensuring that Indonesia’s 240 million citizens have better lives. However, Indonesia has made international commitments to reduce the rate of deforestation and knows that action is vital to tackle its serious contribution to global as well as local environmental and social issues.

Assuming that in the short to medium term that Indonesia’s economy will continue to rely heavily on palm, timber and other agricultural products, a delicate balance is needed between growth and environmental impact. SBY said this himself on Tuesday, “it’s about striking a balance…the central tenet of the strategy is about creating prosperity for everyone, in a way that does not harm the natural environment”.

There are many parallel issues that need addressing in order to achieve this, linking Indonesia’s forest reforms with a wide range of social and economic challenges. Conflict with local communities, dealing with fire and haze, and regulation of the private companies that dominate the industrial landscape in Indonesia are just a few of them. No single policy or action will manage to achieve this, and no single actor is responsible. Instead a multi-stakeholder approach is required, and this week a UN-REDD Programme, UNEP Finance Initiative, UNORCID and UNDP’s Green Commodities Programme convened workshop brought many of these stakeholders together in the first of three regional workshops to try and identify a coherent package.

Reducing forest loss while maintaining a strong economy can be delivered in two ways: firstly making more of the land available and creating more value in Indonesia (leaving remaining forest to be protected); or if deforestation is needed, ensuring that it is as low-impact as possible. Making more from the existing land could be achieved by attaining price premiums for certified products, or increasing yields form better practices and agro-technology. Creating “added-value” in the supply chains is also a key challenge for Indonesia as much of the palm oil it exports is unprocessed. Reducing the impact of deforestation can be done by avoiding high-conservation value areas, and peat draining and burning, perhaps by prioritising conversion of land that is already deforested and used for other purposes.

None of these are brand new ideas. And they are complex and difficult to achieve. But where innovation and investment of time, minds and capital is needed is in identifying how to promote, encourage, or force the shift of business practice to the types activities outlined above.

The workshop identified a suite of financial instruments and policy interventions that could drive private sector change. Potentially scalable and feasible ideas emerged, including:
• Wide ranging legal policy reform including removing perverse incentives and subsidies to the palm oil sector;
• Design of green bonds and development impact bonds to finance sustainable production;
• Building an economics evidence base that unpicks the implications of changing the sector’s practices.

Delivering these would require collaboration from the national and provincial governments, the financial sector, research and NGO partners, and early movers in the palm oil industry itself.

The front-page headline of today’s newspaper bemoans the lack of innovation in Indonesia’s economy – and the need for investment in skills and technologies in order to strengthen Indonesia’s economy, reduce its reliance on and exposure to other economies, and ultimately lead to improved quality of life in Indonesia. If we join the dots between this week’s headlines, and the evidence and discourse emerging from the research and thinking at this week’s summit and workshops, it appears that investing in changing practices to reduce deforestation is a no-brainer for solving Indonesia’s other prominent social and economic problems.

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Bio: Will McFarland is a Research Officer at ODI in the Climate and Environment Programme. He works on green growth, natural resources and forests.

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Green Bonds have been mentioned a number of times at the Forests Asia Summit taking place this week in Jakarta as a mechanism to finance sustainable land use and were described in excited terms at the Abu Dhabi UN Ascent in advance of this year’s UN Climate Summit. What is all the excitement about? Finance experts Iain Henderson and Johan Kieft, in Jakarta for the Forests Asia Summit; and Sean Kidney, at the Abu Dhabi UN Ascent, have not only asked a few questions, but tried to answer them too!

Q: There has been a lot of interest in bonds at the Forests Asia Summit in Jakarta this week. Are they a new financial mechanism?

A: The short answer is no. In fact, they have been around for hundreds of years and we know they were used in Renaissance Italy about 800 years ago. There are even claims that – like many things – the Romans invented them a couple of thousand years ago during the time of the Roman Republic.

Q: So why all the interest?

A: There are a few reasons. Although bonds aren’t a new mechanism, green bonds are relatively new and interest in them from the world’s largest investors is growing rapidly. We are also seeing the range of issuers expand and corporates are also now using green bonds to raise funds to drive sustainability down their supply chains. High quality or “investment grade” bonds are also the single largest pool of private sector capital. This is relevant as it is increasingly clear that we need to tap into the vast pools of private sector resources to plug the well-documented finance gap. Creating a financing mechanism that looks, smells and feels like something private investors buy and sell in large volumes every day makes a lot of sense.

Q: Fine, but why is this relevant to REDD+?

A: There is growing recognition that we need to move away from a “siloed” forest-centric approach to deforestation and forest degradation, towards a more holistic approach to development that is forest-friendly and has green growth at its heart. Beyond the forest frontier, we will also need to deal with the agricultural, infrastructure, urban and transport requirements that are essential to creating a green economy and this all costs money. However, this green economic transformation is vital to create the jobs and green growth that will in turn create the social and political space to allow REDD+ to be implemented at scale.

Q: So, how do bonds fit into this scenario?

A: To create the green economy described above, we will need a blueprint, and for this we need carefully planned green growth strategies that include REDD+. These blueprints will in turn require financing. This is where green bonds come in, as they are a mechanism for preferencing these sorts of green productive investments over alternative growth strategies in developing economies.

Q: How do the investors know what is “green”?

A: We need credible standards to differentiate what is green and what is not, especially in complicated areas like forestry and agriculture. These standards then need to be verified by reliable external third parties to make sure the funds raised from the bonds are helping, and not hindering, green development.

Q: Will this make a difference?

A: Yes. Robust standards that are externally validated can help reduce the risk and complexity of greener investing. They make product selection simple and standardised for investors and they outsource the social and environmental due diligence to credible third parties. There is huge demand for this. Twenty two trillion US dollars in assets represented by the Climate Bonds Initiative advisory panel is calling for this to help screen and preference green investment.

Q: Is this just about the private sector?

A: No. This is about repositioning the narrative in both policy and financial circles towards financing productive investments that will provide a much needed long-term economic stimulus. Uncovering the large-scale investor appetite we are seeing in the market will help to spur policy makers to develop green growth frameworks in the knowledge that cheap private sector capital is eager and available.

Q: So how do we scale up?

A: There are several key requirements such as issuing in large size to create the “liquidity” required by the biggest investors, strategic use of public balance sheets to buy down the cost of capital, using tax incentives and creating a compelling story. Have a look here for some more on this.

About the authors:

Iain Henderson joined the United Nations Environment Programme Finance Initiative (UNEP FI) in Geneva in 2012 to work on REDD+ and Sustainable Land Use. Prior to this, he spent two years in Hong Kong, where he grew up, with WWF’s Forest & Climate Initiative working on finance-related issues. For the first 12 years of his working life, Iain worked in investment banks in London in the Fixed Income, Currencies and Commodities divisions of UBS and Deutsche Bank.

Sean Kidney CEO and co-founder of Climate Bonds Initiative is also a member of the Board of the Network of Sustainable Financial Markets. He is also a member of the Commonwealth Expert Group on Climate Finance; the Finance Advisory Board of the European Wind Energy Association; Mercer’s Sustainability Opportunities Fund Advisory Panel; Palmetto’s renewal energy fund advisory board; and the Advisory Council for the Corporate Knights Capital Advisory Council.

Johan Kieft is currently working as the Head of the Green Economy Unit at the United Nations Office for REDD+ Coordination in Indonesia (UNORCID). During his career, Johan focused on climate change, green growing mainstreaming in development planning and sustainable development with a variety of development agencies and the United Nations. Some of his key achievements include his work on humanitarian assistance in Indonesia, facilitating the drafting process of the Viet Nam Green Growth Strategy and developing concept to mainstream REDD+ in a Green Economy in Indonesia.

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