INVESTING IN TREES AND LANDSCAPE ... - PROFOR

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BOX 3.1. REDD BENEFITS TO LOCAL COMMUNITIES Wildlife Works has been in business for 14 years; it pioneered a new business model that brings innovative market-based solutions to communities and wildlife conservation in the developing world. The company established a new entity, Wildlife Works Carbon LLC, to help local landowners monetize their forest and biodiversity assets. The company’s flagship REDD project in Rukinga, Kenya, protects over 500,000 acres of forest and brings benefits from direct carbon financing to Kenyan communities while securing a corridor between the Tsavo National Parks. Wildlife Works is actively developing a portfolio of additional REDD projects in Africa with the aims of protecting 5 million hectares of native forest, capturing 25M tonnes of CO 2 annually, creating thousands of sustainable jobs for rural Africans, and securing enduring markets for their products. Recently the company announced an agreement with BNP Paribas Corporate and Investment Banking and its commodity derivatives business in which BNP Paribas will provide up to $50 million in finance to combat deforestation and climate change. The bank’s carbon finance business and Wildlife Works will develop a portfolio of large-scale REDD carbon projects in Africa. BNP Paribas will have the option to purchase avoided emission credits created from the portfolio, with the right to purchase 1.25 million tonnes of credits over the next five years. The project meets Climate Community and Biodiversity Alliance standards and is designed to bring substantial benefits to local communities while protecting forests and biodiversity. Sources: http://www.wildlifeworks.com; http://www.ecosystemmarketplace.com/pages/dynamic/ article.page.php?page_id=7717&section=news_articles&eod=1 Granting greater control to those who appreciate the multiple services provided by trees and forest landscapes is a way to satisfy multiple objectives for investment in trees and landscape restoration, and increases the chances of reaching an outcome with acceptable trade-offs among those services. Investors who are interested in economic, social, and environmental sustainability might wish to pursue an investment strategy built around strengthening local control. The case for local control of various forest and tree-based enterprises across the landscape can be viewed in terms of economic, social, and environmental impact. Economic impact In developing and developed countries, SMEs—such as those found across different landscapes— can be the engine of economic development. For example, Mayers (2006a) estimates that in many countries, 80–90 percent of forestry enterprises are SMEs, comprising over 50 percent of all forest sector employment and over $130 billion a year of gross value added globally. Unlike the vertically integrated industrial model of forest resource management that has been the dominant paradigm for so many years, small-scale industry has specific microeconomic characteristics that generate a multiplier effect in rural economies—wealth is accrued locally, resource rights are secured as enterprises develop, social capital is enhanced, and local environmental accountability is strengthened (Macqueen 2008). This translates into entrepreneurial skills, higher incomes, higher local consumption, and improved terms of trade. The Livelihoods and Forestry Programme funded Chapter 3. OPPORTUNITIES AND CONSTRAINTS FOR INVESTING IN FORESTS AND TREES IN LANDSCAPES 73
y the UK Department for International Development (DFID) in Nepal (LFP 2009) reports that the multiplier effect is approximately 10:1, but some studies calculate it to be as high as 20:1 (GEF 2009). Social impact Economic development that involves the active participation of local people has obvious social benefits. Specializing in small enterprises (e.g., timber processing) allows households to make a smooth transition from subsistence living to the market economy. Time gained through buying food in the market instead of hunting or gathering can be spent participating in local institutions. Surplus income is often invested in health and education, improving the welfare of the next generation through better nutrition and broader horizons for fulfilment. Communities with a mosaic of locally owned businesses tend to have more self-confidence, political influence, and autonomy. Environmental impact It is a common generalization that forest-dwelling people are naturally disposed to be careful stewards of the environment and that when they do collude in the degradation of forests, they do so for understandable economic reasons (the “poverty causes deforestation” argument). Conversely, when forest-dwelling people receive financial benefits from the forest, they have a strong incentive to keep the forest standing (Carter, Felber, and Schmidt 2007). This may not be entirely accurate for all people in all places (just as negative generalizations about large corporations may overlook positive examples), but widespread evidence from around the world demonstrates that private property holders, including those with communally held property rights, can and do protect public goods if the appropriate incentive structure is in place. In fact, rural communities own or administrate under license at least one quarter of forests in developing countries, and they invest $2.6 billion in conservation, exceeding state funding and all forms of international conservation expenditures combined (Scherr, White, and Kaimowitz 2004). Macro Versus Micro Investments It is easy to understand why investors and governments often perceive greater value in macro investments that involve few transaction costs, as long as areas of land can be found that are empty or underutilized. But perceptions that such areas exist are highly questionable in most contexts. For instance, in South Africa, large plantations have always been the preferred option for timber companies. But first land shortages and then land reform have forced companies to negotiate with multiple smallholdings through outsourcing agreements. It remains to be seen whether the reduction in scale efficiency brought about by the new approach will have a significant effect on profitability and to what extent the benefits of improving the social and economic conditions of smallholders outweigh any such costs. What is clear from recent research is that investments in SMEs have some advantages from a sustainable investment perspective. 4 Research suggests that industrial-scale commercial forestry has, at best, avoided exacerbating poverty, but evidence is scarce that it has actually reduced poverty (Mayers 2006b). Small and medium-sized forest enterprises offer better prospects for rural development, especially when they are organized in groups or associations that have strong social and environmental aims (Macqueen 2007a). 74 INVESTING IN TREES AND LANDSCAPE RESTORATION IN AFRICA
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INVESTING IN TREES AND LANDSCAPE RE
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Acknowledgments This volume draws o
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REFERENCES_________________________
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vi INVESTING IN TREES AND LANDSCAPE
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OVERVIEW Reforestation measures for
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out their plans. This vision of cli
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ABBREVIATIONS ACT ADB BDSP CA CBI C
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PROFOR RA REDD REIT SADC SAGCOT SFM
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INTRODUCTION WHAT DO WE MEAN WHEN W
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The approach can involve the use of
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HOW CAN WE GENERATE INVESTMENT? Des
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1 TREE-BASED AND OTHER LAND MANAGEM
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Macro Trends That Affect Demand for
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In this context, investment opportu
Page 30 and 31: Indigenous Fruits, Nuts, and Kernel
Page 32 and 33: Honey The global trade in honey is
Page 34 and 35: TABLE 1.4. PRODUCTION AND CONSUMPTI
Page 36 and 37: continue to depend on charcoal and
Page 38 and 39: Tree Crops Coffee is one of the top
Page 40 and 41: Faidherbia albida intercropping sys
Page 42 and 43: Carbon storage in fertilizer tree s
Page 44 and 45: Marketing and Processing Investment
Page 46 and 47: 1.4 VALUE CHAIN INNOVATIONS FOR PRO
Page 48 and 49: In Africa, farms that engaged in ce
Page 50 and 51: 3. Some tree-based investments, suc
Page 52 and 53: 2 WHERE DO PRIVATE MARKET INCENTIVE
Page 54 and 55: and coordinate investment in major
Page 56 and 57: BOX 2.1. KAGERA RIVER BASIN: TRANSB
Page 58 and 59: at first seemed modest, when adjust
Page 60 and 61: with strong policy and extension su
Page 62 and 63: country-level analyses to identify
Page 64 and 65: supermarket in Africa, and growing
Page 66 and 67: nonfarmed areas in infrastructure,
Page 68 and 69: BOX 2.5. WESTERN KENYA TEA LANDSCAP
Page 70 and 71: size of an agricultural carbon proj
Page 72 and 73: COUNTRY PUBLIC PRIVATE (by descendi
Page 74 and 75: To avoid participating in this scen
Page 76 and 77: need to be developed. Progress in l
Page 78 and 79: 3 OPPORTUNITIES AND CONSTRAINTS FOR
Page 82 and 83: SMEs operate in various kinds of va
Page 84 and 85: sovereign wealth funds, and so on.
Page 86 and 87: Investors may be neither willing no
Page 88 and 89: BOX 3.3. OVERCOME REGULATORY BARRIE
Page 90 and 91: land must be unclaimed wilderness.
Page 92 and 93: issues should be dealt with before
Page 94 and 95: Capacity building is relevant for a
Page 96 and 97: Certain issues should be explored f
Page 98 and 99: anything. For this reason it is som
Page 100 and 101: to increasing the capacity of commu
Page 102 and 103: Hard investors, on the other hand,
Page 104 and 105: REFERENCES Aagaard, P. 2010. “Con
Page 106 and 107: Cheboiwo, J. 2007. “Economic and
Page 108 and 109: Feleke, S.T. and R.L. Kilmer. 2009.
Page 110 and 111: Huang, S. 2004. Global Trade Patter
Page 112 and 113: Mathenge, M., J. Olwande, F. Place,
Page 114 and 115: Place, F., S. Franzel, J. Dewolf, R
Page 116 and 117: Sileshi, G., F. Akinnifesi, O.C. Aj
Page 118 and 119: _____. 2011. Conflict, Security and
Page 120 and 121: ANNEXES ANNEX I. SOURCES OF SPATIAL
Page 122 and 123: ANNEX II. INVESTOR TYPES IDEAL TYPE
Page 124 and 125: BO LAGER pointed out that farmers w
Page 126 and 127: areas and watersheds and to anticip
Page 128 and 129: The company does not deal with fore
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ANNEX IV. INVESTMENT FORUM PARTICIP
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FIRST NAME LAST NAME TITLE COMPANY
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FIRST NAME LAST NAME TITLE COMPANY
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HISTORICALLY, BOTH PUBLIC AND PRIVA
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