INVESTING IN TREES AND LANDSCAPE ... - PROFOR

Capacity building is relevant for all parties. Investors can learn more about certain landscapes and
local conditions. Governments can learn more about what works in promoting enterprise. NGOs can
refine their community development skills. Capacity building is an integral part of the process, with
each step calling for different skills and intervention from third parties.
The guiding principle is to respect inherent skills while acknowledging the potential for improvement.
All parties should commit to bringing optimism, enthusiasm, and a willingness to learn. Investors
must acknowledge that investment will be required in capacity building and that new enterprises
have the right to make mistakes, as long as they learn from them quickly.
Building a Partnership
Trust and transparency: foundations of a successful partnership
Transparency can relate to the process of negotiating a deal and to the way the business is managed,
managers appointed, salaries agreed upon, and benefits distributed. Many community enterprises
fail because a lack of transparency leads to a loss of trust between the leaders and the members.
Investors are likely to be used to a high degree of transparency, as they are accustomed to published
accounting and auditing. Banks expect some scrutiny of the deals they sign.
Transparency should permeate every stage of the process, and all parties should try to ensure that
information can be readily accessed and understood (transparency is worthless if the information
can be understood only by insiders). While transparency deals with access to information, capacity
building enables people to understand the information and act on it appropriately, and thus reduces
the possibility of exploitation. The principle of transparency is one of open and honest sharing of
information at all times. The practical steps involve training, translation, and use of appropriate
communication tools.
However, transparency is just one element of the process of trust building. In modern investment
relationships, the process of trust is embodied in institutions and signified by the strength of social
capital. For instance, the sanctions for misconduct by directors ar severe in many jurisdictions, usually
ensuring some adherence to fiduciary responsibilities. These sanctions are buttressed by systems
that monitor performance, such as independent auditing of accounts. Assets lodged as security for
a loan can be relied upon to be available for alienationin the event of default. In forest investment,
with its long time frames and remote locations, trust plays an important role in satisfying investors
that future returns will be realized. However, local institutions may be weak or nonexistent, and
judicial systems dysfunctional. Therefore, some outsourcing of trust may be necessary; for instance,
by encouraging certification schemes such as that of the Forest Stewardship Council (FSC), by
setting up auditing systems, and by long-term involvement of intermediaries.
Compatible visions and common goals
In conventional investing, it is not always essential that the investor and investee share a common
vision, but it is important that the investee convey a singular vision that is consistent with the
investor’s own worldview and sufficiently motivating to suggest to the investor that this company
will achieve its business goals. Objectives indicate the direction of travel, while vision generates
motivation and tenacity.
Chapter 3. OPPORTUNITIES AND CONSTRAINTS FOR INVESTING IN FORESTS AND TREES IN LANDSCAPES
87