Inclusive landscape finance — Waking the sleeping giant

Inclusive landscape finance — Waking the sleeping giant

General - 30 June, 2020

Of a total of around 570 million farms in the world, more than 80% are smaller than two hectares. Hundreds of millions of these smallholders depend on agriculture and forestry for their livelihoods, and produce more than half of the world’s food. They have the potential to play a key role in achieving inclusive and climate-smart development. Currently, however, many of these smallholders live below the poverty line and are highly vulnerable to climate change. They are a sleeping giant, whose potential can be unleashed by helping them to improve their production and economic viability. But for this they need funding to invest in sustainable production practices, organization, access to information and markets, and the development of small and medium enterprises.

On a global scale, lack of money is not the problem — the problem is where it is invested. Every year, hundreds of billions of dollars are directed to industrial forms of agriculture and forestry, which are dominated by large-scale companies. Smallholders are sidelined. The bulk of the money thus does not reach the majority of agricultural and forestry producers.

But things are starting to change. NGOs, financial institutions, companies and governments are increasingly showing interest in new models that can reorient investments toward land-use practices that benefit the environment and the rural poor, including women and youth. Tropenbos International calls this inclusive landscape finance. New ways are being developed to direct funds to investments that contribute to sustainability and inclusiveness, such as blended finance and green bonds. However, concrete examples of their successful implementation remain few and far between.

Listen and learn

How can we make sure that investments in agriculture and forestry actually contribute to social and environmental objectives, and make landscapes more sustainable and inclusive of the rural poor? Professionals working in agriculture, forestry and finance all hold pieces of the puzzle, but they tend to operate in their own areas. There is an urgent need for these different parties to listen to and learn from each other. Tropenbos International therefore teamed up with the CGIAR Research Program on Forestry, Trees and Agroforestry (FTA) and the Center for International Forestry Research (CIFOR) on a new initiative to analyze barriers to inclusive finance and bring stakeholders together to come to workable solutions. The initiative encourages innovative thinking and joint learning, facilitates and strengthens networks, and builds bridges between actors across the usual sectoral boundaries.

At the beginning of 2019, Tropenbos International started conducting interviews with a wide range of experts about the barriers to and solutions for inclusive landscape finance; the interviews have been published online on the Tropenbos International and FTA websites. The information from these interviews fed into a webinar in July, with participants from an Ugandan NGO (Ecotrust), an investment manager (Althelia Funds), and the FAO. This was followed by an e-dialogue, through which hundreds of people from all over the world could join the discussion and provide input to a draft paper. In November we organized a panel discussion at the Global Landscapes Forum in Luxemburg, where the webinar participants entered into a discussion with other contributors, including representatives of Rabobank, Total SA, the Green Climate Fund, and a multi-village association from Guatemala. Finally, in December, we organized a digital summit. The results of the various discussions that took place throughout the year have been published online (including a white paper), and will be synthesized in a publication that is planned for 2020. The discussions also resulted in new plans to establish collaborative projects with Althelia, Ecotrust, the Rabobank and FAO; for example, on case studies of the impacts of innovative funds and financing approaches, to learn how they can be improved.

Helping landscape initiatives to set priorities

In 2019 Tropenbos worked with EcoAgriculture Partners to develop the Landscape Assessment of Financial Flows methodology. It can be used by landscape-level initiatives and multi-stakeholder platforms to identify financial flows within a particular landscape with both positive and negative impacts on people and the environment. It is a practical tool that helps stakeholders identify local sources of finance for new investment ideas, find the current financial flows that are most in need of transformation, and better understand the elements of a landscape’s financial context that require support.

In July the tool was piloted with a multi-stakeholder platform in the Juabeso-Bia and Sefwi Wiawso Landscape in Ghana. A major outcome of the pilot was that stakeholders started seeing their landscape from a different perspective. The assessment highlighted that companies are increasingly willing to invest in climate-smart cocoa production, which creates new possibilities for smallholders. But this also comes with new risks; it promotes smallholder specialization, which over time may decrease their resilience to climate change and market fluctuations. The assessment concluded that investments in climate-smart cocoa should enhance, rather than compromise, diversification. Besides cocoa companies, local and national banks could have an important role in achieving this, by including sustainability criteria in their assessment processes for loan applications.

The pilot’s outcomes have been used to develop local implementation priorities for the Mobilizing More for Climate programme, in which Tropenbos collaborates with IUCN NL and WWF NL in Ghana, Cameroon, Mozambique, Uganda and Indonesia. Through this programme Tropenbos will continue to work with the multi-stakeholder platform in Ghana to implement the recommendations that came out of the assessment. The methodology will also be used in new programmes developed by Tropenbos and its partners, such as Working Landscapes.

The future of landscape finance

Activities in 2019 resulted in new insights, connections and tools, providing a steady basis for future work. We learned that inclusive landscape finance first and foremost requires collaboration among local groups, national and international CSOs, and financial entities. Together they can develop funds to channel finance from various sources to local actors. Bridging the gap between investors and smallholder investees requires local organizations (forest and farmer producer organizations, unions, associations, etc.) that allow for funds to be aggregated. In this, NGOs can act as catalysts.

In the coming years, Tropenbos will continue to work with partners to organize producers, improve their financial literacy, develop risk reduction strategies, and create connections with financial institutions. This should help to attract new financial flows for smallholders and small and medium enterprises in agriculture and forestry. In addition, these cases will serve as a proof of concept. They should show what is possible, and therefore are expected to increase investors’ appetite to invest in similar initiatives. The ultimate goal is to wake up the sleeping giant, harnessing the full potential of hundreds of millions of smallholders in the forested tropics to achieve truly inclusive and climate-smart landscapes.

Published in the Annual Report 2019