Developing financial data on sustainable land use for investors

By Florence Bernard

What often prevents public and/or private bodies to invest in sustainable land use practices is a lack of tangible information to decide between several options against comparable metrics, reliably inform expectations of risk and return, for informed investment decisions. Very little data, if any, is available on either the financial requirements or performance of various sustainable land use practices.

One of the key objectives for the ICRAF-led SECURED Landscapes (Sustaining

Farmer in Cameroon explaining latex tapping. ICRAF and TMP are working on a project to understand how public and private financial investors can be encouraged to provide capital for sustainable land use practices Ecosystem and Carbon benefits by Unlocking Reversal of Emissions Drivers in landscapes) project, is to understand how public and private financial investors can be encouraged to provide capital for sustainable land use practices. TMP Systems – a finance and technology consultant focusing on asset management, economic development and climate change – provided technical guidance on this area with assistance from ICRAF

TMP Systems has built financial models that help to determine whether certain sustainable agricultural practice projects being piloted by ICRAF are financially profitable, and how they compare with the practices currently in place. Using field data from the country projects, they found for instance that the suggested sustainable practice in Indonesia (replacing oil palm plantations with Jelutong latex tree) showed a profitable return which was more than coffee agroforestry system but less than oil palm system.

The sustainable practice suggested in Vietnam (intercropping of maize with Acacia Mangium and Melia Azeradach) did not show a profitable return, however it did significantly improve on the base case scenario (mono-cropping of maize, cassava and rice).

Another key finding from the TMP Systems study was that combining improved production practices with post-harvest value chain upgrades (such as in areas of storage, energy, transportation, training and collective aggregation, etc.) can provide optimal outcomes in terms both of sustainability and livelihoods. However much of the data that would usually be required to develop such financial model was not available so TMP Systems had to rely heavily on proxies for certain inputs. It follows that better data and more robust financial models are needed to provide accurate cost benefit analysis that meets the needs of investors.

Building on the analysis of existing routes to finance for sustainable land use practices, TMP Systems recommends that public and philanthropic money should be used to make sustainable land use practices investment ready. This means developing enabling conditions for production, access to market, and reporting. Then, in order to get to scale, aggregating smallholder loans and securitizing cash flows through intermediary organizations like ICRAF could be an attractive proposition to private financial investors.

To attract more public and private financial investors, there is need to make sustainable land use practices an understandable and attractive niche for investors, and to have more data that makes it easy to value  assets and returns. While need for robust, reliable and comparable data is crucial, the cost of sending people out to collect data is astronomical and even more for projects like ICRAF’s at smallholder level. At the same time the reporting must be standardized and location specific. To address this challenge, TMP Systems is currently developing a Field Monitoring System that can combine self-reporting and a high level of automation. This promises to be a major improvement on current methods in terms of cost, efficiency, data quality and reliability, and adaptability to different local contexts and investor requirements.

Dragging a knowledge chain through the peat

Lack of understanding of peat is not the weakest link in the chain, say Meine van Noordwijk and colleagues

By Amy C. Cruz

The high emissions of greenhouse gases from tropical peatlands caused by changing their land use have become a problem for policymakers that they can no longer deny, as their own scientists have now confirmed what external critics told before.

Researchers at the World Agroforestry Centre Indonesia are assessing the viability of rubber agroforestry on peat. Photo: World Agroforestry CentreThe emissions need to be reduced to mitigate the effects of climate change but because of the complex issues involved, governments, societies and private businesses are still ‘muddling along’ when it comes to conserving peatlands. The peat models we have so far are as clear as mud.

Given the urgency and political sensitivity, peat and peatlands have become an interesting test ground for understanding the chain that links knowledge with action. Who needs to know, who can act and where is knowledge the weakest link in the chain's limiting action?

Such a ‘knowledge value-chain for peatland conservation’ can trace steps from fundamental understanding of peatlands all the way to multilevel actions towards conservation and reduction of emissions.

‘We found that there are four separate parts of an overall knowledge value-chain concept that links fundamental understanding to action’, said Meine van Noordwijk,  leading a team of authors in a recent publication in Mitigation and Adaptation Strategies for Global Change, ‘and there are several weak links that need to be strengthened in a complex chain. Coordinated research and action is needed to achieve positive policy actions and behaviour changes.”

The research team had looked at how people’s understanding, willingness, ability and actions towards peatland conservation have progressed over time. Understanding peat and its processes was the first section in the value chain, including the fundamental point of agreeing on the definitions of ‘peat’ and ‘peatland’ so that they can be correctly identified and assigned more attention, if necessary.

Towards this, different studies had been carried out to develop more accurate ways of quantifying and attributing emissions from peatlands and yet there was still room for improvement, especially because peatlands are variable by nature, making it hard to ensure accurate measurements. In addition, different land uses on peat also result in differences in emissions.

‘Hard science may seem easy compared to what it takes to get a globally agreed set of default values that can be used for transparent emissions’ accounting’, said Dr van Noordwijk.

The second section of the chain is the willingness to act to reduce emissions. For example, in the past, policymakers could not ignore the problem of smoke haze caused by peatland conversion because its effect on visibility was too obvious. Conversion without use of fire seemed an acceptable alternative. The invisible carbon emissions from the conversion and drainage itself could be ignored. However, when emission estimates, mostly from peat drainage and fires, identified Indonesia as the third-largest emitter of greenhouse gases there were hardly any Indonesian scientists who had experience and data to challenge or corroborate the claims.

‘Now that weak link has been strengthened, as is evident by the four papers by Indonesian scientists in the REDD-ALERT special issue. Indonesian policymakersnow acknowledge the importance of reducing emissions from peatland as part of the broader debate’, said Dr van Noordwijk.

But willingness to act is not enough. Third, relevant authorities need to be able to influence companies and people to actually reduce emissions. While peatland conversion appeared to be attractive to companies because it brought less conflict with local people and their land-right claims than conversion elsewhere, peatland use now gives oil-palm companies a bad name internationally and potentially affects their sales. Where the long process of issuing permits has already started, however, it is not easy for a local government to stop the conversion and reverse permits. Players at this level need to be aware of how emission reductions are calculated and valued. Local governments need to secure jobs and revenue, so alternative scenarios need to meet their expectations.

The fourth section of the chain is formed by farmers and their communities living in or near peatlands. Slowing current conversion and redirecting land-use changes without alternatives that provide improved livelihoods for local people is not attractive for any policymaker.

‘There are not yet sufficiently viable, alternative uses of peatlands that do not contribute to higher emissions but provide for local incomes and livelihoods’, said Dr van Noordwijk. ‘Thus, the primary focus for this section of the chain needs to be on testing and improving the various locally developed solutions, such as agroforestry involving locally adapted trees for which a market exists’.

Looking over the whole length of the knowledge chain, Dr van Noordwijk and colleagues conclude that progress has been made in the first three sections but peatland countries, such as Indonesia, and international supporters now have to focus on improving the fourth section. 

‘If good science, accurate numbers, a willingness and ability to act on emission estimates are not accompanied by viable alternatives for local livelihoods then the ultimate goal of reducing emissions cannot be achieved,’ conclude Dr van Noordwijk and the research team.

Read the article

Van Noordwijk M, Matthews R, Agus F, Farmer J, Verchot L, Hergoualc’h K, Persch S, Tata HL, Khasanah N, Widayati A, Dewi S. 2014. Mud, muddle and models in the knowledge value-chain to action on tropical peatland conservation. Mitigation and Adaptation Strategies for Global Change 19(6).

This work is linked to the CGIAR Research Program on Forests, Trees and Agroforestry





Peru: Ministry of Environment work with ASB partners to evaluate methodology for low emissions development planning

By Glenn Hyman and Valentina Robiglio

A lot of research and development deals with different aspects of reducing emissions from forest degradation and deforestation (REDD+). But how can we really get change on the ground? Last week collaborators of the ASB Partnership for the Tropical Forest Margins presented an approach to low emissions development planning to the Directorate of Land Use Planning and the National Forest Conservation Program, Programa Bosques, of the Ministry of Environment of Peru (MINAM) in a three days demonstration workshop.

William Llactayo of MINAM opened the

The meeting was hosted by the Ministry of Environment of Peru (MINAM) and involved researchers from the World Agroforestry Center (ICRAF) and the International Center for Tropical Agriculture (CIAT). Participants from the various directorates of the MINAM were trained in the Land-Use Planning for Low Emission Development Strategies (LUWES) methodology, which consists of the development of future land use and zoning scenarios and the calculation of the impacts of land use change on greenhouse gas emissions. Working in groups and using ABACUS software,  they combined information on land-use, carbon stocks and profitability for land-use systems in the Ucayali  region where research on this topic has been carried out by the ASB partners over several years. The results included an analysis of opportunity costs of avoided deforestation, estimates of CO2 emissions under different scenarios and the calculation of a reference emissions levels for REDD+.  

MINAM is now evaluating the possibility of implementing this methodology in their land-use planning processes. Given that every region of the country has a mandate to create land-use plans, this process could be a vehicle for including considerations on the reduction of greenhouse gas emissions and the conservation of other ecosystem services in development plans.  The expectation is that efforts to reduce emissions can be more efficient if they are connected to land-use planning processes. Read in Spanish

Working groups discussed low emissions

Can REDD+, PES and other payments prevent destruction and degradation of our ecosystems?

By Elizabeth Kahurani

Markets can only be a part of the solution to reversing unacceptable levels of deforestation and forest degradation, according to research from the World Agroforestry Centre (ICRAF). “Looking at the whole system and all available options remains the only guarantee, and this means taking a landscape perspective,” according to Dr Ravi Prabhu, Director of Research at ICRAF, who was speaking at a side event of Subsidiary Body for Scientific and Technical Advice (SBSTA) at the UN Framework Convention on Climate Change (UNFCCC) in Bonn on June 5th 2013.Dr Ravi Prabhu (left), Director of Research at ICRAF, with other panelists at a side event of Subsidiary Body for Scientific and Technical Advice (SBSTA) at the UN Framework Convention on Climate Change (UNFCCC) in Bonn on June 5th 2013

Dr Ravi defined a landscape as a mosaic of agriculture, forests, plantations with competitions, trade-offs and synergies between land uses. At this level, there are also multiple sectors, stakeholders and practices. Given that the system is so dynamic, he pointed to multifunctional co-investment mechanisms as necessary means of embracing local people, private and public sectors, PES bundling and stacking as options.

In other words, success was more likely if the needs and interests of all the actors who mattered were taken into account and a framework was set up to allow them to jointly invest finances, time and resources in the landscape in order to derive the values they were looking for. Although this would involve compromises and negotiation, a more diverse and therefore resilient system was likely to result.

The event, hosted by the Global Forest Coalition (GFC), focused discussions on a report on non-market based approaches to reducing deforestation and forest degradation submitted to SBSTA by GFC.

According to the report, indigenous communities have always preserved and protected their forests not just for the economic value they derive from them but also for important cultural and spiritual functions. According to the report, there is evidence to show that areas protected by communities are more likely to survive deforestation and negative environment extractions as opposed to areas protected through other means of control such as government bans. As such, empowering communities to manage their forests remains the best option from efforts to protect the ecosystem while promoting livelihoods. But how?

Debates and negotiations have centered on market approaches such as Payment for Environmental Services (PES) and Reducing Emissions from Deforestation and forest Degradation (REDD+). Essentially these approaches are based on a financial compensation to forest users for the opportunity costs of more ‘destructive’ land-use forms based on a market price for the goods in question, e.g. water or tonnes of carbon dioxide.

Simone Lovera, Executive Director of Global Forest Coalition warns that approaches based on such market mechanisms should be approached with caution as they could present a higher risk to communities particularly with regard to efficiency and equity. Besides, she argues, political and financial commitments do not match these policy frameworks. “For instance, so far, the carbon market has only realized less than 1% of the anticipated REDD+ funding. Financial constraints therefore bring in the issue of who receives funding, who is going to be paid for what and more often than not it is not the individual households that benefit,” said Simone while speaking at the UNFCCC side event.

She noted that there is need to pay attention to non-market based approaches that ensure recognition and territorial rights of the indigenous people and local communities. These should empower communities by also promoting local knowledge and information systems as well as policies for legal and financial support on land reforms, sustainable agriculture and that discourage destructive activities like logging. “Such means of empowering communities to protect their environment ensures sustainability as they do not rely on unpredictable and uncertain funding flows,” said Simone.

A landscape approach takes into account needs and interests of all the actors who matter especially local communitiesPresenting evidence from ICRAF’s work on environmental services, Dr Ravi used results from research sites in Southeast Asia and Africa to explain some of the PES related challenges especially on issues to do with equity and efficiency (see presentation on Slideshare). He emphasized the need for a comprehensive systematic approach, one that can leverage on best options available from various approaches and deliver on securing livelihoods for communities and ecosystem services. “Looking at the whole system is the only guarantee, and this means having a landscape perspective,” explained Ravi. He emphasized that a market price or opportunity costs based approach generally underestimated the full value of the forests, focused as they were on a particular good or service.

He concluded with the message that agroforestry systems can deliver both market and non-market benefits in ways that empower local communities to ensure sustainability.

Read about our work on Landscape approaches to REDD+

Meeting explores low emission development scenarios

By Glenn Hyman, International Center for Tropical Agriculture

Pucallpa, Peru - Last week more than 25 professionals working on issues related to reducing greenhouse gas emissions met in the city of Pucallpa, Peru to discuss low emissions development scenarios. The workshop was organized by the World Agroforestry Center (ICRAF) and the Regional Government of Ucayali, with participation of other institutions working in sustainable development in the region. The initiative is an activity of the ASB Partnership for the Tropical Forest Margins.

Group discussion during training on methodologies to estimate the costs and benefits of development, Pucallpa, PeruThe workshop was a combination of discussions on regional planning and of training in methodologies to estimate the costs and benefits of development. During the workshop’s first day, participants discussed different development scenarios, including the effects of increases in deforestation and increases in the development of certain crops. Subsequent days were used to estimate the impact of different development scenarios. Toward that end, ICRAF scientists gave training in the ABACUS software. Sonya Dewi and Degi Harja, of ICRAF’s Southeast Asia headquarters, traveled all the way from Indonesia to give instructions and how to use the software tool, as well as explaining low emissions development planning methodology. ABACUS  estimates greenhouse gas emissions and sequestration from land-use change and the opportunity costs of avoiding such changes.

On the last day of the workshop, workgroups presented the results of their simulations before a group of decision-makers in the region, including Franz Orlando Tang Jara, director of the Natural Resources Department of Ucayali and Miguel Vasquez, President of the Oil Palm Roundtable, among others. A news article by Peru national REDD Group had earlier indicated that the training would benefit officials from various government ministries.

The participants produced many interesting results and many questions to be answered with future research. Finding a balance between economic development and reducing greenhouse gas emissions will have its complications and difficulties. Some projections for growth of the oil Palm industry are going to imply substantial conversion of forests simply for the lack of other available lands. The development of new transportation infrastructure may have enormous impacts and requires much more research to understand the costs and benefits of these planned developments. The ASB  Partnership will publish a final report of the workshop at the end of May.

Read this article in Spanish here

Download: Landuse Planning for Low Emission Development Strategy


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