For fledgling businesses with big ambitions to positively transform landscapes, getting private sector investors on board can be tricky. What can they do to make it easier?
We put the question to experts in West Africa’s sustainable impact investment space – here’s what they had to say.
Sustainable landscape enterprises must ‘think markets’ if they are to be successful. Securing off-take agreements with private companies committed to responsible sourcing has proven to be a successful strategy in western Ghana’s cocoa-growing landscape.
Increasing demand for forest-risk commodities like cocoa, oil palm and soy threatens the future of our forests. In fact, estimates of global commodity-led tree cover loss hit 27% between 2001 and 2015 – making it the primary driver. But getting the right balance between land-use patterns – protecting and restoring our remaining forests at the same time as providing enough fuel, food and fibre to sustain a growing population – is no simple task and requires a coordinated effort between many different actors and across supply chains.
One solution evolving over the last few decades comes in the form of the sustainable ‘landscape approach’. Celebrated for their potential to bring on board stakeholders from across sectors – including government, private companies, producers and communities – landscape models look at long-term, sustainable management of resources within a given landscape. For these models to be commercially viable, attracting private sector investors into the mix is critical but has so far proved challenging.
Investor appetite is changing
Historically, the general investor perception has been that sustainable land-use businesses are high risk – with uncertain and slow returns on investments. But this has started to change. Larry Fink (CEO, BlackRock) reckons that due to the widespread impacts of climate change, investors are feeling increasingly compelled to engage in sustainability initiatives and be part of the solution.
Even so early-stage landscape initiatives still have financial barriers to overcome – finding it difficult to identify the right funding opportunities and match investors’ preferences. How can they address this?
Attracting sustainable impact investment
Last October, experts from the wider community of sustainable impact investment came together to share their experiences with financial solutions for landscape approaches in West and Central Africa. Corne De Louw, Project Manager at Rabobank, was joined by Fidelity Bank Ghana’s Head of Agri-business, Andrew Ahiaku along with Haruna Eliyasu, Landscape Development Coordinator at the Nature Conservation Research Centre (NCRC).
Convened by Partnerships for Forests, panellists shared practical advice to landscape businesses on how to attract investments to sustainably commercialise their operations, outlining strategic criteria for businesses to consider when scoping for private capital. Their advice is summarised in this financing guide for landscape businesses. We share a preview of these insights below.
A key recommendation for landscape initiatives was to “start small”. It might sound counter-intuitive for a vision to transform large land areas, but as Haruna Eliyasu from NCRC explained “there is no easy way of getting initial funding for sustainable landscape financing. The most innovative approach is to find a solution within the landscape”.
The conservation NGO found innovative ways of generating funding for the 150,000-hectare Wechiau landscape in Northern Ghana. After successfully leveraging an initial donor grant, setting-up a self-sustaining community trust fund, and supplementing revenue from ecotourism with that from sustainably harvested commodities, NCRC supported local communities to have stronger, more secure incomes as well as sustainably finance its wildlife protection.
Beginning with immediately available funding opportunities – such as personal or joint savings, community resources and/or social impact investments – would enable similar sustainable production schemes to get off the ground. By creating this foundation, such businesses would be better placed to approach traditional investors, securing a proof of concept that could readily be scaled-up and create real returns for both parties.
In any landscape enterprise, it is vital to ‘think markets’ and find solutions that answer demand and supply problems of commodity value chains already in the landscape. One way of doing this is by securing off-take agreements with private companies committed to responsible sourcing and having them fund specific value chain operations, such as training producers on best agricultural practices or supplying farmers with inputs to improve their yields.
A successful example of this kind of strategy supported by Partnerships for Forests is aiming to make Ghana’s 240,000-hectare Juabeso-Bia cocoa growing landscape deforestation-free. Headed by cocoa manufacturer Touton, the model brings a consortium of partners to train farmers in climate-smart farming techniques who then sell their cocoa beans directly to Touton for processing.
The way forward
Above all, forest landscape ventures must demonstrate that their organisational arrangement has the capacity to control costs and risks related to material adverse change – such as an unexpected drastic decrease in production volumes or yields – through consistent results and overall performance. An often-underappreciated consideration to some, Andrew Ahiaku estimates this alone could increase the chances of loan approval by 75%.
Ultimately, there is no blueprint for unlocking landscape finance; forest-based enterprises must have a deep understanding of the dynamics of their sector in order to identify and explore opportunities to leverage scaling.
In practice the search for this kind of impact capital will necessarily be a continuous process. To maximise chances, scouting for investor opportunities from the earliest stages of idea conception and throughout the entire landscape management process is key. But given access to the right funding, landscape management strategies are starting to fill a large section of the puzzle in safeguarding the world’s forests.
For more practical advice on accessing finance for sustainable landscapes, read and share the financing guide for landscape businesses.