New alliances for the restoration of ecosystems

Arnold Ponçon, CEO of the Ponçon Chalier Group from Nicaragua, motivates the participants for new cooperations. His recommendation: "The complexity of the system can only be met with diversity".

The regional forum "Private Sector Financing for Investments in Landscape Restoration in Central America" took place in San Salvador at the beginning of October. 

The collaboration of the two IKI projects Upscaling of private FLR investments in Latin America (FLILA) and the Green Development Fund for Central America brought together actors from the forestry and agricultural sectors as well as from the banking and private sectors for the first time. A total of more than 90 representatives attended on site and more than 100 online participants were present at times, Including participants from both the public and private financial sectors, the international cooperation and the agricultural sectors. 

Framework conditions for government incentive programmes

The topics discussed in seven different panels, amongst others, were risk management and monitoring of effects, already existing investments in landscapes in the region, the potential of impact investors for the restoration of landscapes, and government incentive programmes. 

Jorge Oviedo, the moderator of this panel, summarised the most important points for successful incentive programmes as follows: 

  • the existence of "champions" who serve as role models is necessary; 
  • the financial incentive must be clearly attributable to an ecosystem service;
  • transparent governance at all levels must be given; 
  • a monitoring and verification system must be available. 

Financing of restoration projects: Challenges and solutions

Challenges named for the financial sector's approach to restoration projects included: 

  • the complexity of establishing (non-financial) impacts, 
  • the risks and often the knowledge of the institutions and the producers. 

Therefore, several banks (e.g. the participating Banpro from Nicaragua, the Global Bank from Panama or the Banco Hipotecario and Banco Atlántida from El Salvador) organise capacity-building actions for their clients to increase the demand for these green financing products. Within the framework of projects for technical assistance, the banks are also expanding their in-house knowledge on this topic, collecting environment data from their clients, preparing a diagnosis of their client portfolio, and developing improvement and financial plans to implement sustainable practices, also comprising of an increase in forest areas. 

Adopting a holistic approach, Lucía Gaitán from Finance in Motion emphasized that landscape restoration should not only comprise of afforestation or the establishment of agroforestry systems, but also of any activities aiming to reduce pressure on existing forests. She sees local financial institutions as key actors with a catalysing role in scaling these investments. 

For example, participating banks are already financing activities that reduce the pressure on forests. The Banco Atlántida, talked, for instance, about investments in biogas plants, which reduce the need for firewood. The Global Bank presented investments in sustainable livestock breeding by means of introducing agroforestry systems. And Banpro explained the FOREST environmental trust fund, which is intended to manage afforestation projects, water sources and environmental education. This fund was initiated with the National Ministry of Environment in Nicaragua, among others. 

Social aspects of investments 

The social component was also emphasised, which is of particular importance in regions where large parts of the rural population decide to migrate due to a lack of prospects. Reports on social categories in the selection of investments came from Root Capital and the Hanns R. Neumann Foundation (HRS), among others. HRS supports families in coffee cultivation, for example in the adaptation to the impacts of climate change. 

Participants discussed the investment criteria of different impact investors and analysed financing options that are integrated into value chains, especially in the coffee and cocoa sectors.

Digital solutions for monitoring the impact of investments

Another discussion panel dealt with various technological options for risk management and impact monitoring of investments. Amongst other things, Jaime Garbanzo from unique land use presented a digital monitoring solution for agricultural banks and green investment funds that grant loans for agroforestry and afforestation and seek to verify their ecological impact. The digital solution supports the management and analysis of data in the fields of deforestation, carbon storage, sustainable practices and business figures. This tool is currently being piloted with a local financial institute in El Salvador.

Innovative financial products: Looking ahead

Finally, participants took a look ahead at the future of landscape investments and presented innovative green financial products such as LAGreen, the first impact fund for green bonds in Latin America, managed by Finance in Motion, as well as insurance products that fund restoration projects. These include, for example, the life insurance "Seguro de Vida Verde" from the Davivienda Bank and the climate risk insurance from the Banco de Fomento Agropecuario in El Salvador. 

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