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As the pressing need for private sector finance to help support REDD+ becomes clear, so too does a major sticking point: businesses say they need evidence of effective forest governance before they invest.
The idea of REDD+, or reducing emissions from deforestation and forest degradation, is to give financial incentives to preserve standing forests and thus reduce carbon emissions. Although policy makers originally intended that long-term funding would come from markets, so far most activities are covered by overseas development budgets.
But with the UN Environment Programme (UNEP) estimating that an average additional investment of $40 billion a year is needed to halve global deforestation by 2030, and public funding sources strained by the global financial crisis, private sector capital, whether in public–private partnerships or corporate investments, is essential for the scheme.
“Private sector finance is expected to provide a significant amount of all REDD+ finance,” Chris Webb of professional services firm PricewaterhouseCoopers said in a panel session on engaging the private sector in REDD+ at a UN-REDD Global Symposium held in Jakarta in June.
“The threat of the private sector not getting engaged is getting bigger and bigger,” he added.
Increasing engagement will require changes to the business environment in REDD+ countries to make it more attractive, Ravi Prabhu, deputy director general of the World Agroforestry Centre, pointed out during the panel session.
“We need to focus on creating the conditions within which the kinds of business we want to see flourish do flourish,” he said.
And for that, “good governance is critical”, according to Yaya Junardy, president of the Indonesia Global Compact Network, who reported findings from private sector roundtables on development issues held in Indonesia earlier this year.
“One very important thing consistently mentioned by the private sector and private business is governance, rule of law and public policy,” he said.
The governance principles that the private sector needs to see, Junardy reported, are the “fundamental values” of transparency, accountability, responsiveness and serving attitude, along with ethics, participation, equity and inclusiveness.
Australian businessman Nigel Turvey of KeepTheHabitat voiced views of the private sector.
“Creating an enabling environment is creating an environment where investors can come in and feel reasonably certain that they can at least get their money back, that there are not two books running, that it doesn’t go into someone’s pocket, it goes into the work,” he said.
“Once you’ve established good governance, then that allows you to invest.”
Similar findings emerged from a Yale/IUFRO side event at the U.N. Forum on Forests 10 in April, where private sector actors discussed the need for land tenure security, contract law, improved transparency and reduced corruption and collusion, as well as the risk associated with the possibility of laws changing.
Studies by the Center for International Forestry Research (CIFOR) have identified the importance of strong and effective forest governance systems for the success of REDD+. Yet CIFOR’s analyses of the political-economic context of seven REDD+ countries revealed that most have weaknesses in this area—to which business interests that profit from resource extraction may exploit or even contribute.
However, the introduction of so-called REDD+ safeguards—policies and measures that aim to identify and mitigate the risks associated with REDD+ projects—could enable investors to engage in such contexts. One of the seven safeguards listed in the Cancun Agreements is “transparent and effective national forest governance structures”.
“The use of safeguards can help mitigate or even prevent the negative impacts associated with investment in a climate of weak governance,” said Maria Brockhaus, a senior scientist with CIFOR.
“If safeguards are used effectively, they can allow private investments to flow in as necessary and realize their potential to become a significant contribution to REDD+ finance.”
For more information on the issues discussed in this article, please contact Maria Brockhaus at email@example.com
This work forms part of the CGIAR Research Program on Forests, Trees and Agroforestry.