Session 5.1: Financing strategies and mechanisms for multiple use sustainable forest management

Moderator: Herman Savenije, Ministry of Agriculture, Nature and Food Quality of the Netherlands
Secretary: Kees van Dijk, Tropenbos International

Background

In recent years the question how to broaden and diversify the financial basis for sustainable forest management (SFM) has received increasing attention in policy making, research agendas and in the field of implementation, both internationally and nationally. One of the main challenges many countries face in stopping forest degradation and deforestation is the need to increase the competitiveness of good forest management and its attractiveness for investment. Forest financing is often partial and ad-hoc, limited to a small number of traditional financing instruments, as credits and subsidies and operators like forest funds. Furthermore in many countries the discussions on forest finance are all too often still largely focused on government and bi- and multilateral Official Development Assistance (ODA) as funding sources for SFM, whereas in reality the amounts of private finance in the forest sector are already exceeding these sources by several times.

At the other hand the multiple values of forests are increasingly recognized and several innovative and promising approaches, mechanisms and opportunities have emerged and brought to practice, generating additional and new revenues to forest  management and causing investment to be more attractive and feasible. It is alsoincreasingly understood that financing instruments are more effective if they are embedded in broadly supported enabling institutional and policy frameworks, both nationally and internationally, emphasizing the need for more comprehensive approaches towards forest financing than used in the past.

Objectives and key questions

To have a strategic discussion on the policies, strategies and practices that are needed for enhanced financing of SFM.

• What are the actual visions, innovative ideas, emerging opportunities and key issues to enhance forest financing, globally, nationally and locally?
• How can innovative approaches be put to practice?

Programme

10.15 Introduction to the session, Herman Savenije
10.25 Keynote: Forest Financing in today’s world: lessons, opportunities and challenges. Jorge Rodriguez, Ministro de Ambiente, Energia y Telecomunicaciones de Costa Rica. (Link to article )
10.45 Voluntary papers:

1. China Green Carbon Fund: China’s Concrete Effort for Global Climate Change Mitigation, Nuyun Li, State Forestry Administration of China. (Link to article )
2. Desarrollo Forestal a Partir de Esquemas de Apalancamiento Financiero del Mercado de Capitales en el Ecuador, Jorge Alexander Muñoz S., TERRA Brokers S.A (Link to article ).
3. Financing strategies in national forest programmes - The broader approach, Kees van Dijk, Tropenbos International. (link to article )
4. Cultivating leadership, participation and inter-sectoral dialogue through the development of forest financing strategies: emerging lessons, Marco Boscolo, FAO Forestry Department. (Link to article )

11.45 Plenary discussion.
12.10 Summary of findings, Herman Savenije
12:15 Closing.
For the complete programme, including presentations visit the WFC website

Summary of findings

The presenters have given a lot of food for further thoughts and inspiration in the ways forward on possible pathways and approaches to mobilize new and additional financing.

Presenters noted various opportunities and innovative cases:

• The experiences with the carbon fund in China, emphasizing corporate social responsibility.
• The use of capital instruments in Ecuador, structuring such efforts as a multiactor process in which every actor contributes its specific part of the puzzle.

Various presenters emphasized the need for more strategic thinking and acting in order to capture these kind of opportunities and to scale up innovative approaches; we must look at the whole system of financing, to include investment options, the payment for forest goods and services, the diversity of forest condition and actors and the enabling environment. The conceptual framework presented may be helpful in his.

It was highlighted that money is not always is the biggest problem, but often rather the lack of the enabling conditions in the country and in the sector to make things work. Creating these enabling conditions is a key role for governments and - if so needed - development cooperation to facilitate these efforts. The role of governments and international development cooperation in creating risk mitigation and guarantee mechanisms to attract private investment and to promote the payment of environmental services was highlighted.

There is a need to change mindsets, attitudes and ways of operation in the forest sector (and also in the other sectors). The need for credible and effective forest institutions and governance was emphasized, both within and outside the governments to create such an enabling environment and to attract investment.

The forest sector should also engage itself more actively in the other development agendas (poverty, water, agriculture, health) evidencing the role forest play in these; and there is a need to work more closely together with other sectors, particularly the financing sector

We should not loose sight on the treasure of the multifunctionality of the forests; PES, REDD, bioenergy are not substitutes of SFM but potential elements that can generate additional revenue, taking into account the trade-offs that exist between the different uses.

The analysis of the status and perspectives on forest financing in Latin America by emphasized the diversity that exist between countries and between forest actors within countries, noting that small producers are now largely ignored and disconnected as to their access to financing instruments. A key challenge is how to make the bridge between big money and small producers in an equitable way.

There exists a big demand in various countries for support in developing their financing strategies and mechanisms and to support innovation. Several encouraging experiences and initial results of such support efforts by NFP Facility, FAO and partners were presented, emphasizing the need to start at the country level (government, pension funds, banks, insurance companies, entrepreneurs, NGOs and local producers, etc.), taking into account the sources, needs and opportunities existing in the country while strengthening the collaborative capacities of these parties.