Note: a fully version of this article is available as a pdf.
Big problem: big finance
Two thirds of rainforest clearance today is for land to produce commodities that are traded globally, and the export value for these forest risk commodities alone is $US135 billion per year (The Forest 500, Global Canopy Programme). In the face of this challenge, both the scale of the finance for forests needs to step up, and the approach to reducing deforestation needs to go beyond the forest boundary.
In order to scale up forest finance, innovative sources are being investigated, from the bond markets, to climate finance from bilateral and multilateral funding institutions such as the Green Climate Fund (Dutschke & Wertz-Kanounniko 2008; Streck et al. 2009; Nepstad et al. 2013; Walker et al. 2013). The array of finance interventions being discussed include:
- Finance programmes that extend rural credit lines and loans to improve agricultural practices, from sources such as green bonds and bilateral and multilateral funding;
- International performance-based mechanisms to reduce carbon emissions from deforestation and forest degradation (REDD+);
- Forest risk commodity supply chain reforms, for example through multi-stakeholder roundtables, standards and certification schemes, and ‘zero-deforestation’ pledges.
Making these finance interventions happen will need engagement with the private sector, not only to raise the investment, but also to play a part in driving changes such as land use reform (Henderson et al. 2013). Engagement with the private sector creates new risks and new opportunities for forest conservation, and will result in new approaches. For example, interventions beyond the forest boundary include environmental finance programmes that extend rural credit lines to smallholder farmers living outside forests, who do have an impact in terms of forest loss.
Private sector engagement for novel forest finance, and landscape approaches that reduce deforestation by acting in the areas around forests, will require cross-sectoral engagement, and multi-stakeholder consultation. New regulatory frameworks will be needed, which draw on existing fiduciary, environmental and social standards and criteria, in order to manage the profound impacts on people and the environment that new finance flows can create. Some solutions to avoid risks and increase benefits are as follows.
- Harmonise different performance standards and safeguards commitments across a landscape by developing comparable indicators (e.g. the VCS landscape standards).
- Establish information flows and reporting protocols.
- Build capacity to develop and maintain monitoring systems within diverse institutions.
At present, however, governance and financial transparency remain limited in tropical forest regions (Global Witness, 2012). There is little clarity on who is receiving finance and what the impacts are among end users. While efforts have been taken to develop forest safeguards and standards, these vary considerably in rigour and breadth (Rey et al. 2013). There is limited experience in monitoring financial flows and impacts of different forest sector interventions and commitments.
A role for participatory monitoring of forest finance flows?
Local communities are important producers of agricultural commodities, so they can be embedded in key supply chains, and many are at the forefront of policies and measures aimed at stimulating sustainable economic development and curbing forest loss. They, and the civil society organisations that support them, should therefore play an integral part in developing safeguard frameworks and indicators that can be used to measure the impacts of finance interventions on the ground.
Furthermore, involving local stakeholders in monitoring activities will be crucial in gathering data to report on the social-environmental outcomes and effectiveness of a wide range of measures, from finance to more traditional rural development projects (MacFarquhar & Goodman, 2015). The involvement of local community members in data gathering can greatly complement existing remote sensing systems, not least through information on the causes of forest loss and displacement of deforestation drivers.
Participatory monitoring can be an important source of information to understand the socio-economic and environmental impacts of forest sector investments and activities. It inform key components of grievance mechanisms, providing evidence if goals are missed or safeguards standards and commitments are not enforced. Participatory monitoring can also help assess cost-effectiveness, benefit-sharing, and ultimately improve implementation strategies. Experiences in the state of Acre, Brazil (Sabogal et al. 2015) and Maï Ndombe province in the Democratic Republic of Congo (Siani et al. 2015), demonstrate the potential of participatory monitoring models for improving transparency and accountability in these jurisdictional REDD+ initiatives and in wider sustainable development strategies.
Participatory monitoring systems can also be integrated into supply chain certification schemes and standards, as part of sustainable development initiatives. For example, fishing communities in Acre, Brazil, are monitoring fish stocks, as a central part of sustainable management and harvest of the large Amazonian arapaima fish. This is a central componet in their path towards attaining Marine Stewardship Council (MSC) certification.
These examples show the relevance and potential of participatory monitoring systems as part of efforts to improve of different financial and policy interventions in tropical forest regions.
In conclusion, innovative forest finance to reduce deforestation will bring socio-economic and environmental risks and benefits. If participatory monitoring is embedded within systems to ensure delivery of finance and outcomes on the ground, it can reduce these risks and make forest finance more effective. This would ensure investor confidence, and build trust with those on the deforestation front line.
References and additional reading
Christopher Meyer & Dana Miller (2015) Zero Deforestation Zones: The Case for Linking Deforestation-Free Supply Chain Initiatives and Jurisdictional REDD+, Journal of Sustainable Forestry, 34:6-7, 559-580. Available here
Dutschke, M. Wertz-Kanounniko, S. et al. 2008. Financing REDD: Linking country needs and financing sources. CIFOR Info Brief .Bogor, Indonesia. Available here.
Denier, L., Chatterton, P., Hovani, L., Scherr, S., Shames, S., Stam, N., 2015, The Little Sustainable Landscapes Book, Global Canopy Programme: Oxford. Available here.
Global Canopy Programme, The Forest 500
Henderson, I. Coello, J. Fischer, R. Mulder, I, Christophersen, T. 2013. The Role of the Private Sector in REDD+: the Case for Engagement and Options for Intervention. UN-REDD Policy Brief Issue #04 Available here.
Streck, C. et al. 2009. REDD+ Institutional Options Assessment Developing an Efficient, Effective, and Equitable Institutional Framework for REDD+ under the UNFCCC. Meridian Institute. Available here.
Streck, C. M. E. Porrua, C. Bracer, M. Core. Options for Managing Financial Flows from REDD+ . Climate Focus. Available here.
Roe, S., Streck, C., Pritchard, L. Costenbader, J. 2013. Safeguards in REDD+ and Forest Carbon Standards: A Review of Social, Environmental and Procedural Concepts and Application. Climate Focus. Available here.
Rey, D., Roberts, J., Korwin, S., Rivera, L., Ribet, U. & Ferro, P. 2013. A Guide for Consistent Implementation of REDD+ Safeguards. Client Earth, London, United Kingdom. Available here.
Global Witness. 2012. Safeguarding REDD+ Finance: Ensuring transparent and accountable international financial flows. Available here.
Siani, C., Thuaire, B. Bottrill, L. 2015. Monitoring REDD+ Safeguards with Communities in Mai Ndombe District. Moabi. Available here.
MacFarquhar & Goodman 2015. Demonstrating 'respect' for the UNFCCC REDD+ safeguards: the importance of community-collected information. Global Canopy Programme: Oxford, UK. Available here.
Nepstad, D. S. Irawan, T. Bezerra et al. 2013. Linking REDD+, sustainable supply chains & domestic policy in Brazil, Indonesia & Colombia. Carbon Management (2013) 4(6), 639–658. Available here.
Walker et al. 2013. Demand-side interventions to reduce deforestation and forest degradation. IIED. Available here.