A guide to investing in collectively held resources
A guide to investing in collectively held resources
15 March, 2019
Notice: Undefined variable: id_overview in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
Notice: Trying to get property 'post_excerpt' of non-object in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
Posted by
FTA COMMUNICATIONS TEAM
Impact investors typically finance businesses that seek to challenge the status quo, valuing environmental and social outcomes to deliver more sustainable returns on investment. Microfinance institutions such as Grameen and FINCA lead the way in financing poor and marginalized groups. Now, however, increasing attention is being given to help investors respect land rights and form equitable partnerships with communities living in rural areas. Communities are increasingly being given rights to manage the world¹s remaining common pool resources (CPR) – such as forests, pastures and fisheries – as common property. As such, investors interested in accessing and developing these resources have the opportunity to work with a new investment partner, the community user group (CUG). This guide is designed to help investors better understand the challenges and opportunities of investing in resources managed collectively by a community – where the community is the principal investment partner! In this guide we draw on examples and lessons learned from four case-study countries considered to have the most successful arrangements for collectively managing natural resources. The case countries are Guatemala, Mexico and Nepal, which have devolved forest rights to communities, and Namibia, which has devolved wildlife rights.
Financing farmers: Can funds for oil palm help save our forests?
Financing farmers: Can funds for oil palm help save our forests?
01 November, 2017
Notice: Undefined variable: id_overview in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR
Posted by
FTA COMMUNICATIONS TEAM
Oil palm fruits in Jambi, Indonesia. Photo by Iddy Farmer/CIFOR
Palm oil: people love it, hate it or maybe just use it without even knowing. The controversial vegetable oil is found in thousands of consumer products from soap to lipstick, frozen pizza, ice cream and even fuel.
World demand continues to increase rapidly and is placing pressure on forests, mainly in Indonesia. But, for now, the profitable commodity is here to stay. So what can be done to reduce the pressure on forests?
Efforts are ongoing to stop the rapid destruction of tropical forests through more sustainable business practices. In 2004, the Roundtable on Sustainable Palm Oil (RSPO) was launched with the vision to “transform markets to make sustainable oil palm the norm”. Pressure from activists on big corporations that use palm oil in their products has also had some impact, leading them to make commitments to sustainable supply and zero deforestation.
Most action to date has focused on how large palm oil companies do business but increasingly, concerns comprise what the implications are for smallholders, and how smallholders can capture greater benefits from engaging in palm oil supply chains.
In Indonesia — one of the biggest palm oil producing countries alongside Malaysia — up to 40 percent of the land used to grow oil palm is cultivated by smallholders who farm, on average, just 2 hectares each.
The sustainability of the palm oil sector has also triggered Indonesian government efforts to improve the policy environment for inclusion of smallholders, and channeling resources for them to improve practices in management and replanting. There is also an ongoing effort to strengthening the national standards for sustainable palm oil (ISPO).
Three teams of researchers from the Center for International Forestry Research (CIFOR) as part of its work under the CGIAR Research Program on Forests, Trees and Agroforestry (FTA) and from partner institutions have produced a series of infobriefs looking at how smallholders can improve their lives and, at the same time, protect remaining forests. The major challenge, according to their findings? Money.
“Oil palm provides more economic benefits to smallholders than other crops, and it’s expanding,” says Pablo Pacheco, a Principal Scientist at CIFOR. “Yet smallholders have to adopt more sustainable practices. Research has to contribute to this, and identify options for them to improve their practices, as well as identify what resources are needed to make that change happen.”
“That’s where financing comes in, and becomes an important key resource for smallholders to be able to access,” he adds.
THE REPLANTING CHALLENGE
A worker wheels a barrow of oil palm fruit. Photo by Icaro Cooke Vieira/CIFOR
The Indonesian government estimates that a total of 175,000 hectares of oil palm farmed by smallholders needs to be replanted each year, and this alone creates major challenges for farmers.
Hans Harmen Smit, global coordinator for palm oil at the Netherlands Development Organization (SNV), one of the partner organizations, was part of the team that examined current finance practices. Their focus was on Indonesia and Malaysia, which together account for about 85 percent of total global palm oil production. Smit says that without proper financing, farmers only replant when they can afford to.
“The problem is, once they replant, they have to wait three years at least for the new plantation to become productive, and during that time they have no income,” he says.
Smallholder income from oil palm varies. On average, smallholders with around two hectares of land can earn a gross monthly income of US$290 to US$400.
Researchers say that without financial support, farmers do not have the resources to replant year after year on the same plot, and so they tend to move to peatlands and forested areas, “slash and burn” the land, and plant the only crops available to them, which are often low-quality varieties.
Smit points out that in Malaysia, the sector has better systems in place for replanting, and smallholders can more easily obtain financial support. In Indonesia, there is the Crude Palm Oil (CPO) Fund that supplies replanting loans, but it is often difficult to access, especially for smallholder farmers with limited funding.
“The lesson learned here is that saving for replanting is often not done as it should be. The government needs to engage more and manage programs to help farmers save for replanting,” says Smit.
He adds that one of the main problems is a lack of available information for financial service providers (FSPs) to evaluate the lending risks and set appropriate interest rates. He says the loans are often too small on an individual level, and this makes the loan origination costs too high compared to their value.
“We need to start by supporting better data collection on the cash flows of smallholders. Once this data is available, we can create investible portfolios for investors,” says Smit.
A couple works together on a plantation. Photo by Icaro Cooke Vieira/CIFOR
The researchers also identified major gaps between existing credit schemes and what farmers actually need. Addressing this could pave the way for more sustainable palm oil for smallholders.
One key finding was that lenders who do offer credit only provide it in the short term. But what smallholders actually need is both working capital and credit in the long term for replanting and financing other management practices.
“Most lenders also don’t have schemes that take into account the fact that oil palm farmers don’t make any money in the first three or four years, so they can’t make payments at this time unless they find additional sources of income, which is difficult,” says Pacheco.
Another issue is repayment of loans. When ‘tied’ farmers, who are under contract with oil palm plantations, access funds through a cooperative, profits from their harvest are used to pay back their loans. But when individual farmers seek loans, they have to pay back in cash.
Smallholders trying to access loans also face major challenges when trying to meet the requirements of most FSPs.
“Sometimes they don’t have savings accounts or own the land, so they can’t provide collateral,” says Pacheco.
Pricing of the fresh fruit bunches (FFB) produced by oil palm can also be a challenge for farmers. FFB prices are set by governments and oil palm companies, and tied farmers are paid more than independent farmers.
But there are ways to help smallholders overcome these challenges. Incentives and technical support to meet sustainability requirements, land tenure security, and support for FSPs to assess and manage risks, and build the capacity of smallholder organizations, could all have an impact, the research finds.
FINDING SUSTAINABLE FINANCE
Most of the financing for major palm oil companies comes from FSPs based in Asian countries like Japan, Malaysia, Indonesia and Singapore. And on the whole, these do not employ adequate environmental, social and governance (ESG) policies, the research suggests.
“American- and European-based FSPs’ policies are more advanced, but even they don’t fully address how financial resources can be better channeled to smallholders,” says Pacheco.
He warns that there is the danger of a two-tier marketplace developing: one in Asia, where there is less consumer pressure for sustainable palm oil, and a second focusing on US and European markets that have adopted more sustainable practices.
INVESTING IN PEOPLE
Pacheco says the future of smallholders holds a real dilemma. If they become more integrated into the existing supply chain, more productive, use better practices and have access to good financing and markets, they are likely to become more and more dependent on supply chains and companies for their livelihoods.
“You want smallholders to improve system practices, their knowledge of fertilizers, harvesting and so on, but without losing their freedom,” says Pacheco.
It all comes down to how farmers are empowered to negotiate prices, conditions with companies and so on, he adds.
“For me, social empowerment is critical, and I think that needs to be included in the debate. Up to now, the focus has been on efficiency, sustainability, less impact on forests — and not enough attention has been given to empowering these important players, the smallholders, who are trying to reap as much benefit as possible in the market,” he concludes.
By Suzanna Dayne, originally published at CIFOR’s Forest News.
For more information on this topic, please contact Pablo Pacheco at p.pacheco@cgiar.org.
This research was conducted by CIFOR in partnership with Profundo, the International Center for Applied Finance and Economics (InterCafe) at the Bogor Agricultural University (IPB), the Netherlands Development Organization (SNV) and Financial Access (FA).
This research was supported by the United States Agency for International Development (USAID) through the project “The Role of Finance in Integrating Oil Palm Smallholders into Sustainable Supply Chains.”
Host country governance and the African land rush: 7 reasons why large-scale farmland investments fail to contribute to sustainable development
Host country governance and the African land rush: 7 reasons why large-scale farmland investments fail to contribute to sustainable development
18 January, 2017
Notice: Undefined variable: id_overview in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
Posted by
FTA
Authors: Schoneveld, G.C.
The large social and environmental footprint of rising investor demand for Africa’s farmland has in recent years become a much-examined area of enquiry. This has produced a rich body of literature that has generated valuable insights into the underlying drivers, trends, social and environmental impacts, discursive implications, and global governance options. Host country governance dynamics have in contrast remained an unexplored theme, despite its central role in facilitating and legitimizing unsustainable farmland investments. This article contributes to this research gap by synthesizing results and lessons from 38 case studies conducted in Ethiopia, Ghana, Nigeria, and Zambia. It shows how and why large-scale farmland investments are often synonymous with displacement, dispossession, and environmental degradation and, thereby, highlights seven outcome determinants that merit more explicit treatment in academic and policy discourse.
Planted forests in emerging economies: Best practices for sustainable and responsible investments
Planted forests in emerging economies: Best practices for sustainable and responsible investments
18 July, 2016
Notice: Undefined variable: id_overview in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
Posted by
FTA
Authors: Brotto, L.; Pettenella, D.; Cerutti, P.O.; Pirard, R.
Investments in industrial-scale planted forests have grown exponentially in recent years and are included into investment portfolios for various reasons (e.g. diversification, risk mitigation, attractive returns). The rapid growth of planted forests may incur negative social and environmental impacts. Thus, investment companies and fund managers are increasingly interested in using sustainable and responsible investment (SRI) tools (e.g. standards, guidelines, and codes of conduct). However, a classification system for SRI tools in the field of planted forests still lacks consensus.
The present study under the CGIAR Research Program on Forests, Trees and Agroforestry therefore identifies, describes and analyzes SRI tools for planted forests and suggests a framework for the evaluation of their capacity to address environmental, social and governance (ESG) issues.
Four key findings emerged:
More than 50 SRI tools are used to categorize investments in planted forest. The most common SRI tools used are management standards, bank investment policies and investment rating systems.
An ESG Reference Document allows a quality assessment of the SRI tools to be undertaken. The most important issues highlighted in SRI tools are: legality, environmental impact and third-party certification. Conversely, issues such as poverty alleviation, minimum percentage of protected areas and prevention of encroachment are not properly addressed.
SRI tools with the highest overall performance originate from the Forest Stewardship Council (FSC), Gold Standard, RepRisk, Certified B Corporation and FairForest and also include the WWF Responsible Investment Guide and the FTSE4Good Index Series.
It is important that planted forests are evaluated either through specific SRI tools, or at least with appropriate consideration in order to properly address risk factors such as improvement of livelihoods and the prevention of encroachment and conflicts.
Love, reason and power needed to deliver sustainable landscapes
Love, reason and power needed to deliver sustainable landscapes
24 November, 2015
Notice: Undefined variable: id_overview in /home/ft4user/foreststreesagroforestry.org/wp-content/themes/FTA/template-parts/content.php on line 64
Posted by
FTA
Keynote address to the Global Landscape Forum on investment in London in June 2015 by James Cameron, Chairman of the Overseas Development Institute. Mr. Cameron is himself an investor in sustainable farming in Tanzania. In this video, he makes the case for not only arguing with facts, the element called “reason”, but using a language that resonates with people, the element of “love”. And, last but not least, one also has to make the message heard through “power”, of course.
Restoration 
Plantations and tree crop commodities 
Enhanced nutrition and food security 
Biodiversity, safeguarding and conservation 
Nationally determined contributions 
Bioenergy and biomaterials 
Blue carbon and peatlands 
Climate change adaptation 
Landscape governance 
Gender 
Silvopastoral systems 
Market-based agroforestry-forestry 
Farm-forest policy interface 
Agroecology 
Livelihood trajectory modelling and assessment 
Inclusive finance and business models 
Innovating finance for sustainable landscapes 
Public and private commitments to zero deforestation 
Orphan tree crops 
Effectiveness of approaches to sustainable supply 
Quality of FTA research for development 
Sentinel landscapes 
Foresight 
Seeds and seedlings delivery systems 
Smallholder tree-crop commodities 
