Scaling Innovative Financing Solutions to Accelerate Investments - Action Dome, UNCCD COP17

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Excellencies, distinguished guests.
Ladies and gentlemen, good morning and welcome to Food Systems and Soil Health Day here at Cop 17.
I'm Charlotte Cannon, delighted to be with you to facilitate the next dialogues.
Welcome, of course, to our session titled Scaling Innovative Financing Solutions to Accelerate Investments.
We all know that healthy soils are the foundation of productive and resilient food systems.
We also know that restoring them can generate value far beyond the land itself, improving agricultural productivity and livelihoods, strengthening resilience to supply chain and food price stocks, supporting biodiversity, and contributing to both climate adaptation and mitigation.
So why is it still so difficult to finance soil restoration at scale? Well, that is the question we are going to try to tackle over the next 90 minutes.
Today, we want to move beyond simply saying that more finance is needed.
We know that and get more specific.
What exactly needs financing? Which instruments can help unlock investments? What evidence do investors need? Crucially, how do we make sure that capital reaches the farmers, the pastoralists, and the communities actually managing the land? We will tackle those questions through three focused conversations bringing together public and finance and private finance, but also science, government, business, and community perspectives.
But first, to frame the investment challenge, it is my pleasure to welcome Juan Carlos Mendoza, Director of Efs Environment, Climate, Gender and Social Inclusion Division.
Juan Carlos, please welcome.
The floor is all yours.
Thank you very much, Excellency's partners, colleagues, and above all friends.
It's a pleasure for me to open this discussion on scaling investment in soil health and restoration.
We all know that healthy soils are the difference between a family that eats and one that goes hungry, between land that endures and land that is lost to degradation.
But also, and this is the first message I want to leave you with, we know that it is an asset.
It is a productive asset.
To start today, let me bring a simple message that healthy soils can be leveraged as such economic asset.
They underpin yields, incomes, and food security, and they help farmers withstand drought and to mitigate floods.
The evidence is strong.
Analysis of more than 300 adaptation investments found that every dollar invested in restoration actions generate more than $10 in benefits over ten years, with an average internal rate of return of approximately 27%.
These are real numbers.
In agriculture and land use, adaptation investment have demonstrated benefit cost ratios of around four to one.
But evidence alone hasn't been enough to crowd in capital at scale.
That's because investors and governments consistently run into three common barriers that I want to share with you and that hopefully will guide our discussion.
The first one is uncertain costs and return with many of these returns represented actually by public goods, even though the costs come from private investors.
Many of these benefits, avoided losses, water security, ecosystem services accrue to society rather to the investor.
The financial case looks weaker than the economic case.
In the development world, we can respond to these through blended finance approach.
Here, IFIs, development and development finance institutions can use concessional resources to cover the cost of low return activities such as capacity building, and to take junior positions in capital stacks that reduce risk exposure for private partners and also reduces the overall interest rate for borrowers and for the final beneficiaries of these activities.
We NFA doing this, for example, with our ACFen program is a program we are supporting jointly with the Green Climate Fund in East Africa.
It has provided concessional loans and grants of 90 million to equity bank, and then this is leveraged by 110 million of their own resources to provide climate adaptation finance to smallholder producers and rural MMEs for regenerative actions in climate spark agriculture across Kenya, Rwanda, Tanzania and Uganda.
Second, the second challenge is the time horizon.
Restoration returns materialized over years, not quarters, which mismatches conventional lending tenors.
We can overcome this again through, for example, layer capital stacks in the blending structure and utilizing guarantees and first loss facilities to provide extra security to long term risk.
In RCAFIM, the example I mentioned before, This is what EFT and the GCF does with respect to equity bank.
It absorbs the first 20% of losses.
This then there is a second loss trench of 60%, which is shared between partners and the bank, with the bank keeping just the more senior trench of 20%.
This structure is designed to bring regional commercial bank into what we have always been seeking, which is rural adaptation investments.
Then the third challenge is scale.
Even where returns are attractive and tenders are workable, in the individual at the farm level, restoration projects rarely reach the ticket size institutional capital needs to deploy efficiently.
The NCO watershed investment rarely clears the economy of scale threshold to make an investment bankable once high transaction costs are factored.
To address this, investments should look at different types of aggregation, blended finance platforms and sustainable finance instruments such as sustainable bonds that pull multiple projects into large investable structure.
EFAT is actually doing this through our own funding program.
We're doing sustainable bond issuance and utilizing our AA plus credit rating to leverage these resources.
To date, EFAT has raised over $1 billion in sustainable bonds since 2021 by creating large scale packages that are issued on bond markets to attract investments from the private sector at scales that do make sense to the investor.
Taken together, these approaches provide the architecture to overcome the typical challenges for mobilizing investment.
Concessional resources to reach the entry point, guarantees provide security to extend the horizon and aggregation platforms deliver scale.
However, one condition applies throughout.
These instruments are only successful if the intervention to finance work for the people managing the land.
Smallholder farmers, pastoralists, indigenous peoples, women and youth need to be part of designing these models.
They should not be just recipients or beneficiaries.
The immediate question, which we'll discuss today is how we come together and formulate the coordinated pilelines that take these instruments to scale in a manner that works both for the investors but also for the first mile farmers and local communities.
If we get this right, we can move from fragmented projects towards unified investment pathways that can really cause transformative change to scale.
With this, I look forward to what I'm sure is going to be a very exciting conversation.
Thank you very much.
Thank you very much, Juan Carlos.
With that, we move straight on to our, our first panel for this session, which will address the financing gap to the financing solution.
It's a first conversation that is deliberately practical.
To explore it, please join me in welcoming doctor Felipe Ortegsh Linkmans head of the bioeconomy Division at the European Investment Bank.
Can we have a round of applause? Please do welcome our guests warmly to the stage.
Doctor Peter, please, please take a seat.
Philippe, come and join us.
Yes.
Doctor Peter Oun who is Global Thematic Lead for Food Systems and Land use at the Global Environment Facility, thank you for joining us.
Constance Neher, who's Director of Germany's Federal Ministry for Economic Cooperation and Development.
She's probably on her way.
Constance will be with us very shortly.
Annie Carroll Nego Bakank who's Secretary-General of the African Rural and Agricultural Credit Association, Africa.
Welcome, Annie.
Okay.
So welcome to all of you.
Philippe, I'd like to start with you and the investor's perspective because we hear constantly that there is capital available, and yet many restoration projects simply do not meet investment criteria.
We're facing a big paradox here.
So what are the specific risks that are keeping these projects outside those criteria? And where can tools such as project preparation, guarantees, concessional tranches, intermediated lending, or technical assistance actually change the equation and make a project bankable.
Yes.
Good.
Thank you very much and thanks for the opportunity to be sitting here in this panel, which touches a very relevant point.
So when it comes to making investment I coming through.
There are a number of elements and barriers that we are seeing in our investment.
Again, I mean, I'm representing here the European investment bank, so it's a large multinational development bank.
We are European institutions, so we are backed by the European member states, and we channel every year $6-7 billion to the agricultural economy sector.
So We have a number of instruments that adapt to this.
This is just to say that in principle, once there is a business case for land, once there is a business case for land regeneration, for sustainable development investment, There can be instruments, and this is our day to day business to adapt instruments to the needs of the sector.
So if we trickle down to where we see the investment barriers, I would clearly point out first the availability of well structured projects that are based on sound business models for land.
There are two options.
One is The current model that has been more to see land land regeneration as a cost motivated by environmental investments for maintenance.
This requires substantial subsidy money.
If we want to factor in the private sector, there needs to be a business case for land that allows the private sector to really invest into these elements.
I'm a including in the private sector, the whole value chain from the farmer in the first place.
So the farmer is a businessman.
He needs to see revenue on investments.
If the focus of production is just on size and intensity, there is no room for regeneration activities or little room because farmers are the first stewards of the land.
Then we have an issue with this aggregation.
Was mentioned before, so we need to think on aggregation models.
It was mentioned.
One way of aggregation model is to work with local banks that actually are and have among their clients, the small farmers and that are interested in increasing their business in rural areas.
We do this on a regular basis, so we have a number of intermediate lending where we put the focus on agricultural value chains that are important, but also on sustainability.
Normally, we always include the percentage of climate action, environmental sustainability targets among our agricultural focus and the economy focused investments.
And then there is a social environmental aspect.
So if we want to factor in private capital based on environmental benefits that are monetized, there needs to be a very clear monitoring and results framework that actually gives confidence to investors in this area.
And last but not least, we need to tackle financial weakness.
So we are talking about value chains, that at the end of are confronted with farmers that in most countries don't have a big financial strength.
So there needs to be financial mechanisms, as we pointed out before, that actually tackle this lack of financial strength that make investments, even if they are aggregated, difficult to tackle for financial institutions.
There needs to be technical assistance to prepare projects and aggregation models to make financing reachable to these elements.
And last but not least, there needs to be also blended financing models that actually tackle with this enhanced risk of farmers, but also the volatility of the value chain itself.
So if we count on models where we are not only counting on payment for ecosystem services, but where we join maybe payment for ecosystem services with traditional revenue streams, which would be the optimal model because farmers are there to produce mainly foods, fibers, and energy, then we need to think about models that actually factor in not only guarantees inferred loss pieces where we have a number of good examples that can be scaled.
But also, and this is less obvious, co financing schemes where you blend probably grant money that covers for these environmental services that do not generate revenues, but still are necessary with traditional lending or blended lending.
Thank you.
Thank you very much, Philippe.
Lots of important points here.
The one that I think resonated possibly the most with the audience is making the business case.
You mentioned that farmers really need to integrate the fact that they are businessmen and women, which sounds obvious, but at the same time, incredibly difficult because I'm sure that requires a lot of education and support in integrating that fact.
Let me turn to you, Peter, next, and to bring you in at an earlier point in that investment journey, many potentially transformative projects never become an investable pipeline in the first place.
Where can GEF absorb that early stage risk and support readiness and how can integrated programming connect food systems, biodiversity, and land restorations to projects that can ultimately attract larger pools of capital so we can scale.
Thank you very much.
First, let me thank the organizers for the invitation and for the GF to come and provide some insight to this conversation.
Just to say that the GF is the financial mechanism for many of the Rio conventions.
Basically, our business model is really providing global environmental benefit for the planet.
Um, but also with that, we have quite a lot of experiences based on the 30 years that we've been in the business supporting some local communities and government in these issues that cut across.
So I will share a few perspectives in terms of, first, you know, the risk and the barriers that we see and how the GF is actually addressing those risks.
The first risk is the pipeline gap.
I think what we see is that many countries have very good restoration ambitions, but some of them are potentially not ready to be invested.
I think that's one thing.
If you look at land restoration, I think Philippe was saying, this is a long term and when it comes to long term, then you need a bit of more viability and support.
This is where some of the grants that the GF provide can actually support that first pipeline gap.
The second gap is actually the adoption risk gap.
When we are telling farmers or small, medium enterprises, it's the cost of transition.
That cost of transition is actually very high for them and if we really want to support them, then we need this idea of blended finance so that you can help concessional finance guarantees, insurance, and all of these things can reduce the risk in terms of the transition.
The third one is the aggregation gap.
I think Filippe will agree with me that the bank will not be interested in a small projects.
They would like something that can demonstrate a business case, and what the GEF does now through the integrated programs is actually building that scale with so many projects that we can aggregate to provide that type to bridge that gap.
The fourth one is the revenue and monetization gap.
After we have done that, then you need several instruments.
This is where things like because, I mean, restoration and regenerative agriculture, they produce public goods, you know, carbon sequestration and so on.
So what we need is basically that we need some of the result based finance that can actually provide incentives, carbon market, biodiversity credit, and all of these things.
So to your question now, let me just see how the GEF is actually looking at this and support this, and I'll be a bit quick.
So I think The most important part of the GEF is now tuning these good ideas into investable pipeline.
And the way we do that basically is first by supporting the reads preparation.
So because we are grant mechanism, we provide again to countries, it's let's say free money if we can say that.
The country project that we have develop these platforms.
They, they can strengthen policies, institutions, data system, project design, investment regine so that restoration and the food systems initiative become bankable opportunities.
So that's one.
The second is in the aggregation opportunities to achieve scale.
I think I talked about this.
The integrated programs that we have is managed by FEU and the EFRD and we also have another program that's managed by the World Bank.
Were able to channel about $350 million, and then with a co financing of about $2.5 billion to countries.
And this is basically grants to support really countries and aggregate this to have a bit of an economy of scale so that countries can be able to tap into some investment.
The third one is the de risking.
In the GF, the money that we have, of course, it's a grant, but now we are introducing the fact that countries should use this grant a bit more sustainably so that this grant can serve also as an investment vehicle to de risk some of the investment that might come.
We're introducing blended finance that will be mainstreams across many of our projects so that the countries can use that to derisk some of the opportunity and the inflow of that money will stay in the country.
Doesn't come to the F.
So that's a very good point.
So let me just say, and the last one is basically, how do we connect environmental outcome to markets and finance? Because as I said, our business model is environmental outcomes, so we need to make sure that we connect that.
So to summarize, I will say, for the GF we are not just only financing projects.
Are helping countries build enabling conditions, partnership, but also investment pipeline that can attract larger investment from the bank from others.
That sequencing of options, the sequencing of investment.
We are looking at that and that's where we are very much acting as a catalytic as catalyst to absorb these costs, this early stage risk and also preparing the ground for scaling investment that can come from other different sources, including the private finance development banks, and so on.
I will leave it there.
Thank you very much.
Thank you so much, Peter, some very valuable insights here.
I'm turning to you, Annie now because we'd like to finish this first discussion by getting much closer to the institutions that are actually lending into agricultural economies.
Let me ask you, what do agricultural public development banks need in order to lend for soil health at scale.
What's the missing piece and how do you overcome that and any barriers now and how can we do it realistically? Good morning to everyone.
Speaking on behalf of Africa, I will say Africa is the African Rural and Agricultural Credit Association that holds 35 countries on the continent of Saarn Africa, including Morocco, made of central banks, public development banks, commercial banks, microfinance institution, cooperative Circus, fintech, non financial institution.
So to answer that question, I would say we should not think about how we should restore the soil, but what are the systems that we should put in place to make that happen? What is how to finance the transition of farmers, cooperative and agribusinesses towards a more resilient, productive, and regenerative production system.
Then to answer that question, I will look at it in three different layers.
The first one will be on the side of the farmers.
What the farmers need, what are the capital.
We are looking at agroforestry management, water management, organic input, soil testing, and diversified cropping.
The value chain level, I'll be looking at aggregation level that my colleague had actually mentioned a while ago, how we must finance the cooperative, the aggregators, the processors, and the agribusinesses that organize farmers, provide input and technical assistance, and build reliable market linkages.
On our own side as Afra, we have experience in terms of value chain and we can confirm that financing true organized value chain is actually very key.
I don't want to go back because my colleagues have already spoken about that because it will help reduce the information costs, the transaction costs and provide to financial institution real visibility into the production cycle.
And then at the level of enabling the ecosystem, be looking at what we need to finance is mostly the connective tissue that makes the agricultural lending investable.
My colleagues have already spoken about that.
It goes back into soil diagnostic, extension and advisory services, climate information, digital platform, agricultural insurance, water infrastructure, and project preparation.
So how does it fits in terms of the purpose in financing those instruments? I must say that is a kind of a layered approach architecture.
At the former level, we look at the conventional and agricultural credits that still has a role to play where cash flow are not clear, but it must be complemented and financial institution, I want to say in Africa are not very patient.
Were speaking this morning about agroforestry, and it takes 20 years to finance agroforestry.
We know that the classical loan in Africa goes between one year and 15 months.
It calls on a lot of patience.
Of course, all the bankers will know themselves and they always say, it's risky.
But what are the risk that everybody should be able to touch on the specific risk that is involved.
Then again, at a higher risk and longer payback investment, we are looking at the credit guarantees and re sharing facilities that are essential.
Among the res sharing facilities, we have one in Nigeria.
NASA, we have another one in Ghana.
Right now we are working together, Africa, we are working together with the Central Bank of Congo DRC to see how we can put in place a platform to the risk agriculture in the objective to revitalize a role in agricultural finance.
Maybe I will pause there and then give you the flowback.
Thank you.
I really appreciate.
Thank you very much, Annie.
We have been joined by a new speaker, Clau Jack and I briefly ask you to introduce yourself and then share your message with us.
Thank you.
Thank you.
My name is Clauiap.
I'm from the German Ministry of Economic Cooperation of Development.
I'm here for my director who unfortunately, due to conflict in schedule, she's not able to come, but it's great pleasure for me to join this event on scaling innovative finance solutions to accelerate investments.
This is a topic that is very much at the heart of what we also as Germany and specifically my ministry is supporting.
We have lots of partners, IFAD, et cetera, here organizing these sessions.
Well, let me share my few remarks.
I think for us, it's really about the agricultural transformation.
It's about long term resilience of agriculture and food systems.
In a way, the current geopolitical situation, the ongoing blockade of the Strait of Formos and et cetera, it's tough and also a new year is coming up, so there is a lot of people will be suffering, but it's also an opportunity to lift up the agenda on long term resilience on everything that's also written in the Nairobi Declaration on fertilizer on soil health.
We actually have a good policy environment is improving.
We have also a lot of national plans on agrcology being written and now we are here for the financing instruments.
The good news is there's also the financing instruments coming up and we are supporting many of them.
Let me just maybe announce that, for example, Germany will commit 6 million as catalytic investment to the soil health fund of the African Development Bank.
So this is again about de risking.
We heard a lot about it this week, de risking investment ready soil health initiatives with the aim to attract to be catalytic and to attract follow on financing from public and private investors.
This will be integrated in the existing Africa fertilizer financing mechanism, which is currently being restructured to include soil health and the production of organic fertilizers.
So I think this is a good example that soil health is coming forward from a niche to something that is recognized that it's really key for the food system transformation and that it can be invested in and that it should be invested in.
Maybe the second one to cite is our new support to develop the Africa Fertilizer Watch, which is a fertilizer market monitoring system in cooperation with the World Bank, which is another means to help to strengthen crisis response and to provide a better database for future soil health measures and policies.
Thank you.
Thank you very much, Claude.
Many thanks to all our speakers here to Annie, to Peter, and to Felipe.
We're going to move on to our next conversation because we've spent some time talking about the instruments.
Next, we're going to talk about the evidence investors need.
Once again, many thanks to our panelists here for their very valuable insights.
Thank you.
Indeed, for our next conversation, we're moving from financial architecture to investment, confidence, and measurement, and we'll ask our panelists what conditions are required for public and private investors to finance soil restoration at scale.
So please welcome doctor Laced Tame Esta, who is principal scientist and director for the multifunctional Landscapes CGIAR Science Program.
Victoria Rigby Dallmann at the World Bank Group at the World Bank, she's Country Manager of Mongolia.
Welcome Victoria and doctor Lauren Jason, who's head of Nature and Climate Solutions at Olam Agri.
Welcome to all of you.
Thank you so much for dedication to join us despite your mobility problems.
Let's quickly move on to the heart of our conversation because well, we're running out of time.
Sadly, we're running behind schedule, so I'm going to ask you all dear panelists to keep your answers very brief and straight to the point, please.
So first of all, doctor Sgt, I'd like to start with the science with you because there are potentially hundreds of things that we could measure by investors, but they need something else.
They need something credible, practical, and affordable.
If you had to define a minimum viable sets of indicators for soil health and resilience, what should they actually measure? Erosion, water retention, yield stability, et cetera, and what can we measure credibly without making measurement itself prohibitively expensive.
Thank you so much.
Good morning, colleagues.
I work with the CJR.
C is one of the largest agricultural research organization which is publicly funded.
We have 15 centers collaborating along that line.
So we have a lot of research experience on soil health and restoration.
It's very good to be in this forum because I have been working on landscape restoration for over 20 years or so.
And which was a bit of a frustrating experience because of the mismatch between the problem we have, the challenges faced and the resources available to address those.
From the perspective of what we can measure, first of all, I think there are some issues that I want to mention.
I think the problem we have is not about what we measure, how we measure and so on.
It is a matter of what we should prioritize.
For example, in some cases, research can continue to do how we measure agro forestry water infiltration, soil moisture, biodiversity in the Amazon forest, and so on.
But still there are key indicators that we can use to measure the soil health and restoration.
For example, we can say soil carbon is an example that we can use to measure soil health, even though there are still debates in the arguments on what soil health is by itself.
There were some conversations, do we have to say soil health? Is it soil fertility? Is it eco health? Is it landscape? But anyway, we can still pick key indicators that we can measure, the soil health, the water retention, the soil erosion processes, the agroforestry, and even the restoration that we can make through gals.
Gali is a huge process that affects a lot of and there are ways to measure those processes.
What we are doing in the CGN research community is that we have different phases.
Number one is to do a baseline, too much facts, get the basics right.
What is the condition of the land or the landscape or the village or the communities that we are engaging? That is very important because without the baseline, then it's very difficult to go further.
There are different indicators and tools that are available to do those within the CR and with other neighbors.
The second one is, what are the processes that have to be resourced? For example, We have to restore the landscape, there are a lot of engagements that we have to undertake with the community.
So it's not about the measurements that we're going to undertake on the soil sampling zone, but of course, now it's getting cheaper.
It was very expensive long time ago, but there are now different gadgets that will enable us to measure soil health in general in a very short time.
One week ago, there was a presentation from India, which is a very good example that demonstrated how investment can be made with that little investment.
Then the other one is also the process, bringing actors together, bringing the communities together, Discussion with the government within the landscape who are diverse, who are different, requires also investment that is sometimes forgotten.
For example, governance.
If we have to restore a landscape, we have to bring so many actors together with different interests with different visions, different priorities and needs.
For them to invest, they have to be convinced.
To convince them, we have to have several interactions that requires some cost as well, which we are now proposing at approximately 300 to 500 euro dollar, for example, which is not very high per year.
Then there is another important evidence that we have to make for the funders is what is the performance of the interventions? There are two ways to do.
Number one is we can do ex ante and other analysis to determine if we invest in these areas which are priority for intervention.
With this and this and this combination of solutions, the likelihood of our gain are this and this and this.
Or we can also do there are a lot of experiences that are already available in different countries, we can get those numbers, aggregate those and provide those values or numbers for defenders to have a basis on what will the gain be.
Another one is also, of course, There are tools and methods to also include the remote sensing and AI processes now in geospatial analytics to easily monitor changes over time, even in real time, and there is a lot of work that we can do with using citizen science where communities, farmers can be engaged to contribute to assess the trends over time.
And with that understanding, there is a possibility to get a custom service payment or biodiversity investment and other gains.
So I hope I don't know if I responded to the question directly.
But I think one important thing is there should be a conversation between the research, the government, and the funding.
Because when they say bankable projects, I feel I have the best bankable project, I submit process path because I may not know what the real requirements are for those bankable projects.
Also from the expectation of the donors can be sometimes too high, sometimes shortsighted because of the experience they have, and also because of the amount of investments that have to come every year.
I think that discussion can enable to reach into a better solution.
Thank you so much.
Very interesting and very valuable points indeed.
Victoria, I am turning to you next to get your World Bank perspective.
According to you, which outcomes actually matter to public and private finances when they decide whether to deploy capital.
Great.
Thank you very much for having me join this panel.
Also, I just want to note that if anyone's been really observant, the photo of me is not actually me.
That happens to be my boss who is based in Beijing.
I'm not trying to take over her identity.
Hopefully, it was just an error.
But it's great to be here.
I'm the country manager for the World Bank Group in Mongolia and for the first time actually, we have someone in this role who's looking at both the public and private aspects of it.
I think this is very key to this topic.
So I've spent quite a lot of time working on financing through the private sector on labeled bonds, labeled financial instruments, looking at the green and blue taxonomies of sustainably linked finance.
Some of the things that we can draw from those I think for this discussion, which is really important because it's relevant whether we're looking at public or private financing solutions is first of all, we need to have base data.
Well, first of all, we need a taxonomy, so we need to know what initiatives are actually going to allow for financing for soil scaling innovations.
Secondly, we need to have a decent baseline and so the data is really critical and so we look to the experts, to all of those in the room and beyond, what is actually measurable and what data do we have? And then building on that baseline, then create targets that will then allow for allow for these different financing instruments.
Those targets we usually say they need to be stretch targets.
They can't be business as usual.
They need to be doing something else.
And so I think and again, that needs to be measured.
Then the other key thing, I think that we've seen through some of the carbon finance initiatives as well, is that the measurement needs to be easy and hopefully cost effective because you don't want a situation where the measurement and monitoring actually takes up half the cost of the project.
So with advances in technology, and I'm seeing this particularly, I think good examples actually here in Mongolia.
You've got this vast space of rural areas, and this is where these sorts of initiatives are going to happen.
How do you actually start monitoring and being able to look at different targets? And you can leverage the fact that you've got significant rural connectivity in Mongolia, that the entities that are really in the communities are the commercial banks.
So you don't need to reinvent things.
You can actually leverage off the financial structures that are on the ground.
There's good in the case of Mongolia, there's good access to finance for the herders and for those who are really involved at the base level and will need to be involved in these restoration projects.
And so I think it's really important to just think about that enabling environment.
And we heard previously from our colleagues from GF and EIB that this is critical.
I think we can build off what we already have.
We don't need to reinvent When it comes to actual targets, as I said, we would be guided by the experts.
But what we've seen in other areas when we've been looking at green or sustainable linked finance is it will not be one target that will be sufficient, so it will be a combination of them.
So it could be that you're looking at, potentially you could be looking at jobs.
Are you going to be able to with soil science giving its complex, is that an area that's going to be easy to be measured? How long will it actually take to get any significant measurement? I think we need to be very practical about this.
And so, really drawing on what data do we have? Back to that first point I made.
What is measurable? Then what is actually going to make a difference? Then let's tailor those different targets and KPIs to be able to really take the financing to the next level and enable the restoration of land and soil become a little bit of the same mainstream now that we have with other areas of label finance.
Thank you very much, Victoria.
Laurence, you sit on the other side of this from within the agricultural value chain.
Victoria just touched upon the importance of measurements for investors.
So companies increasingly need to provide data on nature, climate, soil performance, et cetera.
And ultimately, that information has to be generated on farms and on that chain I just mentioned.
So what data can companies and their value chain partners realistically collect and use? We've had some pointers here with doctor Testa, but in very concrete terms, what can they provide? Yeah.
Thank you very much.
Maybe first to explain, Ola magri is a global commodity trader in food, feed, and fibers.
So we source from large farmers, but also from smallholder supply chains.
And so I think in this context, I'll focus more on the smallholder context, if that's okay.
Um, and so maybe if I can start from the point of view of evidence and data.
A company like ours starts from risk assessments, right? So we look at it in our supply chains, we look at environmental risk in, I think, five different layers.
The first one is deforestation, the second one biodiversity, water, climate change risk, and the third one is really land degradation and soil degradation risk.
So here we really try to align with the guidelines from UNCCD.
So there, you know, the types of indicators that they're looking at is net primary productivity.
It is land cover, but it's also soil organic carbon.
So often when we speak about soil health, one of the first indicators that comes is SOC, soil organic carbon.
So everybody knows how difficult it is to measure first as a baseline and second, also to measure changes.
We were talking in the previous panel about we need, you know, this front costs from a point of view of adoption, but also from a point of view of measurements, right? And so, but it's not only, like, a cost at the beginning, it's also it takes a long time to be able to measure changes in soil health.
And so from that perspective, you know, thinking about these longer term requirements when we are developing, you know, these instruments is really important.
So, of course, we know that, I mean, in our case, we know that we look at it from a double materiality perspective, right? So we know, especially in Sub San Africa, we know that the agricultural systems have been mining the soils for decades.
And I know, of course, that, you know, also based on what was said in the previous panel, this has a direct impact on our business as well.
And so, what we're trying to do is to kind of look at proxies that can give us an idea about, what is happening with soil health if it takes so long for us to measure changes in soil organic carbon.
And so we can look at pH, for example.
This is more readily measurable.
We look at farmers practices.
Again, often, when we're looking at ecosystem services, we need to measure outcomes, but practices are a way to understand where we're going in terms of outcomes.
The other one as well is yield, of course.
I mean, if there is a high yield gap, we're pretty sure or we're almost very sure that there's going to be a problem in soil health.
Then we try to also understand and align with methodologies.
When we're looking at, and we're trying to develop and scale solutions, we can look at it from a point of view of these public private partnerships we have experience in partnerships around blended finance as well.
It's very much about aligning on what are these indicators that we need to measure that we can help measure in the field.
But we're also looking at other types of solutions which are very much market based instruments, right? Which is like what we were talking about, you know, carbon credits, insets, et cetera.
Often it's a carbon angle when we go there.
And then it's really like the measurement is very much aligned with a methodology under a voluntary standards.
Or you know, when it is a scope three solution, it's also aligned with a standard from one of our customers? Then it's about, what does our customer need in order to make a claim.
All our data design data infrastructure has to be adapted from the point of view of what can be measured in the field practically, about how do we align with country level strategies, policies, baseline, et cetera, frameworks around that.
What is the design and what is the framework that our customer wants to use? Then, of course, there's this common denominator, I hope that can bring us to those solutions.
I'll stop here.
Many thanks, many thanks to all our speakers.
We need to wrap up to quickly move on to the next conversation.
But once again, thank you very much for joining us here on the stage, especially you, Victoria, and enjoy the rest of your day here at Cp 17.
Thank you so very much.
Let me thanks for.
During our next discussion, we'll address the following question.
What makes these financial instruments, the financial instruments we have discussed prior to this last segment visible? I'd like to do so to welcome to the stage, Nondri Enero, who's CEO of the Mongolian Nature's Legacy Foundation.
Paulina Arroyo, who is director, Global Portfolio for the Enduring Earth Partnership, please come and join us here on stage and take your seat.
Doctor Campari, who's global leader for Food and Agriculture at WWF International.
Welcome and welcome back.
And Rashanak Kashkuy representing the ICCA consortium.
Thank you.
Yeah, I'm happy here.
Welcome to all of you.
Um, I am going to start with you, Nomari because obviously Mongolia is our host country and I'd like to start with a very concrete example of what's happening here.
The Mongolian Nature's Legacy Foundation is using an environmental trust fund as part of the Eternal Mongolia Project Finance for Permanence Initiative.
How can that model combine long term finance with national ownership and actual delivery on Mongolia's rangeland and restoration priorities.
Thank you.
Thank you.
Thank you so much.
It's really a pleasure to be part of this discussion and during the opening segment and the previous sessions, I think we talked a lot about the barriers, and of course, different potential challenges we've heard about the difficulty with the time horizons when we talk about the different projects we have, the scale issue, risk, the need for blending in concessional capital, results based finance, coordination, and so on.
I think in Mongolia and Paula will also talk about the examples globally, I think we have a financing solution that addresses most of these challenges that we are facing, which is called the Eternal Mongolia Project Finance for Permanence Initiative.
You can see on the slide here a very quick snapshot of what it is.
It's an initiative that we, the Mongolia Nature's Legacy Foundation is implementing together with the government of Mongolia, led by the Ministry of Environment and Climate change and together with Nature Conservancy.
What this really is, is a long term conservation financing model of $200 million for 15 years and beyond, and it blends private donor funding, which was raised by the Nature Conservancy as part of the Enduring Earth partnership, and it blends in also country commitments.
Committed by the government of Mongolia is 127 million, the donor portion is $71 million.
And the beauty of this model is not about just spending up this $200 million in 15 years, but the whole goal of this is by the end of the program, we should be creating a permanent financing structure for the different goals that we're trying to achieve.
In Mongolia, it focuses on protected areas, and I think colleagues will also mention how important the protection, the conservation part is also important to the discussion that we have.
But in the context of Mongolia, of course, herders have a critical role to play.
So we have a target to reach also 24,000 herders over the next 15 years.
And there are different financing mechanisms that we are targeting, which both includes public funding, but also using market based instruments like green loans, offsets, and so on.
In the next slide, I just wanted to show an example of only one of these instruments that we are working on, which is a value chain sustainability linked value chain financing program, Victoria already mentioned about these instruments.
When you talk about the food system in Mongolia, we are a little bit different.
It's mainly based on livestock sector and the livestock sector is really based on traditional herding practices.
One third of our population still lives the traditional herding lifestyle.
We've heard about the desertification issue and the challenges that we are facing in a country driven by unstainable use, sometimes also unsustainable supply chains and climate change, so on really has become an issue that impacts also the people living in the capital, creating air pollution issues, social issues, health issues and so on.
And sustainability linked value chain program and the next slide that we're designing is trying to solve this issue through different components.
The first step is to start with, of course, it needs to be bottom up.
Often when we talk about the finance, there's a risk that it comes to top down and we forget the engagement, the importance of really working with the communities on the ground.
So we give out grants from the Mongoliics Legacy Foundation to help with the community capacity building, with the planning of conservation work, with the business planning, supporting with early stage that capacity governance building and so on.
Then we link these hurders and the communities with the different value chains.
Here we have the meat industry, the food and beverage industry, cashmere, anyone that's buying a service or a product from these hurders that have made commitments to more sustainable patient management practices works with them.
Then the next step and the third component is the financing mechanism that comes on.
Here it's supply chain.
It's not only we're going directly to the hurder to give a loan, Herder accesses a lower interest loan, but also the processors, the buyers, everyone that has made a commitment to buy the raw materials, they also get incentivized for their practices.
But what they have to commit in return is to sustainably buy at the premium price the raw materials, the products that these herders are basically offering.
And the last panel, When we talk about sustainable financing products, it's not that banks are not interested.
We have in Mongolia, a lot of interest, a lot of funding that has been raised.
The challenge with sustainable financing mechanism has been a lot on the measurement, the impact measurement, which gets costly and especially when you think about the herd alone, very small ticket size, you need to make it cost effective for financial institution to create an interest.
There's a digital MRV part that comes into it where we can measure the results that enables us to later on also access additional carbon payments, nature payments, and so on.
I just want to in the conclusion to say that when you talk about the different challenges that nature, land, soil health, no one financial instrument alone can address this.
We need to really thinking about how are we stacking all of the different economic incentives opportunities that are coming from this instrument to make this transition possible for communities heads and the whole supply chain.
Thanks a lot.
Thank you so much, Ninari Water creative, very innovative form of financing for the long term.
Very impressive indeed.
Paulina, next, I'm turning to you to build directly on what we've heard here because the the project finance for permanent is explicitly trying to solve one of the problems we've identified here today, is short project cycles for very long term environmental challenges or opportunities.
From your experience, what makes that model durable and what have you learned about long term commitments, governance, and adaptive management and about combining public, private, and philanthropic capital effectively? That's a lot in one question.
I will cover elements of that and thanks to NOI for providing that specific context.
It's a pleasure to be here as part of the representation of a global alliance.
We are a partnership called Enduring Earth, and it's a partnership with the Nature Conservancy, World Wildlife Fund, the Pew Charitable Trust, Zoma Lab, and more recently, the Moore Foundation and the Bezos Earth Fund.
And the Project Finance for permanence actually comes from the private sector, from the investment sector.
This came a few over 15 years ago, many of us who have worked in conservation, and I'm looking at Joel, you worked together for so many years at the Nature Conservancy.
And for many years in conservation, we were working on site to site and really trying to resolve the problems at a specific protected area or with specific communities.
And we were always challenged by the scale and challenged by the financial gap to fill really what was needed.
And, we can stay on this slide.
And so it 15/15 years ago, a few of us came together and said, how can we use a model from the investment sector to work in conservation? Basically saying, if you have a project, say in the finance sector, you want to build a bridge and you don't go out and start building the bridge until you have all the funding for it.
And so what we started to do is adapt that model to say, we have a product that we're going to build together.
We bring all the stakeholders together, which would be the funders, the decision makers, and then the local stakeholders or rights holders.
And then once we have all the resources together and the matching and the leveraging, and so in some ways, you're reducing the risk because you're involving so many funders at the same time.
And that would allow then you to secure in one single agreement and under one single vision, a single objective, and that single agreement, which in the private sector, you're all very familiar with, you sign one agreement.
It's the closing of the deal.
Many times in the PFPs we say, we're going to close a PFP.
It's because we finally reached the agreement with all the stakeholders and we've secured the funding.
This is one model that we've adapted to break that project to project cycle, to be able to scale at the scale geographic scale that we need.
But I would say then the third element is the government because the governance because this is not just a funding model, this is also a governance model that requires all the institutions.
In 2020, the partners of the organizations that we came together to form Enduring Earth as a partnership, and we said, Okay, in the first 15 years of doing PFPs, five were created with the Nature Conservancy in WWF in Brazil and Canada.
If we work together, we could replicate and scale more, and we've done so in the first five years of the partnership, we have launched eight more PFPs including internal and Mongolia, and we've also contributing to the 30 by 30 targets and leveraging finance, we've been able to then secure funding for 230 million hectors.
If I could just do one more, if you can go ahead and pass to the other slide, I'll tell you when to stop.
The next slide.
Next slide.
This gives you the breadth of how we are now moving towards the next five years of the partnership.
And so in the first five years that we've learned, yes, we can do this by working together and bringing the financial sector in this and looking at a more integrated approach of the landscape.
So I do see a lot of opportunities between land restoration and bringing together the 30 by 30 targets.
And then moving forward in the next five years, we hope to be able to launch another 20 PFPs in high biodiversity areas.
Then I'll do one more slide if I still have time.
I won't go into this one, but I'd say the next slide, which is very similar to what Nome presented.
This is really the heart of the model.
The financial aspect of it is that we bring together the private philanthropy, the multilateral and what we call a capital transition fund.
That transition fund can be spent out over ten, 15, in the case of Brazil, for ARPA, for life, it was 25 years.
All that funding comes together and then leverages what the government would be a counterpart match of at least a one to one match, which could be the budget allocation or it could be other funding sources from the government.
Then if you see that sustainable finance mechanisms, that's the area where a lot of the mechanisms such as environmental services, park entry fees, many of the mechanisms that we have been talking about in this forum, usually are done individually, but what the PFP model really is a forcing mechanism to align all those funding mechanisms together towards a common goal.
The government and the stakeholders and all the local partners, basically what we're giving that is ten, 15 years depending on the time frame of the transition fund.
To meet the full of what is needed to cover either the cost for managing a protected area system, for managing community lands because we have PFPs that have been very much focused on indigenous territories like in Canada, community conservancies in Namibia for life that was recently launched.
It's a combination of really looking at the landscape.
I'll stop there.
Thank you very much.
We are seeing very interesting presentations here.
It's frustrating that we don't have all the time.
We need to really go through them at greater depth, and that's what I'd like to encourage anyone here in the audience and beyond, of course, to get in touch with, of course, all speakers directly and their organizations to find out more because this is absolutely fascinating and seeing that map with the scale of it, which is always good news is very encouraging indeed.
Thank you very much for that.
Um, we're going to need to be very brief in with our next speaker.
So Ja very quickly, how can conservation, finance, and value chain investment connect restoration outcomes with livelihoods and resilience.
Thank you.
Thanks, Charlotte, and good morning, good afternoon, everybody.
No power points from me to begin with.
So we at the WWF, we firmly believe that farmers are the first environmental stewards and they do not want to be the last, right? When we see and observe what unsustainable agriculture looks like, and it's impacting some of the most meaningful agendas for this crop, rangelands, savannas, and grasslands.
We believe that this is caused by either lack of capacity to make decisions about the land or perverse financial and economic incentives that lead economic agents to behave in a way that is not appropriate for climate, nature, and sometimes people.
Right? So this brings us to the core of this session, what can be done about financial systems.
Traditional I think the main issue here, and this was broached by our colleague from Olan in the previous panel.
Traditional finance views, for example, if you're talking about soil restoration, or soil improvement as a high risk and low yield activity, mainly because of the time horizons that payoffs materialize is quite long.
So we need to change the way that financial systems work.
At WWF, we take a dual approach.
One is greening the financial system, and the other is financing green systems.
So let me go through each of those, like in a two sentences.
So the greening finance is all about changing the institutional space for financial transactions to happen.
And this means de risking farmers, and it also means actually influencing the decision of central banks by integrated food and agriculture related risks into their assessments.
Food and agricultural sector, we all know, it's one of the most underfunded sectors when we talk about climate finance, right? And we need 40 times the actual finance that is coming today.
So greening the financial system is very important to establish the right conditions for finance to operate.
The other part financing green is funding and financing farmers and ranchers and fisher folks to do the right thing for the protection and conservation of lands and waters and their biodiversity and mitigate and adapt to climate change.
So there are many, many ways in which we can do this.
But, you know, the most important thing is to green the financial system and finance green projects.
I'll stop there.
Thank you.
Thank you.
Really appreciate.
I'm going to turn to Rush annex straightaway to get your perspective, the perspective of indigenous peoples, pastoralists, and young people.
What does fair and genuinely I don't feel that old, but what does fair and genuinely accessible finance actually look like from your perspective.
So it's a hard question to answer in 5 minutes.
And This agenda is very huge.
It has a lot of perspectives to it.
But to be very simple and fast, I will say that the availability of finances for youth and the communities themselves that are directly working on land is very limited.
If you ask a farmer there's international funding for your work that you're doing, the first answer is, it is too hard.
I can't afford the time, expense, and the paperwork and everything.
Here the government comes in and gets the funding for international funds and also local funds to manage the project, but here is the problem.
We see in our lands and government led projects that they don't follow up.
Especially in long term projects like soil health, which from a soil engineering perspective, at least needs three years of support and work and the income will not be immediate.
Personally and local communities, mostly go for fundings that come with a direct and fast comeback of their finance and money, basically.
This is not a very healthy way to approach it, especially for you and CCD.
It is very important and long term.
People don't see the immediate results.
This makes it so hard for them to connect with it.
Of course, everyone cares.
But when you're in a hard situation and your finance, your family, your food on your table relates on this, There's other things to be cared for.
A youth projects, what great projects they are working on, but the communities don't believe in youth, not in a bad way, of course, I'm not saying that they don't care.
It's just the youth believe in communities come from their achievements, which doesn't happen easily.
It's hard to be 20 and work on such progress programs and everything and don't know your place and everything and communities like you're so young, I don't believe in you.
That's natural, expected.
But for policymakers and funding people, people who fund stakeholders, private section, there should include youth because in my experience, youth program ble always results in something because they're passionate, they have hope, they haven't faced much of the harshness of it.
There's always creativity in the work.
So policymakers, also funders should consider youth as a main and very important partner because in communities and local eyes only you are accepted when you achieve something.
So before achievement, what are you just a young person going around? That won't work.
So the steps should be easier for you, especially in funding and the programs that youth are working.
I have been around in a few meetings of theirs and they showcase very powerful programs, both in technology, observing, science, political works, all of it.
So I think everyone should put more time in youth agendas and youth led programs, not just studies.
Thank you.
Thank you, Roshak some fairly valid points here.
Indeed, and many thanks to all our speakers for joining us here onstage.
Let's have a final round of applause, please, for our panelists and for their valuable insights they shared here with us this morning.
Many thanks to all of you and many thanks to you in the audience for your attention, and of course, finally, many thanks to fad for organizing this session.
Can I please ask all the panelists and the speakers who joined us here for this session to maybe join me here on the stage for a final picture, please.
Let's do this quickly, please.
All the panelists and speakers who were with us, very quick photograph.
A memento of this wonderful session.
All the speakers, stakeholders, all the people who worked on this session, please come to the stage now.
Thank you.
I