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Financing FLR: Governance and funding opportunities for landscape management and restoration measures


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Financing FLR: Governance and funding opportunities for landscape management and restoration measures

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Presentation by Etifor at the workshop Maich Chania organised in the context of the Mediterre3 project. The project is supported by the European Climate Initiative (EUKI)

Presentation by Etifor at the workshop Maich Chania organised in the context of the Mediterre3 project. The project is supported by the European Climate Initiative (EUKI)


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Financing FLR: Governance and funding opportunities for landscape management and restoration measures

  1. 1. EUKI “MediterRE3” workshop, Chanià (Greece) 31 Jan – 2 Feb 2023 Alessandro Leonardi, CEO, Etifor | Valuing Nature alessandro.leonardi@etifor.com Financing FLR: Governance and funding opportunities for landscape management and restoration measures
  2. 2. OUTLINE 1. Who is Etifor 2. Introduction 3. Types of financing instruments 4. Examples 5. Conclusions
  3. 3. 3 Etifor is a spin-off of the University of Padua that provides international consulting services to public and private organizations to help them grasp the full value of the products and services provided by nature. ETIFOR | VALUING NATURE
  4. 4. OUR APPROACH SCIENCE INNOVATION GOVERNANCE 1. Understand the problem through research & development. 2. International solution benchmarking. 3. Creativity, innovation and context-specific design. 4. Financial strategy and funding support. 5. Implementation through participation and good governance. 6. Smart communication and consultation.
  8. 8. OUTLINE 1. Who is Etifor 2. Introduction 3. Types of financing instruments 4. Examples 5. Conclusions
  9. 9. Sticks Carrots Sermons POLICY AND MARKET BASED TOOLS
  10. 10. To change behaviours Land managers Final users WHY WE SHOULD USE INCENTIVES
  11. 11. Climate adaptation need a mixed green-grey infrastructure approach To increase resiliance of the build environment • Point vs landscape action • Public purchase vs community landscape management WHY WE SHOULD USE INCENTIVES
  12. 12. INCENTIVES SHOULD BE SET WITHIN A GOVERNANCE FRAMEWORK FUNCTIONAL: Which conservation and management practices provide the largest environmental, social and economic benefits? ECONOMIC: How do we fund stakeholders’ coordination and conservation projects? GOVERNANCE have three main components : INSTITUTIONAL: Which are the parties involved and what organizational, institutional and contractual arrangements are in place to coordinate them?
  13. 13. WHO IS INVESTING IN FLR? Source: FAO and Global Mechanism of the UNCCD, 2015
  14. 14. WHO IS INVESTING IN FLR? Cost of restoration Risk of investment These investment sources may finance different FLR and stakeholder needs, at different stages of the restoration process, according to the level of risk investors are willing to accept and the expected rate of return.
  15. 15. OUTLINE 1. Who is Etifor 2. Introduction 3. Types of financing instruments 4. Examples 5. Conclusions
  16. 16. Policy instruments
  17. 17. Law compliance Funding / Quantity of ES Agro-environmental schemes EU structural and environmental funding Number of actors and/or land covered by incentives PES funds Win-win in kind schemes Multy-utility – Private sector Farmers associations, NGOs, etc Public authorities and CSO National gov. and EU National gov. and EU INTEGRATED FINANCING
  18. 18. 1. Payments for Ecosystem Services (direct deals) 2. Carbon/ecosystem services certificates (trading) 3. Blended finance TYPES OF FINANCING INSTRUMENTS
  19. 19. Market-policy tools that allow: • transfers of resources between social actors, which aims to create incentives • to align individual and/or collective land use decisions • with the social interest in the management of natural resources It can be designed with many financial instruments: scope tax, subsides, etc. (Muradian et al., 2010). 1. PAYMENTS FOR ECOSYSTEM SERVICES (PES)
  20. 20. 1. Management activities and interventions affect ecosystem structures, processes, functions, or capacities to  2. Create positive impacts on ecosystem services that  3. Provide benefits to relevant stakeholders which we can value. Source: Haines-Young & Potschin 2010 Ecosystem Services
  21. 21. Environmental problems lead to conflicts and participation Partnership creation and alignment Funding search Design and startup phase Implementation and delivery of payments and interventions Testing and piloting Evaluation and follow up Failure or replication/scaleup of the program TIME The «life» of PES
  22. 22. 2. Carbon/ecosystem services certificates (trading) Actors and components: • Carbon standards and certifications entities/systems • Landowners • Project developers • Market, trading systems (brokers) • Buyers
  23. 23. • Measure • Avoid • Reduce or Minimize • Restore or Regenerate • Offset MITIGATION HIERARCHY
  24. 24. Forecast of voluntary carbon markets to 2030
  25. 25. Carbon/ecosystem services certificates (trading) • Recent criticism to carbon credits markets and certification systems • VERRA forest carbon credits cover 75% of the market • 90% of their credits are overestimated and “fake”
  26. 26. https://ec.europa.eu/commission/presscorner/detail/en/ip_22_7156
  27. 27. 3. Blended finance It Integrates: grants + technical assistance + investments (loan or equity) or commercial financial (private funding through business models)
  28. 28. OUTLINE 1. Who is Etifor 2. Introduction 3. Types of financing instruments 4. Examples 5. Conclusions
  29. 29. Examples of funding opportunities 1. PES with water tarriff 2. FSC ecosystem services certification 3. BIOCLIMA - Blended finance 4. Wild forest products (if we have time)
  30. 30. Freshwater provisioning (30% at regional level) Biodiversity conservation (Natura 2000 site) Promoting a water related PES through the water tariff system 1. LIFE BRENTA 2030 PROJECT
  31. 31. LIFE18 NAT/IT/000756 “Promoting good governance and innovative financing schemes for biodiversity and water conservation of Brenta river” How? By creating synergies between water and biodiversity sectors: integration of the drinking water planning with Natura 2000 through the application of the Environmental and Resource Costs (ERC) LIFE BRENTA 2030 PROJECT
  32. 32. Forest infiltration areas to increase water table of the Brenta River Basin
  33. 33. Improved FM to avoid erosion and dam sedimentation (IT and FR) Idro Ecomuseo delle Acque di Ridrac
  34. 34. Forest management for Resilience to Wildfire in water catchments in Colorado (US) www.outtherecolorado.com
  35. 35. Art. 9 WFD “Recovery of costs for water services”  polluter/user pays principle Water tariff headings: ENV costs: referring to the impact of the water service on the environment and ecosystem RES costs: referring to the missed opportunities of other users as a consequence of the water service E.g. Lowering of the groundwater level E.g. Land use and agricultural practices ENVIRONMENTAL AND RESOURCE COSTS (ERC)
  37. 37. Forest owners (supply) Intermidiary National & local governaments Water buyer International institutions Regulations NGOs: funding and lobby Universities: design & M&V Farmers associations: win win advice AES AES Financial flows No monetary flows Hydrological services PES usually are coupled with a «multiple benefit partnerships»
  38. 38. KEY MESSAGES 1. Many protected areas are providing water-ES among the others 2. Valuing ES through the activation of PES schemes can increase the funding for protected areas management 3. Innovative fundings can be drivers for the creation of new governance models and create synergies among different sectors/ entities 4. The key (and the challenge) to enhance the governance of protected areas is the cross-sector cooperation
  39. 39. • Economics and governance of payment schemes with a practical view • Case studies fact sheets • The most complete and up to date database (177 active schemes)
  40. 40. Sustainability standards and certification systems can be used to promote products, processes or services arising from FLR practices and outcomes if they comply with specific environmental/social requirements. 2. FSC ® ecosystem services certification FSC Forest Management Certification + FSC certification of ecosystem services
  41. 41. 1. Compliance with Laws 2. Workers’ Rights and Employment Conditions 3. Indigenous Peoples’ Rights* 4. Community Relations 5. Benefits from the Forest 6. Environmental Values and Impacts 7. Management Planning 8. Monitoring and Assessment 9. High Conservation Values 10.Implementation of Management Activities FSC-FM Certification: THE 10 PRINCIPLES OF FSC® Social Impacts Economic Impacts Environmental Impacts Source: FSC-STD-01-001 V5-2 EN 2015
  42. 42. The Ecosystem Service Procedure (FSC- PRO-30-006 V1-0) allows to certify forest management positive impacts on ecosystem services The FSC® Ecosystem Service Procedure
  43. 43. 1. Prerequisites, Safeguards, Context 2. Demonstration of Impacts 3. Benefits & Claims Source: FSC-GUI-30-006 V1-0 EN The FSC® Ecosystem Service Procedure
  44. 44. • Ensure traceability, transparency and visibility • positive verified impacts can be included into strategies to reduce company impacts (es: climate-neutrality). • Promote short-value chain approaches (alternative to carbon credits, long-value chains) The FSC® Solution: verified positive impacts PAYMENT Certified positive impacts COMPENSATION Certified ecosystem services Local companies Measured negative impacts
  45. 45. www.wownature.eu How do we engage with companies and people?
  46. 46. www.wownature.eu • Since 2019 • FSC-certified projects in 6 Italian regions and 3 countries • Partners include more than 20 forest managers representing 300 smallholders • 200 private companies involved • 20.000 citizens involved • 5 million euros raised with ~70% going to the ground • 3,000 hectares of new FSC-certified forests https://www.wownature.eu/en/wow-areas/
  47. 47. Forest Managers use FSC-ES Procedure because : • It rewards their daily efforts for responsible forest management • It encompasses different ecosystem services • It provides a better (and the proper) price than other rewarding instruments • It fits for every type of forest and forest manager (planting/improving/conserving/SLIMF smallholders/indigenous) • It does not harm the users’ and owners’ rights over the forest (companies do not buy ecosystem services, they support forest managers through sponsorships) • It does not conflict with timber and firewood production. Why We Use FSC-verified Impacts Companies, governments, and citizens appreciate the FSC-ES Procedure because: •It is applied on top of the FSC-FM standards, minimising the short- and long-term risks of investment with comprehensive environmental, social, and economic safeguards •The FSC logo is well-known, widely recognized, visible on the market and easy to communicate •It is consistent, ensuring the same quality across the globe •No Hypocrisy: It is in line with the efforts to shift towards bio-economy using FSC-certified materials
  48. 48. 3. BLENDED FINANCE
  49. 49. 3. BLENDED FINANCE: BioClima Public Private Partnership The model: 1. A public grant of 3.5 mln to incentivise: • forest biodiversity conservation and climate adaptation measures • private finance for conservation 2. Grant requirements for applicants: • to measure ES impacts with the use of FSC FM + ES PRO • have sponsor committed to support FSC ES 3. A technical assistance to support regional parks: • To identify the right interventions and carry out FSC certification • To find sponsors
  50. 50. Public-Private Blended Finance Model BENEFICIARIES PRIVATE SECTOR TECHNICAL ASSISTANCE (ETIFOR) Independent and third-party measurement and verification of ecosystem services Target 1.5 M€ co- finance Economic valuation of ecosystem services Technical support Flow of Capital Flow of Services BIOCLIMA INTIATIVE 3.5 M€ Regional Funds Support for the valuation of ecosystem services and securing private co-finance PROJECTS Demonstration of positive impacts on ecosystem services Lombardy Region CARIPLO FOUNDATION Target 5 M€
  51. 51. Key results: ● 12 regional parks joined the initiative ● 3K hectares of conservation forests have applied for FSC + FSC ES certification ● 3.5 mln euro of sponsorships confirmed + 3.5 public grant BIOCLIMA: PUBLIC-PRIVATE-PARTNERSHIP 2022-2024 https://www.wownature.eu/bioclima/
  52. 52. Conclusions: Fire prevention investment model Sales of ecosystem services Avoided cost from decresed fire probability Investments for FSL
  53. 53. The case of wild mushroom collection fees in Borgotaro • Borgotaro valley was the most productive place for wild mushrooms in the Milan surrounding • In 1964 it was introduced a fee in order to commercialize the recreational wild mushroom picking • Initially it was just a local regulation, but in 1993 it inspired the national law of wild mushroom collection.
  54. 54. The payment mechanism supports a special silviculture approach in order to sustain the wild mushroom productivity of the forest for myco- tourists. Andamento della produzione fungina in base all'età dei popolamenti 0 1 2 3 4 5 6 0 10 20 30 40 50 60 70 valore di produzione Valore Poli. (Valore ) Forest service Financial means Customer Prod. Payment for recreational WM picking Investments for WM production in Borgotaro forests
  55. 55. m = intensity of forest management c = control by local police or forest guards a = access to the forest Pfee = f(m,c,a) Examples: • 6 €/dd in white area • 15 €/dd in green area • 22 €/dd in brown area How is the price set?
  56. 56. Available for android here: https://play.google.com/apps/internaltest/4700275190889108392 iOs version is forthcoming E-ticket Trace me Report Paths News Maps Rescue system Actual stage of implementation: Implementation year 1964 13000 ha forest surface 0.1-0.2 M WM pickers 0.4-1.2 M€ turnover Events: E-ticket for selling picking permits App. for selling & rescuing (May) App as tool to trigger the dialog among forest owners Challenges: New data to increase the wild mushroom production in forest and manage the user in the forests. Payment evolution: revenues based on the actual use od the single forest New way to sell the ticket
  57. 57. • Good governance is a pre-requisite for a funding/financing strategy • Integrated financial strategy responds to different landscape needs, in relation to level of risks, innovation and involved actors • Market and blended finance approaches can integrate traditional funding, market forecast are very positive! • Existing systems may be complex, need to partner with key consultancy/NGOs that can support the implementation and leverage the local demand for ecosystem services Conclusions