Motivating private investment in restoration

Though restoration of degraded land creates natural goods and services, like timber and clean water, the private sector has been slow to view restoration as an investable activity. We spoke with investment consultant Ademola “Demmy” Adesina on how the private sector can be motivated to join the global restoration movement.

Natural resource investors should be interested in restoration, says investment consultant Demmy Adesina. "It’s just a question of - how do you link a particular restoration activity to a return on investment?"

- By Aaron Reuben, IUCN Global Forest and Climate Change Programme

Bio note: Ademola “Demmy” Adesina works on private sector development activities in Africa as Advisor to Africa Programmes for the Gatsby Charitable Foundation and Senior Executive for Business Development and Corporate Strategy at the investment company Aquifer Limited. Earlier in his career he managed programme-related investments for the Rockefeller Foundation in New York and structured financial derivatives for JP Morgan's investment bank.

Demmy, you have a lot of experience managing investments in developing economies. Do you think restoration is a good bet for investors and rural communities?

Frankly, I don’t think there is enough data out there yet on what it means to invest in restoration. It sounds like there are restoration options that can be attached to investment opportunities, but we still need to describe what those linkages are. Which restoration activities fit better with investment returns? It isn’t always clear.

What sort of investors could be interested in forest restoration?

Forestry investors, natural agriculture investors, investors in carbon related activities – natural resource investors in short. Restoration shouldn’t be any different from those other commodities they pursue. These investors are comfortable with ecosystem services and they are comfortable with the long time spans needed for this work. It’s just a question still of: how do you link a particular restoration activity to a return on investment.

What needs to happen to bring these investors to the restoration table?

I think you need to go to them. Draw the connection for them between what they are already doing (e.g., investing in forestry) and restoration. Show how restoration investments are similar to what they invest in already, will improve sustainability writ large, and, further, will bring down their long-term costs. By costs I mean that there are negatives associated with not doing restoration. Someday these investor’s existing assets will bear those costs, whether through higher water prices, less productive agricultural systems, or something similar. It would be interesting to think about putting structural mechanisms in place that could make investment groups feel those costs sooner – say by putting a price on not doing this today. It would be similar to the argument for putting a price on carbon.

Where should we start?

There are emerging financial structuring groups that focus on ecosystem services and developing market around these assets. Eko Asset Management Partners is a great example. They are the world leaders in trying to quantify natural assets – and they have money involved as well.

We’re currently at a workshop devoted to better exploring these questions. From what you’ve heard here, where do you think the restoration community is getting it right, in terms of speaking to the business community?

I was pleasantly surprised by the nuance in some of the conversation I’ve heard about how to quantify the costs and address the problems of degradation. IUCN’s Restoration Opportunity Assessment Methodology (ROAM) is a good example of what’s right - mapping the opportunities and then drilling down to find developable projects and then linking restoration activities to what the business return could be. I heard great examples of that from Mexico and Brazil.

So ROAM is a step in the right direction?

For sure. One thing I would think about in addition is: Can you quantify the costs of inaction and allocate those costs equitably to people driving degradation, or who are not trying to restore? That doesn’t seem to be part of the ROAM cost-benefit analysis yet but it’s an interesting model from other sectors. Can you calculate how much water is being lost by someone pursuing a particular activity and put a price on that cost, which can support restoration?

This discussion occurred during the learning event, “Financing functional restoration in rural landscapes in Mesoamerica, South America and West Africa,” held in Antigua Guatemala in February of 2015. The event was organized through the Private Sector Investment in Landscape Restoration project (PiLaR) of the IUCN, which is supported by the Norwegian government. The supply chain projects mentioned in the discussion are also supported by PiLaR. Learn more.

Work area: 
Disaster Risk Reduction
Protected Areas
Social Policy
Forest Landscape Restoration
South America
North America
East and Southern Africa
West and Central Africa
West Asia
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