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Boosting Impact Investment in Natural Resources: Forestry and Land

3p Contributor | Tuesday February 11th, 2014 | 0 Comments

5373057117_a00999908a Editor’s Note: This is the third post in a three-part series examining how the global sustainability agenda will boost impact investment in natural resources. In case you missed them, here are the first and second posts in the series.

By Marta Maretich

With sustainability a growth area for world markets — and a priority for many world governments— there is a new focus on impact investing in natural resources. This three-part series examines how the global sustainability movement is driving the markets in four key natural resource sectors— oceans, minerals, forestry and land — and shaping the financial choices of impact investors around the world.

Part III: Forestry and Land

Unlike mining, forestry is already a popular focus for impact investors. Many sustainable forestry enterprises have cropped up in recent years, working to conserve — and sustainably exploit — wooded environments across the globe, and these remain attractive investments.

It hasn’t all been smooth sailing, though. Carbon offset schemes were central to many forestry enterprises, and the collapse of the world carbon markets in 2012 was a blow to the sector. Some forestry sustainability accreditation programs have come under fire, too, and there has been a shakeout in certification schemes that many hope will lead to a more reliable system.

Despite this, impact investors, like the Packard Foundation, have largely stuck with forestry because of its many wider benefits. Sustainable forest management supports biodiversity and habitat conservation, creates local jobs, protects indigenous communities, fosters eco-tourism and recreation, contributes to food stability, and aids climate stabilization — as well as having the potential to generate diverse revenue streams and attract tax breaks.

Meanwhile, new technologies are expanding the horizons of sustainable forestry. Innovations, such as the use of drones and sophisticated geo-mapping techniques, are advancing the science of forest management — making it possible to do more with woodlands while we protect them. Eco-tourism and boutique woodland businesses are taking off in many parts of the world. The link between agriculture and forest habitats is contributing to the search for ways to bring prosperity to some of the world’s poorest communities. At the same time, big multinationals such as paper manufacturers are bowing to regulatory pressure and seeking ways to develop more sustainable supply chains — a shift which will have implications for sustainable forestry businesses.

Land

Land is a resource that offers a host of opportunities for impact investing both in emerging and developed economies. Essential to human life and prosperity, land produces food, water, wood, fibre, fuel and minerals, and, when managed responsibly, it also provides vital ecosystem services such as photosynthesis, pollination, nutrient cycling, water purification, soil formation, climate stabilisation and flood prevention.

Increasingly, land use and ownership is seen as the key to solving many of the world’s most pressing environmental and social problems. Large international organizations like the United Nations Convention to Combat Desertification (UNCCD) are now promoting responsible land investments as a way to halt land degradation and preserve the integrity of our natural capital. Land and property rights are also central to poverty alleviation, and securing land for use by rural populations is a priority for many development organizations.

Yet, as is true across the natural resources sector, there is a right way and a wrong way to invest in land. Oxfam has raised concerns about a global land grab where big investors, often foreign governments and pension funds, buy up large tracts of farmland, especially in parts Africa, Latin America and Asia, squeezing local people out. Their report drew attention to the negative impact on local communities from the wrong kind of investing and led to a call to the World Bank to end its participation in these deals.

To make sure they are part of the solution, not part of the problem, impact investors need to be aware of the issues. The right kind of investing respects the rights of locals to “Free and Prior Informed Consent,” promotes land rights and good land governance, and fosters food security both locally and internationally. To avoid possible pitfalls, investors would do well to tune into the conversation about land use here and here, and subscribe to sets of principles like these and these.

In the developed world, land investment is often part of a move to a more green and sustainable lifestyle. Iroquois Valley Farms, chosen as one of the Impact Assets 50, leases farmland to organic farmers, while Beartooth Capital acquires western ranches for conservation and use as eco-tourism destinations. In cities, land acquisition plays a part in neighborhood regeneration and community homeownership schemes. With these models turning profits, and the movements behind them gaining popularity, we can expect to see more opportunities for land investment in developed economies in the future.

Image credit: ulka.w, Flickr

Marta Maretich is Maximpact’s Chief Writer and Blog Editor. Maximpact is a free global portal for the social, impact and sustainability sectors. It operates as a secure web-based listing service that allows sustainability, philanthropy and CSR professionals, as well as entrepreneurs, intermediaries, and funds to share information about initiatives and impact investment deals, online. For more information on the platform or to review latest impact projects visit: www.maximpact.comThis article first appeared on Maximpact’s blog.


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