#30 July 2012

Dear Readers,

Last month, I had the opportunity to participate in the most recent REDD+ Partnership meeting in Santa Marta, Colombia, where the Partnership facilitated a much-needed discussion on advancing REDD+ financing. A number of strong take away messages came out of those discussions, all of which underscored the need to scale up financing in all phases of REDD+.

Experience to date has shown that the cost of readiness is greater than originally thought, and if we are to achieve the goal of reducing emissions from deforestation and forest degradation and slow down global warming, significantly larger financial commitments for REDD+ will be required. Currently, most REDD+ funding has come from the public sector though presenters at the workshop demonstrated evidence of the increase in the private sector’s interest and action. To scale up requires that private finance becomes a meaningful part of the funding equation for REDD+. However, what was also clear from the discussions is that how to finance REDD+ and how best to engage the private sector is understood differently by the different REDD+ stakeholders.

Given this, a critical starting point for advancing REDD+ financing will be in understanding the range of stakeholders along the REDD+ value chain, their objectives and the range of financial tools at their disposal. On one end of the REDD+ value chain, we have different classes of investors with different expectations of return on their investments. There are producers involved in forest landscape transformation and those involved in structuring investment for activities like food security, and pulp and paper, among others. National governments also contribute domestic finance for REDD+ and there are options here for public-private partnerships. In between we have the bilateral and multilateral financing.

In this context, three key messages emerged for me from the discussions in Santa Marta. First, we need to recognize the fact that the rate of return from land based investments is generally lower than what conventional investors expect. REDD+ investments could fail because investors have unrealistic expectations of the rate of return, so good design upfront and sufficient consultation is important for sustainability and profitability. Secondly, investments are not just about carbon or developing a carbon market. Investors in agriculture (ie/developing oil palm on degraded lands) and infrastructure (ie/ developing road and rail networks) can tailor make these investments to ensure that deforestation and forest degradation are reduced by including the value of the additional benefits that REDD+ brings.

Finally, creating the enabling conditions for the private sector to develop carbon markets means that the public sector and governments need to develop tools throughout Phases 1 and 2 of REDD+ to reduce the perceived and actual risks. This means that laws and policies are enforced, land tenure arrangements are clear and safeguards are in place, not only to reduce and prevent negative social and environmental effects but to identify opportunities and create incentives to realize additional benefits from REDD+. The discussions demonstrated a growing interest and appetite to explore innovative financing arrangements for REDD+.

Yemi Katerere

Head of the UN-REDD Programme Secretariat