Katie McCoy l Palladium - Feb 19 2024
Why Scaling Climate Projects will be Critical for Our Forests in 2024

Trends in the sustainable forests and land use sector don’t happen overnight or even emerge over the course a year – it can take decades for market systems, behavioural, economic, and attitudinal changes to take effect. Because ultimately, sustainable change within the sector requires transformational shifts to the ecosystems and supply chains providing jobs, while also restoring and protecting forests.

It’s a complicated but necessary shift. Forests play a critical role in regulating the global climate and yet, one fifth of global greenhouse gas emissions are the result of deforestation, agriculture, and other unsustainable land uses.

We’re all well aware of the urgency of the climate crisis. This year has to be about reaching scale, transforming whole landscapes with our solutions.

Nature and Land-Use is on the Agenda

The last few UN Climate Change Conferences (or COPs) have finally acknowledged that nature and forests are serious players in tackling climate change, rather than being a ‘nice to have’.

At 2021’s COP26, 145 countries signed up to the Glasgow Leaders Declaration on Forests and Land Use, which focuses on collective efforts to halt and reduce forest loss and degradation, indicating a definite shift from talk to action.

In addition, COP leaders are recognising that nature-based solutions (NBS) can help reduce carbon at scale. NBS, like mangrove forests which mitigate storm damages, can reduce emissions by up to 30%, operate in a way that creates both scalable positive impact on climate – acting as a carbon sink – as well as positive impacts for people and communities.

This dual effect means they have an important role to play alongside technological approaches to reducing or mitigating carbon, which can often have less of a ‘people’ impact but are nonetheless critical.

To Reach Real Scale, Smallholders Must be the Agents for Change

Smallholder farmers make up 97% of agricultural deforestation in Africa, 59% in Asia and 52% in South America. At the same time, smallholder farmers play a crucial role in local economies and global food supplies and security.

They hold the key to scaling a shift to sustainable land use but must be included from the start of any projects or programs that intend to include them, not after decisions on projects have already been made.

Benefit sharing, in particular, needs to be co-designed with individual communities to be both equitable and sustainable in the long term. We’ve seen time and time again how useful models or benefits in one area or region don’t necessarily translate across communities in the same landscape.

In Ghana, more than 80% of oil palm fruit bunches are produced by smallholder farmers but their productivity is up to 50% lower than that of larger plantations. As global demand for palm oil is on the rise, harnessing these smallholders represents a massive opportunity. Through Partnerships for Forests, our program which works with nature-based businesses to combat deforestation, we’re supporting a production-protection model to develop locally-owned sustainable palm oil fields and increase the productivity of those fields through better management practices.

"Nature based solutions have an important role to play alongside technological approaches to reducing or mitigating carbon."

Since the project, called BOPP, began, more than 300 smallholder farmers have benefitted from new livelihood options such as baking, pig farming, and beekeeping, providing them with an additional income to palm oil in compliance with forest protection codes and conservation agreements. And the development of community oil palm fields means that the project has centralised community support. We plan to bring 16,000 hectares of forests under protection and 4,000 hectares under sustainable production by the end of this year.

The Complexity and Opportunity of Emerging Markets

Scale won’t necessarily come easily, especially in emerging markets and complex environments. But these are the places where it’s needed the most. From Brazil to Peru, the importance of scaling NBS in these contexts is clear and it goes hand in hand with solutions that help to create change at all levels from policy through to sustainable practices on the ground. Emerging markets, while often having difficult market access or conditions to set up new businesses and supply chains, also provide the greatest opportunities.

Products, like sustainable coffee, cocoa, and honey, and stories attached to those products, have potential to draw new interest from international markets and consumers. But scale must be reached to set up viable and economically sustainable processing facilities and supply chains – small-scale or isolated projects can rarely sustain these costs.

To do so, it’s vital to get players of all sizes, across the entire supply chain involved and linked across landscapes – from startups and small businesses through to multinational enterprises. None of this should be happening in a vacuum.

Meanwhile, 65% of the world will be participating in major elections this year. We can only expect that the outcomes of those elections will impact the policy environment around forests, including regulations for forestry businesses, logging, carbon markets, and enforcement of forest protections.

For Scale We Need Investment

Since launching, Partnerships for Forests has mobilised £1.25 billion in private investment, but it’s not enough to scale all of the global projects needed to address climate change. The gap to funding nature is enormous and it’s not going away or getting any smaller. Our Climate Smart Lending Platform is just one of many vehicles that exist to help enable financial institutions to engage with smallholder farmers and catalyse investments to improve their resilience to climate change.

The platform creates the opportunity to combine climate-smart credit and smallholder finance to provide farmers with the necessary tools and incentives to adapt their agricultural practices and combat land degradation. It also provides lending institutions with the monitoring and guarantees needed to enable them to reach more smallholders and reduce the risk of climate-related defaults.

The push for scale in forest businesses and supply chains must be met by a huge increase in in investment into nature. Investable pipelines of nature businesses need to be enhanced and expanded, but communication between investors and businesses also needs to be improved. The opportunities are vast, but they require investors to bring new thinking to the kinds of business models they support, or different approaches to risk management in order to increase capital flows to businesses in emerging economies.

Incumbent industry must also be willing to invest in their own operations – and in communities – if we are to see true transformational change for the world’s tropical forests, and for nature overall.

For more, read 'We Can't Fight Climate Change without Smallholder Farmers' or contact info@thepalladiumgroup.com.