A decade ago, 100,000 volunteers from the Senegalese villages of Casamance and Siné Saloum joined together to replant 80 million mangrove trees, the world’s largest mangrove restoration program. Ten years later, the mangroves have sequestered more than 160,000 tons of carbon, the equivalent of taking more than 100,000 cars off the road every year. The restored coastal ecosystem better supports wildlife and local livelihoods, bringing villagers an additional 4,200 tons of fish, shrimp and oysters yearly. About 95% of villagers believe that the project has had a positive impact on their lives.
Local NGO Oceánium led the project, but impact investor Livelihoods Carbon Fund provided the financial backing. Ten companies—including Hermès, Danone and Michelin—have invested in the Livelihoods Carbon Fund with the dual goal of offsetting part of their carbon emissions and improving livelihoods in the developing world. The encouraging results of the mangrove restoration project show how investing in sustainable forestry projects can yield huge benefits.
Impact investments, such as the ones supported by the Livelihoods Carbon Fund, are investments made with the intention of generating measurable social and environmental benefits alongside a financial return. The Global Impact Investing Network (GIIN), one of the world’s largest and most influential impact investing networks, has collaborated with investors for 10 years on how to increase the scale and effectiveness of their practice. Now, in partnership with WRI’s Global Restoration Initiative, the GIIN has developed guidance for sustainable and responsible forestry investments through its Navigating Impact project, a component of its larger IRIS+ system. This partnership enables investors to select sustainable forestry strategies and access evidence and metrics that measure progress toward their goals.
As forest cover around the world continues to decline, many communities—especially their poorest members—continue to depend on land and forests for their livelihoods. As these benefits become better recognized and valued, investors in sustainable forestry are seeing financial returns that outperform investments in conventional timber.
Investors have already started putting their money into innovative forestry, land-use and other tree-based projects. These projects focus on making a profit while reducing greenhouse gases, strengthening local economies and increasing incomes, or improving ecosystem services like water quality, air quality or soil productivity.
The GIIN and WRI identified five main impact investing opportunities in the sustainable forestry space. Each offers examples of investments that are already yielding impressive results:
Impact investments in sustainable forestry can also help meet global sustainability and development goals. In restoration, for example, impact investors have signed on as official financial partners to the African Forest Landscape Restoration Initiative (AFR100), which aims to restore 100 million hectares of degraded land by 2030, and the Latin America and Caribbean-focused Initiative 20×20, which aims to restore 20 million hectares of land by 2020. Through these initiatives, private sector partners have earmarked more than $480 million for restoration in Africa and $2.4 billion for reversing land degradation in Latin America.
However, sustainable forestry isn’t free from risks. Environmental challenges like pests or fires and socio-economic challenges like illegal logging can be considerable setbacks for any forestry project. Beyond these external risks, unsustainable forestry practices—such as overharvesting, destructive logging, or planting inappropriate tree species—remain a challenge.
Investors should perform thorough due diligence to understand the possible ecological impacts of a project and the interests of the local communities involved. One of the most meaningful ways to mitigate risk and generate positive impact is to ensure that local communities are engaged in the sustainable forestry project. For example, Livelihoods Carbon Fund said that villagers acting as principal agents of change were and continue to be vital to the project’s success. (Interested investors can find a sample due diligence questionnaire in GIIN’s latest report on Scaling Impact Investment in Forestry.)
As more investors explore sustainable forestry as a compelling financial and impact opportunity, it will be critical for them to understand how to navigate the complex sector to drive greater results for people and the planet. Check out the GIIN’s new Sustainable Forestry Navigating Impact project theme to learn more.