UNCCD, LDN Fund and TAF partnership to advance the LDN agenda
This is where investments in sustainable land use are needed. Examples of investing in sustainable land management include financing of businesses that contribute to biodiversity and adaptation, including sustainable forestry and agriculture; green infrastructure investments; climate mitigation projects; and payment for ecosystem services. Not only do such activities generate income for local communities, protect natural assets such as forests and water, and restore degraded lands, the corresponding investments can also generate financial returns. These practices are also widely recognized as a cornerstone for achieving the Paris climate goals and the Sustainable Development Goals (SDGs), including SDG 15.3 to contribute to Land Degradation Neutrality (LDN). Already, forward-looking banks, companies and other investors have in recent years made commitments to increasingly make capital available that not only takes financial returns into account, but also socially equitable and environmental returns.
But to scale up investments in sustainable land management, more capital is needed. Recent estimates of the nature financing gap have been in the range of US $598–824 billion per year, with current levels of funding covering only 16–19% of the overall need to halt biodiversity loss. In addition to more capital, also more projects are needed. Today there is still a shortage of investment ready projects and developing these takes time. This is also because such projects often require new types of collaboration, and the criteria of the investment funds can be challenging to meet. Many investment opportunities are perceived to be too risky, or are overly complex at transaction level, thereby limiting replication potential and becoming too inefficient.
To help overcome these barriers, investors, such as the LDN Fund, can invest in building sector expertise, including its risk, return and impact profiles; develop appropriate financing and risk allocation mechanisms; and invest in building partnerships and a wider ecosystem that supports these innovative deals. With a healthy pipeline of larger-scale investment opportunities with transparent features, more investors would be willing and able to increase their exposure to natural capital investments.
In addition, those supporting projects in the early stages of innovative business models, such as the LDN TAF, can scale up their support and guidance on how to pilot and structure ambitious investment proposals in line with investor requirements.