A typology of risks to increase investment in indigenous and community-led landscapes

The finance gap for nature is well-established, as one of the most poorly-funded themes amongst the UN Sustainable Development Goals, missing at least USD 4 trillion in finance if we are to meet net-zero and nature-positive targets. At the same time, Indigenous Peoples and Local Communities (IPLCs) are vital custodians of the world’s landscapes: at least 32%, or 43.5 million km2, of global land and associated inland waters is owned or governed by IPLCs, either through legal or customarily-held means. Communities have been noted to manage biodiversity on par with or more effectively than state protected areas, even when conservation is not the primary purpose (e.g. in Schuster et al., 2019; Corrigan et al., 2018)

The forthcoming Global Biodiversity Framework is likely to recognise the importance of Indigenous Peoples and Local Communities  in meeting targets such as to protect 30% of the world’s land and water  by 2030, yet they face several challenges to accessing investor capital for this conservation mandate. These challenges include a lack of appropriate legal frameworks to recognise land rights, weak governance, exclusion, and capacity for community-led monitoring and enforcement. Together these represent a mix of real and perceived risks to investors, including financial, social and environmental risks. Unique risks specific to private investment in community-led conservation and particularly non-freehold / non-state land have already been identified (e.g. in Smith et al, 2022) including land tenure types that are unfamiliar to most investors but widely used in conservation practice.

At the recent meeting of the Coalition for Private Investment in Conservation, Dr Frank Hawkins noted that, “identifying and mitigating the perception and reality of risk by both IPLCs and investors is one of the most important steps needed to close the conservation finance gap.”

Josep Oriol, working actively in this space as managing director of Nairobi-based Okavango Capital noted, “we have many potential transactions at the conception stage but they sometimes fall through at the due diligence, closing, or growth stages. We need to standardise the risks that are causing real or perceived bottlenecks at each stage in order to address them systematically.”

Nature Lead at the UNEP Finance Initiative, Jessica Smith, conveyed that many de-risking products are out there for other impact investing themes, yet the few available for conservation finance remain at the ‘proof of concept’ stage or are highly bespoke. She highlighted that, “in order for a larger number of banks, insurers and investors to get involved in nature finance with IPLCs, there need to be more standardised frameworks and methods to make risk-return calculations. This requires quantitative measures, as uncertainties will limit the potential of scaling investments in this space. A common typology of financial, environment and social risk related to IPLC landscapes for investors is the key to consistent measurement.”

Seeking to address this gap is a group of researchers and professionals from the UNEP Finance Initiative, the Coalition for Private Investment in Conservation (CPIC), the University of Cape Town Graduate Business School and on-the-ground practitioners. One current hypothesis is that commonalities exist among issues related to investing in various forms of community-led conservation landscapes across a number of regions in the Global South (i.e. emerging markets and the developing world). There is currently a major gap in the market for a framework for identifying, assessing and managing financial, environmental and social risks in private financial investments (including blended finance) in community-led conservation in the Global South.  Developing a common typology provides a structured way to quantitatively assess risk, for investors and their advisors, but also for IPLCs themselves.

This includes possible investment in freshwater, marine, and terrestrial areas where Indigenous Peoples and Local Communities can promote nature-based solutions – for example in mangroves, sea grasses, peatlands and other sizeable carbon sinks that will help us reach net zero emissions.

Get involved: answer this questionnaire by September 6th to help build a common framework for identifying, assessing and managing risks in private financial investments in community-led conservation in the Global South.