- An Impact Investment Fund for Land Degradation Neutrality
An Impact Investment Fund for Land Degradation Neutrality
To achieve the target of a land degradation-neutral world (SDG target 15.3) by 2030, large amounts of financial resources must be mobilized. Public and philanthropic resources alone will not suffice, as acknowledged in the Addis Ababa Action Agenda. New financial instruments and intermediaries, as well as enabling conditions, are needed to catalyze private capital to attain land degradation neutrality (LDN). For this reason, Decision 3/COP.12 requested the Global Mechanism (GM) to develop options for increasing resources for the full realization of LDN initiatives, including the “creation of an independent Land Degradation Neutrality Fund (LDN Fund)."
What is the LDN Fund?
The LDN Fund is an impact investment fund blending resources from the public, private and philanthropic sectors to support achieving LDN through sustainable land management and land restoration projects implemented by the private sector. GM spearheaded the establishment of the LDN Fund and undertook its initial design with support from the Governments of France, Luxembourg, Norway, and the Rockefeller Foundation and involvement of an advisory group that brought together representatives from public financial institutions, international NGOs and academia. A private sector investment management firm Mirova, an affiliate of Natixis Investment Managers dedicated to responsible investing, was selected competitively to manage the LDN Fund. Officially launched at UNCCD COP 13 in Ordos, China, the LDN Fund is the first-of-its-kind investment vehicle leveraging public money to raise private capital for sustainable land projects. Anchor investors – the European Investment Bank and the French Development Agency – are joined by institutional investors including the first north-American private investor Fondaction, the Fondation de France foundation and insurance companies BNP Paribas Cardif and Garance. The initiative is also backed by de-risking partners that include the Government of Luxembourg, IDB Invest and the Global Environment Facility. In total, investors have announced commitments of over USD 100 million out of a target of USD 300 million.
By leveraging long-term non-grant financing, the LDN Fund will invest in financially viable private projects on land rehabilitation and sustainable land management worldwide, including sustainable agriculture, sustainable livestock management, agro-forestry and sustainable forestry. Eligible projects generate environmental and socio-economic benefits as well as financial returns.
What will the LDN Fund do?
In addition to restoring degraded lands, the Fund with generate revenues from sustainable use of natural resources, creating green job opportunities for local communities, increasing food and water security and sequestering CO2. The LDN Fund will provide evidence of its achieved impacts through a rigorous monitoring and evaluation framework. The LDN Fund investments will follow an Environmental and Social Management System (ESMS) meeting international best practices. The LDN Fund complies with robust environmental, social and sustainability standards, along with responsible investment criteria. The ESMS approach was developed with the support of an independent internationally-acknowledged expert and benefited from public consultations that included CSOs. In addition to the IFC Performance Standards, the LDN Fund will follow the Voluntary Guidelines on the responsible Governance of Tenure (VGGT) developed through inter-governmental negotiations within the Food and Agricultural Organization. The ESMS also includes a complaint and compliance mechanism to ensure that project-affected populations have formal ways to voice their concerns, identify and correct the causes for grievance.
Restoring vital ecosystems
In its operations, the LDN Fund aims to take a landscape approach which considers and manages trade-offs among competing land uses, individual interests and sectoral policies. Addressing land degradation at the landscape level can help develop a more coordinated approach to natural resource management on a larger scale by bringing together multiple actors from smallholders, communities and civil society to SMEs, large corporations and regulators. The protection of vital ecosystem services goes hand in hand with safeguarding against potential large-scale land acquisitions that contradict environmental standards and the interests of local communities.
Empowering sustainable business
The Fund is designed to substantially scale up land restoration and sustainable business models implemented on restored land. Many small-scale projects have confirmed that sustainable landscape management is not only key to achieving LDN, it is also more financially viable in the long term than unsustainable alternatives. The LDN Fund will offer financing for the rehabilitation of degraded land and for sustainable business models used on land affected or at risk of degradation. In addition to direct investments into larger scale projects, the Fund is also expected to work with financial intermediaries. For instance, in most land use sectors the access to finance for smallholders and small businesses is a big challenge. To meet the needs of these land users, the LDN Fund will channel capital through local financial institutions and intermediaries who commit to promote LDN-relevant sustainable land use among small- and mid-sized responsible producers.
- The Rockefeller Foundation
- Government of France
- Government of Luxembourg
- Government of Norway