What

Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What problem does the investment aim to address? For the target stakeholders experiencing the problem, how important is this change?

Reducing Deforestation and Degradation: Deforestation and forest degradation continue to be leading challenges for reducing global climate emissions and managing local environments, exacerbating food insecurity, loss of water quality, soil loss, fire prevalence, and stalled or unequal economic growth, among other issues. Intact forest landscapes in particular have high conservation value because they provide a wide range of ecosystem services (1).

Conserving Forest: A few proven methods for investors to conserve forests and forest resources are highlighted here.

  • Forest Product Harvesting: Lucrative forest products with global market demand offer an economic opportunity for forest conservation. For example, the açaí fruit, found in Amazonian forests, is commercially valuable for use in food, nutritional supplements, and cosmetics (2). The açaí market has been growing quickly, hitting nearly USD 2 billion in revenue in 2016 (3).
  • Reducing Drivers of Deforestation: Investing in alternatives to drivers of forest degradation and deforestation can help to preserve remaining forests by intensifying existing agriculture, limiting livestock expansion, or reducing logging. For example, some species of bamboo can commercially substitute for timber and grow faster than comparable short-rotation tree plantation species, taking pressure off forest land for fiber and building materials. In 2012, the world bamboo market was estimated at USD 10 billion (4).
  • Payments for Ecosystem Services: Diverse actors promote and make available other types of conservation measures, including partnerships among government, civil society, and the private sector. For example, the United Nations Framework Convention on Climate Change (UNFCCC) manages the REDD+ program, defined as “reducing emissions from deforestation and forest degradation in developing countries, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks.” Although accounting for REDD+ transactions must involve national and sub-national governments, impact investors already contribute substantially to REDD+ initiatives at the project scale by investing in businesses that participate in voluntary forest carbon markets (5). Such projects must be “nested” in jurisdictional-scale REDD+ initiatives to benefit from official financial incentives (6).

What is the scale of the problem?

Growing Deforestation and Forest Degradation: Together, deforestation and forest degradation produce more emissions than the entire global transportation sector, comprising 17% of global carbon emissions (7). Loss of tree cover continues to accelerate in the tropics, rising over the past 17 years and reaching the second worst year on record in 2017 at a loss of more than 15 million hectares (8).

Five factors can explain global forest loss between 2001 and 2015 (9):

1 Commodity Production: Commodity production, such as agriculture, mining, and oil and gas, is responsible for 27% of deforestation, most of which is in the tropics. Deforestation for this purpose is often permanent. 2 Shifting Agriculture: Shifting agriculture, where land is cleared and burned to produce subsistence crops, is practiced in low-income, tropical regions and accounts for 24% of global deforestation. Depending on the region, this practice can either offer a stable, well-managed cultivation cycle or demand continual expansion into intact forest landscapes. 3 Urbanization: Urban areas continue to grow, impacting nearby forests and contributing to less than 1% of global deforestation. Two-thirds of global forest loss due to urbanization occurred in the eastern United States. 4 Wildfires: With increasing intensity and frequency and comprising 23% of global deforestation, wildfires destroy large swaths of forest, particularly in northern Canada and Russia. Wildfires can be caused by both a warming climate and human interaction. 5 Forestry: The forestry industry manages natural forests and tree plantations throughout North America, Europe, Russia, China, southern Brazil, Chile, South Africa, and Australia. The industry contributes 26% of global forest loss, most of which is temporary, planned harvest of timber and other wood products. Sustainable forestry certification is uncommon outside of the northern hemisphere.

Who

Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who (people, planet, or both) is helped through investments aligned with this Strategic Goal?

The Planet: Forests help to regulate climate, sequestering carbon and moderating the effects of climate change. Reducing tropical deforestation has a particularly large impact, since tropical forests store almost 2.7 times more carbon than an average temperate forest and 3.5 times more carbon than a boreal forest (10).

Animals, Plants, and Insects: Forests are home to a large share of the earth’s land-based biodiversity. Animals, plants, and insects are at risk of extinction if their forest habitat is destroyed, which can cause additional social and economic damage directly to humans due to the adverse effects of throwing ecological systems out of balance. For example, pollinators provide essential services for the world’s food crops, and their loss could cost USD 285 billion to USD 577 billion per year (11).

Concerning socio-economic challenges in general, rural and urban communities can both benefit from improved forest protection.

Rural Communities and Local Indigenous Communities: More than 1.6 billion people depend on forests for their food, water, fuel, medicines, traditional cultures, and livelihoods (12). In developing countries, for example, 28% percent of total household income derives from economic activities in the environment, primarily activities in natural forests (13). Indigenous people and local communities often live inside or close to dense forests and are recognized as either owning or controlling 18% of global land (14). Those communities that live closest to the forests and who rely on them for resources will ultimately benefit most from conservation initiatives.

Urban Communities: Although conservation efforts often focus on rural communities living close to forests, city dwellers also benefit. Healthy forests can improve water quality in urban areas, offer protection from extreme weather events, and make urban communities healthier and happier (15).

What are the geographic attributes of those who are affected?

Forests in regions all around the world provide value for local communities, local flora and fauna, and global environmental objectives. Many forest conservation projects focus specifically on areas with high rates of deforestation or a large area of intact forests.

Current Trends: About half of the world’s deforestation takes place in tropical countries. Between 2002 and 2012, half of tropical deforestation occurred in Latin America (10). More recently, from 2015 to 2017, the main countries with forest loss included Brazil, the Democratic Republic of Congo, Indonesia, Malaysia, Bolivia, Colombia, Paraguay, Mozambique, and Côte d’Ivoire (10,16).

Global Opportunities for Conservation: Intact forest landscapes are found primarily in humid tropical forests in the Amazon and Congo River basins, the islands of Borneo and New Guinea, and the southeast Asian highlands. In addition, a high percentage of the northern boreal forests in Russia, Canada, and the United States’ Alaska continue intact, yet only 12% of them is permanently protected (27).

Contribution

Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

How can investments in line with this Strategic Goal contribute to outcomes, and are these investments’ effects likely better, worse, or neutral than what would happen otherwise

The responsibility for forest conservation has often been attributed to governments. But global environmental funding for forest conservation projects has not materialized as expected, as public investment in agriculture, forestry, land use, and natural management totals only 3% of all public investment in climate action (17). As a result, impact investors can play an essential role in conserving these areas of significant value.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many target stakeholders can experience the outcome through investments aligned with this Strategic Goal?

Forests extend over a third of the earth’s surface area and support billions of people in both rural and urban communities (18). Each investment will require separate calculation of its total number of target stakeholders, which will vary with factors such as how close communities live to the protected forests and which benefits these communities derive from these forests. In any case, local communities are likely to gain the most from forest protection (19).

How much change can target stakeholders experience through investments aligned with this Strategic Goal?

Increasing forest conservation can offer substantial benefits to local communities who rely on the forest. Conserved forests also continually sequester carbon, reducing the global effects of climate change. Investors in forest conservation should consider their investments over a long-time horizon to ensure that the forest and its resources continue to provide the expected benefits.

The following is one example of impact from a project aligned with this strategy:

  • In Brazil’s Cerrado region, Althelia Funds is supporting INOCAS, a Brazilian start-up, to pioneer an alternative to palm oil, a non-native resource that has vastly contributed to deforestation in the Amazon. By planting the native Brazilian macaúba tree on existing cattle pasture and then harvesting its fruit for plant oil, INOCAS’s project is expected to sequester around 600,000 metric tons of carbon dioxide and reduce deforestation pressure in the region. It could even disrupt the global market for palm oil, the plantations for which are often cited for mass habitat loss and environmental degradation (20).

Risk

Dimensions of Impact: RISK

Key questions in this dimension include:

What impact risks do investments aligned with this Strategic Goal run? How can investments mitigate them?

External Risk: Even within conservation areas, the drivers of deforestation can continue. Forests must be carefully monitored for illicit activity, such as illegal timber harvesting or wildlife poaching. Natural drivers of deforestation, such as extreme weather and natural disasters, can also affect the stability and resilience of conserved areas. Insurance can protect investors against potential damage caused by fire, tree diseases, insect outbreaks and extreme weather events. Multilateral consultations and partnerships during project design stage can also help secure community’s long-term buy-in and mitigate external risks caused by human activities.

Stakeholder Participation Risk: Effective forest conservation requires respecting the rights and ensuring the buy-in of local communities in and around the forested areas. The support of local groups, including their capacity to manage resources sustainably, is essential both for long-term business success and to increase the likelihood that forests stay intact (21).

Drop-off Risk: A successful forest-conservation business ensures the permanence of the conserved area and must execute a long-term strategy that creates sustainable revenue to manage the property. In the United States, for example, land trusts use stewardship endowments to help ensure long-term conservation (22).

Unexpected Impact Risk: To avoid overuse and permanent damage, businesses profiting from conservation areas must be thoughtful about how they use the land. For example, a successful business may bring numerous visitors or employees into a conserved area; such a business must be sensitive to the impact created by the additional human traffic. In addition, conservation projects should carefully evaluate impact beyond their boundaries, evaluating whether they have caused leakage or deforestation in neighboring areas.

Each project must individually estimate the probability that any of these risks happen based on the conservation solution and location, among other factors.

What are likely consequences of these impact risk factors?

Failure to preserve forests may put both the business model and impact at risk. Heavy use of the forest may require revenue activities to pause while the forest recovers.

Illustrative Investment

INVESTMENT 1: Ecotrust Forest Management (EFM) manages more than 100,000 acres of forest land across Oregon, Washington, and California using a climate-smart management philosophy and strategy to preserve high-carbon-sequestering forests in the western United States. EFM’s maintenance of healthy watersheds also preserves vital habitat for Northwestern fish populations, such as wild salmon and trout. EFM has pioneered its climate-smart forestry methods over 15 years. Its model extends the average age of forests, increases land in protected reserves, retains 10–30% more trees on the landscape, restores habitat, and develops strong relationships with local communities. To ensure shared local prosperity, EFM actively looks for opportunities to transition its land ownership to community and conservation owners like tribes, land trusts, water districts, conservation groups, and public agencies (22).

INVESTMENT 2: &Green approaches the challenge of deforestation by focusing on one of its main drivers, agricultural production systems. By investing in commercial projects in agricultural value chains, &Green protects and restores tropical forests and peatlands and makes agriculture more inclusive and sustainable. In Indonesia’s Jambi and East Kalimantan provinces, the fund financed Royal Lestari Utama to pioneer sustainable natural rubber production. Its rubber concessions function as a buffer to Jambi’s Bukit Tigapulu National Park. In addition, Royal Lestari Utama set aside a total of 28,000 hectares of its land in Jambi (24% of the concession) and East Kalimantan (51% of the concession) to protect high-conservation-value (HCV) areas, high-carbon-stock forests, and other areas with conservation value. The project expects to create a program for 3,000 smallholder farmers and support an estimated 16,000 jobs once the plantations are fully developed (23).

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

NESTA: 2
REDD+ and Biodiversity Conservation: A Review of the Biodiversity Goals, Monitoring Methods, and Impacts of 80 REDD+ Projects

Panfil, Steven N., and Celia A. Harvey. “REDD+ and Biodiversity Conservation: A Review of the Biodiversity Goals, Monitoring Methods, and Impacts of 80 REDD+ Projects.” Conservation Letters 9, no. 2 (2016): 143–50.

NESTA: 2
Cheap Carbon and Biodiversity Co-benefits from Forest Regeneration in a Hotspot of Endemism

Gilroy, James J., Paul Woodcock, Felicity A. Edwards, Charlotte Wheeler, Brigitte L. G. Baptiste, Claudia A. Medina Uribe, Torbjørn Haugaasen, and David P. Edwards. “Cheap Carbon and Biodiversity Co-Benefits from Forest Regeneration in a Hotspot of Endemism.” Nature Climate Change 4, no. 6 (June 2014): 503–7.

NESTA: 1
Conservation and Restoration of Mangroves: Global Status, Perspectives, and Prognosis

Romañach, Stephanie S., Donald L. DeAngelis, Hock Lye Koh, Yuhong Li, Su Yean Teh, Raja Sulaiman Raja Barizan, and Lu Zhai. “Conservation and Restoration of Mangroves: Global Status, Perspectives, and Prognosis.” Ocean & Coastal Management 154 (March 15, 2018): 72–82.

NESTA: 2
Forest Figures: Ecosystem Services Valuation and Policy Evaluation in Developing Countries

Ferraro, Paul J., Kathleen Lawlor, Katrina L. Mullan, and Subhrendu K. Pattanayak. “Forest Figures: Ecosystem Services Valuation and Policy Evaluation in Developing Countries.” Review of Environmental Economics and Policy 6, no. 1 (January 1, 2012): 20–44.

NESTA: 2
Classifying Drivers of Global Forest Loss

Curtis, Philip G., Christy M. Slay, Nancy L. Harris, Alexandra Tyukavina, and Matthew C. Hansen. September 2018. “Classifying Drivers of Global Forest Loss.” Science 361 (6407): 1108–11.

NESTA: 2
Global variation in terrestrial conservation costs, conservation benefits, and unmet conservation needs

Balmford, A., K. J. Gaston, S. Blyth, A. James, and V. Kapos. February 2003. “Global Variation in Terrestrial Conservation Costs, Conservation Benefits, and Unmet Conservation Needs.” Proceedings of the National Academy of Sciences 100 (3): 1046–50.

NESTA: 4
The Value of Forest Ecosystem Services to Developing Economies

Mullan, Katrina. 2014. “The Value of Forest Ecosystem Services to Developing Economies.” CGD Working Paper. Washington, DC: Center for Global Development.

NESTA: 3
AR5 Synthesis Report: Climate Change 2014

IPCC, 2014: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the
Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp.

NESTA: 3
Climate Benefits, Tenure Costs: The Economic Case for Securing Indigenous Land Rights in the Amazon.

Ding, Helen., Peter Veit, Erin Gray, Katie Reytar, Juan-Carlos Altamirano, Allen Blackman, and Benjamin Hodgdon. October 2016. Climate Benefits, Tenure Costs: The Economic Case for Securing Indigenous Land Rights in the Amazon. World Resources Institute: Washington, DC.

NESTA: 2
IPBES Global Assessment Summary for Policymakers

IPBES. May 2019. “Summary for policymakers of the global assessment report on
biodiversity and ecosystem services of the Intergovernmental
Science-Policy Platform on Biodiversity and Ecosystem Services.” IPBES: Bonn, Germany

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.