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 Poverty and Increasing Employment: Poverty and unemployment threaten local economies and communities in both developing and developed countries (1). Providing access to markets, credit, and technical skills and upholding secure property rights (also known as tenure) can help grow local economies and improve the livelihoods of local communities through sustainable forest-based activities (2).

Conserving Ecosystem Services: Investing in sustainable forestry practices can also help to ensure that communities continue to benefit from the ecosystem services that forests provide, including food, shelter, watershed protection, and species habitat, as well as the preservation of cultural forest-related values for current and future generations.

Focusing on Communities: Some of the many opportunities to support communities are highlighted here.

  • Partnering with Communities: Globally, smallholders own more forest land area than corporations, which makes them natural partners for business expansion (2). Concerning community-based forestry, impact investors can work with smallholder forestry or collaborative regimes to scale local operations.
  • Providing Forest-Based Resources or Alternatives: Supporting sustainable forest management, as through the sustainable production of fuelwood or building materials, or investing in alternatives to forest-based resources, such as improved cookstoves, benefits the vast number of people who rely on nearby forests for basic resources. Fuelwood, for example, remains the primary source of energy in rural areas of developing countries, and 18% of the world’s population uses wood as its primary building material for homes (see Energy Access theme for further details) (3).
  • Hiring Local: Businesses that create formal, stable green jobs can focus on hiring local people. The formal forestry sector already employs 13.2 million people worldwide, with another 41 million employed informally (3).

What is the scale of the problem?

Poverty and Economic Inequalities: Rural poverty is an acute global challenge; more than 46% of the worldwide rural population is poor, compared to around 16% of the urban population (1).

Low-income people, especially in developing countries, rely substantially on local forests and forest resources. In fact, forests provide 1.6 billion people—around 20% of the global population—with food, water, fuel, medicine, a forum for culture, and livelihoods (5). Yet forests around the world are disappearing quickly, with tree cover loss rising over the past 17 years (6).


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?

Rural Communities: Around 40% of the global rural population living on less than USD 1.25 per day (or approximately 250 million people) live in or around tropical forest and savannah, and depend on forest resources for their livelihoods (7).

Youth: Youth, defined by the United Nations as people aged 15 to 24, continue to have high rates of unemployment, with a fifth of all young people in 2018 not in employment, education, or training (8). Unemployment is a key driver of youth migration, as many young people leave rural areas for new urban employment (9).

Women: Women are heavily involved in less visible and less valued tasks around forestry and land use, such as harvesting fuelwood and non-wood forest products or managing smaller agroforestry enterprises. For example, in the East African highlands, a community’s women plant fodder shrubs for its livestock (10), and, especially in Africa, women collect most household fuelwood, which requires significant physical effort and time (11). Formalizing women’s work in the forestry sector and offering new opportunities to contribute to the commercial forest-based value chain can contribute to gender equality and help to reduce poverty (12).

Indigenous Peoples: Indigenous Peoples comprise 5% of the global population yet 15% and 33% of the extremely poor and rural poor, respectively (13). Indigenous people and local communities are also the most effective stewards of dense forests and are either own or control 18% of global land (14).

Forests: The actions of local communities can reduce deforestation. In Bolivia, Brazil, and Columbia, tenure-secure indigenous forest areas had lower deforestation rates between 2000 and 2012 (15).

What are the geographic attributes of those who are affected?

Investments in sustainable forestry help to improve local economies and communities in both developed and emerging markets.

Partnering with Communities: Thirty million people benefit from private forest ownership around the world, with Africa and Europe home to the largest number of forest owners (8.2 million and 7.2 million, respectively) (3). In Latin America, communities legally manage a third of total forest area across the continent and 50% or more in Colombia, Ecuador, Mexico, Nicaragua, and Venezuela (2). Commercial smallholder forestry is a more mature industry in Europe and North America (2).

Providing Forest-Based Resources or Alternatives for Locals: In 13 sub-Saharan African countries, as well as in Bhutan and the Lao People’s Democratic Republic, fuelwood generates 90% or more of all energy used. Moreover, 20% of the population in Africa (and 15% in Asia and Oceania) is involved in producing fuelwood and charcoal. Regarding wood used for home construction, one billion people in Asia and Oceania rely on forest products as the main materials for their walls, roofs, and floors (3).

Hiring Local: Sub-Saharan Africa and Southern Asia—two regions already experiencing considerable poverty and labor vulnerability—will host 38% of the global labor force by 2030 (16). Regarding employment in the formal forestry sector, Asia and Oceania account for half of the global total, while Europe has the highest proportion of its workforce in the formal forestry sector (3).


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

Local communities that depend on forests are often the most impacted by changes to the land. They can also be some of the most effective protectors of forests, if given a voice in the issue (15). Investments in forest-related jobs hold the potential to increase local communities’ economic power, thereby also increasing their ability to protect forests beyond capabilities that would have otherwise been the norm.

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?

The number of people impacted depends on the scale of the investment. Larger operations with more employees or with distributed commercial models, such as outgrower schemes, will reach more people and have greater impact. Investments along forestry value chains can also generate broader impact, as multiple different groups benefit. In addition, investments that offer financial and other benefits directly to communities can more effectively create the desired community-focused impact.

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

The amount of change depends on the type of community-focused project, geographic challenges, and consideration of risk. To create lasting impact, investors can take additional measures to, among other concerns, legally ensure long-term property rights, transfer technical and managerial skills, and promote market linkages (2).

Examples of how much impact can be achieved from projects aligned with this strategy include the following:

  • From the eastern Andes mountains to the lowland Amazon rainforest, Andes Amazon Fund (AAF) has supported the creation of more than 45 protected areas and the formalization of 12 indigenous lands, amounting to more than six million hectares conserved in Peru, Bolivia, Ecuador, and Colombia (17).
  • In sub-Saharan Africa, BURN locally manufactures clean-burning wood and charcoal stoves. Since 2013, it has created more than 400 jobs in manufacturing, sales, and distribution; reduced local fuel costs by more than USD 150 million; improved air quality for more than three million people; and conserved more than 2.4 million tons of fuelwood (18).


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?

Stakeholder Participation Risk: Community-based forestry usually performs below its potential without empowerment, secure tenure, and strong governance (2). Secure tenure is particularly important for Indigenous Peoples and local communities to benefit from investments in sustainable forestry, as some lack the right to exclude outsiders from lands they control or may have no legally recognized right to manage their lands. Working with communities that have well-established tenure—or working to establish tenure—and involving communities early in project design to address their concerns can help mitigate this risk.

What are likely consequences of these impact risk factors?

Without communities’ buy-in and attention paid to their constraints, the project may perform below capacity (2). Communities can also suffer from burnout if expectations are unrealistic (2).

Concerning secure tenure, lack of ownership rights may undermine incentives to invest in long-term improvements and limit the ability of communities to establish and maintain natural resource–based enterprises. Without clear ownership of land, Indigenous Peoples and local communities may be unable to claim payments in compensation for their conservation activities, leading to decreased participation.

Illustrative Investment

INVESTMENT 1: The Moringa Fund invests in integrated value chains for agroforestry to improves lives alongside the environment. In Nicaragua, Moringa invested in an outgrower program for Cafetalera Nicafrance, which produces high-quality coffee and timber on 1,800 hectares of land. The outgrower program specifically targets small- and medium-sized farms affected by climate change and a crippling coffee disease outbreak. It offers zero-interest loans, access to improved seedlings and better coffee processing technology, and capacity building trainings. In addition, the outgrower program ensures coffee sales to premium coffee brands like Nespresso, reducing the risk for farmers. Since 2015, the program has helped strengthen the local community by generating $3.4 million in value and providing 880 jobs. In addition, Nicafrance’s provides healthcare, transportation, housing and education to its workers and their families (19).

INVESTMENT 2: The Forestry and Climate Change Fund invested—in partnership with local NGO Naturaleza para la Vida—in a sustainable forest management venture in Guatemala. Partnering with small- and medium-sized landowners, Naturaleza para la Vida has responsibility for inventory, forest-management plans, licenses, and the execution of the work. In return, forest owners are responsible for fire prevention and the general safekeeping of their forests. This partnership offers key technical support and creates local jobs in timber production while helping communities to continue managing their natural forests (20).

Draw on Evidence

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

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.

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.

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.

Forty Years of Community-Based Forestry: A Review of Its Extent and Effectiveness

Gilmour, Don. 2016. “Forty Years of Community-Based Forestry: A Review of Its Extent and Effectiveness.” FAO Forestry Paper 176. Food and Agriculture Organization of the United Nations: Rome, Italy.

Benefits and Costs of Improved Cookstoves: Assessing the Implications of Variability in Health, Forest and Climate Impacts

Jeuland, Marc A., and Subhrendu K. Pattanayak. “Benefits and Costs of Improved Cookstoves: Assessing the Implications of Variability in Health, Forest and Climate Impacts.” PLOS ONE 7, no. 2 (February 13, 2012): e30338. https://doi.org/10.1371/journal.pone.0030338.

State of the World’s Forests: Enhancing the socioeconomic benefits from forests.

Food and Agriculture Organization of the United Nations. October 2015. State of the World’s Forests: Enhancing the socioeconomic benefits from forests. Food and Agriculture Organization of the United Nations: Rome, Italy.

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.

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.

Agroforestry for Ecosystem Services and Environmental Benefits: An Overview

Jose, Shibu. “Agroforestry for Ecosystem Services and Environmental Benefits: An Overview.” Agroforestry Systems 76, no. 1 (May 1, 2009): 1–10. https://doi.org/10.1007/s10457-009-9229-7.

A Global Baseline of Carbon Storage in Collective Lands

Rights and Resources Initiative, Woods Hole Research Center, World Resources Institute, Environmental Defense Fund, Alliance of Indigenous Peoples of the Archipelago, Mesoamerican Alliance of Peoples and Forests, Coordinator of Indigenous Organizations of the Amazon River Basin. September 2018. A Global Baseline of Carbon Storage in Collective Lands. Rights and Resources Initiative: Washington, DC.

Agroforestry, Food and Nutritional Security

Jamnadass R, Place F, Torquebiau E, Malézieux E, Iiyama M, Sileshi GW, Kehlenbeck K, Masters E, McMullin S, Weber JC, Dawson IK. 2013. “Agroforestry, food and nutritional security.” ICRAF Working Paper No. 170. World Agroforestry Centre: Nairobi, Kenya. DOI: http://dx.doi.org/10.5716/WP13054.PDF

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.