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Pitch

An online platform for finance and forest management will be further developed to facilitate private investment into sustainable forestry.


Description

Summary


Overview online management and finance platform for sustainable community forestry

 

Economic pressures are causing deforestation and forest degradation in Central American countries like Panama. This deforestation is reducing forest carbon stocks, biodiversity, and threatening the livelihoods of indigenous groups.

Responding to this challenge more private investments are needed for reforestation activities. To facilitate private investment, an online finance and project management platform will be further developed out of partly existing components. The platform lays the foundation to demonstrate new sustainable and REDD+ aligned income streams for indigenous communities, to increase forest restoration, and to scale up innovative private financing models.

The benefit for the investors is, that they will have access to a structured database of sustainable forest investment opportunities. With this marketplace, community reforestation projects have the chance to raise funding by presenting their project as an investment opportunity.

The forest management & reporting module will assist a professional forest management and at the same time will be used as a controlling tool for the investor to track the project progress. Drone based imagery and maps will be used for the project presentation and as evidence for successful reforestation activities.

The platform itself consists out of a

  • Finance module: a forest project marketplace to raise funding for reforestation,
  • Management & reporting module: a centralized database to manage the forest projects and to provide transparency towards the investors,
  • Mapping module: drone based high resolution maps will be provided as web maps for transparency, management and presentation purposes.


In order to create a learning example for project implementers and practitioners, the platform development and implementation will be carried out in close collaboration with Planting Empowerment's community reforestation model in Panama.


What actions do you propose?

Target Group
The direct and primary beneficiaries are the indigenous communities of the Darien region of Panama. However with the expansion of the Business model, indigenous groups from other provinces in Panama will be reached.

The project aims to integrate 10 communities in 5 years. In the long-term and with the support of the web-platform, the finance of other community reforestation projects throughout tropical regions worldwide will be enabled. The majority of these communities share the characteristic of protecting thousands of hectares of primary and secondary forests under significant pressure and threat. Unfortunately, the lack of sustainable economic opportunities available, forces them into destructive land use practices causing deforestation and degradation.

Embera girl dressed for a dance, Darien Province, Panama, photo by Yves Picq

Overarching Goal

For the first 5 years the platform aims to facilitate EUR 8M of private investments in community forestry in Panama. Indigenous communities and other tropical countries have access to an affordable and easy-to-use tool for forest management and reporting towards investors. Professionalization will result in a higher level of investment readiness, which will stimulate the flow of investment capital towards entrepreneurial forestry activity.

Forestry provides a profitable and more sustainable land use alternative to cattle ranching and slash-and-burn agriculture. However, indigenous communities are impeded by high implementation costs, long term capital lockup, and the lack of technical capacity. Attracted investments will enable them to overcome these barriers and shift economic activities towards sustainable forestry.

Scaling Planting Empowerments agroforestry partnership model will significantly increase the biodiverse and native species forest area. The spatially distributed forest patches serve as valuable stepping-stone habitats for flora and fauna. The land use change from non-forest and degraded landscapes towards mixed forest plantations will increase carbon sequestration.

The provided tools empower communities to produce marketable timber, to become competitive in local timber markets, and thus reduce pressure on primary forests. Investors will benefit from higher returns.

Demand for a forest management and finance platform
Currently forest investment markets in developing and emerging countries are intransparent, not structured and investors only do have little experiences with this asset class. A platform that connects responsible investors with projects and which assists projects to become more professional especially in their project documentation has the potential to attract more investments for the sustainable forestry sector (Haas, et. al. 2013).

Idea and planned measures
With over 8 years of hands on project development experience in South East Asia and Central America, OpenForests is working since 5 years successfully on different tools to support sustainable forestry.

At this stage OpenForests has developed a marketplace for sustainable forest investments, a rating to measure the holistic performance of forestry projects, and a mapping and forest management module based on drone imagery. However these tools are yet independent and not connected.

By integrating all tools in one "online platform for management and finance of sustainable forestry" we want to unleash  the synergies between all tools and provide an easy access through one platform. The following actions will be carried out in consecutive order:

  • Conceptual design of forest investment & management platform: requirement analysis, design of data model, business logic and user interface.
  • Platform development: programming, software testing.
  • Platform deployment: setup of IT infrastructure (servers), maintenance of IT infrastructure, ensure internet access for key personnel.
  • Pilot field implementation: implementing the platform driven management to real forest projects.
  • Capacity building: training key personnel to use the web-platform to manage the pilot forest projects, establishment of online learning courses for users, in-field and online support for users.
  • Drone based mapping: mapping of the forest sites with openforests' drones, integration of mapping results in GIS platform component for management and project presentation.
  • Expansion: promotion of Planting Empowerments business model to potential investors, including a “road show” in Europe, leverage PE’s model to +1000 ha by recruiting and integrating new indigenous communities in Panama and other tropical regions.
  • Reporting & documentation: platform improvement, annual report documenting project progress, continuous technical documentation of the platform in a wiki, collection of feedback from users (smallholder, managers, investors), establishment of regular iterative development cycle.

 

Existing components

Forest Project Marketplace: http://marketplace.openforests.com/en/marketplace

Drone Mapper: https://openforests.com/drone-mapper/

Forest Manager: https://openforests.com/forest-manager/

Reporting Tool: http://fairforest.openforests.com/

Planting Empowerment's land lease model
The implementing partner and pilot project for the platform is Planting Empowerment. They lease land for a certain period from indigenous communities and pay a monthly management fee for planting and managing the reforestation on the leased land which is financed by private investors. Due to a missing local banking infrastructure cash-payments are directly conducted through a local office. The payments are  Benefits of the timber sales are shared amongst investor and the community.

Communities receive based on local market prices a continuous management and lease fee and receive about 10% of the final timber sales. Communities are directly paid by Planting Empowerment.

Seeds are mainly collected from local trees. Seedlings of different commercial and locally adapted native tree species are produced within their own nursery which can be scaled in relation to the obtained private investments for a reforestation area of up to 1.000 hectares. As diverse native forest function as water reservoir the hydrological regime for the forest sites will be improved and reactivated in comparison to business a usual (slash and burn agriculture and cattle farming).

How the platform works and what are the benefits

The platform provides tools for responsible investing into sustainable forestry and the management of such projects. 

Benefits for local communities
Local indigenous communities could present their project proposal at an international marketplace for sustainable forest investment opportunities, which will help them to raise funding for their reforestation activities.

Through their social land lease model, which has been developed in conjunction with Planting Empowerment, private investors have the chance to invest in reforestation projects managed by these communities. The land titles stay with the communities - in this way land grabbing is avoided -  and the return of the timber harvesting is shared amongst investors and local communities.

At the same time the forest management module of the platform assists the communities to efficiently manage their forest operations and monitor the progress. The mapping module will help to map the project boundaries and make the project presentation at the marketplace more transparent.

Benefits for investors
Investors will have access to a structured database of environmental friendly and social forest investment opportunities and will save costs to find good projects. Through high resolution drone imagery they will have visual evidence of the project sites and can follow the project progress on the ground.

The forest management module allows investors to get a current data-driven insight of the project progress and to control whether their are deviations from the business plan.

More transparency provides a better base for decision making and reduces investment risks, which makes it much more attractive to invest in projects which are connected to this platform.


Who will take these actions?

Conception, design and programming of the finance and management platform in Germany
OpenForests will carry out the entire platform development and execution. Team members which are directly involved are:


In addition the OpenForests expert network provides assistance.

Implementing partner in Panama
Planting Empowerment will act as a local implementing partner and light house project in Panama:

Political support by:

  • ANAM - Ministry of Environment, Panama: Discussion of need for agroforestry projects for Indigenous communities as part of national REDD program and ANAM is where Planting Empowerment has its current plantations registered per national law.
  • Planting Empowerment executed a consultation process with the community of Arimae to ensure Free, Prior, and Informed Consent and received political consent from the relevant community leaders.


Where will these actions be taken?

The platform will be developed in Germany and the simultaneously implemented community forestry project will be carried out in Panama.

The target group of the online platform are community reforestation projects from developing and emerging countries.

Starting situation in Panama

Despite a relatively high stage of economic development, environmental standards as well as the treatment of indigenous groups still require substantial improvements.

Currently Panama loses significant amounts of its primary forest cover every year. Main drivers are: slash-and-burn subsistence farming and increasingly industrial agriculture. The results are high CO2 emissions and severe biodiversity losses in the Chocó forest of the Darien region of Panama, where 19 tree species are critically endangered.

Indigenous communities have little opportunities to implement reforestation activities because of a lack of capital and technical assistance. Currently their marginal income is limited to subsistence farming and to seasonal work for multinational investor driven teak plantations, without capturing any of the capital appreciation of the investments. A new model is needed.

Planting Empowerment, a local organization, has piloted a community reforestation with mixed native tropical species, financed by private investors. OpenForests will provide a finance, management & reporting platform to accurately provide timely information to current and potential investors which allows to scale the business model and replicate it in other places.

 


How much will emissions be reduced or sequestered vs. business as usual levels?

The business as usual scenario in the Darien region of Panama is cattle-farming, which has led to deforestation and continuously releases methane due to the metabolism of the livestock.

The goal of the project is to plant an area of 1000 hectares within the first 5 years. Conservatively calculated carbon sequestration within one hectare of planted forest are 150 tC which will result in carbon sequestration of about 150.000 tC over a time period of 20 - 30 years.


What are other key benefits?

All business activities are implemented in a manner to improve ecosystem functions for future generations.

In comparison to monoculture plantations, sustainably managed forests with diverse tree species are less vulnerable to climate change and related effects like storms, fires but also calamities like pests and diseases. It could be shown that forests on former deforested land can significantly improve local climate conditions and contribute to the regulation of hydrological regimes. This helps to secure water sources for livestock and essential food production during droughts and also promotes biodiversity.


What are the proposal’s costs?

The required funding for this proposal covers the platform development, the coordination of the light-house community forestry project, further project scouting activities to populate the platform and fundraising activities to finance multiple reforestation activities in order to reach a critical mass.

The funding of the multiple community reforestation projects which should be scaled up first in Panama, later in Central America and then in the rest of the world, will take place only by attracting private investments through the marketplace module of the platform.

It is expected that the platform stimulates a continuous growth of community reforestation models and their replication beyond Panama. After a scaling phase of about 5 years, this growth will lead to a positive cash flow and be demonstrative to attract more investment into the sector. All costs for the web-platform will then be covered by a fraction of the attracted private investment capital. This costs include improvements, maintenance and provision of the IT-infrastructure and accompanying training.


All cost figures are provided after appropriate taxes.

  • The total external funding costs for the first 5 years are 705.000 EUR
  • Own funds provided for the project are 170.000 EUR
  • After 5 years the platform will be self sustainable


Time line

1. Year: Creation of the online platform and IT-infrastructure: the platform includes a marketplace for forestry projects, a forest management module with the capability to track beside the business parameters also the social and environmental project impact and a mapping module.

2. Year: Capacity building to enable key personnel to use the forest platform. Pilot field implementation.

3. Year: Mapping to support monitoring of management activities, forest growth, carbon stock and presentation for marketing.

4. to 5. Year: Scaling up the pilot business model to 1000 ha and 10 communities leveraged by EUR 8M of private investments with the help of the platform. Placement of 20 additional smallholder-driven reforestation projects in other tropical regions.

6.+ Years: Further scaling up the project in other developing & emerging countries with similar projects.


Related proposals

Integrating REDD+ and Green Economic Growth for sustainable forest landscapes
This project also contributes to permanently reduction of emissions from deforestation and degradation by establishing productive plantations on degraded land.

Trees for Food Security
Provision of alternative income sources for rural communities by planting trees and at the same time improving soil fertility for sustainable agriculture.


References

Haas, et al 2012: Facilitating private forestry investments: a practical approach to risk assessment: http://www.etfrn.org/file.php/45/3.1haas-watson-schmidt.pdf

A scalable forest online management and finance platform to scale up community reforestation projects world wide has the chance to unleash the potentials to direct responsible investments into sustainable forestry as currently only a small fraction of investments is allocated into forestry: Page 14: http://www.fao.org/docrep/015/an901e/an901e00.pdf

The reporting module implemented in this platform aligns with IRIS. IRIS is the catalog of generally-accepted performance metrics that leading impact investors use to measure social, environmental, and financial success, evaluate deals, and grow the credibility of the impact investing industry. https://iris.thegiin.org/users/profile/fairforest