Pillar: FSD Africa Investments

Finance Is Failing the World’s Best Defense Against Climate Change

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Gabon is sometimes described as a “giant broccoli,” and from 3,500 feet up, it’s easy to see why. During a two-hour flight from the capital, Libreville, to a cattle ranch in the southernmost province of Nyanga, the land below is a nearly unbroken stretch of textured green carpet, one of the world’s largest intact rainforests.

These trees are Gabon’s superstars. They absorb and store millions of tons of earth-warming carbon dioxide each year, a critical function for the global fight against climate change. They also fuel the country’s timber industry, a major focus of economic development during the past decade.

In today’s financial markets, Gabon’s trees are worth more dead than alive. Despite the billions pledged worldwide to fight climate change, little has been distributed as compensation for the global benefit that trees provide. In 2021, Gabon received its first payment for reducing forest-related emissions—$17 million via the Central African Forest Initiative.

The timber industry, on the other hand, contributes about $1 billion to Gabon’s annual gross domestic product. It could be a great deal more. Unlike some of its neighbors, the country strictly limits logging, palm oil production and other activities that lead to forest destruction; it’s suffered less than 1% forest loss since 1990, compared with about 14% for continental Africa.

Now that oil production, the country’s primary source of revenue, is dwindling, leaders are reevaluating the money-making potential of the forests. Opening more land to timber companies is one option, but for now Gabon’s environmentally minded government is more interested in keeping the trees alive—if the international financial markets can make it worthwhile.

The best avenue for that, Gabon says, is the $2 billion-and-growing market for “carbon offsets.” That’s traditionally been limited to those who can document improvement on past environmental practices, not those who, like Gabon, never wrecked their forests in the first place. That’s because for a carbon offset to fulfill its function of compensating for its buyer’s emissions, it needs to have financed something that wouldn’t have happened otherwise. But in Gabon, forest protection has been happening anyway.

A boat transporting logs passes bay an oil rig in the Cape Lopez bay in Port-Gentil on October 14, 2022.
Men work on oil pipeline near Gamba on October 12, 2022.
Pipes near crude oil processing facilities in Gamba on October 12, 2022.
Unlike some of its neighbors, Gabon has put strict limits on logging. But with oil production—the country’s primary source of revenue—dwindling, leaders are reevaluating the money-making potential of the forests. Photographer: Guillem Sartorio/Bloomberg

Still, Gabon insists it should be compensated for the air-purifying service its trees provide. Otherwise, it hints, its commitment to forest preservation may take a backseat to more traditional economic development. In its recent national action plan under the Paris Agreement, the global climate pact, the country says it plans to remain a “net-carbon absorber”—if it gets access to international finance through a carbon market.

“There is no financial instrument to support Gabon to continue to offer this critical ecosystem service,” Akim Daouda, the chief executive officer of Gabon’s $1.9 billion sovereign wealth fund, said in an interview during a recent trip to London. “Can we monetize the forest and keep it for the rest of the planet? Or do we need to find a way to respond to the needs of our population?”

An excavator moves a log in a forest clearance concession managed by African Equatorial Hardwoods (AEH), a new forestry and timber processing company managing more than 420,000 hectares of forestry concessions, in Mayumba on October 11, 2022.
Forest clearance where logs are stored before transportation at a concession managed by African Equatorial Hardwoods (AEH), a new forestry and timber processing company managing more than 420,000 hectares of forestry concessions, in Mayumba on October 11, 2022.
A worker operates a machine at a timber processing plant managed by African Equatorial Hardwoods (AEH) in Port-Gentil on October 14, 2022.
Men work at a processing plant managed by African Equatorial Hardwoods (AEH) in Mayumba on October 11, 2022.
Men work at a processing plant managed by African Equatorial Hardwoods (AEH) in Mayumba on October 11, 2022.
Men work at a timber processing plant managed by African Equatorial Hardwoods (AEH) in Port-Gentil on October 14, 2022.
Gabon’s timber industry has been a major focus of economic development in the last decade, contributing as much as $1 billion to Gabon’s annual gross domestic product. Photographer: Guillem Sartorio/Bloomberg

Gabon’s per capita GDP is the highest on the continent, but there’s little evidence of wealth past or present in Nyanga. One of the few local health centers lacks running water, exposed wires poke out of the walls, and bare mattresses cover four, cast-iron bedframes.

The province is home to a 100,000 hectare (247,000 acre) cattle ranch, part of the Grande Mayumba project. A flagship of Gabon’s “sustainable development” efforts and backed by investments from the family offices of the Westons, Fricks and Sarikhanis, Grande Mayumba’s plans include logging, cattle farming and eco-tourism, as well as an area 37 times the size of Manhattan set aside for conservation.

The ranch raises N’Dama, a small chestnut-colored breed of indigenous beef cattle that tolerate tsetse flies and the sleeping sickness they carry. The 4,000-strong herd will grow and eventually roam alongside wild buffalo and antelope. The free-range model will minimize harm to the savannah ecosystem, and careful grasslands management could boost the soil’s carbon stock, according to Africa Conservation Development Corp., Grande Mayumba’s parent company.

The ranch isn’t profitable yet. So far, only Grande Mayumba’s logging operation is fully operational. The rest has moved far more slowly. To raise the money needed to really get the project off the ground, ACDG will need to issue and sell carbon credits.

Men load cattle into a truck at Nyanga ranch, comprising 100,000 hectares of savannah together with 4,000 head of Ndama and other mixed breed cattle on October 10, 2022.
Cattle can be seen gathered in a facility at Nyanga ranch, comprising 100,000 hectares of savannah together with 4,000 head of Ndama and other mixed breed cattle on October 10, 2022.
The Nyanga ranch raises N’Dama, a small chestnut-colored breed of indigenous beef cattle that tolerate tsetse flies and the sleeping sickness they carry. Photographer: Guillem Sartorio/Bloomberg

The forest-based carbon offsets on the market today tend to be based on projects that seek to avoid emissions or increase carbon storage. Limiting deforestation usually qualifies; so could planting trees. Developers usually calculate how the forests fared under their control compared with a historical baseline, then sell the difference in units of extra tons of carbon removed or avoided as offsets.

But because Gabon already has stringent restrictions on logging and there’s little deforestation to speak of, ACDG has had to take a different approach. Based on trends in more than a dozen once-highly forested countries, it contends there’s an imminent threat to the trees in Nyanga. Pending government approval, ACDG will sell credits based on how Grande Mayumba’s activities avert that hypothetical future destruction.

“There will be development in the Grande Mayumba area over time,” said Rob Morley, science and environmental planning director at ACDG. “This will either be unsustainable, unplanned and that will lead to a large amount of forest loss, or it will be planned.”

Sunset at Nyanga ranch, comprising 100,000 hectares of savannah together with 4,000 head of Ndama and other mixed breed cattle on October 9, 2022.
Pupils rise their hands to answer a question at the local school at Nyanga ranch, on October 10, 2022.
Men does repairs on a bulding that accommodates workers at Nyanga ranch, on October 10, 2022.
Sunset at the Nyanga river on October 9, 2022.
Gabon’s per capita GDP ranks among Africa’s highest, but there’s little evidence of wealth past or present in Nyanga. Photographer: Guillem Sartorio/Bloomberg

On the ground, the threat feels distant. About the size of Israel, the province is Gabon’s poorest, with just three paved roads, two hospitals and few public services. Residents have gone looking for better opportunities in Gabon’s main cities, leaving a population of around 53,000.

The Grande Mayumba project says it will generate as many as 4,000 jobs, mirroring President Ali Bongo’s Gabon Émergent, the country’s three-pillar development strategy based on industry, the environment and a services economy. Most will work in forestry or ranching, but a handful will staff a luxury ecolodge under construction in neighboring Ogooué-Maritime province. For $2,000 per night or so, well-heeled tourists will be able to see hippos frolic in the surf and ghost crabs dash in and out of the waves.

When ACDG figures out how to stabilize a runway on the sandy soils, guests will be able to access the lodge by plane. Until then, it’s a half-day journey from the nearest main town, by car, river barge and speedboat. The last leg is by quadbike along a strip of beach frequented by buffalo and the odd elephant, tide permitting.

Aerial view from Petit Loango, a 20-bed eco-lodge under construction at Petit Loango on the coastline of Gabon’s flagship Loango National Park on October 12, 2022. Based around the forestLAB research centre based at Petit Loango, the lodge aims to set a benchmark for nature-based tourism in Equatorial Africa.
Men work in the construction of a back-of-house infrastructure that will accomodate staff at Petit Loango, a 20-bed eco-lodge under construction at Petit Loango on the coastline of Gabon’s flagship Loango National Park on October 12, 2022. Based around the forestLAB research centre based at Petit Loango, the lodge aims to set a benchmark for nature-based tourism in Equatorial Africa.
A man stands in front of the 1km airstrip under construction at a 20-bed eco-lodge under construction at Petit Loango on the coastline of Gabon’s flagship Loango National Park on October 12, 2022. Based around the forestLAB research centre based at Petit Loango, the lodge aims to set a benchmark for nature-based tourism in Equatorial Africa.
Plans of the construction of the Petit Loango, a 20-bed eco-lodge under construction at Petit Loango on the coastline of Gabon’s flagship Loango National Park on October 12, 2022. Based around the forestLAB research centre based at Petit Loango, the lodge aims to set a benchmark for nature-based tourism in Equatorial Africa.
Africa Conservation Development Corp, Grande Mayumba’s parent company, is constructing a luxury ecolodge in neighboring Ogooué-Maritime province. For $2,000 per night, it will welcome well-heeled tourists eager to see hippos frolic in the surf and ghost crabs dashing in and out of the waves. When ACDG figures out how to stabilize a runway on the sandy soils, guests will be able access the lodge by plane. Photographer: Guillem Sartorio/Bloomberg

In its original plans, Grande Mayumba expected its model to generate as many as 200 million credits over the next 25 years. At today’s prices, that would be worth about $2 billion, according to data provider Allied Offsets, roughly equal to Gabon’s sovereign wealth fund.

So far that’s yet to materialize. The British bank Standard Chartered Plc and Swiss trading firm Vitol SA have expressed interest, but neither have culminated in a deal. Investors are getting antsy.

Josh Ponte, a former gorilla researcher and special adviser to the President of Gabon and now an ACDG director, bemoaned the delay in carbon-credit revenue.

“The carbon play was a core incentive,” he said, sitting on a rudimentary platform that will eventually be a dining room. Other than some staff lodging, there’s little more to see. “But there’s since been a reality check on the timeline of the carbon credits, how they’ll work, and how they’ll fit with government strategy. It’s really tiring our investors.”

Directors at at ACDG, Kevin Leo-Smith (left) and Josh Ponte (right) examine camera traps near the site where Petit Loango lodge will be built on October 12, 2022. As part of the forestLAB bio-monitoring programme, 10 camera traps were deployed at Petit Loango between April and July 2022. The camera traps recorded at least 21 species – the most frequently documented being blue duiker, red-capped mangabey and forest elephant. Other species recorded included forest buffalo, red river hog, chimpanzee, gorilla, hippopotamus, giant pangolin, leopard, crocodile, nile monitor and water chevrotain.
A forest elephant roams near Gamba on October 12, 2022.
Josh Ponte (center right), who now serves as an ACDG director, checks camera traps near future site of the Petit Loango lodge. The camera traps recorded over 20 species, including forest elephants. Photographer: Guillem Sartorio/Bloomberg

Gabon Vert, the environmental pillar of the Bongo administration’s development plan, frames both its deal with ACDG and the country’s plans to issue its own, sovereign carbon offsets. Gabon’s offering will rely on different math. It plans to tally the CO2 its trees suck out of the atmosphere, subtract its own emissions, and sell the difference to other, more polluting countries as “net sequestration” credits.

Anyone can issue carbon credits, and anyone can buy them. Most developers use third-party verification bodies to vouch for the quality of their offerings. Gabon doesn’t plan to do so. Fledgling exchanges are also trying to streamline trade, but for now, over-the-counter, bilateral deals are the most common.

It’s not clear the markets will bite. Gabon’s plans have been met with caution. It’s yet to sell some 90 million credits it already generated for past carbon absorption using an established albeit contested approach.

“It always makes me nervous when people say they’re going to roll out their own methodology,” said Danny Cullenward, policy director at nonprofit research group CarbonPlan. “It’s really easy to manipulate the methodology intentionally or incidentally to produce outcomes that are less credible or inconsistent with other key points of data.”

Methodology aside, political uncertainty hangs over Gabon. The fate of Gabon Vert may depend on the outcome of the presidential election later this year.

Though a member of the Bongo family has led Gabon for the past 56 years, the current presidency is under a cloud. Ali Bongo won his most recent election by fewer than 10,000 votes, triggering charges of ballot-rigging and days of violent protest. A 2019 coup attempt failed, and Bongo has had a stroke.

Ahead of this year’s presidential election, the government has embarked on an aggressive green diplomacy push. In February, a delegation joined the UK’s environment ministry and King Charles III to chat conservation. This week, Emmanuel Macron will attend a “One Forest” summit in Libreville, the first time a French president has visited the country in about a decade.

The Grande Mayumba project was already halted once, in 2015, when Gabon’s then-oil minister gave the site of a proposed port to a Moroccan company, despite an agreement that assigned it to ACDG. Development stalled until the dispute was resolved in 2018.

“If the president were to change, I’m not convinced that the model has got deep enough roots yet to be fully sustainable,” said Lee White, environment minister in Bongo’s government. The project also is facing a groundswell of opposition from local communities and NGOs. A grassroots campaign called “No to Grande Mayumba” calls for the suspension of the plan, saying restrictions on access to resources threaten the custom and livelihoods of subsistence farmers who haven’t been adequately consulted.

“There’s sacred forest here and the local population should be consulted on what can and can’t be cut down,” said Nicole Nouhando, governor of Nyanga province who’s broadly supportive of ACDG’s plans.

ACDG has had its own turmoil. Alan Bernstein, the South African safari entrepreneur who founded the company, left after a falling-out with its biggest investors. ACDG says he no longer holds stock in the group; Bernstein says he is seeking compensation after an initial court settlement in January.

Aerial view of Libreville on October 8, 2022.
Aerial view of a primary forest in the Nyanga region on October 12, 2022.
During a two-hour flight from the capital of Gabon, Libreville, to a cattle ranch in the southernmost province Nyanga, the land below is a nearly unbroken stretch of textured green carpet. Photographer: Guillem Sartorio/Bloomberg

For now, Gabon and ACDG are pushing ahead. In the absence of oversight, their success depends less on whether the credits help avert climate change and more on whether and how much a buyer will pay.

In December, US oil company Hess Corp. sealed the first purchase agreement for a similar kind of “high forest, low deforestation” credits with Guyana. Earlier in the year, the International Civil Aviation Organization said those credits could be used by airlines to offset their emissions. Experts have cautioned the credits will fail to serve their purpose.

If ACDG or Gabon can make a deal, it will add fuel to the efforts of other rainforest nations across the world’s tropical belt.

It could also pit the government at odds with the private sector. Gabon is one of a handful of countries with agreements to generate and trade their own carbon credits under a new carbon market run by the United Nations, according to Trove Research Ltd., a carbon analytics company. Last year, White castigated TotalEnergies over a new forest-based credits plan in Gabon. “They don’t have the rights” to that carbon, he said.

ACDG retains the government’s support. The success of the Grande Mayumba project would encourage “forest countries to continue preserving their forests,” said Daouda of Gabon’s sovereign wealth fund, which will market the country’s carbon credits. For him, it would answer the country’s big question in the affirmative: “It would mean that today, the world is recognizing that a living tree has higher value than a dead one.” —With Akshat Rathi and Ben Elgin

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How regulation hitches are limiting carbon trading

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As countries around the world race to combat the effects of climate change, carbon trading continues to gain traction.

Carbon trading is the buying and selling of permits of carbon credits that allow the holder to emit a certain amount of carbon dioxide and other greenhouse gases (GHGs).

Financial site Investopedia defines a carbon credit as the equivalent of one tonne of carbon dioxide or any other GHGs that an organisation can emit into the atmosphere.

Essentially, companies are awarded credits to allow them to continue to pollute up to a certain limit, often on a reducing basis.

What happens when a company exceeds its limits?

While some businesses are able to cut their emissions, others are not able to do so. For some, their emissions might even increase in the course of a given period.

Those that cannot reduce their emissions are, however, allowed to continue operating, but usually at a higher cost.

In some instances, businesses are unable to exhaust their credit limits even after operating for the marked duration. These are called ‘‘surplus’’ or ‘‘excess’’ credits.

When a business is left with unutilised credits, it can sell them to other businesses. The business may also choose to keep the surplus credits for future use.

What is the difference between carbon credits and carbon offsets?

While carbon credits and carbon offsets are sometimes used interchangeably, they are different commodities with the same goal of reducing the emission of carbon and other GHGs into the atmosphere.

Carbon credits are limited to within an area and are regulated by a governing body. It is this governing body that is also responsible for creating and distributing them to companies operating within that jurisdiction.

Carbon offsets are neither created by a specific entity nor distributed by a particular body. Instead, they are traded freely on ‘‘voluntary markets.’’

Read: Northern Kenya conservancies eye pie of carbon credit billions

While carbon credits ‘‘cap’’ emissions, carbon offsets compensate an organisation for investing in carbon projects, also called green projects, that help to cut down emissions.

Carbon offset projects can be realised through activities that either reduce the emission of greenhouse gases or those that increase carbon sequestration.

Some of these activities may involve investment in renewable energy forms to displace fossil fuels that emit carbon and reforestation to increase the number of trees that serve as carbon sinks.

Does Kenya have a history of carbon trading?

This trade dates back to 2014. A group of 60,000 smallholder farmers in the Western region under the Kenya Agricultural Carbon Project (KACP) earned carbon credits for sustainable farming.

The credits had been issued worldwide under the sustainable agricultural land management (SALM) carbon accounting methodology.

The programme supported the farmers to grow crops in a productive, sustainable and climate-friendly manner.

With its forests, expansive grasslands and wetlands, Kenya is considered a rich carbon offset sink. This is expected to improve even further once the country attains its target of planting 15 billion trees in the next 10 years.

How is carbon trading regulated in Kenya?

One of the functions of the National Climate Change Action Plan under the Climate Change Act of 2016 is ‘‘to guide the country toward the achievement of low-carbon climate-resilient sustainable development.’’

It does not, however, address specifically how trading in carbon credits, as a climate change response, will be regulated in Kenya.

Environment lawyer Stella Ojango acknowledges the gaps, noting that Kenya’s limited regulatory framework and absence of requisite laws make carbon trading in the country an almost opaque undertaking.

‘‘We have the Climate Change Act of 2016, but it does not address carbon trading sufficiently. We need to amend that Act so that we can introduce regulations for trading carbon. Enriching our laws will help to regularise this business.’’ Ojango says.

Last year, the Nairobi International Finance Centre (NIFC) said Kenya lacks a clear framework for buying and selling carbon credits locally.

The body noted that this unregulated sale of carbon credits costs the country billions of shillings in unrealised revenues.

The organisation is planning to establish a carbon trading exchange in the country to allow small-scale trade-in credits.

‘‘We need to have in place mechanisms that measure how much carbon is being absorbed through reforestation. This way, we will have created a market. Regulating the pricing aspect will then become easier,’’ Ojango adds.

How are carbon markets regulated elsewhere?

Kenya is not alone in lacking proper regulation for carbon trading. Most of the carbon credit markets in the developing world are unregulated by law. There are no agreed prices for carbon credits.

Plans are underway to establish a global carbon credit and carbon offset trading market. This was agreed on by negotiators at COP26 in Glasgow in 2021. Carbon credits also exist within markets with Cap & Trade regulations.

Who is trading in carbon credits in Kenya?

A number of businesses and organisations are already making money from either carbon credits or carbon offset programmes.

In Northern Kenya, conservancies are increasingly moving away from tourism as their mainstay to now invest in carbon projects as a source of revenue.

Northern Rangelands Trust (NRT), for instance, has put 4.7 million acres of grassland under a carbon project.

NRT is a group of 39 marine and land conservancies that cover, among other counties, Laikipia, Samburu, Tana River and Lamu. Out of these, 14 are under the project.

The Northern Rangelands Carbon Project will focus exclusively on the removal of carbon from the soil, with a target of 50 million tonnes of CO2 in 30 years. This effectively makes it one of the few projects of this scale in the market globally.

Last year, Kenya Forest Service (KFS) signed a deal with global audit firm BDO that would see the government agency earn millions of shillings for offsetting carbon dioxide.

According to the deal, KFS will rake in $15 (Sh1868) for every tonne of carbon dioxide removed from the atmosphere by government forests.

In villages in coastal Kenya, communities living near the sea are selling ‘‘hewa kaa’’ to international corporations to help them reduce their carbon emissions.

This carbon project is promoting the conservation and sustainable use of mangrove resources by the villagers.

Controversy of trade

While widely adopted around the world today, carbon credits still divide opinion. Those in support say carbon trading is a ‘‘measurable and verifiable’’ emissions reduction strategy through climate projects.

Those opposed to carbon offsets call the trade ‘‘a scammer’s dream scheme’’ and the next big thing in greenwashing.

Climate change advocacy organisation Greenpeace dismisses carbon offsets as a bookkeeping trick ‘‘intended to obscure climate-wrecking emissions.’’

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Africa getting little of $382m renewable energy projects cash

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Renewable energy projects attracted investments worth $382 billion globally in 2021, according to the International Energy Agency, but only $13 billion, or three percent of that, funded projects in Africa, highlighting a major funding gap foiling green transition and energy access on the continent.

With only 48 percent of African population having access to electricity, experts say investment in the continent’s renewable energy sector could both leapfrog the green transition efforts and connect more people to the grid.

Despite this, it has been established that investors with the capacity to invest in this sector shy away from the African market, a problem which brought together several stakeholders in the energy sector in Nairobi this week, attempting to change the narrative.

At a forum convened by the World Resources Institute (WRI) and the Children’s Investment Fund Foundation, participants drawn from the private sector, government, civil society organisations from Kenya and beyond deliberated on how investors can be mobilised to support Africa’s green transition through investments.

Reluctant to invest

Rebekah Shirley, WRI’s deputy regional director told the forum that private sector players are reluctant to invest in this sector, creating a funding gap of billions of dollars every year, despite the wide access gap.

“Even in other regions of the world where energy access is still a challenge like the Southeast Asia, we don’t see funding gaps of this magnitude, why Africa?” she posed.

Alex Wachira, principal secretary for the state department of energy, said that there is a list of challenges contributing to the energy gap, even in Kenya, which slow down economic growth in the country.

“We (the Ministry of Energy) are aware of the many challenges attributed to this, including limited incentives to attract private sector investors,” he said in a speech read by a representative.

Lack of political will

Another challenge identified is the lack of political will for appropriate legislation and implementation of policies to incentivise private sector investment in renewable energy projects, especially in rural areas.

For instance, only two of Kenya’s 47 counties have drafted energy plans that would give way to appropriate energy policies, deprioritising renewable energy projects at the local governments.

This, according to Eva Sawe – a senior programmes officer at the Council of Governors, is because lawmakers have not been sensitised on why renewable energy projects should be a priority.

But even with the right policies and incentives to support private sector investment in renewable energy on the continent, investors said there is a still a shortage of talent in Africa limiting the production capacity of companies investing in the sector.

“If an investor is coming into the country to do any renewable energy project, the first hurdle they will face is the lack of skilled people,” said Andrew Amadi, the chief executive of Kenya Renewable Energy Association.

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Is nature-based investing ready for take-off in Africa?

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Thousands of delegates gathered for the 2022 United Nations biodiversity conference (Cop15) in Montreal in December, tasked with finding a pathway to halt the alarming decline in global biodiversity. The negotiations eventually produced a landmark agreement to protect 30% of the Earth’s land and oceans by 2030, along with a host of other targets to reduce the loss of biodiversity.

While the agreement was signed by national governments, private sector representatives were conspicuous by their presence at the conference. But financial institutions have increasingly been making commitments to protect and enhance biodiversity in recent years, giving rise to a plethora of new jargon.

“Nature-based investing” – where investors provide benefits to nature and ecosystems, alongside achieving a financial return – is the latest buzzword. At the heart of this approach is the acknowledgement that “natural capital” – in other words, the Earth’s biodiversity and natural resources – provides benefits, often defined as “ecosystem services”, to the human population.

Nature is clearly indispensable to many economic activities. In Kenya, for example, tourism is making rapid progress in recovering to pre-pandemic levels, when it generated over 8% of GDP, and the tourist trade depends heavily on the lure of the country’s wildlife. Threats to biodiversity and ecosystems in Africa and around the world are therefore an issue of profound importance for investors, as well as governments.

“We have been losing natural capital at such an incredible rate over the last 60 or so years, and the pressure from consumption and demographics is so huge, we are now at that point in time where there’s just not enough resources to go around,” warns Alejandro Litovsky, CEO of consulting firm Earth Security. “There’s a real question around the operating conditions for companies and assets that depend on the services that have been free for a very long time.”

The sixth extinction?

The gravity of the crisis facing nature has sometimes been overshadowed by the climate crisis (which is itself one of the main drivers of biodiversity loss). But the data on nature makes for grim reading. Over 6,400 species of animals and 3,100 species of plants in Africa are at risk of extinction, according to the International Union for the Conservation of Nature.

Globally, the scale of the disaster is such that many scientists argue that the Earth is entering its sixth period of mass extinction. This puts the current biodiversity crisis on a par with the asteroid strike that wiped out the dinosaurs 65m years ago.

The destruction of vital ecosystems across many parts of the world is the consequence of prevailing economic models prioritising short-term gain at the expense of long-term sustainability. “I spend a lot of time with African leaders,” says Kaddu Sebunya, CEO of the African Wildlife Foundation, “and they’ll tell you frankly that ‘the global economy doesn’t pay or reward me if I secure forests. But they reward me if I cut down the forest and export sugar.’”

But when habitats are lost or damaged, it is often humans who pay the ultimate price. The devastating mudslides that hit Freetown, Sierra Leone, in August 2017, killing over 1,000 people, were partly caused by deforestation on hillsides around the city. As the city grew, its surrounding hills lost much of the tree cover that had held soils together and provided a natural drainage mechanism.

In the aftermath of the tragedy, Freetown has become one of the pioneers of nature-based investing in urban areas in Africa, according to John-Rob Pool, senior manager at the World Resources Institute. Among other initiatives, the city is establishing a ‘water fund’ as a public-private partnership to protect nearby areas of forest that provide Freetown with its water supply.

Other African cities can benefit from following Freetown’s example, says Pool. “Nature-based solutions, when implemented and deployed properly, can be really useful in improving air quality, in reducing extreme urban heat, improving the quality and the supply of water, in reducing the risk of landslides and flooding, and so on.”

Chinese minister of ecology and environment, Huang Runqiu (L), shakes hands with the DRC's environment minister, Ève Bazaiba Masudi at the 2022 UN biodiversity conference in Montreal
The Chinese minister of ecology and environment, Huang Runqiu (L), shakes hands with the DRC’s environment minister, Ève Bazaiba Masudi at the 2022 UN biodiversity conference in Montreal, Quebec. (Photo: Lars Hagberg / AFP)

Financing dilemmas

The 2022 UN biodiversity conference produced a historic agreement on biodiversity – but the conference concluded in controversial circumstances. In declaring the text of the agreement to be final, the Chinese president of the conference ignored the objection of the Democratic Republic of the Congo, which was continuing to seek additional financial commitments from wealthy nations.

“We didn’t sign the agreement,” Ève Bazaiba, the DRC’s environment minister, said. “It is not possible for us to implement it. We cannot accept the level of ambition without more finance.”

The UN Environment Programme states that the private sector currently provides only 17% of total investments into nature-based solutions. It estimates that total financing will need to more than double, to $384bn a year by 2025, in order to meet biodiversity goals.

The fact that financial institutions are lining up to express their enthusiasm for nature-based investing may be seen as an encouraging sign. Gautier Quéru, head of the Land Degradation Neutrality Fund, which provides long-term financing to projects that meet strict environmental and social standard, says Cop15 has brought “momentum” to nature-based investing.

“Public money will not be enough to meet the objectives,” he says. “We need the mobilisation of private sector actors, including finance and industry. And the good news is that at Cop15, the positive mobilisation of the business and finance sector was really striking.”

A natural fit?

While the availability of finance is one part of the challenge, investors also need to determine what, in practice, they can actually invest in when it comes to nature.

Devang Vussonji, a partner at consulting firm Dalberg, says that the difficulty of measuring and assigning value to different types of biodiversity is a major factor holding back investment in nature-based solutions in Africa.

“There’s a lot the market needs to figure out,” he says. “What do we value and not value?

“How do we set a price around it? How do you compare mangrove populations declining to elephant populations declining? How do you compare tropical areas to temperate areas and so forth?”

For many investors, a possible starting point is carbon credit schemes, which are designed to conserve or enhance forests that act as carbon sinks – theoretically enabling companies to offset emissions from other activities. Such schemes are mainly intended to contribute towards net zero targets, but nature is a possible added beneficiary.

“There’s now a recognition that if the carbon markets have proven themselves, are beginning to take off, there’s good demand for products as well as good supply of products, then the same can be replicated for broader nature-based investing as well,” says Vussonji. “The first of those opportunities we’re seeing is piggybacking on carbon credits, so as carbon credits are being created or being sold, other ‘biodiversity credits’ can be added on to them.”

While private sector finance has an indispensable role in conserving biodiversity in Africa and elsewhere, another essential element is coordination between the public and private sectors.

Sebunya emphasises that governments and NGOs must help provide a pipeline of projects that investors can adopt. Even where funds may be available from impact-focused investors, he says, “finding the bankable pipelines that are shovel-ready for investors is a huge, huge challenge”.

The African Wildlife Foundation, in an effort to meet this challenge, has been working with the Rwandan government on ways to support the mountain gorilla population in the country’s Volcanoes National Park. With the gorilla population expanding thanks to the success of recent conservation efforts, Sebunya says that thoughts are turning on how to expand their habitat.

One solution, he suggests, is encouraging local communities to grow bamboo – the gorillas’ favourite food – as a cash crop. This would potentially provide a win-win solution, allowing locals to generate income from selling bamboo to companies that could process the crop into various products, while providing a food source for the gorillas.

Will life find a way?

Conservation will have to compete with many other priorities in Africa, including the need to ensure a food supply for a human population that is set to almost double by 2050. “You do have that trade-off between protecting virgin nature and cultivating food for a growing population,” Litovsky acknowledges. Developing agricultural techniques that regenerate natural ecosystems will be “really quite fundamental” to Africa’s future, he adds.

Yet it is worth bearing in mind that Africa has in fact been more successful than most of the world in retaining its biodiversity up to now. The continent hosts around one-quarter of the Earth’s biodiversity. It contains the mighty Congo Rainforest, one of the “green lungs” of the planet. Its megafauna have remained relatively intact, thousands of years after early humans slaughtered the largest animals they encountered on other continents.

“Africa today has abundant nature in many places and abundant natural resources,” says Litovsky. “If you think about those as an asset that can be monetised in a variety of different ways, as part of a long-term economic development model, then that can really create a very exciting prospect for how Africa can develop into the future.”

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Former Climate Action Champion, Nigel Topping, to join FSD Africa as Senior Climate Adviser

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Nairobi, 17 January 2023 – FSD Africa is delighted to announce that Nigel Topping, until recently the UK’s High-Level Climate Action Champion, will be joining the organisation as a senior climate advisor to strengthen its offering in developing innovative approaches to addressing the impact of climate change in Africa.

Nigel was appointed as the UK’s High-Level Climate Action Champion in January 2020 ahead of COP26 in Glasgow, stepping down from the role in November 2022 after COP27 in Sharm-el-Sheikh. During this period, working closely with both the outgoing Climate Champion from Chile, Gonzalo Muñoz, and the incoming Climate Champion from Egypt, Mahmoud Mohieldin, Nigel worked tirelessly to promote climate action on the part of non-state actors – civil society and the private sector – and establish the Climate Champions Team as a formidable catalyst for climate action. The Climate Champions Team has been able to amplify its direct impact through an extraordinarily impressive range of innovative partnerships, including in Africa.

In his new role as a Senior Adviser, Nigel will complement FSD Africa’s work on climate finance, and particularly in innovative green financing.

It has been estimated that climate finance in Africa needs to increase by a factor of nine times (by an additional $250bn per annum) to meet the continent’s aggregate Nationally Determined Contributions and, in particular, to increase climate finance coming from the private sector which, at just 14% of the total, is a much lower share than in other regions. There is also a need to spread climate finance more equitably around the continent (as more than 50% of climate finance currently goes to just 10 countries) and to change the mix of climate finance more towards equity (or grants) than debt which the continent can scarcely afford at present.

To achieve this, FSD Africa is planning to both scale up its work in green finance and support new partnerships with organisations looking to drive climate and nature-positive action and which see advantage in leveraging FSD Africa’s financial sector expertise and networks.

Commenting on his appointment, Nigel Topping praised FSD Africa for its trailblazing work in developing Africa’s financial markets and innovation in tapping capital using new instruments such as green bonds and gender bonds. He observed that FSD Africa has been supporting green finance in Africa for several years having initiated green bond programmes in Kenya and Nigeria in 2017. It has used this experience to build out an extensive and diversified portfolio of other projects in the climate and nature space.

He commented: “Climate finance will be critical for enabling Africa to adapt to the growing impacts of climate change and to ensure that its future development path is consistent with the goal of limiting global warming to no more than 1.5°C. I look forward to working with the FSD Africa team of experts across the African market to fast track the development of innovative climate finance and nature programmes and ensure that more benefits are realised by the population and investors across the markets.”

FSD Africa’s CEO Mark Napier welcomed Nigel Topping’s appointment:

“We are delighted to have Nigel joining our team. Nigel is an incredibly impressive and collaborative leader with great sectoral knowledge on climate action. I have no doubt at all that he will be able to accelerate the impact of our work on climate, deepen our technical knowledge in relevant sectors and join us in brokering exciting new partnerships.”

FSD Africa’s Board Chair, Frannie Léautier, joined the CEO in welcoming Nigel Topping observing that a commitment to developing and implementing transformative adaptation programmes to tackle climate change in Africa will be key in tackling poverty and inequality: “Nigel’s decision to join FSD Africa as a Senior Climate Adviser is a fantastic endorsement of the work that our team has been doing for several years to develop solutions to the continent’s most pressing challenge of the day – climate change. We will benefit greatly from his leadership and experience,” she added.

Transform Health Fund Announced at U.S.-Africa Leaders Summit

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Washington, DC, Dec. 14, 2022 (GLOBE NEWSWIRE) — The Health Finance Coalition (HFC), powered by Malaria No More, and AfricInvest today announced pledged commitments of $50 million for the pan-African Transform Health Fund, to finance the scaling of proven, innovative models that improve access, affordability, resilience, and quality of healthcare in Africa. U.S. International Development Finance Corporation (DFC), U.S. Agency for International Development (USAID), Royal Philips, Merck & Co., Inc., known as MSD outside of the United States and Canada, FSD Africa Investments, Netri Foundation, Anesvad Foundation, Grand Challenges Canada (with funding from Global Affairs Canada), Chemonics International, and MCJ Amelior Foundation have all announced their commitments, subject to final due diligence before closing. IFC is in the advanced stage of approving its investment in the fund.

The announcement was made as part of the U.S.-Africa Leaders Summit in Washington, D.C. hosted by President Biden. The Transform Health Fund is an innovative blended-finance fund focused on locally led health supply chain, care delivery, and digital solutions in Africa. The fund is a collaborative effort bringing together commercial, government, and donor investments under the leadership of AfricInvest, a leading pan-African investment platform active across private equity, venture capital and private debt, and the Health Finance Coalition, a group of leading global health funders hosted by Malaria No More, to finance enterprises that improve health system resilience and pandemic preparedness across the continent.

The Transform Health Fund will provide debt and mezzanine financing to scale high-impact health enterprises serving vulnerable communities, while offering risk adjusted returns. As a result, the Fund is expected to help bolster healthcare systems in Africa, which face a massive financing gap – a challenge made more difficult by COVID-19 – by working to achieve Universal Health Coverage (UHC).

The Challenge: Africa Faces a Massive Health Financing Gap

While Africa is home to 16 percent of the global population and 23 percent of global disease burden, just 1.6 percent of annual impact investments – now estimated at a market size of $1.16 trillion – target the healthcare sector in Sub-Saharan Africa. Small and medium enterprises (SMEs) are generally left out of this impact investment and the COVID-19 pandemic has made this gap even wider.

The Opportunity: Innovative Financing to Support African Healthcare

To respond to the critical healthcare financing gap in Africa while building a resilient ecosystem, the Transform Health Fund will target three critical areas serving low-income patients: supply chain transformation, innovative care delivery, and digital innovation. The Transform Health Fund investments will target countries across sub-Saharan Africa, with a focus on East, Southern, and Francophone West Africa.

“Three decades of expertise and insight allows AfricInvest to leverage a wide range of support throughout many regions of the continent,” said Ziad Oueslati, Founding Partner, AfricInvest. “We believe our team is well-positioned to continue financing African health-sector companies through innovative financing models such as the Transform Health Fund.”

“The Transform Health Fund will demonstrate that health enterprises serving the most vulnerable communities are investible,” said Martin Edlund, CEO, Malaria No More and Executive Director of the Health Finance Coalition. “To solve the health financing gap in Africa, we need to crowd in substantial private investment – this fund demonstrates a new model for achieving that while prioritizing transformative health impact.”

“Scaling proven solutions in Africa’s healthcare requires adequate investment and innovative financing,” said Noorin Mawani, Co-lead of the Transform Health Fund. “The Transform Health Fund seeks to apportion risk and return while delivering high impact-focused funding to healthcare businesses that need it most.”

“The Transform Health Fund demonstrates what’s possible when you combine a ‘capital stack’ approach to financing with a genuine commitment to transformational impact,” said Ray Chambers, WHO Ambassador for Global Strategy and Health Financing. “But to achieve the world’s ambitious global health goals, we need to urgently scale such efforts – especially as the world recovers from COVID-19 and faces serious macroeconomic headwinds.”

“Working together, we can build a stronger and more resilient healthcare system in Africa by strengthening regional supply chains, delivering care to underserved communities and leveraging the digital economy to provide innovative healthcare solutions,” said Makhtar Diop, Managing Director of IFC. “The rapid pace of innovation witnessed in the health sector provides an opportunity to leapfrog and we look forward to our collaboration with the Transform Health Fund to finance Africa’s health transformation.”

“Since our company’s founding, we have been committed to advancing global health and using the power of science to save and improve lives,” said Robert M. Davis, CEO and Chairman, Merck & Co., Inc. “Creative financing models like the Transform Health Fund can be effective tools to help enable greater access to health, and we welcome the opportunity to partner with like-minded organizations focused on strengthening health systems around the world.”

“DFC is proud to be one of the first supporters of Transform Health Fund whose mission is to invest to strengthen healthcare systems and supply chains across Africa,” said Lauren Cochran, Vice President of Equity and Investment Funds, U.S. International Development Finance Corporation (DFC). “This commitment is an important example of DFC’s work to expand access to quality healthcare services, build the private sector, and empower local communities.”

“As part of our ambition to improve the lives of 2.5 billion people per year by 2030 and in particular the health and well-being of 400 million people in underserved communities, we recognize the important role businesses can and need to play in unlocking financing for Universal Healthcare in Africa,” said Marnix van Ginneken, Philips’ Chief ESG & Legal Officer. “The Fund’s innovative model positions private capital to co-invest and provide impact capital to innovative healthcare delivery models, including digital transformation which is essential to bridging the gap to underserved communities and increasing access to quality and affordable care.”

“We have seen from our work throughout Africa that transformative change happens when local leaders, innovators, and entrepreneurs have the resources, networks, and capital to bring their ideas and solutions to scale,” said Jamey Butcher, President and CEO, Chemonics International. “Chemonics is proud to support the Transform Health Fund, an investment vehicle that will do just that for healthcare in Africa.”

“We are delighted to partner with AfricInvest and The Health Finance Coalition in establishing an investment vehicle that has secured much needed private flows of finance for African healthcare,” said Anne Marie Chidzero, Chief Investment Officer, FSD Africa Investments. “The fund will back an emerging class of private health provision that will improve livelihoods for vulnerable populations. The future of health finance lies in bringing together different types of capital with a common purpose, something we are excited to back through our investment in the Transform Health Fund.”

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Africa’s carbon finance stream can be scaled up to $200 billion per annum – Osinbajo

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Nigeria’s Vice President, Prof. Yemi Osinbajo, said Africa’s share of the global carbon market can be scaled up massively to reach foreign direct investment (FDI) of between $120 to $200 billion annually.

The Vice President stated this during his keynote speech at the Rockefeller Foundation meeting in New York.

He identified a combination of capital flows, job creation, and the avoidance of long-term climate destruction as critical drivers of African leaders’ interest in supporting this effort.

According to him, Africa currently has only a small share of the carbon market. He explained the importance of this projected carbon finance stream, saying:

“For a continent that needs $240 billion annually in mitigation investment alone, this carbon finance stream could be the difference between transitioning and not (transitioning). As all of us in this room understand well, the priorities of the African continent are not just to act decisively on the climate crisis, but to also create significant growth opportunities for our young and growing population.”

“The investment required to advance the energy transition in Africa is huge. World Bank estimates suggest that Africa needs $6.5 trillion US dollars between now and 2050 for mitigation action alone to keep temperatures below 2 degrees of warming.”

VP Osinbajo also highlighted that the carbon market pipeline could create 30 million jobs in the next decade, with the potential to create more than 100 million jobs through climate-aligned projects by 2050.

Africa’s carbon markets: During his speech, VP Osinbajo noted that the rapid progress recorded in Africa benefitted from the support of a very engaged Steering Committee with the United Nations, Global Energy Alliance for People and Planet (GEAPP), USAID, and a range of other public and private actors, which resulted in the successful launch of the African Carbon Markets initiative (ACMI) in Sharm-el-Sheikh, Egypt during the COP-27 event.

“The strong commitment and presence from fellow African leaders demonstrate the willingness and leadership of Africa. We already have 7 African countries (Burundi, Gabon, Kenya, Malawi, Mozambique, Nigeria, and Togo) signed up to develop country carbon activation plans and over $200 million in advanced market commitments, which we must continue to further advance as this is going to be the critical driver of action on the continent.”

“I think it’s an auspicious moment for Africa to be participating more fully in the global carbon market conversation, especially in the light of the slowing pace of green investment flows into the continent. The work several of us have done together in the past few months makes it clear that while other sources of flows are slowing down globally, carbon markets are growing rapidly,” Osinbajo said.

Advancing carbon markets: VP Osinbajo also spoke about the essence of collaborations in developing carbon markets on the continent. He said collaboration is a key to unlocking opportunities in Africa’s carbon markets. He said:

“One of the strong points of ACMI and the way we must structure it going forward, in terms of governance, is the flexibility to smoothly work with other initiatives, and there will be many others. Two days before the opening of Cop 27, Senator John Kerry and I had a conversation about the proposed Energy Transition Accelerator and we both agreed that once the details were worked out, we would work out a collaborative framework with ACMI.

“Carbon markets will play a critical role in the implementation of this (Energy Transition) Plan – in mobilizing the capital required to move to our net-zero economy-wide trajectory. I want Nigeria to have the first Carbon Markets Activation Plan.”

In his contribution, the US Presidential Envoy on Climate Change, Senator John Kerry, commended VP Osinbajo for his leadership on the issue of energy transition. Kerry said:

“We are grateful for the leadership of the VP, grateful for the reception you gave me on my visit to Nigeria. I am honoured to share the platform with you on how to move the African Carbon Market Initiative (ACMI) forward.

“It is possible to create a high-integrity carbon market in a way to address Climate Change and African Development aspirations. We are all joined together looking forward to developing the financing.”

In case you missed it: The ACMI is a new initiative that was launched during the conference of parties (COP 27) event held in Egypt. The ACMI will be led by a fourteen-member steering committee of African leaders, CEOs, and carbon credit experts. The ACMI aims to dramatically expand Africa’s participation in voluntary carbon markets.

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‘A unique opportunity’: Why calls are growing for new rules to protect ‘nature markets’

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A new report has pinned the overall value of nature markets at a huge $10tr – but will it cut through with decision makers at COP15?

The launch of the UN biodiversity talks in Montreal this week has prompted yet another report that attempts to put a financial value on the services nature provides to the global economy.

The, study published by the Taskforce on Nature Markets group this morning, pins the value of”nature markets” at almost $10tr a year, a figure which amounts to roughly 11 per cent of global GDP.

The report, produced with help from McKinsey sustainability analysis outfit Vivid Economics, identifies two dozen markets that are explicitly base on the valuing and trading of nature, ranging from emerging markets such as carbon and biodiversity credits and nature liability insurance to more established markets such as conservation, nature-related tourism, and soft commodities.

The findings were framed by NatureFinance, the group behind the task force, as proof of the need to enhance governance of these so-called nature markets through cross-jurisdictional governance and regulation. The group has warned that embedding rules and incentives in these markets that protect nature are in the interest of the global economy, noting they are likely to lead to improvements on the bottom line for both public and private sectors.

The findings add to a library of reports published recently that have sought to either put a price on nature’s services or highlight the economic benefits they bring and the risks associated with their destruction. NatureFinance analysis is notable, because it specifically explores the role nature plays in the trajectory of 24 specific markets, from agricultural and livestock to nature-based carbon credits.

Jason Eis, executive director of Vivid Economics, said the findings highlighted the need to ensure that governance of these markets benefits nature. “The key is market governance and market infrastructure including features like rules of trade, product and certification standards, taxes and subsidies which could potentially help drive incentives for companies to support nature in responsible ways,” he said.

The Global Biodiversity Framework (GDF) under discussion at COP15 sets out a number of measures around how global systems of governance and finance can be reformed to better protect nature and close a massive $700bn annual biodiversity financing gap by 2030. Target 14 calls for biodiversity values to be integrated into policies, regulations, planning, development processes, poverty reduction strategies, accounts, and assessments of environmental impacts at all levels of governance. This integration of nature into policymaking dovetails with the aim of Target 19 in the draft text, which calls for a rapid acceleration in both public and private finance towards nature conservation and remediation, in particular in the Global South.

Simon Zadek, co-lead of the Taskforce Secretariat and executive director of NatureFinance, said it was critical that funding for biodiversity was not limited to foreign aid. “By redesigning nature

markets to include nature positive instruments and policies in their governance, we can include a broader array of financial tools and move beyond Official Development Assistance (ODA) as the principal source of biodiversity funding,” he said. “We have a unique opportunity to reshape the core logic of these markets so that nature positive, net zero and equitable outcomes are built into the way they operate.”

The start of the COP15 Summit this week has also been accompanied by the launch of a number of new products designed to help companies and investors track and reduce their exposure to nature-related risks or quantify the benefits generated by nature-positive investments.

For example, a new ratings agency launched by the African Leadership University’s School of Wildlife Conservation (ALU’s SOWC), consultancy firm Dalberg, and FSD Africa Investments is aiming to help investors measure, rate, track and communicate the positive impacts their investments have on biodiversity.

The new Biodiversity Investment Rating Agency is set to advise investors on identifying the opportunities for impact investing in biodiversity-related projects, spotlighting relevant frameworks to measure biodiversity investment impacts. “Institutional investment in biodiversity as an asset class will be the key to unlocking the billions of private capital we need to address climate change and promote the business of conservation,” said Mike Musgrave from the SOWC.

Anne-Marie Chidzero, CIO at FSD Africa Investments, said the Biodiversity Investment Rating Agency would “help investors measure and track the impact of their capital on biodiversity conservation and restoration will play a central role in increasing investment in the sector”.

Meanwhile, British start-up NatureMetrics has this morning announced the launch of a new nature performing monitoring service for companies, designed to help them continually monitor their impact on nature.

“By launching the world’s most accurate nature performance monitoring system, companies across the globe will have one simple-to-deploy tool, enabling them to understand, track and improve their natural capital,” said Katie Critchlow, CEO of NatureMetrics. “Through cutting edge environmental DNA technology, we’ve devised a way of turning complex nature data into simple and meaningful metrics to inform board room level decisions for business and nature.”

Attempts to measure and price nature remain controversial in some quarters, and the surge of new products and reports that frame nature as an asset class or cluster of markets will be met by criticism from some green groups as the talks get underway in Montreal. Some campaigners have long argued that appealing to companies and countries’ financial self-interest panders to the root cause of the destruction of nature – the pursuit of economic growth. There is also a debate around whether the focus on environmental risk disclosures and measuring natural capital is inadvertently helping companies to defer actions that can deliver a more nature-positive world.

The counterargument, of course, is that quantifying nature’s services can drive change rapidly and at scale, because translating natural assets into financial terms will inevitably hit home with governments and in boardrooms. There is also strong sense among companies that the introduction of nature risk reporting into financial accounts is an important first step in their journey towards becoming nature-positive operations and giving investors insights they need to divert capital towards greener businesses. More than 300 companies have expressed their support for any deal reached at COP15 to include rules that would make nature risk reporting mandatory at large companies and financial institutions.

At any rate, NatureMetrics headline $10tr figure for the value of nature markets is clearly designed to shock governments and businesses assembled at COP15 into delivering a deal that can secure future economic growth by protecting nature. Delegates should take note.

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Innovative Rating Agency Launched to Boost Biodiversity Investments

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African Leadership University’s School Of Wildlife Conservation (ALU’s SOWC), Dalberg, and FSD Africa Investments bring together their in-depth expertise in biodiversity conservation and restoration, finance, and impact investments to form a partnership that will help investors measure and track the impact of their biodiversity-related investments over time.

NAIROBI, KIGALI, DAR ES SALAAM – A pioneering initiative aimed to boost biodiversity investments by helping investors measure, rate, and track their impact on biodiversity conservation and restoration – the Biodiversity Investment Rating Agency (BIRA) – was launched today by the African Leadership University’s School of Wildlife Conservation, Dalberg, and FSD Africa Investments.

Biodiversity is ranked as the third most significant threat to humanity, after carbon emissions and nuclear war.  Yet, less than 16% of the required funding is currently available for biodiversity, leaving a US$ 700 billion funding gap for biodiversity conservation and restoration. Private capital can play a critical role in closing this funding gap while tapping into an attractive asset class that is poised to grow. However, investments are currently limited because there is no standard way to measure, rate, track, and communicate biodiversity impacts. Investors are looking for simple, credible tools based on biodiversity science.

 Figure 1: Illustration of the biodiversity conservation funding gap

Illustration of the biodiversity conservation funding gap
Source: The Nature Conservancy, Closing the Nature Funding Gap, 2020

To address these challenges, BIRA will advise investors on identifying the opportunities for impact investing in the biodiversity sector, spotlighting relevant frameworks to measure biodiversity investment impacts, and provide existing aligned frameworks with guidance on how to make their tools investor friendly. BIRA aspires to see measurement frameworks that can provide simple answers to investors’ questions about the potential outcomes of biodiversity investments. BIRA will work in collaboration with existing frameworks that meet certain design criteria to develop modules that match measurement frameworks with investor needs.

FSD Africa Investments and Dalberg are excited to welcome ALU’s SOWC as the science and training partner for the initiative. ALU SOWC will bring its expertise in scientific inquiry, research, and training to ensure that the modules developed are credible and usable. BIRA will also lean on SOWC’s expertise to develop and launch training programs that will help bridge the existing knowledge gap in the market.

By bridging the gap between investors and the existing biodiversity measurement frameworks, BIRA will support informed decision-making by investors. Ultimately, this will increase investments in conservation and restoration, leading to positive biodiversity outcomes.

Mike Musgrave, Conservation Leadership Faculty, School of Wildlife Conservation, said:

“Institutional investment in biodiversity as an asset class will be the key to unlocking the billions of private capital we need to address climate change and promote the business of conservation.”

Devang Vussonji, Partner, Dalberg Advisors, said: “We have lost 68% of monitored animal populations between 1970 and 2016. We face a USD 700 billion funding gap in reversing this effect, and private capital will be essential in filling this gap. BIRA aims to attract private capital to the sector by making it easier for private investors to measure, communicate, and track biodiversity outcomes.”

Anne-Marie Chidzero, CIO, FSD Africa Investments, said: “FSD Africa Investments is proud to partner with Dalberg and the African Leadership University’s School of Wildlife Conservation to create the Biodiversity Investment Rating Agency. This innovative initiative to help investors measure and track the impact of their capital on biodiversity conservation and restoration will play a central role in increasing investment in the sector.”

BIRA invites technical partners and investors to join the founding partners in developing the initiative. Interested parties should contact Devang Vussonji at devang.vussonji@dalberg.com.

FSDAi Nyala Facility B.V. invests USD 1.5 million in equity into ARUWA Capital Management

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Amsterdam, 05 December 2022 – FSDAi Nyala Facility BV (FNF BV or Nyala) has invested USD 1.5 million in equity into Nigerian based ARUWA Capital Management. ARUWA is a Gender Lens Investing (GLI) Fund which provides capital and post-investment management support to Small and Growing Businesses (SGBs). This investment has brought the Fund to its target size of USD 20 million.

In addition to the investment, Nyala will provide post-investment catalytic support to ARUWA’s team focused on achieving a sustainably investable proposition with a robust team and governance.

This transaction is a high-profile deal in the GLI space. ARUWA Capital Management is a Nigerian GLI fund, founded in 2019 by seasoned investment professional, Ms. Adesuwa Okunbo Rhodes.

ARUWA’s investment thesis is to make healthy returns by investing in female-oriented, female-owned or female-led SGBs in real economy sectors with steep growth curve potentials, thanks to the leverage of technology. ARUWA’s post-investment support to its portfolio companies is also well thought through as it makes use of high-quality finance and administration expertise from a locally renowned consultancy with a strong track record in venture building.

Joris van Oppenraaij, Senior Investment Officer at Nyala Venture stated that “Pre-investment, we closely worked with ARUWA on attracting more institutional investors to speed up the closing of the fund. During that period, I witnessed the swiftness with which ARUWA’s team executes high quality deals, followed by post-investment focused and tailor-made support to their investees”.

“This is Nyala Venture’s first investment and is an excellent fit with Nyala’s catalytic mandate given ARUWA’s focus on Gender Lens Investing and on Small and Growing Business. As part of our mandate, we aim to build a new asset class of Local Capital Providers, such as ARUWA, to further strengthen and deepen the SGB Financing ecosystem in Sub-Saharan Africa” added Bart Schaap, Managing Director at Nyala Venture”

“This marks an important moment to celebrate as we back female fund managers in Africa, future and formidable allocators of capital for our sustainable future” noted Anne-Marie Chidzero, CIO FSDAi.  “This investment builds upon the Collaborative for Frontier Finance’s vision for Africa that Small and Growing Businesses need local capital managers to address the systemic gap in financing these engines of growth and jobs” concluded Drew von Glahn, Executive Director, Collaborative for Frontier Finance.