Creating New Value Based on Nature
A Business Commitment to Biodiversity Creating new markets or transforming existing ones, in which nature conservation or sustainable use is the basis for wealth The IFC approach to biodiversity conservation and sustainable use is to invest in innovative business models that are protective of nature as well as socially and economically beneficial. In order to meet this challenge, IFC partners with industry, NGOs, and other financial institutions to develop four categories of tools: metrics to measure biodiversity impact and value; customized services blending investment and technical assistance targeting nature-based business; methodology and trading rules for biodiversity offsets; and specific financial products that conform to the reality of longer term returns. What IFC brings Combined expertise in finance and biodiversity conservation Experience of partnering with a wide range of stakeholders (e.g., non-governmental organizations, industry forums, international organizations) Access to a wide variety of internal and external resources to support complex or riskier ventures Presence in the field close to clients who need to deal with areas with very high biological diversity With the Global Environmental Facility and other donor support, IFC is able to provide innovative financing solutions that champion businesses with a biodiversity focus. IFC is committed to the UN Convention on Biological Diversity, particularly to its decisions regarding private sector engagement.
Four Models of Engagement 1 Developing Standards for Sustainable Supply Chains How to measure and incorporate the biodiversity value of a product or service? A lack of realistic, simple, and auditable standards for biodiversity that are globally accepted is hindering further adoption of better business practices. The use of such standards would not only limit damage to biodiversity, but allow for corporate value to be created through biodiversity conservation. In the global commodities market, the private sector acknowledges the need for sustainability in their supply chains, and more companies are demanding specific and efficient standards. IFC s work in this area includes participating in industry-led multi-stakeholder initiatives, such as commodity roundtables and investing in building knowledge and practical tools. IFC supports players individually along the supply chain and the strengthening of the chains themselves, blending investment with both traditional and innovative technical assistance and advisory services. Approaching issues via the supply chain a natural gathering of all relevant stakeholder groups in a given sector allows a clear view of who wins and who loses, of gaps and market failures. This approach addresses imbalances and inefficiencies while optimizing value creation from small producers to large off-takers. By collaborating with all the market players to set, test, and implement standards, with the ultimate goal of global uptake and mainstreaming, IFC is working to transform the commodity markets. The Biodiversity and Agricultural Commodities Program (BACP) supports the adoption of nature-friendly practices at the production level and throughout the supply chain of four tropical agricultural commodities: palm oil, soy, sugar, and cocoa. These four crops currently cover over 132 million hectares worldwide, much of it near or in areas of high biological diversity. Simple standards and practices are needed to help producers minimize their impact on biodiversity, as well as provide social and economic benefits. The BACP also supports financial institutions to adapt their services to encourage the adoption of biodiversity-friendly practices by their clients, and supports governmental institutions in their efforts to change or adapt regulation, in particular concerning land use.
2 Tapping New Revenue Streams Conserving nature in its wildest possible state can benefit communities and be a source of profit to businesses, if one knows how to wisely harness the ecosystem services (fresh water that is abundant and clean) or harvest the non-timber forest products. IFC has been incubating business models that assist these diverse nature-based enterprises, providing debt and equity financing with technical advice. Experimenting with these models has allowed IFC to fine-tune its services offering to meet the characteristics and needs of this category of business. They face higher risk due to the innovative nature of their products; they require the development of a robust supply chain often based on trained and organized local communities; new products require sizable research and development expenditures which constitute a huge cost. An adequate blend of finance and advisory services increases the capacity of these enterprises to meet their challenges and will increase their numbers to constitute a stronger global presence. Finally, IFC supports the establishment of commercialization arrangements and trading entities that will allow for small producers to aggregate their products in the quantities and qualities required by the market. IFC is working with partners to help create a stronger, distinctive, and more visible global market for native, local, sustainably harvested natural ingredients and other non-timber forest products. These products can be used in food, such as açai from the Amazon; in cosmetics, such as exotic oils derived from seeds of the baobab tree and others which command a high price in world markets; or in pharmaceuticals, such as Devil s claw. Working with sustainable producers and other market players in the sector, IFC helps bring the value of the natural diversity of tropical forests to the local stakeholders, connecting them with the global marketplace.
3 Piloting Biodiversity Offsets 4 Adapting Finance to Nature IFC s Performance Standards and, in turn, the Equator Principles require a project that would have a negative biodiversity impact to avoid, mitigate, or ultimately offset the damaging impact. IFC works with partners to help determine the methodology of evaluating ecologically comparable biodiversity offsets. IFC also actively prepares for biodiversity offsets trading mechanisms that will be established internationally or nationally. This requires working with governments and companies to enhance the biodiversity components of their regulations and management systems, and the construction of market-based mechanisms through pilot initiatives. There is a global need for adequate financial products and services to satisfy the demand from the growth in nature-based ventures. IFC is developing new financial products that address this demand. Biodiversity-friendly characteristics of financial products can involve adopting longer term returns for investments that require a longer timeline, such as in sustainable forestry. IFC has also supported the development of finance vehicles whose mechanisms are geared specifically towards biodiversityenhancing projects. These biodiversity and ecosystem finance tools will be necessary for the private sector to minimize risk when undertaking innovative biodiversity projects. IFC supports the Business and Biodiversity Offsets Program (BBOP), which develops the concept and methodology of offsets in great detail. BBOP is managed by a secretariat consisting of Conservation International, Forest Trends, and Wildlife Conservation Society, and supports pilot offset projects that demonstrate positive conservation and livelihood outcomes for the affected areas. BBOP is a partnership of businesses and NGOs to establish and disseminate best practices in order to facilitate corporate and policy decisions that meet conservation and business objectives. IFC has contributed directly to biodiversity finance through a number of means. IFC s own Environmental Business Finance Program invested in projects whose profit model derives from conserving biodiversity. IFC also supports the EcoEnterprises Fund, run by The Nature Conservancy, with technical assistance, and invests in Verde Ventures, run by Conservation International two examples of special financial intermediaries that have made investing in new biodiversity ventures their specialty.
About IFC At IFC our mandate is to further sustainable economic development through the private sector. We pursue this goal through innovative solutions to the challenges of development, as we invest in companies and financial institutions in emerging markets and as we help build business skills. We consider positive development impact an integral part of good business, and we focus much of our effort on the countries with the greatest need for investment. We recognize that economic growth is sustainable only if environmentally and socially sound and if it helps improve the quality of life in developing countries. Environment and Social Development Department For general inquiries: Enviro@ifc.org INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, NW Washington, DC 20433 USA Tel: (202) 473-1000 Fax: (202) 974-4404 www.ifc.org/enviro Enviro@ifc.org Cover image: Local farmers in boat transport lepironia grass across a canal in Vietnam. Image courtesy of Hoa Doan. Interior images courtesy of Curt Carnemark.