The Land-use Finance Tool
Published: February, 2019
Since 2010, USD 20 billion has been provided to support the reduction of forest emissions. But, over the same time period, at least USD 777 billion has been invested in land-use activities that could be driving deforestation (Climate Focus, 2017). Finance flows, from both public and private sources, drive economic activity that contributes either to the sustainable or unsustainable use of natural resources.
What is land-use finance mapping?
Land-use finance mapping is a methodological approach that supports the analysis of financial flows in activities and sectors related to the use of land, particularly the potential impact (positive or negative) on forests. Finance mapping derives from traditional budget review approaches but seeks to offer additional insights to inform policy development. The analytical approach used is a quantitative and qualitative life cycle analysis of financial flows in selected sectors.
Finance mapping was originally developed by Climate Policy Initiative to track global financial commitments to climate action. The approach has since been adapted and further developed to support countries and jurisdictions in understanding their financial landscape in selected sectors of interest. Finance mapping can, in theory, be applied to any sector, scale (global, national or local), and sources of finance (public or private).
Why map land-use finance?
Mapping finance flows into land-use activities helps policymakers and other change-makers understand who finances what, and what the best solutions could be to maintain and grow forests sustainably.
Tropical forest country stakeholders, development partners and investors are interested in understanding existing dynamics in financial flows to inform how their own investments can support policy goals and ensure sustainable land use over time.
Finance mapping activities will be most useful when integrated alongside broader analytical activities, such as: building strategies; and carrying out institutional and public financial management analysis, policy and investment planning, implementation, and monitoring and evaluation.
Some key ways in which land-use finance mapping can support the policy process are:
– Mobilizing and planning resources: the quantification of investments relevant to REDD+ strategies, policies and measures is a key analytical step in the elaboration of resource mobilization frameworks, funding proposals, and the identification of funding gaps at national or sub-national levels. In addition, the analysis of actors, financing mechanisms and policies can help identify barriers to investments and potential incentive mechanisms. This analysis can also inform the design of specific financial instruments.
– Aligning finance to policy objectives: Mapping business-as-usual finance flows that are not aligned with REDD+ objectives can provide strategic information for inter-ministerial and cross-sectoral coordination and efforts to mainstream climate objectives in planning. Characterizing financial flows according to their potential impact on forests requires multi-stakeholder and participatory discussions on setting the boundaries for REDD+ aligned or ‘green’ activities. This process can directly feed into policies and measures for REDD+, and help define sectoral plans and activities.
– Monitoring financial flows: Mapping financial flows provides a baseline to monitor progress in mobilizing resources and redirecting investments to more sustainable activities. Periodic tracking helps improve accountability and build trust with partners. It also provides data for international (United Nations Framework Convention on Climate Change (UNFCCC), the Green Climate Fund (GCF) and donors) and national reporting requirements.
How does the tool work?
Developed by the EU REDD Facility and Climate Policy Initiative, the Land-use Finance Tool offers methodological guidelines to countries, jurisdictions and their partners to map public and private investments that support forest and climate objectives, and those which might be driving deforestation. The tool has eight modules, which represent the various analytical steps involved in developing a land-use finance mapping analysis. They can be approached in a linear way or independently. This is because the development of a landuse mapping analysis is an iterative process, which requires revisiting certain elements of the work as data collection and analysis progress.
The tool is based on experiences and lessons from climate finance or land-use finance mapping in Indonesia, Côte d’Ivoire, Vietnam and Papua New Guinea. It will be improved iteratively over time following further implementation experience. An interactive toolbox will shortly be available for interested practitioners.
For more information, please visit www.landusefinance.org.
- climate change
- climate exposure
- climate finance
- climate funds
- climate investment
- development finance institutions
- land use
- private finance
- public finance