This presentation by UNEP, GCP, Environmental Defense Fund & Permian Global was given at a session titled "REDD+ & the private sector: Leveraging private sector finance for REDD+ implementation" at the Global Landscapes Forum: The Investment Case on June 10, 2015. For more, please visit http://www.landscapes.org/london/

2. Leveraging private sector finance for REDD+ implementation
Time Expert Cluster Agenda
10:15 Welcome
10:20 – 10: 40 Presentations by:
• Victor Galarretta, President of Advisory Board MDA and Programa
Nacional de Conservación de Bosques y Cambio Climático
• Satya Tripathi, Director of the United Nations Office for REDD+
Coordination in Indonesia (UNORCID)
10:40 – 11:00 Presentation: Overview of REDD+ financing mechanisms
Ruben Lubowski, Chief Natural Resource Economist – EDF
Jacinto Coello, Program Officer – UNEP FI
11:00 – 11:20 Break-out sessions:
1. Price guarantees – EDF and Permian Global
2. Risk mitigation instruments- UNEP and GCP
11:20 – 11:30 Feedback from respective break-out sessions
11:30 – 12:00 Stuart Clenaghan, Founder - Green Gold Forestry
Discussion: Practical applications in the context of Peru
Building an implementation roadmap towards COP Paris
12:00 – 12:15 Expert cluster conclusions

3. Current Profile of REDD+ Finance
93.6%, Public sector
0.1%, Private sector
0.1%, Other
0.4%, Public-private sector
Private Foundations, 5.8%
Source: Forest Trends 2014, REDDX, based on data from 7 countries;
Voluntary REDD+ Partnership Database.
Public pledges to 2020:
Bilateral: $4.9 billion
Multilateral: $3.1 billion

4. Context
 Transformational change impossible
without transforming the private sector
 Needed: redirection of private capital at
grand, unprecedented scale
 Discussion is not about prioritizing private
over public finance
 Discussion is about the smartest use of
public, philanthropic and other sources of
finance to achieve transformation

5. Overview
• Challenge is redirecting capital for agriculture and rural
development
• Need production and protection—underpinned by carbon
accounting
• Lower average risk-adjusted cost of capital for more
sustainable investments
– Providing more certain revenue for carbon/environmental services
– Attract lower cost, lower risk capital from:
• institutional investors, government, philanthropy, mission-oriented investors,
consumer goods and agribusiness companies, carbon markets, etc.
• Mechanisms needed at international, national, local levels

6. Finance mechanisms

7. A “Bridging” Proposal: Minimum price
guarantees
• Public/philanthropic donors guarantee minimum price
that at least covers costs during transition to future
carbon markets (10-15 years)
– Example: Pilot Auction Facility (PAF) for Methane & Climate Change
Mitigation developed by the World Bank
– “Put” options as a guarantee that carbon credits can be sold at a
minimum price  confidence to invest in “clean” projects.
• Reduces risks for suppliers/investors while keeping
upside.

8. Proposal for Private Investment in Pipeline
of Carbon Credits
• “Rental with option to buy”
– Example: Buyer would pay $1-3 for right but not the obligation to
buy credit at discount to market price in 2020-2025 (“call
option”).
• Less risky than buying credits outright for buyer.
• Additional upside for seller.
• Appreciation / risk-mitigation if carbon prices rise.
• Could help monetize carbon revenue stream.

9. How might PAF minimum price
guarantee model be applied to REDD+?
http://www.pilotauctionfacility.org/content/videos
• Would it work to auction off put options for REDD+? Are
there other criteria to prioritize “bids”?
• What would be the criteria for eligible reductions?
• Should options these be tradable and, if so, who would be
eligible to exercise?
• Who could bid?
• Who could finance?

10. Source: ODI/UNEP FI
What are the activities that are to financed?

11. A framework for understanding private land use
finance
For what?
Where?
HIGH RISK
LARGE SCALE
HIGH RISK
SMALL SCALE
LOW RISK
LARGE SCALE
LOW RISK
SMALL SCALE
What?
Project finance Project bond
Private equityListed equity
Corporate loans
Mortgages
Barriers?
Tech, market risks Political, country
risks
Lack of readiness
How?
Risk guarantees Risk insurance
Etc.Institutional readinessIncentives (FITs)
Carbon pricing though
Advanced Market Ms
Bundling Junior co-financing Market readiness
Etc.
Source: UNEP FI

12. Thank You!