News | Aug 2023
Joanna Wolstenholme, Programme Officer in UNEP-WCMC’s Nature Economy team, explores key considerations for impact investors, with help from two new real world case studies
How easy is it for financiers looking to invest for environmental and social impact to really gauge the changes their investments have made? And how can those investments be set up to succeed from the start?
The UN Environment Programme World Conservation Monitoring Centre (UNEP-WCMC), working alongside UN Environment Programme (UNEP) colleagues, has now released two case studies outlining best practice and lessons learned on environmental and social management in sustainable land use finance. These lessons learned should help other financial institutions to develop their own impact frameworks and ensure that investments generate true environmental and social impacts which are properly tracked.
The case studies focus on two impact investors with whom we have worked over several years: AGRI3 and the Responsible Commodities Facility (RCF). Both of these organisations strategically target their investments in sustainable agriculture processes, not only to avoid generating adverse risks but also to create positive environmental and social impacts on nature and people.
AGRI3 Fund is a guarantee fund, with an aim of protecting natural ecosystems, developing sustainable agriculture and improving rural livelihoods in low- and middle-income countries. RCF focuses on investing in the Cerrado, a critical and threatened landscape in Brazil, to incentivise the production of soy on land which has not recently been deforested or converted from natural habitat to soy production. The recent targeted approaches of these two funds demonstrate how to generate positive impacts and tackle the twin global crises of climate change and nature loss.
Impact frameworks are policies developed by investors to set safeguards, avoid and manage risks, identify and assess impacts, set targets and measure progress. The frameworks cover both managing potential risks – such as deforestation or conversion of natural habitats – as well as maximising for positive impacts – for example, habitat protection or restoration, job creation and increased resilience of communities and infrastructure in the face of climate change.
Key learnings from the case studies include the need to keep both impact aims and tracking processes targeted and measurable. Impact investors need to check that they are able to action everything that is included in their impact framework, so as not to fall foul of greenwashing claims. Funds and facilities should also be aware that developing a robust impact framework, as well as building trust and aligning expectations among project partners, takes considerable time and resources. It is vital to ensure that all partners are on the same page at an early stage and agree on a theory of change for impact, so that issues do not emerge down the line. Working through local partners is key to developing trusted relationships with potential investee farmers.
Grace Blackham, Head of ESG and Compliance at Sustainable Investment Management, which manages RCF, told UNEP-WCMC: “The first crop cycle of the RCF confirmed to us that by focusing on clear, measurable and enforceable objectives, these can more easily be pursued and enforced. This initial trial gave us confidence that the RCF can be successfully scaled up in line with our plans.”
Additionally, the use of well-established indicators, such as the ones developed by UNEP and UNEP-WCMC, was highlighted as an important success factor for the funds.
Jill Shankleman, E&S Impact Advisor to AGRI3, told us: “The UNEP Positive Impact Indicators Directory was very useful when we were revising our impact KPIs because it allowed us to use definitions that we hope will become established across the sector and lead to consistent measurement across funds.”
Read about the AGRI3 and RCF case studies and their emerging impact outcomes on areas including land protection, carbon sequestration and sustainable agriculture at the Info Briefs section of the UNEP Land Use Finance Impact Hub.
Explore template indicators for positive investment impacts via the Positive Impact Indicators Directory.