Healthy, functioning natural environments are the critical foundations for water and food security, human health and economic resilience and biodiversity conservation. They also contribute significantly to the Sustainable Development Goals (SDGs), including increasing employment, safeguarding clean water access, protecting vital ecosystem services, and growing the amount of land and oceans under protection.
Yet the national and global spend on environmental sustainability does not translate into appropriate support for this critical foundation, and many landscapes are facing considerable threats. South Africa has to address the substantial shortfall in spending to address how priority landscapes and ecosystem services are funded and managed.
The project is led by Candice Stevens, Head: Innovative Finance and Policy at the Wilderness Foundation Africa (WFA). Based on her past success of securing tax incentives for declared protected areas (nature reserve and national park status), Stevens started having discussions with WWF who have been leading the drive for long-term sustainable funding for the environment. From this engagement, in November 2019 WWF and WFA formed the Sustainable Landscape Finance Coalition (simply known as the “the Coalition”) to drive the development of finance solutions for sustainable landscape conservation and environmental initiatives across Africa.
The WWF Nedbank Green Trust is supporting this initiative that brings together a regional knowledge base of thought leaders, experts, and stakeholders to create a landscape finance sector. The network comprises a wide range of sectors, including conservation, agriculture, banking, investment, legal, academia and government. ‘Major players from every sector are actively involved in the Coalition. It’s one thing to just talk about green finance but moving beyond this to create a viable green finance sector is a different story altogether,’ says Stevens, who is chairing the Coalition.
An essential starting point for the Coalition is for the environmental sector to network with a wide range of sectors to finance environmental change. ‘It requires engaging with investment, banking, private equity, legal and others.’
Since its launch, the Coalition has snowballed with an incredible amount of support and an urgency to implement solutions. ‘We now have a council of 22 members leading The Coalition, comprising over 700 members, 80 organisations and individuals and 12 specialist contributors who are in the process of developing six finance solution incubators, five pilot projects, four finance strategies and one feasibility study,’ Stevens explains.
Critical decisions are being made on a scale never seen before in terms of investment in green outcomes for economic viability and job creation. ‘Environmental conservation and sustainability are now legitimately possible in our legal and banking structures and in how the Johannesburg Stock Exchange undertakes various instruments on capital markets with major environmental benefits. It is such an exciting, powerful trend.’
Webber Wentzel is the Coalition’s legal representative; Nedbank, RMB and Agri SA Enterprises sit on the Coalition’s council, the Development Bank of South Africa is involved, as is National Treasury (which released the SA Green Finance Taxonomy (GFT) in June for comment). Key partners include South African National Parks (SANParks), the United Nations Environment Programme (UNEP), the United Nations Development Programme (UNDP), Stellenbosch University, the Department of Forestry Fisheries and Environment, the South African National Biodiversity Institute (SANBI) and the African Farmers’ Association of South Africa (AFASA).
The Coalition’s six finance solution incubators have been launched in 2020, and three have been completed and gone to pilot:
Biodiversity Management Agreement – tax incentive
To offer one example of where this would apply: a high percentage of our most threatened species like rhino and lion are in private hands and these species come with large management costs, which the tax incentive will address. It’s gone to pilot nationally and Section 37 C(1) of the Income Tax Act allows the deduction of all the costs of managing threatened species if you comply with the law. This can be replicated to all threatened species as long as there are approved biodiversity management plans.
Bio offset finance tools and corporate finance mechanisms
This pilot is developing a unique and innovative corporate finance model to facilitate financial provisioning for biodiversity offset-receiving sites that are declared protected areas. This is critical for their long-term security as well as their ongoing and effective management.
An example of carbon payments is where they are linked to large grassland carbon projects. South Africa has not taken up the significant opportunities in carbon payments globally. The Coalition launched a grasslands carbon project covering 300 000 ha of grasslands in the recently announced new Grasslands National Park in the Eastern Cape – another WWF and SANParks project, with funding from the WWF Nedbank Green Trust. The park will include a range of landowners in the region – private and communal – and will give them access to a new stream of payments on the voluntary carbon market. A company like Microsoft, for example, doesn’t just want to be net zero in terms of their carbon footprint; they want a net decrease and are looking for large carbon offset projects to buy up carbon credits on the open market. One of the partners in the Coalition is the Climate Neutral Group, with Gray Maguire tracking activities in the landscape to calculate how much carbon is sequestrated.
Other finance solution incubators in development are:
If you are a declared protected area (a nature reserve or contract national park) you should get a rebate on your municipal property rates. The municipal property rates incubator has a two-pronged approach to address the issue at a national level through the Wilderness Foundation Africa’s Ellané van Wyk, Lead: Environmental Tax Services and Training, Innovative Finance. The idea is to establish discretionary rebate policies for municipalities who can either exempt the applicant or exempt part of their property as is being practised in municipalities like the City of Cape Town and eThekwini, both examples of sustainable cities in the making. eThekwini created a municipal rebate so that if you have a property with an indigenous vegetation belt that contributes to corridors through the cities, you pay rates for your home but are exempt from paying property rates for that area of your property.
Unpacking how the Coalition can create bridges between bankable green projects and investors, venture capitalists and other financiers, and help to develop the value chain, such as small, medium and microenterprises engaged in alien invasive clearing or microenterprises such as biochar. This incubator is led by WWF Finance Practice Investment Analyst, Cerin Maduray, and is supporting some critical and cross-sectoral bankable project investigations.
A high-level cost benefit analysis of all the incubators was conducted, and the initial findings show that investments of all the incubators combined would be between R243 million and R329 million in a conservative scenario, and between R1,4 billion and R1,9 billion in the least restrictive scenario.
‘There are various layers of complexity about who is doing what in the landscape and there are different benefit mechanisms, but payment can flow to anyone in the pilot areas irrespective of whether it is community-owned or privately owned land,’ says Stevens.
‘The silver lining of the Covid-19 pandemic is that it has escalated so many conversations we have been having about the environment, particularly in the finance world,’ says Stevens. ‘What could have taken 10 years of discussion took a year of discussion, networking and lesson-sharing to catalyse new, innovative financial objectives and green finance instruments and solutions to address the environmental challenges we are facing.’
If you would like to join the Coalition, contact Candice Stevens at firstname.lastname@example.org.