BLENDED FINANCE FOR CONSERVATION

As part of the international and interdisciplinary Radboud University think tank Global Climate Action, I co-authored a policy advice for the Dutch Ministry of Foreign Affairs. The paper carries the catchy title “Mind the Gap: Overcoming Information Asymmetries Between Investors and Landscapes to Catalyse Private Finance for Forest Conservation” and is the result of months of literature research, global expert interviews and digital focus groups.

Our thesis examines why private investment in tropical forest conservation remains far below what is needed and proposes a targeted solution to unlock financing. Despite forests representing nearly 30% of potential climate solutions, only about 3% of global climate finance flows into forest-related projects. The key barrier, the paper argues, is information asymmetry—a persistent gap between what investors need to know and what is actually known about local forest landscapes, stakeholders, risks, and project viability.

The authors analyse three business models commonly used in forest conservation: ecotourism, sustainable commodity production, and carbon credit generation. Ecotourism is determined to be unreliable as a primary investment model due to low demand, environmental sensitivities, and difficulty scaling. By contrast, sustainable commodity production and carbon credits offer more tangible revenue potential, but both rely heavily on complex landscape-specific information—such as land tenure, local infrastructure, farmer capacity, regulatory conditions, and market dynamics. Investors, however, typically lack this detailed insight, rendering projects too risky or immature to attract capital.

This lack of reliable, standardised data also hinders blended finance solutions. While the Dutch Ministry of Foreign Affairs and other institutions already support risk-mitigation tools and capacity-building programs, these efforts do not resolve the deeper challenge: early-stage projects remain invisible and difficult to evaluate. Therefore, public funds allocated toward de-risking mature projects will not meaningfully grow the pipeline of finance-ready conservation initiatives.

The article proposes a centralised, government-supported data platform to bridge this gap. The platform would gather verified, landscape-level information—co-developed with local institutions and smallholders—and present it in a standardised format accessible to investors. It would combine data on sustainable commodity production and carbon credit opportunities, enabling a diversified “landscape portfolio” approach rather than project-by-project investment. Smallholders would be incentivised to participate through public grants and technical support, while multi-stakeholder landscape agreements (similar to SourceUp’s Compacts) would ensure alignment among local actors.

By increasing visibility, reducing transaction costs, and aggregating opportunities, the platform would catalyse private investment into early-stage forest conservation initiatives, especially from impact investors and development banks. Although not a complete solution to global conservation challenges, it represents a crucial step toward building a mature investment environment capable of protecting tropical forests at scale.

The full article can be found in Radboud University's educational repository.

© Luka Paul Vethake, 2021