Strengthening inclusivity in ecological restoration: Insights and financial strategies

I recently delved into two captivating reports on ecological restoration (Zu Ermgassen, and L?fqvist, 2024; Carbon Direct, 2024), which highlight both the challenges and the immense potential in this critical field. With global targets set by initiatives like the Bonn Challenge and the UN Decade on Ecosystem Restoration, the path forward is clear. However, a significant barrier to scaling these efforts remains: the lack of adequate funding. This newsletter explores key takeaways from these reports, providing insights into how we can overcome financial barriers and align private investments with restoration goals.

Key takeaways:

The importance of restoration finance:

• Restoration of degraded ecosystems enhances biodiversity, promotes food security, and contributes to climate mitigation by sequestering nearly 3 gigatonnes of CO2 annually.
• Despite the clear benefits, restoration projects remain underfunded. The global community is not on track to meet the ambitious targets set for 2030, largely due to financial constraints.

Public vs. Private funding:

• Historically, more than 80% of restoration finance has come from public sources. While public finance remains crucial, it is insufficient to meet the enormous financial needs, which are estimated to be five to seven times higher than current spending.
• Private finance is essential for bridging this gap, yet it often prioritizes cost-effective solutions like monocultures over diverse, naturally regenerated ecosystems. This misalignment can lead to suboptimal ecological outcomes.

Barriers to private investment:

• Time and cost: Restoration projects often take longer to generate returns compared to traditional carbon projects. This delay can deter private investors seeking quicker financial gains.
• Risk and bankability: Restoration projects can be complex and have higher failure rates, making them less attractive to risk-averse investors.
• Scale: Effective restoration is typically site-specific and may not easily scale, leading to higher costs per unit of carbon sequestered.

Opportunities in the Voluntary Carbon Market (VCM):

• Buyers in the VCM are increasingly seeking projects that deliver both carbon sequestration and biodiversity benefits. This dual focus can drive higher-quality restoration projects that contribute to resilient and adaptable ecosystems.
• Clear demand signals from buyers and innovative project designs that blend traditional and restoration-oriented approaches can unlock more opportunities in the VCM.

Solutions and recommendations:

• Blended finance models: Combining public and private funds to de-risk investments can make restoration projects more attractive to private investors. For instance, a blended finance model enabled the restoration of 90 hectares of blanket bog in Scotland.
• Clear buyer demand: By signaling a strong demand for high-quality restoration projects, buyers can motivate project developers to prioritize biodiversity and ecosystem health alongside carbon sequestration.
• Innovative project designs: Projects that integrate both restoration and traditional carbon approaches can address multiple goals, making them more appealing to a broader range of investors.
• Building the “Missing Middle”: Bridging the gap between local implementers and international buyers is crucial. Developing intermediaries who understand both local contexts and global market demands can facilitate better project outcomes.
• Adaptive governance: Strong governance and monitoring systems are essential to ensure that restoration projects deliver on their promises. This includes robust measurement and enforcement mechanisms to verify ecological and social impacts.

Case Studies and success stories

Several initiatives exemplify the potential of ecosystem restoration when adequately supported. Costa Rica's national Payments for Ecosystem Services (PES) scheme has successfully doubled the country's forested areas since the 1990s, showcasing the impact of sustained public investment combined with supportive policies.

Conclusion

1. Report on 'Opportunities for Ecological Restoration in the Voluntary Carbon Market' by Carbon Direct and Meta: The report concludes that there is significant potential to enhance ecological restoration within the Voluntary Carbon Market (VCM). However, several barriers exist, such as the high time and cost requirements, project complexity, scale limitations, and misalignment between carbon and biodiversity goals. To overcome these challenges, the report recommends clear buyer signals for restoration-oriented projects, innovative project designs that mix traditional and restoration-focused approaches, and the use of de-risking tools such as blended finance vehicles. The ultimate goal is to foster high-quality restoration projects that not only sequester carbon but also restore resilient and productive landscapes that benefit both nature and local communities.
2. Primer on 'Financing Ecosystem Restoration' by Zu Ermgassen, and L?fqvist, 2024 : The primer emphasizes the critical need to upscale finance for ecosystem restoration to meet global targets. It highlights the risks associated with relying solely on private finance, which may not always align with socially and ecologically sound restoration outcomes. Public investments in governance and oversight, along with scientific research on restoration outcomes, are essential to ensure that financial resources are directed towards effective and just restoration interventions.

References:

1. Zu Ermgassen, S. O., & L?fqvist, S. (2024). Financing ecosystem restoration. Current Biology, 34(9), R412-R417.
2. 'Opportunities for Ecological Restoration in the Voluntary Carbon Market' by Carbon Direct and Meta, 2024.