Navigating Risks for Nature-Based Solutions

In the backdrop of the first ever Accelerating Nature-Based Solutions Conference held in Lusaka, Zambia from 11 – 15 March, the African Climate Foundation organised a pivotal side-event titled ‘Managing Risks in Accelerating Finance for Nature-Based Solutions.’ This event, which brought together a diverse array of stakeholders ranging from NGOs, government bodies, and the private sector to technical experts and community representatives, served as a crucible for profound discussions and insights into the future of sustainable land use and restoration in Africa. 

The event sought to dissect the critical nexus between nature-based solutions (NbS) and risk management within the realm of climate and carbon finance while analysing the inherent risks in accelerating finance for NbS investments. 

The session kicked off by scrutinizing the potential risks associated with NbS financing. From financial uncertainties to ecological vulnerabilities, participants examined the multifaceted challenges that loom over accelerated finance for NbS investments. The discussions revolved around identifying strategies to mitigate risks and instil confidence among investors, particularly in projects offering public benefits such as biodiversity conservation. 

Key highlights emerged, shedding light on the perils of neglecting NbS financing. Failure to allocate adequate resources may lead to the loss of invaluable social and environmental benefits, amplifying the urgency for robust investment frameworks. Additionally, the scrutiny of carbon credits as a financing mechanism underscored the need for vigilance, especially in less developed countries (LDCs), where risks may be exacerbated by regulatory uncertainties. 

Amidst the challenges, opportunities abound. Participants explored innovative de-risking tools to navigate the regulatory maze of carbon credit markets, while also emphasizing the importance of financing the first loss on capital as a pivotal strategy for unlocking commercial investment in long-term NbS projects. Drawing from the experiences of multilateral banks in Africa, stakeholders shared insights into best practices for NbS financing, laying a foundation for risk-averse investors to learn and adapt. 

Furthermore, the event spotlighted the imperative of incorporating risk considerations at the project ideation stage. Ensuring gender inclusion, fostering job creation opportunities, and tailoring projects to local contexts emerged as key strategies to enhance the feasibility of NbS financing. Central to this discussion was the emphasis on Free, Prior, and Informed Consent (FPIC), underscoring the importance of community participation in risk identification and management processes. 

“The ACF’s Land-Use programme will be focusing on catalysing the uptake of nature-based solutions to enhance ecosystem rehabilitation and restoration for the benefit of African communities.” – Fanuel Massawe, Programme Officer – Sustainable Landuse and Agriculture.

As discussions unfolded, it became apparent that while challenges persist, solutions are within reach. Insurance mechanisms were highlighted as potential avenues for underwriting NbS projects, albeit within the nascent landscape of the carbon credit market. Participants agreed that with concerted efforts and collaborative approaches, the promise of NbS financing could be realized, paving the way for a more resilient and sustainable future.

“We are committed to addressing the financing risks, hindering the scale of nature-based investments, to enhance the resilience of ecosystems that Africa depends on for its sustainable development,” said Irene Karani of the African Climate Foundation.

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