It is widely recognized that public finance is insufficient for achieving the goals of significantly reducing deforestation, improving equity and meeting climate change targets. Globally, at least 500 million people depend on nature for their livelihoods. Many of them are in developing countries where the needs of rapid economic growth often contradict the preservation of ecosystem services and biodiversity, even though they are fundamental for the well-being of rural communities. Sectors such as smallholder agriculture, fisheries, forestry, renewable energy and ecosystem services, which provide significant livelihoods for people and can support countries to build climate resilient societies, generally do not receive adequate finance from government budgets. More innovative financial models are required to generate large-scale private finance that can address the complex challenges of engaging with these sectors and deliver strong economic, social and environmental returns. The Sustainable India Finance Facility (SIFF) provides a catalytic platform for unlocking capital from investors and private finance institutions to channel resources into overlooked environmental sectors with positive transformative potential in India.
SIFF bridges the gap between the government, private sector, and civil society, coordinating cross-functionally to support the country in working towards its inclusive development and emissions reduction goals as stated in its Nationally Determined Contribution (NDC). SIFF is a partnership facilitated by the United Nations Environment Programme, the World Agroforestry Centre and BNP Paribas SA. It facilitates long-term investments to reverse the continued depletion of agricultural systems, fisheries, forests, renewable energy and wildlife, with a special focus on improving well-being of marginalized communities.
Instead of a conventional ‘concentrated risk’ approach where all the risk is concentrated at the hands of the borrower, SIFF mainstreams a unique ‘distributed’ risk model that has a host of significant actors assuming responsibility for segments of the risk along the value chain making the projects ‘investable’. This enables the provision of financing to sectors that typically do not qualify for loans due to an inability to provide returns within short repayment periods and high interest rates. The combination of credit guarantees from development finance institutions ensures that capital can be made available at rates notably below current market rates for a duration that allows the projects to generate returns for marginalized communities while ensuring considerable social, environmental and economic returns. A paired grant component provides technical assistance and co-funds early stage development costs, offering an opportunity for philanthropic foundations and corporates to leverage their funding with private finance.
Alignment with India’s Development and Climate Objectives
In India, forest areas and biodiversity continue to face increasing pressures from unplanned urbanization and increasing populations. More than 40% of the country’s forests have been degraded mostly due to significant extraction of natural resources. As ecosystem services make up almost 50% of the incomes of forest dependent households in India, persistent depletion of natural capital is a challenge in meeting any equitable development goals. In addition, nearly two-thirds of India’s population is engaged in agriculture, which is directly linked to the availability of natural resources and ecosystem services to sustain health, food supplies, and income. However, despite supporting much of the population, agriculture accounts only for 17.4% of total value added (% of GDP) in 2016, compared to 44.1% in 1960. High-input, resource-intensive farming has overtime resulted in lower yields and income, encroachment of forest land, biodiversity loss, soil depletion, and water scarcity. Decreasing availability of arable land, together with projected population growth, poverty, and vulnerability to climate variability, demands urgent investment to create value-added, generate employment, restore rural landscapes and ecosystem services, and improve food security.
Additionally, around 363 million people remain in poverty and 4.9% of the population (aged 15 years and above) unemployed. Acknowledging environmental sustainability as an imperative for growth, the Government of India has made efforts to secure inclusive development for its growing population, whilst simultaneously revitalising and safeguarding the natural capital upon which landscapes, society, and economy flourish. At the international level, it has publicly committed to reducing the emission intensity of its GDP by 20-25% by 2020, and 33-35% by 2030, below 2005 levels. Its NDC sets forth comprehensive climate mitigation and adaptation strategies across sectors, from manufacturing and energy to forestry and agriculture. However, there is yet to be a cohesive mechanism that can provide financing to implement India’s development and climate programs at scale.
Furthermore, at least 14 out of 17 SDGs are greatly affected by ecosystem health, sustainable land use and natural resource management. Investments in sustainable rural landscapes and livelihoods can therefore drive the necessary change across most, if not all, of the SDGs targets. SIFF is working with numerous stakeholders to build partnerships and bring finance into sectors such as smallholder agriculture, biodiversity conservation, air quality improvement and renewable energy access to support this transition and plans to facilitate USD 10 billion in investments by 2025.
Zero Budget Natural Farming in Andhra Pradesh
SIFF is supporting the Government of Andhra Pradesh’s efforts to become India’s first Zero Budget Natural Farming (ZBNF) state by converting 6 million farmers cultivating 8 million hectares to 100% chemical free agriculture by 2024. This is an unprecedented transformation towards sustainable agriculture at a system scale that is enhancing resilience of smallholders in varying agro-climatic zones, promoting gender sensitive development and providing an opportunity for reclaiming planetary boundaries. ZBNF is a unique best-practice model of low-input/high output agriculture that enhances farmer’s welfare utilizing low-cost and inorganic chemical fertilizer free strategies.
The benefits of ZBNF include; a) provision of cost-effective bio-inoculants, b) consistent yields, c) restoration of ecosystem services, d) conservation of biodiversity, e) use of local seeds, f) multi-cropping with tree cover, g) ability of farms to withstand extreme climatic events, h) safe and nutritious food, i) improvements in health and j) empowerment of women farmers. As of August 2018, over 300,000 farmers in villages across all 13 districts of Andhra Pradesh have been transitioned to ZBNF with a goal of converting 500,000 farmers by March 2019. As 14 out of the 17 SDGs are dependent on the status of natural resources, the successful scaling up of ZBNF is also delivering an effective cross-sectoral strategy for achieving almost a quarter of the 169 SDGs targets. The ZBNF project is a recognition that ecology centric approaches are critical for achieving food security and meeting the needs of a global population of 9.7 billion people by 2050, as arable land area decreases and climate change creates unpredictable weather patterns. SIFF’s partnership with the Government of Andhra Pradesh, leading to the effective scale-out of ZBNF targeting investments of USD 2.3 billion over the next 6 years will result in a vetted solution for this global food challenge facing countries.
Conservation and Livelihoods Generation in the Western Ghats
The Western Ghats are a global biodiversity hotspot representing one of the most species-rich ecosystems in India. They are home to the largest population of the Asian elephant and provide habitats for several endangered species including tigers, leopards, Indian bison, etc. However, forest loss, encroachment and forest conversion coupled with climate change impacts threaten the Western Ghats ecosystems and their functionality. Moreover, an estimated 50 million people live in the region making it necessary to find livelihood opportunities that have resulted in considerable extraction of natural resources through mining as well as unsustainable agricultural practices. SIFF is working with entrepreneurs on a range of interventions that will deliver economic returns through conservation and community forestry in the Western Ghats including protecting estuaries, watersheds, developing sustainable fisheries, biodiversity friendly bamboo plantations and NTFPs based premium markets.
Improving Air Quality and Community Health in Northern India
SIFF is assessing additional projects on alleviating the deteriorating air quality over northern India. It is estimated that by 2030, PM 2.5 emission levels will increase by 25% in the country and emissions of major carcinogens like volatile organic compounds will see a 30% rise. On average PM 10 levels across all major cities in India are expected to reach 150 µg/m3 by 2050. In northern India, vehicular emissions, industrial pollution and construction, combined with the burning of crop residues is creating toxic levels of pollution, exacerbated during the winter temperature inversion, and evident through thick smog across northern Indian cities. In November 2017, Delhi measured an AQI of 999 with some parts of the city recording levels as high as 1,010. Smaller cities also consistently recorded severe levels between 400 – 500 AQI. With an estimated 7% of the world’s population residing in northern India, extreme pollution levels have significant consequences for health, especially for children, and can impede the ability of the country to achieve its sustainability and climate targets. SIFF is currently working with state governments and key industry actors to advance innovative ideas in biomass to bioethanol and biomass to bio-CNG conversion to remedy the situation.