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Creating New ValueBased on Nature
The IFC approach to biodiversity conservation and sustainable use is
to invest in innovative business models that are protective of nature as
well as socially and economically beneficial. In order to meet this
challenge, IFC partners with industry, NGOs, and other financial
institutions to develop four categories of tools: metrics to measure
biodiversity impact and value; customized services blending
investment and technical assistance targeting nature-based business;
methodology and trading rules for biodiversity offsets; and specific
financial products that conform to the reality of longer term returns.
Combined expertise in finance and biodiversity conservation
Experience of partnering with a wide range of stakeholders (e.g.,
non-governmental organizations, industry forums, international
organizations)
Access to a wide variety of internal and external resources to
support complex or riskier ventures
Presence in the field close to clients who need to deal with areas
with very high biological diversity
What IFC brings
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With the Global Environmental Facility and other donor
support, IFC is able to provide innovative financing solutions
that champion businesses with a biodiversity focus. IFC is
committed to the UN Convention on Biological Diversity,
particularly to its decisions regarding private sector
engagement.
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A Business Commitment to Biodiversity
1 Developing Standards for Sustainable Supply Chains
How to measure and incorporate the biodiversity value of a product or service? A lack of realistic, simple, and auditable
standards for biodiversity that are globally accepted is hindering further adoption of better business practices. The use of such
standards would not only limit damage to biodiversity, but allow for corporate value to be created through biodiversity
conservation. In the global commodities market, the private sector acknowledges the need for sustainability in their supply
chains, and more companies are demanding specific and efficient standards. IFC’s work in this area includes participating in
industry-led multi-stakeholder initiatives, such as commodity roundtables and investing in building knowledge and practical
tools. IFC supports players individually along the supply chain and the strengthening of the chains themselves, blending
investment with both traditional and innovative technical assistance and advisory services. Approaching issues via the supply
chain – a natural gathering of all relevant stakeholder groups in a given sector – allows a clear view of who wins and who loses,
of gaps and market failures. This approach addresses imbalances and inefficiencies while optimizing value creation from small
producers to large off-takers. By collaborating with all the market players to set, test, and implement standards, with the ultimate
goal of global uptake and mainstreaming, IFC is working to transform the commodity markets.
The Biodiversity and Agricultural Commodities Program (BACP) supports the adoption of nature-friendly
practices at the production level and throughout the supply chain of four tropical agricultural commodities:
palm oil, soy, sugar, and cocoa. These four crops currently cover over 132 million hectares worldwide, much
of it near or in areas of high biological diversity. Simple standards and practices are needed to help producers
minimize their impact on biodiversity, as well as provide social and economic benefits. The BACP also
supports financial institutions to adapt their services to encourage the adoption of biodiversity-friendly
practices by their clients, and supports governmental institutions in their efforts to change or adapt regulation,
in particular concerning land use.
Four Models of Engagement
2 Tapping New Revenue Streams
Conserving nature in its wildest possible state can benefit
communities and be a source of profit to businesses, if one knows
how to wisely the ecosystem services (fresh water that is
abundant and clean) or harvest the non-timber forest products.
IFC has been incubating business models that assist these diverse
nature-based enterprises, providing debt and equity financing with
technical advice. Experimenting with these models has allowed
IFC to fine-tune its services offering to meet the characteristics and
needs of this category of business. They face higher risk due to the
innovative nature of their products; they require the development
of a robust supply chain often based on trained and organized local
communities; new products require sizable research and
development expenditures which constitute a huge cost. An
adequate blend of finance and advisory services increases the
capacity of these enterprises to meet their challenges and will
increase their numbers to constitute a stronger global presence.
Finally, IFC supports the establishment of commercialization
arrangements and trading entities that will allow for small producers
to aggregate their products in the quantities and qualities required
by the market.
harness
IFC is working with partners to help
create a stronger, distinctive, and more
visible global market for native, local,
sustainably harvested natural ingredients
and other non-timber forest products.
These products can be used in food,
such as açai from the Amazon; in
cosmetics, such as exotic oils derived
from seeds of the baobab tree and
others which command a high price in
world markets; or in pharmaceuticals,
such as Devil’s claw. Working with
sustainable producers and other market
players in the sector, IFC helps bring the
value of the natural diversity of tropical
forests to the local stakeholders,
connecting them with the global
marketplace.
3 Piloting Biodiversity Offsets
IFC’s Performance Standards and, in turn, the Equator
Principles require a project that would have a negative
biodiversity impact to avoid, mitigate, or ultimately offset
the damaging impact. IFC works with partners to help
determine the methodology of evaluating ecologically
comparable biodiversity offsets. IFC also actively
prepares for biodiversity offsets trading mechanisms that
will be established internationally or nationally. This
requires working with governments and companies to
enhance the biodiversity components of their regulations
and management systems, and the construction of
market-based mechanisms through pilot initiatives.
4 Adapting Finance to Nature
There is a global need for adequate financial products
and services to satisfy the demand from the growth in
nature-based ventures. IFC is developing new financial
products that address this demand. Biodiversity-friendly
characteristics of financial products can involve adopting
longer term returns for investments that require a longer
timeline, such as in sustainable forestry. IFC has also
supported the development of finance vehicles whose
mechanisms are geared specifically towards biodiversity-
enhancing projects. These biodiversity and ecosystem
finance tools will be necessary for the private sector to
minimize risk when undertaking innovative biodiversity
projects.
IFC supports the Business and Biodiversity Offsets
Program (BBOP), which develops the concept and
methodology of offsets in great detail. BBOP is managed
by a secretariat consisting of Conservation International,
Forest Trends, and Wildlife Conservation Society, and
supports pilot offset projects that demonstrate positive
conservation and livelihood outcomes for the affected areas.
BBOP is a partnership of businesses and NGOs to establish
and disseminate best practices in order to facilitate corporate
and policy decisions that meet conservation and business
objectives.
IFC has contributed directly to biodiversity finance
through a number of means. IFC’s own Environmental
Business Finance Program invested in projects whose
profit model derives from conserving biodiversity. IFC
also supports the EcoEnterprises Fund, run by The
Nature Conservancy, with technical assistance, and
invests in Verde Ventures, run by Conservation
International – two examples of special financial
intermediaries that have made investing in new
biodiversity ventures their specialty.
INTERNATIONAL FINANCE CORPORATION2121 Pennsylvania Avenue, NWWashington, DC 20433 USATel: (202) 473-1000Fax: (202) 974-4404www.ifc.org/[email protected]
Cover image: Local farmers in boat transport lepironia grass
across a canal in Vietnam. Image courtesy of Hoa Doan.
Interior images courtesy of Curt Carnemark.
About IFC
At IFC our mandate is to further sustainable economic development
through the private sector. We pursue this goal through innovative
solutions to the challenges of development, as we invest in companies and
financial institutions in emerging markets and as we help build business
skills. We consider positive development impact an integral part of good
business, and we focus much of our effort on the countries with the
greatest need for investment. We recognize that economic growth is
sustainable only if environmentally and socially sound and if it helps
improve the quality of life in developing countries.
Environment and Social Development Department
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