News detail

Financing landscape restoration projects with blended finance: is collaboration key?

Together with the financial sector, the Erasmus Platform for Sustainable Value Creation aims to enhance knowledge about sustainable finance. Max Berkelmans, alumnus of RSM’s MSc Global Business & Sustainability Alumnus (2019) and now a global trainee with Rabobank, shares the most important insights from his thesis research conducted during his internship at Commonland, a not-for-profit organisation that works to enable large-scale and long-term restoration initiatives. Max writes about the role of project developers and fund managers in blending different types of investments (public, private, philanthropic) for landscape restoration projects.

In 2015, Commonland stated that factory owners would frown on the suggestion that it was a sound business decision to sacrifice production equipment for the sake of the product being made. But this is precisely the way our ecosystems are currently managed. Economies are based on consumption patterns and production methods that generate jobs, while simultaneously degrading the ecosystems that are the basis of this wealth creation.

The World Resources Institute (WRI) states that over the past 50 years, almost a quarter of the world's land mass (i.e. 2 billion hectares or the size of China and the USA combined) has been degraded as a result of soil erosion, salinization, drainage of peatland and wetland, and forest degradation. Such continued land degradation and the loss of ecosystem services – the benefits to humans from natural environments and healthy ecosystems – severely endangers human well-being by threatening food and water security. The list of consequences of the loss of ecosystem services goes on and on: biodiversity loss, increased occurrence of extreme weather events, involuntary human migration, and even civil conflict.

Attracting private investments for landscape restoration

Luckily, there is something we can do: restore landscapes and ecosystems. And initiatives to promote landscape restoration are more prevalent than ever. The United Nations even declared 2021-2030 as the UN Decade on Ecosystem Restoration and aims to showcase successful public and private initiatives to halt ecosystem degradation, enhance the exchange of knowledge of what works, and create links between initiatives and stakeholders that are not usually accustomed to working together. In addition to the decade on restoration, other initiatives such as the Bonn Challenge to restore deforested areas, and the UN’s Sustainable Development Goal (SDG) Indicator 15.3 Land Degradation Neutrality also promote landscape restoration.

These promising initiatives primarily involve the public and civic sector and depend heavily on public and philanthropic funding. But what’s often missing in such initiatives is the involvement of the private sector and in particular, long-term large-scale private investments. Unfortunately, there are many barriers that impede private investors from investing in landscape restoration projects (LRPs), such as such as an unattractive risk:return ratio, investors’ unfamiliarity with the sector, and a disconnect in the market LRPs.

Addressing the funding gap faced by the landscape restoration sector could be done using blended finance, a set of financing mechanisms that combine capital with different levels of risk to drum up capital that can be risk-adjusted and can achieve market rates of return from investments that have positive environmental impact. This kind of work is already being done by the Global Impact Investing Network (GIIN) that convenes impact investors to facilitate knowledge exchange, highlights innovative investment approaches, and is building the evidence base for impact investing.

But although the idea of blending different types of investments to create a more attractive investment environment for LRPs sounds compelling, very few transactions have actually been made. According to Mirova, the fund manager of the Land Degradation Neutrality Fund, the market for blended finance and landscape restoration are at a very early stage of development.

The importance of intermediaries

What all of these initiatives have in common – and what makes them so hard to establish – is the requirement for effective collaboration between a wide range of stakeholders such as investors, co-operatives, NGOs, knowledge institutions, governmental organisations and smallholder farmers.

There are four relevant stakeholder groups: project developers, local actors, actors surrounding the landscape, and investors.

For example, project developers are well-suited to bridging the international community. They have their own strengths in the process, and they have investors with local actors on the ground – which are important for attracting investments – giving them the outreach and legitimacy for a landscape restoration project.

Local actors have an in-depth understanding of the local and cultural circumstances of any project and can provide the local presence that is necessary for developing long-term and trusted relationships with communities.

The collaboration between these actors, and the role of intermediary organisations such as project developers and fund managers, is exactly the focus of the working paper I created as part of my internship with Commonland.

Activities within landscape restoration projects

As I outlined in my working paper, landscape restoration projects include a wide range of activities which often fall under a common landscape vision or plan created by the various stakeholders. These activities are managed and funded by the stakeholder groups. But before any company or business can generate financial and social or environmental returns, there needs to be an enabling environment in place. For example:

  • Building capacity in co-operatives leads to strong institutions and governance processes that reduce the number of perceived risks that investors see. Better governance processes enhance the probability that co-operatives repay the loans and microcredits.
  • Business development activities lead to the development of new business plans, and more buying and processing of products and commodities. Business development activities thereby indirectly lead to revenue-generating activities because the co-operatives and local businesses are those in which private investments will be made.
  • Nature restoration activities reduce the overall risk of operations for farmers and can contribute to the overall productivity of the land. Restoration activities also ensure the continuity of revenue-generating activities in the landscape.
  • Activities that contribute to the engagement of stakeholders are necessary to develop a common vision for restoring the landscape. It’s important that time and money should be invested in ensuring that farmers, communities and organisations that operate in the landscape feel aligned to that vision and make the transformation to regenerative agricultural practices.

Thus for activities to generate revenue in the first place whilst ensuring social and environmental aspects of the landscape are not compromised, land restoration activities, business development activities and activities that create an enabling environment need to be in place.

Blending of investments at fund and project level


The blending of investments takes place at the project level and the fund level.

  • At the project level, project developers can be seen as an intermediary organisation in co-ordinating investments. They play a key role in attracting donor money and investment capital which they co-ordinate and distribute among actors and activities in the landscape. Project developers can fund co-operatives and local businesses with donations, investment capital and through providing technical assistance and business support. Furthermore, project developers play a role in aggregating smallholder farmers through collaborating with co-operatives.
  • At the fund level, the fund manager can be seen as intermediary organisation for co-ordinating investments. They attract donations and investment capital to diversify and reduce risks for private investors, thereby incentivising them to deploy capital in funds intended for landscape restoration. Blended finance funds can provide technical assistance and money to support building capacity as well as monitoring social and environmental returns. This enhances the development of “investment-ready” projects, mitigates risks, and maximises social and environmental returns. Fund managers play a vital role in aligning investors’ requirements and priorities thus alleviating any mismatches between stakeholders and investors.

More information

If you enjoyed reading this, try another in our series of blog posts about sustainable finance from the Erasmus Platform for Sustainable Value Creation at Rotterdam School of Management, Erasmus University (RSM). It is intended to act as an introduction to the Platform’s work; to promote and foster knowledge on sustainable finance. Please see our webpages to find out more.

Platform for Sustainable Value Creation blog