Africa positions nature as an asset class

________________

The conservation and wildlife economy discourse in Nairobi has placed nature as an asset class set to compete with other traditional markets such as equities, bonds, and commodities.

African countries, including Uganda, have been provided with a robust decision and investment opportunity to turn the tide on conservation and wildlife, from merely ecological protection to biodiversity and conservation-derived finance.

Investors, philanthropists, conservancies, tech experts, conservationists and government leaders are keen on turning the annual negotiations into an operational framework, with a clear call for the establishment of prudent national wildlife economy investment platforms which would coordinate wildlife-based investments, showcase opportunities, and strengthen value chains to enhance market access and competitiveness.

According to the convention, as philanthropy alone remains insufficient, conservation will only endure if it makes economic sense, a case that was echoed by Africa Parks Network.

“As protected areas across the continent continue to face volatility in traditional funding, there is an urgent need to diversify financing. Carbon finance, alongside broader nature-based finance instruments, provides an alternative,” says Matthias De Beenhouwer, the nature-based solutions manager at Africa Parks Network.

The transition, which brings host communities to the centre of all initiatives, intends to support the growth of the bio-economy, improve household income and further climate-environmental governance across East African states like Uganda, Kenya, Tanzania, Rwanda, DRC, Burundi, and  Southern Africa, West Africa, including Cameroon, some of Africa’s top biodiversity economies.

Market overview

Pertaining wildlife, largely denoted by plants and animals (both marine and terrestrial), the wildlife economy investment index (WEII) by the School of Wildlife Conservation at the African Leadership University in Rwanda reveals that the leading five investment avenues collectively gross a market share of over $250b (Sh919.9tn) per year in Africa.

Ecotourism, carbon markets, including Reducing Emissions from Deforestation and Forest Degradation (REDD+), among other climate solutions, game hunting, quite controversial considering its illegality in some jurisdictions, wildlife ranching and forest products form part of the market base.

Matthias De Beenhouwer reveals that climate and environmental finance is shifting from philanthropy and donor funding towards result-based financing. Just last October, Uganda received $31 (Sh112.5b) from the Global Environment Facility’s (GEF) REDD+. The country managed to sequester 8.07 million tonnes of carbon dioxide equivalents between 2016 and 2017, across activities such as climate-smart agriculture, sustainable charcoal and fuel production, plus forest restoration.

Uganda’s position

Non-timber forest products, carbon finance, ecotourism, hunting, wildlife trade (animals and plants) and fisheries form Uganda’s wildlife economy. Regarding carbon finance, as the country opens up the conservation and wildlife economy to private sector participation, market experts at this year’s business of conservation conference inform that there has always been voluntary private markets for instance in carbon trading.

The Environmental Conservation Trust of Uganda (ECOTRUST) notes that both biodiversity credits, derived from habitats and species, and carbon credits, derived from initiatives like forestry, form part of the biodiversity and conservation finance. For the latter, Ugandans have been trading carbon for 22 years now, and the entity has mobilised over $28m (Sh103b).

The organisation cites its trees for global benefits project, a carbon market initiative that has so far amassed 52,000 farmers, from 33 in 2003, supported by a community-led approach where community land associations are empowered to own land and sustain different projects, including biodiversity.

 “We monetise conservation through carbon credits and biodiversity credits upon quantification of the conservation objectives. Also, through the non-timber products that come out of the forest conservation and restoration efforts. We support smallholder farmers with certification so that their efforts are quantified as sellable carbon credits,” says Pauline Nantongo, the ED, ECOTRUST.

Meanwhile, Goretti Masadde, a board member at ECOTRUST and CEO, Uganda Institute of Banking and Financial Services, is optimistic that Uganda’s regulatory regime, set to also unleash energy efficiency regulations and green bonds, will widen private equity in the biodiversity and conservation economy.

She highlights the banking sector’s environment, social and governance framework as a key driver, pushing financial institutions towards carbon neutrality within their value chain and that of the private investments that they fund. However, countrywide, carbon literacy remains a big challenge.

The African Wildlife Foundation will soon be availing a crucial decision and investment toolkit for stakeholders, including African governments, to plug into. This targets transforming natural capital into quantified economic value, capable of informing policy reform and investment. In it, solutions to curb data poverty and fragmentation, which limit proper decision-making, pricing of risk, and valuing returns, will be addressed.