Entrepreneur Bastien Loloum, a participant in the UNEP founded Restoration Factory Initiative, provides a business’s perspective on finance for nature, highlighting challenges and presenting ‘ecosystemic’ solutions.
Written by Fiona Cromarty
It is well established by the Intergovernmental Panel on Climate Change that economic development has been a driver of increased resource use and environmental damage, and human activities are at the root of the climate crisis. Although this statement may be alarming, it presents an opportunity for humanity to re-evaluate ‘business-as-usual’ and take action to meet the biodiversity, climate change, and land restoration ambitions set by the 1992 Rio Conventions.
A sustainable relationship between the natural world and humankind requires immediate global action to align social and economic systems with the Sustainable Development Goals and commitments under the Paris Agreement and international biodiversity frameworks. Yet, there is a gap in the current level of finance supporting this transformative shift: Investments in nature-based solutions (NbS) need to triple by 2030 according to the UNEP State of Finance for Nature report. The Restoration Factory, an initiative founded by the UNEP Land Use Finance Programme, FAO, and IUCN, is helping to address this finance gap by supporting the establishment of NbS-focused businesses.
Launched in March of 2021, the Restoration Factory initiative guides entrepreneurs through different stages of their business venture for six months. To receive mentorship from the Restoration Factory, each entrepreneur’s business plan must incorporate local impacts on landscape restoration, biodiversity loss, and job creation. With the Restoration Factory’s advisement, business developers can enhance their company’s ability to assess the business case, build capacity, access the market, and raise capital through grants and public or private investments. In this way, the Restoration Factory initiative advances sustainable consumption and production and addresses environmental degradation issues that contribute to the triple planetary crisis through a value-chain approach. To date, the Restoration Factory’s private sector mentors have guided a first cohort of entrepreneur-mentees through the training program on business discovery.
Delicias das Ilhas, one of the thirteen businesses that participated in the first cohort of the Restoration Factory, provides a real-world example of how businesses can group development with ecological sustainability through reducing business-driven deforestation. Their experiences also offer insights into the social and economic systemic shifts necessary to overcome challenges associated with scaling NbS projects.
The story of Delicias das llhas
Bastien Loloum moved from France to the African island of São Tomé and Príncipe (STP) in 2005. In 2009 he founded Delicias das llhas – or Island Delights in English.
Delicias das llhas is a company specializing in the manufacture and sale of lesser known and locally processed goods, including homemade sweets, spirits, spices, teas, soaps and dehydrated tropical fruits without additives, preservatives or sugar. Sale and use of these products supports restoration efforts and job creation by sourcing local ingredients that are certified organic, Fairtrade, and in line with STP’s environmental forest-positive conservation efforts.
As Delicias das llhas developed over the years, so did a multitude of potentially crippling challenges. Loloum faced “poor infrastructure, unqualified labor, high costs of insularity, and also lack of funding, particularly at local banks”. Available financial mechanisms offered loans with interest rates that were as high as 25 per cent due to the high risks and low returns associated with the business model. These challenges in obtaining funding are not unique when starting a small business with a focus on restoration in a rural environment, Loloum states that “Risk is always a factor that Investors will look into, particularly if it is an eclectic destination, like São Tomé.”
Delicias das llhas was gradually able to secure assets by soliciting help from NGOs. However, this approach to securing funding is not without its flaws, Loloum notes that “NGO supported programs lack coordination” and project durations are “very often not compatible with business dynamics.” These programs “have little capacity to leverage the economy and business in general” to facilitate growth of NbS initiatives due to the small envelopes at stake; he claims they are usually USD 5-10 thousand and target very tiny business ideas. The challenges that Delicias das llhas faced in business growth and securing financial stability coupled with the severity of the COVID-19 pandemic forced a re-evaluation of the business itself.
As Loloum was looking for help in structuring ideas at the local FAO office, he discovered the Restoration Factory program. Through the support of the Restoration Factory’s dedicated mentors, Delicias das llhas had support and guidance in identifying the transition they had to make. This transition required higher investment needs that will produce larger returns to scale-up the business, Loloym states “It was during the restoration factory that eventually we came to the conclusion that we needed to add more value to our products – transition from low investments, low-risk, low margins, to high investments, high-risk, better margins, with more specified products at a higher value.” With support from the factory’s mentors, Delicias das llhas shifted their business model and financial projections to target the foreign market with specialized and highly valued items, instead of the wide variety of products they were initially marketing to the local tourists in São Tomé and Príncipe. This shift is in effort to overcome the frequent and common financial barriers and secure the company’s impact plan, business model and viability and overall financial projections.
Delicias das llhas’s journey demonstrates the barriers that NbS-related businesses can have in obtaining sufficient funding, which is a first-hand example of the need to mobilize additional finance to support and scale-up nature-based projects.
Bastien presents an ‘ecosystemic’ approach as a solution to facilitate finance for nature
In a panel discussion with European Investment Bank (EIB) and UNEP, Loloum urges an ‘ecosystemic approach’ as a key aspect to enable finance to NbS projects. This requires recognition of the socio-political, economic, and environmental ecosystems as interdependent actors within the larger market, and these systems need to work collaboratively to enable change.
Loloum clarifies, “An ecosystem is composed of many small elements that really come in together to make an impact. So, let’s look at the smaller elements within the ecosystems, how we can support them individually but always with the ecosystem in mind.”
Finance is one small part of this larger system, and it can serve as a catalyst for addressing the triple planetary crisis – the interlinked and cascading effects of climate change, biodiversity loss, and land degradation.
As Loloum demonstrates, businesses that have restoration objectives often have high risks with low returns, creating barriers for prospective investors. Thus, there is a need to better map out the marketplace for NbS and restoration ventures to increase the efficiency of investment strategies and reduce risks in the value chain. According to the recent report on the State of Finance for Nature, financial organizations, investors, businesses, and government agencies can support this shift by standardizing financial mechanisms supporting NbS finance. Additionally, Loloum recommends that investment codes be shifted to attract more targeted investors, and governments be proactive in adapting policies to promote more investments in restoration. He urges governments to take note of the current climate crisis, “In the aftermath of covid 19 crises, the local government was able to develop programs to try to recuperate losses and trigger the economy, in that same effort to adapt to a better and more sustainable economy. It had to be a crisis that brought them to this state of mind. But we have been in a climate crisis for many decades.”
Although projects within the first cohort of the Restoration Factory ranged in topic and region, all business proposals accounted for economic, social and environmental impacts. There was a clear emphasis on sustainable use of land and resources resulting in higher quality products, as well as a focus on the opportunity for job creation through localizing production and sourcing of materials. NbS and restoration-focused businesses place a priority on improving livelihoods and community welfare while sustaining the natural environment and resources that the businesses rely on.
Innovation offers an important route out of many environmental problems, as stated by the sixth edition of the Global Environment Outlook assessment. Thus, it is imperative we mobilize financial and political systems to better support nature-based solutions and restoration businesses, according to the State of Finance for Nature Report. Loloum states, “It is not only one business that can drive a value chain, but it is many businesses that work towards an ideal result that we are all looking for, (which are) the impacts on forest restoration.”
Background on the Restoration Factory
The Restoration Factory has been created with the vision that restoration and business experts can join forces to build back a better future, in which ecosystems services are essential parts of a profitable, thriving, and green business transformation. It is an e-learning programme developed by UNEP, FAO, and IUCN that helps entrepreneurs develop enticing business models from ideation to validation to implementation and provides guidance to business developers in assessing the business case, supporting capacity building, and offering market access considerations. The initiative aims at shaping a pipeline of opportunities for commercial and financial partnerships to be formed. To learn more or get involved as a mentor, click here.
Background on UNEP Land Use Finance Programme
The UNEP Land Use Finance Programme is under the Climate Finance Unit to proactively unlock and scale up blended financial initiatives to transform land use to meet targets set by the Paris Climate Agreement and the Sustainable Development goals.
