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Investments: an introduction

Investments: an introduction. Guided by national forest programme (nfp) principles. Investments. Goods and services. Financing Sources Goal : Reduce Costs Liquidity provision Risk Mitigation Types : Subsidies Tax reduction Credits Investments Funds Sources :

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Investments: an introduction

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  1. Investments: an introduction

  2. Guided by national forest programme (nfp) principles Investments Goods and services Financing Sources Goal: Reduce Costs Liquidity provision Risk Mitigation Types: Subsidies Tax reduction Credits Investments Funds Sources: State, Donors, Banks, institutional investors, pension funds, stock market Payment Sources Goal: Increment Revenues Types: Environmental Services Goods (timber, NTFP) Tax reduction Sources: Society, State, consumers, NGO etc. SFM by forest owner/ Manager (Communities, State, NGOs, private enterprise) Financing (distribution) mechanism State Bank Fund Project/ Programme (Bundling) Payment (revenue) mechanism Market Negotiated deals State Fund (Bundling) Plantations/Natural Forests/ National Parks /Agroforestry Enabling environment for financing strategy Source of concept: Savenije & van Dijk, persComm. 2007 National Forest Financing Strategy: a multi stakeholder process

  3. Encourage willingness of others to invest in forests Reduce cost of investment Remove structural barriers Sometimes direct investment Focus on purchase, establishment or maintenance of forest Often government or international agencies involved ‘Investments’: characteristics

  4. Financing not directly related to volume of output of products and services, No buyer and seller of the forest product or service No market for products and services, but: Yes, sometimes a market for the capital flows Investment financing: What it is not

  5. Seems ‘traditional’ versus ‘innovative’ Innovative not better because it’s new Selection of proper channel depends on local circumstances Also depends on politics: role of the government Investments versus goods/services financing

  6. Government funding Donations, bilateral multilateral aid, multilateral agencies and agreements Environmental funds Taxation measures Favorable credits Subsidies Capital market Investments Sources & Mechanisms

  7. Support to forest owners by forest service Advice Seedlings Provision of funds to buy forests Government provides funds to manage the state forests Government funding

  8. ODA: a major source for financing SFM But only 10% of world wide spending on forest management (which is not necessarily SFM) Focus on poverty alleviation, MDGs Catalyzing role, leverage function Sometimes debt-for-nature swap as an instrument Bilateral and multilateral aid (1)

  9. Multilateral agencies and agreements: Sources of funding with their specific mechanisms Examples: GEF; ITTA and ITTO; UNCCD; NFP facility; PROFOR at Worldbank Mostly project based Favored beneficiaries: government and civil society Bilateral and multilateral aid (2)

  10. In more than 30 countries, since 1990ies ‘Investment’ but not ‘traditional’ Examples: National trust funds; Foundations; Endowment funds; Conservation trust fund (independent from government) National Environmental Funds

  11. Costs of forest establishment & management deductible from tax Land rent Personal income tax Fiscal transfers: polluter pays to sustainable producer Ecological value-added-tax (VAT): Part of a tax is transferred to a fund for forests or water management Taxation measures

  12. Low interest, long period to pay credit back, period of grace Not always exclusively directed at forest sector: Agricultural sector Enterprises Favorable credits

  13. For forest establishment, Maintenance Protection Many examples e.g. in Costa Rica Subsidies

  14. A company acquires immature forests and plants new forest, makes contracts for management and maintenance and even long term contracts for harvesting and selling the timber. based on these contracts securitized financial instrument will be issued backed by the net cash flows generated from the harvest and commercialization of the forest products. Advantages: Fund investors will receive dividends and a return of capital. important environmental impact Small and medium landowners significantly increase their current income and can monetize and optimize the value of their current landholdings. Capital market (1)

  15. A pension fund example: Swiss pension fund buys a forest concession in Brazil Hires expertise to manage the concession Establishes a saw-mill Looks for international marketing expertise Capital market (2)

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