Combat desertification COP17: ‘Rangelands must be recognised as eligible for climate and adaptation funds’

The 17th Conference of the Parties (COP17) to the United Nations Convention to Combat Desertification (UNCCD) is being held in Ulaanbaatar, Mongolia, under the theme Restoring Land, Restoring Hope. Land degradation already affects up to 40 per cent of the world’s land, with far-reaching impacts on food production, water availability, livelihoods and economic stability. Yet financing to address it remains far short of what is needed, with a gap of about $278 billion a year.

The talks are taking place during the UN’s International Year of Rangelands and Pastoralists, as Mongolia — where nearly 77 per cent of land is already degraded — pushes rangelands and pastoralism to the centre of the global agenda.

Down To Earth’s Shagun spoke with Louise Baker, managing director of the Global Mechanism of the UNCCD, on the sidelines of COP17 about rangelands financing, the $12 billion Riyadh Partnership, mobilising private capital for drought resilience, and whether the current finance architecture can respond quickly enough to worsening El Niño-driven droughts.

Edited excerpts:

Shagun: This is the International Year of Rangelands and Pastoralists. From the figures we have, pastoralism currently gets about 5 per cent of global climate finance. Two years ago, COP16 outcomes included decisions on rangelands and pastoralists. Do you think COP17 will move beyond that into dedicated funding lines for rangelands?

Louise Baker: Rangelands cover more than 50 per cent of the world’s surface. Considering how central they are, rangelands are definitely underfinanced.

The Rangelands Rising report, which was released at COP17, showed that the rates of return from investing in rangelands are around $4 to $6. They go up to something like $35 or $36 if you include wider public benefits such as water supply. So the economics are now getting much better.

The Rangelands Flagship Initiative, a global initiative to significantly increase investments to achieve land degradation neutrality, was launched at COP17, with around $1.2 billion across 40 projects named under it. The initiative is really focused on knowledge, investment and institutions.

I do not think there will be a dedicated funding line at this stage. But I think it is about eligibility for rangelands, so that they are explicitly named in things like nationally determined contributions, national adaptation plans and biodiversity plans, and then recognised as an eligible category in climate and adaptation funds.

Shagun: There is often a risk that flagship announcements fizzle out after COP ends. How significant a legacy do you expect the Rangelands Flagship Initiative to leave beyond this COP?

LB: The International Year of Rangelands and Pastoralists has done a great job. Normally, these international years are more about raising awareness. But apart from raising awareness, we have all been deliberate about making sure that this Rangelands Initiative is something that happens this year — a COP17 legacy project that is very much about pipeline development.

So this first pipeline of $1.2 billion will then look to develop a bigger pipeline of projects and programmes, and knowledge and institutions that roll forward and build momentum behind investing in rangelands over the coming years.

It is not there yet, but this is a work in progress. I think it is a commitment by all the partners to be involved in building a legacy for COP17, so that rangelands are not something that just happens and then fizzles out.

It is also a fitting legacy for the Mongolian presidency, given its expertise on rangelands issues, and I hope it continues championing this in the years ahead.

Shagun: It has been almost two years since the $12 billion Riyadh Partnership pledges were made at COP16. How much of that $12 billion has actually been secured? And how are issues prioritised under the UNCCD finance architecture?

LB: The commitment runs to 2030, and it is a pooled approach. It is more a question of donors marking funding within their own portfolios, and delivering and prioritising desertification and drought issues. They will report back at the next COP, which is the halfway point, on exactly how much they have spent.

But money is going out. The Islamic Development Bank, for instance, says it has spent more than half a billion dollars on desertification and drought-related work.

If you look at how much money goes into the Convention as a whole, it is a combination of domestic and traditional financing. It comes from the Green Climate Fund, the Global Environment Facility and other banks — the World Bank, the African Development Bank. Each donor, development partner, vertical fund or bank has its own priorities and its own group of countries it works with.

It was a real step up from the Gulf region at COP16, and that was definitely encouraged by the COP presidency, which wanted to show that the region was engaging and taking the issue very seriously, because land degradation and drought are really important issues for that region.

The Global Environment Facility is the formal financial mechanism for the Convention, but it is a very small amount of money relative to the need.

Shagun: There are also voices asking for land restoration financing to be put on par with climate financing. What do you think about that comparison? Is it gaining traction with donor countries?

LB: I would say land restoration is climate action. I do not think we want to go into competition with climate finance. I think that is the wrong frame.

Soils and rangelands are the largest terrestrial carbon stores we have. Rangelands alone probably hold a third of the terrestrial carbon reservoir. So I would say that land is one of the best-value investments in a climate portfolio.

You should be able to deliver mitigation, adaptation, water security, food security, biodiversity and rural jobs through land. It is a faster route to parity if we integrate, blend and deliver on the land, climate and biodiversity agendas at the same time, rather than creating a parallel architecture.

So yes, I think there should be more money going into this, but the how of it is the question.

Shagun: What is your broader read on where international finance for the Convention stands right now, and where it is headed?

LB: What is interesting about where we are at the moment is that international finance is in flux. Grant finance is falling around the world — I think by about 23-24 per cent over the last couple of years. That is a significant reduction in grant financing, which is very, very difficult for many countries.

But it means we have to look at how we can transform the financing of the Convention. I think what is positive is that there is a willingness to embrace different types of financing, and a willingness to really look at how different streams can work together.

The rangelands agenda is very positive news. Private sector engagement, from the material-risk-to-business perspective, and the willingness to blend that with public finance for the greater good, are also positive.

But there is still a lot of work to be done. It cannot be fixed in one COP. This is a road we travel together, building resilience and building an economic model that makes resilience feasible and viable.

Shagun: What is the state of mobilisation of private finance in drought resilience? Investors usually want predictable returns, while managing drought is often a long-term effort that produces long-term benefits, but not necessarily immediately. What financing model can make drought-resilience projects more attractive and investable for private financiers?

LB: We have tended to spend most of the money that we invest in drought, after it hits, as a sort of reactive finance. So we spend money on humanitarian aid and on building back, or in terms of insurance.

I think now we are increasingly moving into a proactive space. This is where it starts structuring a little differently for the private sector. It is about the private sector realising that drought has a material risk for their businesses.

The costs of drought are quite high, probably around $300 billion a year on average, and it varies a lot depending on how bad a year it is. Drought hits everything from energy production and river transportation to the social licence to operate in places where, for example, a private company extracts water if it is a bottling plant.

So I think there is much more realisation from the private sector that drought is a material risk to their businesses. That has triggered some interest in whether they can build the resilience of ecosystems and invest in projects with good rates of return, while securing a resilient ecosystem in the face of something like drought.

They want an investment in drought resilience, but they also want to secure their value chains. From the private sector perspective, I think we are doing a couple of things: encouraging the private sector to look at its pipelines and value chains, see how dependent they are on land and water, and invest accordingly. We are also establishing an impact investment fund, which will be a vehicle for the private sector to invest.

Shagun: More than 70 countries have submitted drought management plans to the UNCCD. What are the major challenges in turning those into finance? Is it a lack of data, government coordination or investor appetite?

LB: Plans are written more as policy, not as investment cases. A drought plan typically states objectives. A financier needs a counterparty, a cost, a revenue stream and an allocation of risk.

The translation between policy and investment case is a big issue, particularly if you want to bring in private sector resources. So I think what we are trying to focus on is the project-preparation phase — the feasibility, structuring and safeguards.

Also, drought projects tend to be too small for development banks and too small for institutional investors. So we have to aggregate and build them at the landscape level.

There are other issues, such as land tenure and investment-grade data on soil health, water availability and drought risk. So it is difficult for investors to target investment. But each issue has a known fix, and we are getting better at doing it.

Shagun: This year’s El Niño is driving major droughts and food security shocks, with impacts potentially continuing over the next 12 months. Can the current funding system quickly redirect money towards emergency response when a crisis hits, or is it too rigid and structured only for long-term projects?

LB: Probably not. I think this is what we have to be prepared for — that these kinds of swings are normal and are becoming more dramatic. Droughts are becoming more severe and more regular.

So this is going to happen on a cycle, and we do not have to constantly spend all our financing on response and rehabilitation. We have to build back better.

We need to be planning not for this El Niño, but for the next one, and investing in preparing for it. There are instruments that can move fast, such as parametric insurance, regional risk pools, sovereign credit lines, modifiers embedded in existing development projects and pre-arranged financing that releases on forecasts rather than damage assessment. So those things do exist.

But again, relief and resilience are competing. I think we are looking for a sort of continuum, with almost one financing plan.

Humanitarian money buys time. But at the same time, we have to build resilience so that the next shock is less severe. That is one of the design principles behind the Riyadh Partnership: we need to have humanitarian money available because people will be suffering. But in parallel, we have to build so that this does not get worse and worse.

The private sector is recognising that drought is a future risk, and the public sector is recognising that a resilient system has to be built. I am relatively optimistic that this will move in the right direction.