This CDKN Innovation Fund project aimed to create a finance framework and cashflow template for innovative financing mechanisms.  Using the state of Acre in the Brazilian Amazon as a case-study, these mechanism are intended to attract public/private sector finance for activities that reduce emissions from deforestation, and fund the transition to sustainable ecosystem management and a low carbon economy.

The project used professional facilitation to bridge the supply and demand sides.  The focus was on further innovation and implementing existing theories of public/private financing by:

• Undertaking preparatory research and analysis to support decision-making in REDD+
• Assessing and developing innovative finance mechanisms and solutions through the effective and creative engagement of different stakeholders (local governments, NGOs, investors, forest communities and local farmers)

The innovation process had six phases as follows:

1. Concept development
2. Defining assumptions for the case study
3. Supporting analysis for decision-making
4. Conducting the forest finance lab
5. Decision making
6. Implementation

The outputs of this project include:

• A cash flow template outlining the status quo of investment attractiveness to investors.
• A summary of environmental and social benefits and impacts from the transition to Sustainable Ecosystem Management (SEM).
• An assessment of the institutional arrangements and finance delivery mechanisms in the case study region.
• A structured finance model, including recommendations on innovative finance mechanisms suited to the Acre region and the necessary conditions to implement them.
• A policy brief on the implementation road map to assess and design innovative finance mechanisms for forests.

Lead: Andrew Mitchell (Global Canopy Programme)

Project Partners: Sean Kidney (Climate Bonds Initiative); John Ward and Simon Baptist (Vivid Economics); Debora Almeida (Maturi Consultancy Group); Mark Tarry (Canopy Capital)

CDKN Funding: £81,000

Photo credit: USAID