USAID Addresses Barriers to Green Financing in the Land Use Sector: Lessons Learned from Southeast Asia

While forests and other ecosystems could help reduce one-third of global greenhouse gas emissions by 2030, currently only about 3 percent of climate finance is invested in forest ecosystems. Southeast Asian forests–one of three critical ecosystems targeted in the U.S. Plan to Conserve Global Forests– historically have been shrinking faster than forests anywhere else in the world due to the expansion of agricultural and forestry commodities such as rubber, coffee, cacao, and coconut. Therefore, it is critical for this region to balance economic growth, forest protection, and climate change mitigation efforts.   

From 2017-2023, USAID Green Invest Asia (GIA) served as a regional climate finance and technical assistance facility for global and regional investors in the land use sector throughout Southeast Asia. The project helped catalyze $446 million, unlocking the potential to reduce a projected 156 million tons of carbon emissions over 15 years and generating benefits for local communities through the improved management of 1.7 million hectares of land. 

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Harvesting Robusta coffee

Photo Credit: em faies

GIA’s partnerships with institutional investors confirmed the availability of capital for sustainable projects in the land use sector and also underscored the need for a pipeline of investment-ready projects. For example, several global and regional funds, including &Green Fund, Land Degradation Neutrality Funds, Rimba Collective Funds, and Tropical Asia Forest Fund II, exist to support the transition to sustainable supply chains across the region. However, these funds are hindered by a lack of technical capacity and supporting information to make the business case for investment. GIA identified and fulfilled a need to highlight strong financial incentives to inspire investor confidence, especially when companies are relatively small with a limited track record in this area.

GIA helped companies deploy tools to address perceived risks associated with private sector investments in deforestation-free, sustainable supply chains, and early-stage forest carbon projects, and connect investors to bankable projects. The activity identified potential projects, ensuring they were investment-ready and matching them with eligible, available funds. GIA helped business partners reduce transaction costs and common risks associated with the land use sector such as extreme weather, complex land tenure systems, and maturity of investment and policy structures. By improving the metrics associated with carbon commitments, partnership models, voluntary carbon markets, and social inclusion, the activity increased both the investable pipelines and interest in emerging markets in Cambodia, the Philippines, and Vietnam.

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Forest Carbon’s project in South Sumatra, Indonesia

Photo Credit: Forest Carbon

While both corporate and national commitments on climate action incentivize investment in sustainable agriculture and forestry, long-term investment at scale requires structural changes among industries and financial systems. GIA convened major players in the coconut, coffee, cocoa, and other land-based industries to engage in discussions on how to improve sustainability across supply chains.

For instance, GIA worked with seven of the largest coconut companies to launch the Sustainable Coconut Charter in late 2020, which now has 17 signatories–including AAK, Barry Callebaut, Nestlé, and Unilever–that control nearly half of the annual global trade in coconuts.

As the industry’s first attempt at regional collaboration to honor global sustainability commitments, the Charter works to boost local farmer livelihoods and sustainable coconut supply.

In the coffee sector, GIA supported an unprecedented 15-company collaboration to standardize carbon emission measurement in Southeast Asia’s coffee sector. This carbon footprint study, tested in the Central Highlands of Vietnam and Southern Sumatra in Indonesia, represents 20 percent of the world’s Robusta coffee supply. GIA’s cooperation with these companies proved that targeted advisory support, coupled with timely capital investments, can drive an entire industry’s shift from business-as-usual to innovation. Based on this success, the Sustainable Coffee Challenge network is replicating this work in coffee supply chains in Latin America, demonstrating USAID’s strong role in advancing low-emission agriculture and shifting market signals in the land sector.  

For more information, read USAID Green Invest Asia’s final report.