FSC hosts side event at tenth UN Forum on Forests

On 12 April 2013, FSC hosted an official side event at the 10th Session of the United Nations Forum on Forests in Istanbul, Turkey. The event was entitled ‘Certification as a screening tool for investment in the forest sector,’ and key organizations in attendance included governments, academics and development co-operation agencies.

The event was moderated by John Hontelez, FSC’s Chief Advocacy Officer, who gave a general introduction to FSC. That was followed by a presentation on ‘FSC and smallholders: a tool for access to finance’ by Joachim Meier-Dörnberg, manager of FSC’s Smallholder Support Project. “About a quarter of the world’s forests are owned and managed by smallholders, which makes them a high priority for FSC,” said Mr. Meier-Dörnberg, before going on to discuss how using FSC certification as a screening tool for financial investment in small forest enterprises (SFEs) highlights the complex issues involved in smallholder support.

Mr. Meier-Dörnberg drew attention to the fact that many SFEs face challenges in accessing finance to improve their businesses. These challenges include administrative barriers, lack of understanding of financial regulations and the remote locations of many SFEs, especially in tropical regions. In addition, he explained how financial institutions have concerns when it comes to investing in SFEs, including low credibility and unattractive SFE business models, and a lack of appropriate risk assessment methods. These factors often hold banks back from giving microcredit to smallholders.

Against this background, Mr Meier-Dörnberg strongly supported the idea that FSC certification can help build a bridge to bring smallholders and financial institutions closer together. To illustrate, he presented an example of an FSC certified co-operative in the Amazon, COOPERFLORESTA, which has successfully attracted financial investment from the Brazilian Development Bank BNDES. Their investment of US$ 625 000 over two years allowed COOPERFLORESTA to increase its production and service delivery portfolio, considerably enhancing their value chain.

If smallholders are to be more successful in accessing finance, innovative instruments and strategic partnerships will be required. These include mechanisms included in FSC’s Smallholder Support and Social Policy Programs, such as the Smallholder Fund and the Train the Trainers Program, as well as strategic partnerships with organizations such as The Amazon Alternative (TAA) and the Finance Alliance for Sustainable Trade (FAST). Petra Hamers, Director of TAA, gave a presentation on behalf of FAST and TAA about ‘Bridging the gap between certified forests and the financial sector.’

Ms Hamers explained that “in order to make sustainable forest management feasible, access to financing is crucial. For forest companies, communities and financial institutions to be able to work together, several issues need to be addressed.” FSC certification helps to manage financial, commercial and reputational risks, making FSC certified forest enterprises interesting potential clients for the financial sector.

With this in mind, TAA and FAST have joined forces to develop a set of services that help both forest enterprises and financial institutions to better understand each other’s dynamics, needs and opportunities. These include SCOPE Insight profiling of business performance; preparation of loan and investment proposals for private and community-based certified enterprises; workshops for staff of financial institutions to learn about the dynamics of the forest and timber sectors and the advantages of working with FSC certified forest managers; the FAST Forestry Financial Fair, which gives representatives of financial institutions and certified forest enterprises a chance to meet; and support for the development of specific financial products by financial institutions. 

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