Investors’ demand for natural assets in Africa is increasing, with the private sector set to play an important role in bridging the gap in long-term land conservation in the region, the CEO of a conservation investment group has told Carbon Pulse.

Stephen Cunliffe of Natural Capital, a Mauritius-based company sourcing investable projects in Africa, said most biodiversity-rich areas in the region are currently protected by short-term flows of grant funding and philanthropy, arguing this could prove unsustainable in the long run.

“If those funds dry up for whatever reason, the philanthropist dies or loses interest, and people redirect their spending, there’s suddenly no money available. There’s no economic rationale to conserve those areas,” Cunliffe told Carbon Pulse.

“Conversely, impact investors have an ownership stake in there, whether through a lease or a title. So they won’t cut and run as soon as the going gets tough. It’s a much longer-term approach and inherently more sustainable.”

As natural assets in Africa are increasingly under pressure, over time they’re becoming rarer and, therefore, more costly, Cunliffe said.

Prices are also directly correlated to the level of risk in a specific country and the potential lack of immediate revenue-generating opportunities.

“The value of land is going up mainly because we’re running out of wild spaces,” he said. “Even though the market doesn’t price them quite correctly at the moment, the demand is certainly growing.”

DE-RISKING INVESTMENTS

Natural Capital predominantly arranges long-term leases from 20 to 99 years of conservation areas between 100,000 and one million hectares, which contributes to de-risking the investment, compared to land purchases, according to Cunliffe.

“Furthermore, it’s important you’re not having foreigners buying up Africa. Africa owns those assets. They’re just being jointly developed to get better. So it’s a much more of a win-win type of outcome,” he said.

After pairing the investors with the appropriate project, Natural Capital manages the acquisition process through in-country special purpose vehicles (SPVs) that it creates to secure those investments.

“From a risk perspective, many investors are still reluctant to manage lands in Africa. Certain risks, such as political ones, can be mitigated by using a portfolio approach and sticking to countries with a strong track record, like Zambia and Namibia,” he said.

“But you also have to pick your investors carefully and go after people who are knowledgeable about Africa and actually want to be invested there for purpose as well as for financial gain.”

Cunliffe pointed out that further investments in Africa’s natural assets could come from the extractive sector, and mining companies in particular, which have come under increasing pressure for their impacts on the region’s biodiversity.

The rising demand for materials key to the large-scale transition to cleaner energy, such as copper, lithium, nickel, and cobalt, is driving a surge of mining in Africa, where a large share of those minerals is still unexploited.

“[Mining companies] are already very involved in Africa, doing not particularly good things for the environment, but obviously, they’re creating jobs and generating revenue, so governments welcome them, and they have an important role to play,” Cunliffe said.

“However, in order to improve their image, they could do a lot more on the environmental side. And increasingly, we’re seeing governments demanding that they put 10% of project revenues into the environment. We’ll see it develop more over time and add more impetus.”

CREDIT MARKET GROWTH

Some mining firms are also mulling engaging in the emerging biodiversity credit market to make nature positive claims, as experts have pointed out offsetting is not a long-term sustainable solution to compensating for the sector’s environmental impacts.

“There are quite a few people working in this [biodiversity credit] space right now. And I think it is exciting for Africa in the future; it just needs a few more years for that market and those credits to develop,” Cunliffe said.

Africa’s biodiversity credit markets have suffered so far from poor demand from European and North American companies, who are more keen to invest where their supply chains have an impact.

In a report released in May, the Biodiversity Credits Incubator recognised biodiversity credits as an opportunity to scale investments in the region.

Yet, speaking to Carbon Pulse, one of its early members advised caution since it is “still a young emerging market with several key challenges facing it before it is fully adopted”.

In April, the African Natural Capital Alliance said it plans to establish a comprehensive nature data platform for the continent, in a bid to drive investment into nature-based solutions.

By Sergio Colombo – sergio@carbon-pulse.com

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