Solutions for Mobilising Financial Sources and Enhancing the Financial Framework for Investments on Deforestation-Free Value Chains
Summary of the collaborative action between the GIZ project SAFE and Climate & Company at a global level
February 19, 2024
The EU adopted its new Regulation on Deforestation-free Products (EUDR) in April 2023, which entered into force in June 2023. The EUDR targets 7 forest-risk commodities: cattle, cocoa, coffee, palm oil, soy, rubber and wood and certain derived products. The Regulation will affect both EU and non-EU companies (operators and traders) that place goods on, or export them from, the EU market. Complying with this new regulation requires the development and adoption of new practices along the supply chains, getting data and engaging with supply chain actors. These are all factors which require substantial funding, and a key question is how to finance this transition.
What?
We've joined forced with the SAFE project implemented by GIZ to get ready for the new EU deforestation-free Regulation (EUDR)
GIZ SAFE, the first official EUDR-support programme jointly financed by the European Union, Directorate General International Partnerships, the German Federal Ministry for Economic Cooperation and Development (BMZ), and Climate & Company join forces in several workstreams relating to deforestation-free supply chains and the successful implementation of the EUDR. Through this partnership, we aim to identify and foster solutions to mobilise financial sources, especially for vulnerable groups, and enhance gender-transformative financial frameworks for investments in deforestation-free supply chains.
The scope of the SAFE project extends to 6 partner countries, namely: Brazil, Ecuador, Indonesia, Zambia, Vietnam and the Republic Democratic of Congo.
To comply with the EUDR, verifiable deforestation-free supply chains need to be feasible for all actors along the supply chains. Financial institutions and private and public financial mechanisms can provide the right incentives for the different actors along the supply chain to implement verifiable deforestation-free supply chains and then comply with the EUDR. Public and private financial sources should be channelled towards sustainable investments and feasible solutions should be provided to smallholders, local communities, and SMEs, to support this transition. The investments needed, the gaps faced in the context of transformation, and “upgrading” of supply chains should be investigated to identify effective solutions and support the development of new business ideas for local actors.
How?
These are the various tasks we will carry out through this project:
- stock-take and empowerment on investment needs and gaps for verifiable deforestation-free supply chains;
- stock-take of financial mechanisms, funds, and financial products;
- stock-take of regulatory financial frameworks for sustainable land use, reducing deforestation and foster sustainable supply chains;
- developing new business ideas for and with local actors;
- leveraging synergies with other development cooperation projects;
- raising awareness on the need for financial inclusion and transition finance alongside the EUDR;
- tap into selected collaborative spaces to share experiences from local, country, and regional project implementation on finance and related topics.
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