Over the past 30 years, Form International has developed numerous business cases to support landscape restoration. Reflecting on our experience, we’ve identified consistent patterns in the design and approach necessary for successful large-scale investments and project development.
1. Comprehensive project design
The first crucial element is the comprehensive design of a project. At Form International, we strive for a multiple land-use approach in all our projects. This approach integrates reforestation afforestation, forest conservation, agroforestry, and community involvement at its core. By doing so, we aim to generate multiple revenue streams from timber, non-timber forest products (NTFPs), and carbon credits.
Balancing these revenue streams in terms of profit, flow, and return allows us to create projects with optimal impact and the best possible return on investment. This balance is essential for achieving social, environmental, and economic sustainability.
2. Blended finance approach
The second element is our approach to blended finance. In the pioneer phase of our projects, we often work with subsidies, donor funds, concessional funds, and our investments to navigate the initial high-risk period. During the first two years, we achieve on-the-ground milestones such as establishing nurseries, planting trees, and implementing other management measures. We also aim for a clear management plan and prepare for the necessary certification.
Once we demonstrate the project’s potential in terms of the further development of the organisation, the business plan, growth options, and revenue streams such as timber, NTFP, and climate benefits, we enter the second phase. Here, development banks, green funds, and donors play a crucial role. This period involves a combination of donor funding, subsidies, and equity investments.
Ultimately, after approximately five years, we develop a sustainable business case that can progress towards long-term value development of the project.
3. Mature investment and long-term value
The third principle we follow addresses the cash flow reality of reforestation projects. Cash flow typically materializes after 10 to 12 years, but it is important to emphasise to investors that significant value development occurs within the first decade. Trees grow, and an average reforestation project sees an annual increase of 10 to 20 cubic meters of standing timber per hectare.
Although timber sales may not happen within the first 10 years, you will have 100 to 200 cubic meters of standing timber per hectare depending on species selection and growth conditions. We term this phase “mature investment,” where equity investments can be made for 10 to 15 years, ensuring the desired return after 20 years. Senior investors will come on board and allow for sustainable long-term growth.
A well-thought-out project design is vital for creating long-term impact. Every project must be tailored to the natural conditions of the area, nature and ecosystems are always unique when it comes to soil and climate conditions and actual land use. We evaluate where natural forests stand, where new forests can be planted, and where agroforestry is feasible. This natural situation assessment helps us determine the best solutions. From an investor’s perspective, multiple land use and revenue streams are crucial for mitigating risk. Relying on a single income source or land use type makes a project vulnerable to unforeseen challenges, such as diseases affecting a monoculture plantation.
In several countries, our multiple land use approach has proven to be effective. We combined forest creation, agroforestry, and community involvement to generate diverse revenue streams and ensure the project’s sustainability. A robust design and a comprehensive approach are fundamental. These key principles for landscape restoration projects are crucial to successful implementation on the ground. We invite you to explore our projects in Uganda, Indonesia, Ghana, and Peru on our website to learn more about our impactful work.
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This blog is written by Paul Hol, CEO of Form International.