Building a New Restoration Economy in India
This article originally appeared in Business India here.
As COVID-19 made its mark on 2022, the planet confronted a series of growing environmental challenges. At the UN, the struggles of farmers and the global food system, the precipitous loss of biodiversity and the ever-heating planet dominated the agenda, culminating at November’s COP26 climate conference.
These challenges are especially stark in India, where more than 700 million people depend on forests and agriculture for their sustenance. More than 85% of them are small and marginal landholders, leaving them especially vulnerable as the climate changes the world around them.
That is why business leaders, government delegates and civil society organizations echoed a common concern at COP26: Global and national action is needed if humanity hopes to build a climate-resilient, biodiversity-rich, food-secure and nutritious future for vulnerable people.
Fortunately, pioneers across India are deploying a set of techniques, known as landscape restoration, that can heal damaged ecosystems, improve biodiversity and water supplies, draw down planet-heating carbon from the atmosphere and (most importantly) provide green livelihoods for farmers and forest dependent population.
Globally, India is among the top fifteen countries with the potential to reduce its emissions by protecting, maintaining and restoring forests and reducing emissions from agriculture. In 2018, WRI found that forest protection and landscape restoration across more than 100 million hectares could store up to 4.3 billion tons of above-ground carbon by 2040. More than half of this potential is for restoration techniques like agroforestry, which can boost crop yields by adding trees to productive farmland.
Landscape restoration also creates jobs and improves livelihoods, especially for youth, poor and marginalized groups, and women. WRI research found that every INR 75 (~$1) invested can bring in economic benefits of Rs525-2,250 (~$730) That opportunity makes it a critical part of India’s post-COVID-19 economic recovery strategy, its international commitments and its Sustainable Development Goal (SDG) targets.
Investing in restoration can drive more inclusive strategies for improving India’s poor and climate-vulnerable districts. For instance, restoration in the Sidhi District of Madhya Pradesh has the potential to create roughly $3.75 million in wage earnings, as well as 3,000 microenterprises that grow, process and harvest high-value tree crops. Building sustainable local economies is critical, as climate change will likely reduce agricultural incomes by up to 25% annually.
Building a Restoration Economy in India
With all the benefits outlined above, why has restoration not expanded across India? In short, investment is lacking. Globally, there is a gap of INR 22.5 lakh crores ($300 billion) in finance for ecosystem conservation and restoration. In India, landscape restoration is fueled primarily by public outlays, along with philanthropic funding. Between 2011 and 2016, almost 75% (INR 1,02,505 crores or $13 billion) came from the Mahatma Gandhi National Rural Employment Guarantee Scheme, whose primary objective is job creation, not landscape restoration.
To restore all of India’s damaged land, we need more private capital. But to spark that demand for restoration finance, India needs a robust supply of projects and businesses. The restoration economy is still at an early stage, with a small market size, a fragmented industry with many small-and-medium-sized enterprises, and nascent business models and value chains that have trouble absorbing capital. How can India break through these barriers and invest in restoration at scale?
Sparking the Ideas of Hundreds of Entrepreneurs
The government of India recognizes the salience of spurring entrepreneurship and provides platforms to nurture the start-up ecosystem in India through Startup India, Invest India and Accelerating Growth of New India’s Innovations (AGNIi). Even though the Indian start-up ecosystem is the third largest in the world, the number of entrepreneurs and businesses working on land restoration is not publicly available.
However, one mentorship and training program, the Land Accelerator South Asia, has received more than 800 applicants from land-restoring companies since 2020, indicating that there are many innovators looking to build their skills and connect with investors. Our analysis of these applications indicates that India's restoration economy is still in its inception stage.
But we also found that these entrepreneurs are experimenting with multiple innovative ways to restore farms and forests and build resilience for rural communities and enhance sustainable livelihood opportunities. Jeev Anksh Eco Products, for example, is a regenerative company that helps farmers market organic Himalayan foods. Gratitude Farms is a start-up that employs Indian Army veterans to grow food forests. And Urvara Krishi offers buyback agreements to farmers working on agroforestry systems, guaranteeing them a competitive market prices for their crops. In total, the 73 businesses that have graduated from the Land Accelerator South Asia program in the last two years say that they have created nearly 1,800 jobs, restored 70,000 hectares of land, engaged 1.1 million small and marginal farmers, and grown 8.7 million trees.
Nurturing a Stronger Restoration Economy in India
Initiatives like the Land Accelerator that support sustainable businesses also reduce two critical barriers to building a new restoration economy for India. First, they provide these businesses with much-needed capacity building through improving their business development, connections to start-up mentors and pitching skills. Second, they channel financial resources from committed impact investors directly to entrepreneurs. Along the way, participating investors learn more about landscape restoration businesses and have access to the best opportunities in this growing industry.
Getting finance to these businesses is, however, not easy. Although access to timely credit or finance is a critical determinant for scaling up these initiatives, anecdotal evidence from these businesses indicates that the existing public and institutional sources of finance are insufficient or inaccessible. A few public programs exist, but are choked by bureaucratic processes, slow and delayed payouts, and low awareness.
Early-stage businesses primarily raise money through friends and family networks, given few private banks are willing to trust in their ideas. Government incentives, development funding and philanthropy could support these early-stage businesses who work in the complex land space and show to impact and institutional investors that these solutions work. These businesses need reliable finance to grow, mature and scale. India can learn from recent examples in Africa, such as TerraFund for AFR100, that are filling this gap by blending finance from many donors and investors and then parceling it into small amounts that start-ups can absorb. With their robust monitoring mechanisms, these programs will build investor confidence through transparency and a commitment to learning by doing.
Time is running out if we want to help India’s farmers and forest dwellers improve their food security, address the climate and meet India’s ambitious target to restore 26 million hectares of land by 2030. As the latest science makes clear, it is code red for humanity unless we rapidly decarbonize the economy. India’s restoration entrepreneurs are ready to offset part of the loss of jobs and livelihoods from these sectors by building thriving farms and forests. Now, we have to trust them.