Episode 18: Elizabeth Littlefield, Senior Partner @ West Africa Blue
Community-Centric Blue Carbon Projects in West Africa
For natural capital aficionados who prefer the written word to the podcast format, we have transcribed (with minor edits for ease of reading) Episode 18 of Solving Climate, Naturally featuring Elizabeth Littlefield, Senior Partner at West Africa Blue. Enjoy!
For those who prefer to listen, you can find the full episode on your favorite podcast platform, or on our website.
Julia Strong: Welcome to Solving Climate Naturally, where we speak with experts and leaders at the cutting edge of natural climate solutions and help demystify this growing field. We're thrilled to be joined today by Elizabeth Littlefield.
Elizabeth L. Littlefield has led organizations in emerging markets development finance in the public, private, and multilateral sectors for the past three decades with a focus on sustainability, natural resources, and economic empowerment. She is the Senior Partner at West Africa Blue, a community-centric blue carbon developer. She is also a Senior Advisor at the Pollination Group; chairs the board of M-KOPA, the pioneer in pay-as-you-go solar in Africa; is the Treasurer of World Wildlife Fund US; and serves on the boards of Development Alternatives, Inc. and other mission-driven organizations operating in developing countries. In 2023, she was selected by Reuters as one of the world's 25 trailblazing women leading the fight against climate change. Ms. Littlefield was appointed by President Obama as the president, CEO, and chair of OPIC, now renamed the US International Development Finance Corporation, or DFC, where she served from 2010 until 2017. With a portfolio of $29 billion in financing and insurance across 106 developing countries, DFC's mission is to drive private investment and sustainable economic development, especially in the world's poorest countries. Ms. Littlefield was previously a Director at the World Bank as CEO of CGAP, Consultative Group to Assist the Poor, a policy and research center dedicated to advancing poor people's access to financial services, and she was J.P. Morgan's Managing Director in charge of capital markets and financing in emerging Europe, Middle East, and Africa (EMEA). And if that wasn't enough, Littlefield also spent 1988 to 1990 living in West Africa, setting up microfinance institutions with local communities. So she understands the on-the-ground challenges and opportunities as well as the financing side of the equation.
Elizabeth, I know we just heard the official version of your bio, but we wanted to hear a little bit about your origin story. Tell us, how does one go from J.P. Morgan to blue carbon?
Elizabeth Littlefield: To be honest, I was kind of an accidental banker, and I'm not really that good at finance, but I did stay in that field for 18 or so years. Within finance, I've really always worked in and lived in and been pretty deeply connected to emerging markets, both when they were emerging and when they were submerging. That involved helping developing countries access capital markets, then building financial systems that serve poor people through inclusive finance and micro-finance, and then at OPIC/DFC crowding in private capital for environmental and development solutions. So my experience was always with finance and development, but my deepest resonance and my heart has always been with nature and wildlife. And frankly, because so many solutions out there trade off the prosperity of humanity versus the prosperity of the planet, I became so excited about what we could do in West Africa, because I don't really know of anything that is as transformative to incredibly poor people and the endangered of biodiversity in the area, as well as adaptation and mitigation at the same time as the work that we're trying to do in West Africa. So that's the micro version of the journey.
Kate Wharton: What brought you to work on natural climate solutions specifically? You could spend your time on many different things, but why climate, why nature, and why now?
Elizabeth: It was really the opportunity that presented itself. When I was at OPIC, we did redirect the agency to one singular focus, and that was renewable resources as well as poor countries. So that's something that's been a consistent focus of mine for many years now, including in the intervening years where I focused on nature-based solutions and climate since leaving the Obama administration. This opportunity to launch a nature-based solutions company in West Africa really started when just after the Ebola crisis, on behalf of the White House, I led an investor trip to Liberia, Sierra Leone, and Guinea, the Ebola countries, to show that Ebola was over and these countries were open for business. On that trip, I met this amazing group of young Canadian guys who had left their jobs on Wall Street in their 20s to come build social enterprises in the region. When I left the Obama administration and DFC, I joined them as an investment committee member. And in seeking to build an ecotourism operation in the southern part of Sierra Leone, they got deeply involved in the communities, including having two of the partners live on the islands of the Sherbro River Estuary to build the first school ever that had been built in that area, out of bamboo. This and other dimensions of their long-term relationship there has really formed this 14-year trust that is the bedrock of the project that we're developing in Sierra Leone, and which is now being replicated in other countries in the region. So that's what brought me to this particular opportunity that I'm so excited to be steeped in.
Ida Hempel: Elizabeth, you are one of the rare leaders in the carbon markets space who really has the finance chops, but also this development background, and now exposure to on-the-ground development of carbon projects. I'm curious to learn what have been the three biggest barriers that you've come up against in scaling nature-based carbon projects? What are some of the lessons learned so far?
Elizabeth: Obviously the voluntary carbon markets have had a bit of a rough go the last couple of years. So I would say the first thing is basically the misunderstanding. I think the four of us agree that the voluntary carbon markets generally and REDD+, the avoided deforestation dimension, is the most rapid response that we have to the climate crisis and the biodiversity crisis. And it's basically the best thing we've got today. Of course, it's really new. It's developing fast. It's very complicated. It's imperfect. But there seems to be a lack of tolerance for that imperfection and that nascency, whereas we all know that areas like medicine and technology and engineering are always changing and emerging and improving. So I think the number one challenge is clearly a misunderstanding of the importance of what this market is trying to do. And in particular, how important it is to keep standing forests standing. And that, of course, is the focus of REDD+ or the deforestation part of the voluntary carbon markets.
The voluntary carbon markets generally and REDD+, the avoided deforestation dimension, is the most rapid response that we have to the climate crisis and the biodiversity crisis.
Thing two is that there are almost no other models that I know of, at least in the blue carbon space, that are really aiming to do a significantly large-scale and yet financially sustainable community-centric project. So we kind of have nobody to emulate or learn from. And that was a surprise to me.
The third thing is that the methodologies are emerging, but they're emerging very slowly. And so there's a lot of waiting around until methodologies are finalized. The technology and the science is completely in flux. Remote sensing, which has captured the imaginations of so many, has very limited applications to see below the canopy in many of these forests. And then the policies, of course, are in flux. But frankly, locally, most communities and most countries in which we're operating don't have the right land tenure rules, and have never even considered building their own infrastructure for carbon markets to develop. So it's basically a lot of things moving at the same time and being not pinned down, which makes it hard to wrap your head around all the different moving parts.
Kate: I'd love to zoom in on the work in Sierra Leone, because it's really an incredible project. Could you talk a bit more around how that specific project in Sierra Leone is accomplishing this goal of keeping forest standing? How you're working with communities? What are the costs involved with that, and why is carbon necessary to the success?
Elizabeth: Let's start with Sierra Leone, although our project in Guinea is moving very quickly as well. So we've really got two countries already on board and two more coming. But there, the dynamic in most of coastal West Africa is that the communities that live there are extremely poor with very low literacy rates and high malnutrition rates. They don't benefit from government services for the most part. And they're entirely subsistent on fisheries. And yet the fisheries in most of the area have been depleted significantly by illegal and unreported fishing, which means that unfortunately, these communities are now catching smaller and smaller fish. And I experienced watching them cutting the holes in the nets smaller and smaller in order to catch ever smaller fish, which of course is devastating. And so then not able to get the fish that they've always relied upon, they're turning to cutting down the mangrove trees more than ever before in order to generate fuel wood, wood for smoking fish, as well as for construction, as well as for sale to neighboring communities for cash for the other things that they need that aren't related to fish. So that dynamic, unfortunately, is a devastating one because the mangroves themselves, as we all know, are the fish nurseries and the home of so many other important species. So our theory of change, if you will, is to find ways to replace mangrove with another fuel wood, replace mangrove wood for another wood to smoke, another source for smoking fish, replace mangrove wood for construction, as well as find other ways for them to generate cash.
And so that project's involved working really closely with the communities to identify other ways of doing all this, including cookstoves and woodlots, and employment of community members to patrol, to restore, to plant, to support the cookstoves, et cetera. So that's sort of what we've been doing. And so far, it seems to be really going well. Communities are incredibly enthusiastic and supportive. Today, we've just finished five different workshop programs, all of the communities for the free, prior, and informed consent process. I would just point out, we're done now in 96 different villages covering over 1,000 community members have participated in all of these workshops. If you just imagine 96 villages, most of which are accessible only by boat, this gives you a sense of the logistical challenges of carrying out a fulsome and deep, honest and truthful, free, prior, informed consent with the communities. So yeah, that part is complete. So now we're scaling up all the activities that will arrest the deforestation. We're already seeing good progress there. And we're commencing the restoration and replanting. We're working closely with the government on the benefit sharing agreement, as well as with the communities, and getting ready for certification next year. So that's a quick snapshot of what's going on in Sierra Leone.
If you just imagine 96 villages, most of which are accessible only by boat, this gives you a sense of the logistical challenges of carrying out a fulsome and deep, honest and truthful, free, prior, informed consent with the communities.
And the same story is going on, but even more quickly in Guinea, where the project is more tipped towards restoration because there's been more large-scale, practically commercial deforestation going on there.
Julia: Amazing progress, Elizabeth, and it's really inspiring to hear about the potential impact, the approach so far, and really for the listeners who are not as familiar with the product development process. Can you just briefly explain free and prior and informed consent? What does that exactly mean or entail?
Elizabeth: Free, Prior, and Informed Consent, commonly known as FPIC, really refers to the rights of indigenous people and local communities to give or withhold their agreement for any activities that might affect them. The word free means they're not being threatened or forced into that agreement. And basically, it's a process that one has to go through in order to ensure that the communities that will be affected by the project understand it, they agree with it, they want to do it, et cetera. So for us, the first workshop would be on what is climate change and how does it affect the communities today? And then the second one would be on what are the roles of mangroves and mangrove ecosystems and what are the benefits, or as we call it, the gifts of mangroves for this generation and the next. And then you go on to workshops on the proposed activities and get great ideas from the communities as to the kinds of things they could be doing differently. And it all culminates in getting them to give their views and opinions. And then finally, we all agree on the path forward.
Ida: Elizabeth, going back to your experience scaling Blue, this is actually not your first rodeo standing up novel projects and opportunities that support development in some of these regions. And in point of fact, after your arc at J.P. Morgan, you moved out to West Africa to help start the initial boom in microfinance. What can the world of nature-based solutions and carbon markets learn from your experiences with the microfinance movement?
Elizabeth: Actually, it's sort of amazing. I think part of my heart was left in West Africa when I did move there on a leave of absence from J.P. Morgan in the late '80s to build microfinance institutions. Of course, the world was different then. And the challenges were different. No cell phone, no internet, no whatnot. But it's really fun and exciting to be back there again, 30 plus years later, building institutions again.
I would say the parallels are striking, in fact. In both the world of microfinance and I think to some extent the voluntary carbon markets, like organic foods and many other sectors, have succumbed to the Gartner Hype Cycle, which involves falling madly in love with the thing, then binging on it, then that leading inexorably to backlash, which then is made worse by the media and over-excitement, and then that leads to a crash from which these sectors need to resurrect themselves in order to grow. I'm pleased to say microfinance is now booming again, but certainly it had a hit from that experience.
You asked what are the parallels? I think the first one is big, huge promises and pressure to demonstrate scale in these nascent, tender markets can invariably lead to disbursement pressure, too much money moving too fast, which leads to bad deals. We saw that in the microfinance sector and also in the early days of the voluntary carbon markets. Another one would be the lesson that building sustainable markets takes a lot of time and it takes some targeted subsidy as well. You can do the quick fix, but if you're gonna be sustainable and generate outcomes for all parties over a long period of time, it takes a lot more time and it takes some money. The other one would be the challenge of trying to optimize two different objectives at the same time, which can be in conflict. In the case of microfinance, it was trying to do development and produce revenues. And in the case of voluntary carbon markets, of course it's doing environmental protection, conservation, and restoration while generating revenues. Those conflicts can be really hard to manage, and you see that I think in every aspect of the voluntary carbon markets.
The last two things I would mention would be keeping the low income communities at the very center of your focus is crucial and has been crucial in both of these sectors. And then recognizing that local government policy and policymakers matter a lot, and short-termism on their part can be hard to resist. In the microfinance case, we saw that keeping interest rates artificially low stifles the market's growth. And in the case of carbon markets, governments wanting to make as much money as they can, which can crowd out private sector interest, is another mistake we've seen.
Kate: Sticking on some of the themes that you just raised from the microfinance sector, particularly around policy and incentives, we'd love to spend some time talking about risk, and particularly the risk of investing in emerging markets. In the world of nature-based solutions, carbon credit buyers and investors are not only concerned about the usual risks of investing in these markets, but also about the rapidly changing regulatory landscape related to carbon. From your perspective, what do you see as the most significant regulatory risks in host countries, and what are some of the things that developers, buyers, and investors can do to mitigate these risks?
Elizabeth: I think the biggest risk today is probably differential views on what's fair. Right now you have governments, NGOs, and the private sector. And frankly, there's decades and decades of distrust between those parties, much of it justified. And so I think from each of those parties' perspective, what's fair in terms of, for example, the distribution of revenues is very, very different. Governments think, “this is in my country, I have huge budget deficits and very poor people, so I should get a significant chunk of that money,” but we all know from what we've seen recently that that can scare away investment capital that's needed to make the projects happen in the first place. Communities in many cases own the land and are doing the significant amount of the labor, and so they obviously deserve a significant amount of the credits. The developers are doing a hell of a lot of work and taking a lot of risk and are very patient with their capital, investing today for an uncertain outcome four or five, six years later. And then of course, investors have lots of choices as to how to invest their money, and the returns to them need to be material enough to keep them focused on that project. So balancing all those things is to me the biggest challenge as it relates to revenue division.
I think the biggest risk today is probably differential views on what's fair.
Today, frankly, the thing that drives my tremendous sense of urgency about getting this right and getting it right fast - and raising the money to do so - is that we see a number of organizations on behalf of countries or companies that have urgent needs for offsets, either to meet their NDCs or to meet their net zero targets, quickly scooping up land and projects throughout Africa and beyond in ways that aren’t really designed to develop a long-term sustainable future and future flows of revenues to the communities in those countries. Unfortunately, both communities and governments have very short-term needs and it's difficult to expect them to wait to see the benefits of a financially sustainably designed project. It's tempting for them to take the short-term solution, and so I think it's very urgent that we put in place the benefit sharing standards and other policies and models that countries can use to withstand the pressures to take the short-term solution.
Julia: Elizabeth, it's really helpful to hear your perspective on that and love the framing around the question of what's fair. One way that I've heard folks in the market consider addressing this challenge is with advanced payments or prepayments, making sure that communities and governments aren't having to wait to see the benefits of the payments for carbon and designing agreements where they're able to participate in the upside that may result from credits that are produced today and guaranteed at one price but then sold later at a different price.
Building on this point of what's fair, I know from our prior conversations that benefit sharing is near and dear to your heart and core to the work with Blue. Why is it so important? What do you think is the number one thing project developers get wrong when approaching benefit sharing? Why is it so hard to get right?
Elizabeth: I think what developers tend to get wrong is making the agreements overly complex. They're secret. They see the communities as recipients or beneficiaries and not as partners. And frankly, it's hard to be the first one out there to make your benefit sharing agreement public. We're all buckling up and planning to do exactly that in the next month or so - to make the benefit sharing agreement that we've been negotiating with governments and with communities fully public and available. It’s risky, but I think it's important because without that, everyone's flying blind on what is fair. And so I think it's very hard, but there's no other way we can actually lift the shroud of secrecy over these benefit sharing agreements.
Ida: Elizabeth, what you said is extremely interesting. But for those listeners who haven't delved into benefit sharing agreements yet, could you give an example for us of what is actually in the agreement, or an example of a benefit sharing agreement that Blue has brokered?
Elizabeth: Yes. A benefit sharing agreement basically spells out the arrangement whereby the revenues that are received from the sale of carbon credits are then divided between (1) the developer to offset his or her costs, (2) the communities who will be working on those things that have created the value of the carbon credits in the first place, (3) the governments who in some cases are contributing to the project and therefore receive some kind of benefit, and (4) the investors that have financed the project. The benefit sharing agreement spells out how those revenues will be divided, whether through a division of the net income after costs, or a division of gross revenues before costs. And those agreements can be complex. In almost every case in the world, they are not fully transparent, and they're not publicly available, mainly for reasons of business confidentiality or other legal reasons. But it's my opinion that those agreements could conceivably be made more transparent, more publicly available so as to serve as models for high integrity projects to use, and for governments to adopt in order to ensure that the project developers that come into their country are held to the same standard that they've established.
Ida: As one follow-up, are you already seeing that those institutions and standard setters that characterize the quality of these projects are beginning to incorporate benefit sharing agreement as a pillar of what they define as a high quality, high integrity project?
Elizabeth: Yes, I think it's been overly simplified though. For example, there are many that will use shorthand to say, “well, this is a good benefit sharing agreement because 50% of the income goes to communities,” but that's very different from having, for example, 50% of the gross revenues go to communities. The devil is in the detail in terms of exactly we're talking about in terms of revenues or income and how the so-called split is organized. You can't really get away with just talking in summary terms about what the content of that agreement is.
Kate: One thing that's obvious from this conversation is that working with communities is hard. And one worry I have is that I'm starting to see some investors and some developers just shy away altogether from projects that involve indigenous peoples and local communities because it's more difficult, because it takes more time, because you're more likely to end up on the front page for something going wrong because people are people. It's easier to just work with private landowners where there aren't any local communities. I'm curious your reactions to this approach. What would you say to them, and what's the case for doing the hard thing?
Elizabeth: I would start by saying it turns out that the nature that we need to survive as a species on this planet happens to be mainly in poor countries, and there are people that live in and among it. And we all know that indigenous peoples are the stewards of a vast amount of the remaining intact nature on the planet. It's their home, and they do a great job of stewarding those resources. If we're going to help them protect those resources from pressures that come from outside, then they need to be partners in that effort. And they're amazing partners in that effort because they know the area, they know the nature, they know the ecosystem, and they're ready to work and to earn money and to do what needs to be done to ensure those ecosystems remain intact, and that the biodiversity they harbor and protect flourishes. At the same time, they are also protecting themselves against climate change because there’s nothing more powerful, at least in the coastal areas that I know, than a flourishing ecosystem to protect those communities against climate change. So it's a powerful adaptation mechanism as well.
The nature that we need to survive as a species on this planet happens to be mainly in poor countries, and there are people that live in and among it.
Julia: Some of the biggest challenges in driving capital to nature-based solutions that we've heard and that we experience in our work day-to-day are the perceived risks of investing in nature-based solutions: the fact that they’re in emerging markets, the lack of understanding from investors of the carbon market ecosystem, and the fact that the carbon market ecosystem is rapidly evolving. This all translates into a lack of available capital and a very high cost of capital. You've mentioned in our conversations that a buyer of last resort would be a powerful solution for mobilizing capital. Could you explain what you mean by this, and how it would work? And then are there other innovative financial structures where catalytic capital, or philanthropic capital, could be particularly powerful?
Elizabeth: This was actually an idea that was generated by my partner, David Dobrowolski. It was referring to the voluntary carbon markets in 2023, which had a bit of a crisis, very similar to what the Euro market suffered just a few years before, when the Euro collapsed and threatened the EU with it. At that time, Mario Draghi, who was the European Central Bank Governor, basically stood up and said, "I will do whatever it takes to save the Euro." And with it, the EU, effectively. In doing so, he created enough confidence and a psychological boost to the market that the Euro bounced back and was rescued. And so we thought that maybe in the voluntary carbon markets - of course, on a much smaller scale - that same effect could be accomplished by a group of investors with significant capital getting behind the markets, saying they believed in it, asserting that this was a solution to solve the problem we have with nature, and agreeing to buy any credits that met certain criteria like transparency and verification, et cetera, that dropped below a certain price. They would then buy those credits and have them in their inventory, which could then be resold back into the market when prices recovered. Not only would it stabilize the market and provide some pricing support, but it would also be an opportunity for those large investors to earn some money by buying low and hopefully selling high later on.
Ida: That sounds like one good mechanism to provide, as you say, a psychological fix for investors. More broadly, all three of us spend our day-to-day thinking about how to encourage more capital to flow into nature-based solutions. What do you wish investors knew about investing in carbon, emerging markets, and natural climate solutions more generally? And what are some of the biggest misconceptions that you see?
Elizabeth: I think probably the biggest misconception is that it's quick. I remember having brokers talking to us a year or so ago saying, "What's the price? What's the volume?" and I was like, wait, you don't understand. This is going to take a year or two or maybe even three. And there was really no understanding of the process that you had to go through. Just doing Free, Prior and Informed Consent (FPIC) in an area as large as the areas that we're involved with, in 96 villages, you can't do that in a month or two.
One of the problems is that for both governments and communities, you're asking them to be patient and trust you that revenues will come in two or three or four or five years. In the case of restoration, it can be slower. Others may come by and offer them a quick fix in a shorter term. That's why the notion of pre-financing so that governments and communities can get benefits flowing to them more quickly because they're taking significant risk, is another important fix or a financing tool that needs to be deployed urgently.
The other misconception is that in the poorer places where nature is, there's not necessarily policy environment that is stable and predictable, and that anticipates the needs of voluntary carbon market project developers or investors.
Julia: Most of the funding for nature-based carbon projects today is either carbon finance, streaming agreements, or equity. This can be very expensive, and it requires returns at a time scale that doesn't necessarily match with the returns of nature restoration, for example. Do you see a role for debt finance for nature-based carbon projects? What needs to happen for Development Finance Institutions (DFIs), banks, private credit funds, et cetera, to be able to underwrite the risk of nature-based carbon projects in emerging markets and unlock lower cost debt financing?
Elizabeth: That's a great question, and I would say two quick things. One of the structures that we've been working with that I think is very well suited for these markets is similar to a carbon streaming structure or a revenue share structure, where investors provide capital today and then are paid back a return once revenues start to flow, up to a certain IRR that is negotiated in advance.
The second structure that is also very attractive and urgently needed is the one we discussed earlier, which is a pre-financing agreement to provide communities and perhaps even governments some benefits so that they can be encouraged to be patient, to undergo the risks that they have to undergo, and withstand the pressures to take other solutions that may be harmful to nature or to themselves.
The third I would mention is political risk insurance (PRI). Maybe I'm biased because of my eight years at OPIC/DFC, but I believe that the political risk insurance tool is an extremely valuable one that makes a big difference to investors. Blue has actually now structured PRI with DFC, and I think we're one of the early ones that have done this within the voluntary carbon markets. I think that broader insurance capabilities that organizations like DFC and MIGA have can be very readily applicable to the voluntary carbon more broadly. And I think you'll find the teams at DFC are extremely problem-solving oriented and creative and experienced in finding the right structures for the right projects.
One challenge I would mention is that there is a pressure for DFIs in general to reach ever poorer countries, but also to optimize private capital mobilization. And in fact, those two things are at odds with one another. You're mobilizing two, three, four times the amount of a private capital - that's easily achievable in Mexico or Indonesia, but not in Sudan or Nicaragua. And so I think that sometimes people don't understand that private capital mobilization aspirations do not go hand in hand with reaching poorer places.
There is a pressure for DFIs in general to reach ever poorer countries, but also to optimize private capital mobilization… I think that sometimes people don't understand that private capital mobilization aspirations do not go hand in hand with reaching poorer places.
Kate: Absolutely. Elizabeth, you're probably not surprisingly our first guest who has run a development finance institution. And so we'd love to draw on some of this experience at OPIC/DFC a bit more here. Looking at the role of development finance institutions in the carbon markets and carbon project finance, what do you think is the role that they should be playing? And perhaps on the flip side, we often see DFIs sort of being asked to do everything, and there are often misconceptions about what DFIs can or can't do. So in addition to the role you think they should be playing, what do you think should be out of scope?
Elizabeth: Well, DFIs are a reasonably diverse group and they have different tools and capabilities and risk appetites. So generalizing is hard to do, although everyone does it. The one thing people tend to agree on is that DFI should take more risk. Okay, I get it. However, there's little understanding of the pressures that a DFIs are under or the mandates that they have from their own shareholders. And for example, when I was at OPIC, we had a statutory mandate to be financially self-sufficient. That doesn't go hand with taking more and more risk. So I feel like there needs to be a deeper understanding of what the structures and the requirements and the mandates of DFIs are before asking them to do things they can't do. It's harder for them to take early stage technology risk, for example. For some of them, it's hard to do large volumes (though DFC doesn't have that issue). Some of them can't do very, very long tenors, which are appropriate for nature (DFC can do that). So I feel that the limitations on DFIs are less well understood than the exhortation to just take more risk.
Ida: Well, you are actually scaling these projects at Blue and probably keenly tuned to the early stage of the development cycle for financing these projects. Could you speak a little bit about what's out there today in terms of early stage development finance and what continues to be missing in the capital stack for nature?
What continues to be lacking in the capital stack for nature is the rapid dispersing, pragmatic early stage capital.
Elizabeth: What continues to be lacking in the capital stack for nature is the rapid dispersing, pragmatic early stage capital. And as I said, that can be grant capital because it's coming along with lessons learned. For example, we at Blue have promised and are developing a kind of market catalyst, or a Living Lab, if you will, that will share open source. It's lessons learned on remote sensing, lessons learned on different interventions like cookstoves and woodlots, lessons learned on community engagement, what's worked and what hasn't worked. And very importantly, lessons learned on the benefit sharing agreement, which as I said, will be made transparent. We ourselves have found that funders have been attracted to that idea of fully open source market catalyst and have been willing to support us with grant capital to develop that. So that has been a very rare and valuable thing.
In addition to that, the other types of financing that are lacking are as we mentioned earlier, pre-financing to give communities some benefits earlier on before revenues from carbon sales will flow, because it doesn't always make sense to sell carbon credits as early as one can. If you're doing, for example, a grouped project where first you start in a small area, make sure you make all the mistakes in a small area rather than a big area, and then you move on to a bigger and bigger area, you may not want to sell carbon credits right away on that first area. So, pre-financing to provide communities or governments with some benefits early on, and that early stage grant capital for experimenting and pilots is rare and valuable. Sometimes it comes with a lot of back and forth and paperwork that can take months and months and months. It's been chastening for me to be on the recipient end of that because I've always really been on the other side of the table, and I kinda wish I'd had this experience before when I was the one making the investments or issuing the grants, because as I say, it's humbling to realize how hard it can be to be on the receiving end of both grants and investments.
Kate: Elizabeth, as we look to start coming to a close, I want to ask more generally, how can listeners who are interested in nature-based solutions get more involved? What would be your suggestions to them?
Elizabeth: Well, I think always learning more because it's a very rich and complicated area, but has fascinating learnings all around. So, I think learning more.
And then the second thing would be advocating for the solution. Again, I don't know of any other rapid response to climate change, with core benefits. I don't call them co-benefits, but core benefits, like benefits to endangered species, to climate adaptation and other features. So: advocating on behalf of this and helping us continue to improve it so that it is living up to its full potential as the best rapid response to climate that we know.
Ida: I love that. Well, Elizabeth, we are coming to a close with our podcast with you. We like to end our podcasts with a little bit of a lightning round where we will ask you a question, and you should aspire to answer it in as few words as possible.
What is your favorite carbon sink? Elizabeth: Well, Mangroves!
What's your favorite book or book you would recommend right now to our listeners? Elizabeth: I would say "The Nature of Nature" by my friend, Enric Sala.
If you had a magic wand, what would you change or do to scale natural climate solutions? Elizabeth: Advocacy and communication program on steroids, pre-financing for communities and governments, and a standardized public benefit-sharing agreement.
As you look ahead, what gives you hope? Elizabeth: Nature is all we've got. We need it to get to where we need to be by 2030. And people are going to slowly realize that, hopefully in time.
2023 was a difficult year for those of us working in carbon markets, but what is your prediction for the biggest nature-related headline in 2024? Elizabeth: “Experts agree voluntary carbon markets work. They're a work in progress, but already the best, fastest solution we have.”
Ida: Elizabeth, this has been an incredible and inspirational conversation. Thank you so much for taking time with us today. And that's it for now. Thank you for joining us.
Elizabeth: Thank you so much for having me and for doing this!